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Just Keep Swimming

Construction job openings just imploded from 456K to 274K in March--  a 182K monthly plunge that is the single biggest drop on record. …So long, housing!  B’bye!

It was awful news, but at least we finally got some honest data from the government.  Or did we?  Who can even tell anymore?

“Hard data”--  such as that provided by government agencies that we really should be able to rely on but haven’t been able to under the current administration-- has been improving recently (despite relentless downward revisions a month later), but the “soft” survey data has been collapsing for years now.  That trend continued this week as S&P Global's US Purchasing Managers Index (PMI) fell from 51.9 in March to 50.0 for April and the Institute for Supply Management’s manufacturing survey also missed, dropping from 50.3 to 49.2.

Also on Wednesday, the Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey (JOLTS) report that job openings are tumbling, nobody’s leaving their current jobs and that hires have unexpectedly cratered down to January 2018 levels.

Job openings, a measure of labor demand, were down 325,000 to 8.488 million for March, the lowest level since February 2021.  Many openings are never actually filled, of course--  I’m personally aware of certain companies who have literally had the same “open” position listed on their websites for years.  Still, the trend in job postings is somewhat indicative of the health of the labor market and the broader economy, and it’s not pretty.

The so-called quits rate, which measures people who voluntarily leave their job, fell to 2.1%, the lowest since August 2020. This decline in the metric suggests that people are holding onto their current jobs as they feel less confident in their ability to find new ones that might pay better.

As for hiring, it is now the lowest since January 2018 (excluding the record one month drop in April 2020), which basically means that the job market is done; you can expect payrolls to be in freefall in two to three months.


The only way the Fed can possibly tame inflation is with interest rates so high that everything collapses. The Fed pumped so much money into our system so hard that it’s sort of like driving your car 120 miles per hour and then slamming on the brakes:  something—or someone--  is going through the windshield.

Even JP Morgan CEO Jamie Dimon sees 8% interest rates being needed to tame America’s Fed-fueled inflation beast, but with an economy addicted to a low cost of borrowing, this would make loans unaffordable for entire sectors of the economy like, say, commercial real estate. It would also cause a rash of bank failures.

So, it’s no wonder that the stock market rallied so hard yesterday after Jerome Powell (and his inner dove) spoke, indicating that the Fed will taper its quantitative tightening efforts even more than investors were expecting.  The market had broadly expected a reduction in the Fed’s balance sheet run-off (the amount of Treasuries it will allow to mature without replacing) to $30 billion from $60 billion, but the actual reduction is to be closer to $25 billion. In other words, the Fed thinks inflation is too high, but it also thinks that rates are too high.  (Hint: stagflation.)  Powell & Co. blinked in its farcical duel with inflation, which we all know isn’t coming back down to its 2% target anytime soon …or, if you’re my age, in your lifetime. 

And that’s why the market almost immediately sold off all of its gains once it had an opportunity to digest Powell’s comments.  Your favorite hedge funds had to reprogram their algos, which even in this age of AI still takes about twenty minutes.


So, look, housing prices are too high. Consumer prices are too high. Government debt is too high.  We get it.  But where do you think stock prices will be ten years from now, higher or lower?

Out of every rolling 10-year period over the past century, the S&P 500 has been positive 95% of the time on a total return basis.  In real dollars, the only times the U.S. stock market has been down on a 10-year basis were following the Great Depression and Great Financial Crisis.  That’s it.

Crestmont Research

Now, I confess that I don’t know anybody who actually lives in the long term--  I myself am consistently endeavoring to live more in-the-moment, to be more present-- but we all need to invest for the long term.  The reality is that consumer prices, housing prices and stock prices will probably be higher and that the economy will probably be bigger ten years from now, and as investors, it makes sense to place bets on the stuff that happens 95-97% of the time instead of on the stuff that happens 3-5% of the time. 

I appreciate that it’s difficult to have faith in the future when so many of our nation’s college kids have turned out to be anti-Semites who are debasing some of our finest educational institutions in support of Muslim terrorists, but you get the picture.  Pray for them, and invest wisely for yourself.

“A setback is nothing but a setup for a comeback.”

Ice Cube


Click here to invest with Chad.

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Divebombing into stagflation nation.


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