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what's happening in the real world is evidence of just how weak the consumer is this is more evidence that the Federal Reserve and everybody else wants to ignore the Biden Administration wants to ignore it it wants to pretend that the economy is strong even though all of the real world evidence is showing that it's not the only evidence that we have that the economy is strong is that we still have a low unemployment rate and we still have a lot of jobs that are unfilled we have a lot of companies advertising for workers well that can change very quickly a lot of the companies that are advertising that say they need new workers they can decide very quickly that they don't need new workers clearly companies that are experiencing a big drop in profits a lot of these companies may be looking to lay off some of the workers they have because they have to cut costs they certainly don't want to hire more workers especially when wages are going up but again it's not just consumers spending less because the price of food and energy or rent is up interest rates are up mortgage rates are up consumers are getting squeezed from so many different angles with these Rising costs and to make it worse the stock market has imploded and you can't just look at what's happening in the Dow because the average investor they don't own the Dow they own some of the stocks that are down 50 60 70 80 90 percent they are getting slaughtered in their portfolios so their net worths are going down their cost of living is going up they're having to cut back on their consumption and when we have GDP that is 70 percent consumer spending and you see the type of financial stress the consumers are under and when you see the evidence of that stress being reported by Amazon by Walmart by Target one after another it's the same story how much more evidence do you need that the economy is in recession and again if all you're doing is hanging your hat on low unemployment and you're looking in the rear view mirror well take a look in the windshield at the weekly unemployment claims that were released today now the prior weeks two hundred and three thousand claims did get slightly revised down to 197 000 but the consensus of a hundred and ninety seven thousand for the current week we ended up well above that at two hundred and eighteen thousand new claims well above the high end of estimates so we're up 21 000 claims off of the revised prior week and the four week moving average is now up to 199.5 this is again a four month high in unemployment claims and if you look at a chart of these claims to me it looks like we've bottomed in claims and now we're headed higher and I think your trajectory of the increase in unemployment claims is going to expand now that so many companies are reporting such bad earnings the stock market has collapsed so much we're seeing this across the board weakness I think a lot of companies are going to be looking to batten down the hatchets and try to weather this recession whether the FED wants to admit it or not in fact Powell just admitted that the soft Landing is going to be pretty bumpy well I think a lot of companies are already experiencing a lot of turbulence and so they're going to do what they can right now even before the landing to get rid of whatever excess baggage they can to be as lean as possible and that means layoffs are coming and so the one thing that people are hanging their hats on to show the strength of the economy well that's going to be gone I mean look look at the data we got today from the Philadelphia fed this is a Manufacturing Index it was supposed to come in at 16.1 the consensus was for a low of 7.6 to a high of 23.1 we came out at 2.6 substantially weaker than even the lowest estimate existing home sales came out today again another Miss they were looking for an annualized rate of 5.65 million we got 5.61 million we're down 2.4 percent month over month 5.9 percent year over year of course home sales are falling because homes are far less affordable now than they were in fact look at the drop off in mortgage applications that was reported yesterday the composite index was down 11 purchases were down 11.9 percent refi's were down 9.5 percent these are big big negative numbers in fact we got the housing starts numbers that came out yesterday as well these were also weaker than expected the consensus was for 1.765 million and we got 1.7 to 4 million why are fewer houses being built well because they're too expensive to sell at a profit especially these starter homes there's really no way that you can build a starter home right now and sell it at a profit so the only way you can get a starter home is to buy one that already exists and a lot of people are just renting and they're paying much higher rents as a result of the lack of Supply now it is possible though that we could start to see some Supply coming on the market from a lot of people who could no longer afford to pay their mortgages if they had an adjustable rate mortgage or even if they had a fixed rate mortgage maybe they can't afford that because their electric bills aren't fixed their food bills aren't fixed they have a lot of other prices that are rising and maybe they no longer have the luxury of pulling Equity out of their house to help manage the expenses so maybe some of these homes are going to come on the market you know it's also possible that some of these homes that were bought by investors might come on the market I spoke a lot about BlackRock and all of the homes that they own in fact I was watching a video the other day George Gammon was making a similar Point talking about all of these Investments single-family homes you had record numbers of single-family homes that were purchased by investors and they've been rented out and I've been mentioning for a long time that while those home buys may have been cash flow positive when interest rates were Rock Bottom now that interest rates are rising and the cost of maintaining these properties are rising I think a lot of these homes are now producing negative cash flow because BlackRock probably has a lot of debt on its balance sheet the cost of service noticing that that is going up and if now it costs more to pay interest than what their net rental income is after subtracting expenses maintenance taxes on all these single-family homes they may decide that it's better to get rid of these homes and if they put these homes on the market that will add to the supply and help push down the price that doesn't do anything with inflation of course because home prices are not there it's just owners of quote would rent that counts which is a nothing number but if real estate prices start to crack that's the only asset that a lot of Americans still have that isn't falling and we know what happens when real estate prices are falling and mortgage rates are rising homeowners mail in their keys instead of their payments because if their home equity is gone there's no point in making a mortgage payment on an underwater property the smart thing to do is stop making your mortgage payments and just live in the house without making any payments because it'll take two three four years before the bank can get rid of you meanwhile you can take that money that you're not sending to the bank and you could just use that to buy more stuff helping to drive inflation even higher
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