WARNING: The Market HATES Good News Right Now

SPEAKER_1 (0:00)

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Michael Zuber (0:30)

All righty, folks, we got some bad news to talk about, some unfortunate news. And that is the fact that it appears good economic news is bad news for the stock market, and really bad news for the bond market. I don't know if you guys saw what happened in the 10-year treasury market yesterday, but it was nothing short of disaster. The 10-year note that usually moves 2 to 3 basis points actually moved 15

That is akin to the NASDAQ falling 3% in a single day, just to give you some context. Now, what do I mean by good news is bad news? Well, let's look at the economic news that sparked this collapse in bond prices and rise in yields. Yesterday, we got 2 PMI numbers, one for manufacturing and one for services. Both exceeded expectations. Manufacturing came in at 57, services came in at 58.7, both significantly above expectations. In fact, these numbers were noteworthy for how strong they were. The strongest growth in more than five years, supported by robust hiring and robust demand.

Input costs, note, input cost. Input costs, aka inflation, if you're not paying attention to the nuance of words. Input costs jumped to the highest level since 2022, driven by higher energy and transportation costs. Folks, we have been talking about diesel for quite a while on this channel. It is now sitting at a record high, and it is one of those things that is in everything, and it will ripple through the economy like a cancer. I don't know how to kind of display it, but it is in the transportation of everything, food, clothing, electronics, everything. And we will be feeling that for months to come. So normally speaking, a growing manufacturing base and a growing services base, growing demand, robust demand, that would be a good thing, right? I mean, just, you know, you want your economy to be growing, you want strong hiring. However, we are sitting here in an environment where the Fed is telling us quite clearly that inflation is a problem. So we get these reports yesterday morning, and the 10-year Treasury rips higher in rate. Not only that, but the five-year note, the five-year note is now over 5%.

The five-year note hasn't been over 5% since 2004, by my recollection. So again, very, very interesting.

Mortgage rates hit 7.26, seemingly marching ever higher to my 7.5.

Weekly mortgage demand, as expected, is down 1.5%. Third negative week in a row. Although we just got new home sales, that just came out at 7 a.m., right when this started. US new home sales units, in a shocking move, shocking number, actually up more than forecast, up to 600, what would that be?

0.684 million, so that would be 684,000. Forecast was only for 610, so a significant beat, and much higher than the previous month at just 607 So again, new homes are up, but what does that mean? Well, it means that new homes are giving away credits, buying down rates. I don't think that story has changed. They are eating margin to move product. It makes, quite frankly, perfect sense. Existing home sales are going to suck. They are going to be weak. Why? Because most homeowners don't have a mortgage company. They can't buy down rates.

They can't eat margin on one product and buy down to 4.99 or 3.99, or even saw somewhere in Texas, 3.49. Wow, you got to be moving. You got to be very desperate to move inventory if you're buying everybody down to 3.49. But again, new home sales up more than expected. Again, the economy appears strong. Why does this matter? Well, the odds of a Fed rate increase changed drastically. And I am talking about an October rate increase. This is something I called for just about a week ago. And basically, this is all this data, robust demand, robust hiring, input cost jumped. All of these are code words for we are going to get another dose. Remember Kevin Warsh said, this is a dose of a restriction. We are going to get another dose in October. And right now, folks, we just gotta be honest with each other. A dose in December is not out of the question. So again, buckle up, Buttercup. It is going to get interesting. Sorry, I'm trying to fight off a sneeze. I do want to thank you. We have seen a dramatic jump in the viewership for the Daily Financial News. Ever since we uploaded them as original videos at 8 a.m., the YouTube algorithm is sending us a bunch of love. We're now getting 10,000 views of the Daily Financial News. So to all the new viewers out there, thank you for being here. Like, subscribe, be a part of the One Rental At A Time family. You get the Daily Financial News five days a week. You get it Sunday through Thursday. I do take Friday and Saturday off, but you get it five days a week. If you just want a bullet point understanding of what's happening in the economy with a real estate slant for sure, give us a follow. Check us out, let us know what you think, ask questions. We have a bunch of really good people here, and I think you'll enjoy the One Rental At A Time family. Next up, we got some Fed speech, Fed talk, Fed Michael Barr. Pay attention, guys. They're telling us a rate increase is coming. My base case is, again, Michael Barr. My base case, further policy adjustments, aka dose, likely to be needed to ensure inflation comes down to target in a timely fashion. Yeah, it's coming.