Yesterday the RFS investment committee made the tough decision to sell your “short” positions, SQQQ and SPXS. So far it is working. You’re probably wondering what has changed and why? The S&P 500 index, our main benchmark, has put up 6 green bars out of 9 in the last 9 days. Last Thursday we officially recorded a “crossover”. You likely remember what a crossover is from our prior emails; nonetheless, it is when one moving average “MA” crosses above or below another MA. The 5 day MA crossed back over the 10 day MA, which is historically a positive “buy” signal. Not a guarantee, but historically very accurate. Simply put, the average of the last 5 days is now higher than the average of the last 10.
The “whys” are not easy. I do not want to be accused of making a political statement, just reporting what is in all the news, including the Washington Post,
Wall Street Journal , and the NY Times. Investors appear to be regaining confidence in the markets as we approach the mid-term elections, which is 2 weeks from today. Putting aside a huge political or economic event, it appears the GOP will take control of both Houses of Congress. President Biden’s approval rating is at an all time low, and he recently suggested he may not run for a 2nd term. Investors and consumers alike are not happy with inflation, interest rates, food, and fuel prices. As you scan and/or read the articles below, the residential real estate market is in a total collapse, as well as new home construction. The 30 year mortgage rate just hit 7%, more than doubling the cost of a mortgage, which was 2.5%, 20% down, last October. Further interest rate increases are potentially in the near future as the Federal Reserve tries to try to help quell inflation which will take another bite out of your budget. Further, most consumers cannot afford new or used car loans, and the auto industry is still suffering from two years of chip shortages. In addition, Goldman Sachs reported yesterday that auto/truck loans are at a higher default rate than they were in July of 2009. One of the articles below reports that real estate agents are leaving the business at a higher rate than in 2008.
The political environment is not great either. President Xi of China just won reelection to a third term and consolidated his top 25 team with all staunch loyalists. He even dismissed, or “retired”, his immediate predecessor. Further, for the 1st time since 1947 there are no women on the top 25 team. All of this is directly from the New York Times.
Xi continues to have his eyes on Taiwan, where the big prize is the worlds largest semi-conductor foundry, TSMC. The NYT further wrote that if Xi invades Taiwan and captures the foundry we will have a worldwide economic collapse. A very good friend and client told me to buy and read, “The Avoidable War”, by Ken Rudd. He is the former Foreign Secretary and Prime Minister of Australia. Very scary stuff, as he knows what he is talking about.
And of course, Russia continues to wreak havoc in the Ukraine, and reducing many parts of the European economy to a standstill.
The realities of climate change aren’t helping either. As in a historic drought has sent the Mississippi River level to record lows, plus the water level in Europe is so low that barges and tourist ships cannot pass from Budapest to Amsterdam. Winter is coming and natural gas shortages could leave millions of Europeans without heating fuel.
That is all for now. We will continue to keep you posted. As always, please call me or write me back, and thanks to the many already doing that.
Praying for a peaceful and prosperous end to this madness.
Home prices cooled at a record pace
https://www.cnbc.com/2022/10/25/home-prices-cooled-at-a-record-pace-in-august-sp-case-shiller-says.html?__source=androidappshare
50% of voters expect the economy will get worse in 2023, new NBC News poll says
https://www.cnbc.com/video/2022/10/24/50-percent-of-voters-expect-the-economy-will-get-worse-in-2023.html?__source=androidappshare
The fate of the world economy may depend on what happens to a company most Americans have never heard of
https://www.businessinsider.com/tsmc-us-china-tensions-may-dictate-fate-of-global-economy-2022-10?nr_email_referer=1&utm_source=Sailthru&utm_medium=email&utm_content=10_things_tech&utm_campaign=Post%20Blast%20sai:%20
A “Record” Number Of Real Estate Agents Will Quit Due To Economy, Realtor Predicts
https://quoththeraven.substack.com/p/a-record-number-of-real-estate-agents?utm_source=substack&utm_medium=email
Southwest Florida real estate expert gives outlook on market
https://www.winknews.com/2022/10/17/southwest-florida-real-estate-expert-gives-outlook-on-market/
Home asking prices tumble at record pace as mortgage rates surge: data
https://nypost.com/2022/10/17/home-asking-prices-tumble-at-record-pace-as-mortgage-rates-surge/
QQQ: U.S. ETF market contracts by $1.1T since it peaked back in March
https://seekingalpha.com/news/3892588-us-etf-market-has-shrunk-by-11t-since-it-peaked-back-in-march?mailingid=29423248&messageid=2900&serial=29423248.15777&utm_campaign=rta-stock-news&utm_content=link-3&utm_medium=email&utm_source=seeking_alpha&utm_term=29423248.15777
Mortgage demand drops to a 25-year low, as interest rates climb
https://www.cnbc.com/2022/10/19/mortgage-demand-drops-to-a-25-year-low-as-interest-rates-climb.html?__source=newsletter%7Cmorningsquawk
Recession-proof Microsoft lays off nearly 1,000 employees across the company – Fortune
https://fortune.com/2022/10/18/recession-microsoft-software-tech-layoffs-staff-employees/