The Capitalist Investor - Episode 122

A golfer’s most useful tool is course management –– it allows them to plan ahead, set their eyes on a specific score and work backwards to reach it. It’s not about getting birdies, but avoiding those double bogeys. Golf is about course management, the stock market is about risk management; right now it’s time to avoid mistakes and just keep the ball in the fairway. This week, Mark is joined by Luke and Tony as they discuss all the headwinds confronting today’s economy. Economic growth is slowing, inflation is still running hot, mortgage rates are skyrocketing, politicians keep lying, and Beyond Meat just continues to mislead the masses. Episode #122 of “The Capitalist Investor,” is all about confronting the issues the economy is facing today all while strategizing efficient plans.

Outline of this Episode:

  • [4:45] Beyond Meat? Beyond natural
  • [10:45] Politicians say, said, lied
  • [23:10] Mortgage rates up, buyers’ hopes down
  • [29:00] Dissecting the earnings season

A new day… a new political narrative

It seems like President Biden’s reason behind high oil prices and towering inflation rates changes everyday. 

In 2021, he first said the supply chain crisis caused inflation. He then blamed oil companies for being unable to keep up with the country’s increasing recovery and demand at the fuel pump post-pandemic, as the root cause for climbing fuel rates.   

Next, he shifted the blame on corporations for being greedy, implicating they were “padding their wallets” by raising gas prices and not paying their workers enough. 

Then by the end of February, Biden shifted the blame of inflation and increasing gas prices on Putin’s invasion of Ukraine and the ensuing international sanctions placed on Russia. 

In July, the president claimed that the inflation crisis was only temporary when it was sitting at 5 percent. Last December, he said he believed inflation had peaked when it hit 6.8 percent. Fast forward into January and the inflation rate reached a new 40-year high of 7.5 percent. This week, it already exceeded its four-decade high at 8.5 percent –– placing an even darker cloud on top of the country’s ability to rebound. 

But the reality is: inflation was an issue before any major supply chain crisis surfaced, it fiercely lingered a long time before Russia’s invasion on Ukraine. But that’s the narrative Biden and his administration is going for: “Putinflation.” It’s a lie, all his reasoning has been lies. Who’s to say what the narrative will be next week or within the next month? 

Inflation started as Biden’s problem and it remains his problem. Fiscal stimulus and bloated spending policies by his administration are the root cause of inflation, but he can’t and won’t even acknowledge that to own the blame. 

It’s a new narrative every time the Consumer Price Index numbers come in. They don’t think we’re paying attention, but we’ve been following rising inflation rates even before they falsely claimed they were temporary. The true narrative has always been the same, anything else has been a feeble lie. 

More cost increases… home buyers are getting hit with growing mortgage rates

This past week, the average mortgage rate increased to more than 5 percent, nearly doubling since January 2021. Amid the surge, the housing market persists –– but not at all in the favor of first-time home buyers. 

Mortgage rates are constantly changing and are often moving in effect with the rest of the economy. In just the last 90 days, the average 30-year mortgage rate has increased more than 1.5 percent, being the quickest escalation in the housing market’s costs since decades. 

One of the most common issues happening for home buyers is having deals fall through after they can’t meet mortgage contingencies. 

When hopeful buyers were pre-approved for a price at a rate of 3.5 percent 90 days ago, they can no longer afford that same house they were approved for when suddenly rates recasted at 5 percent. It’s the beginning of the end for them –– we’re seeing a growing number of buyers failing to meet mortgage contingencies and these houses are just going back on the market. 

Something needs to change; people simply can’t present more money whenever interest rates jump.

If there has been anything consistent about the housing market, it’s that cash is golden and good –– there are no mortgage contingencies there. But unfortunately, for many first-time home buyers and younger generations that cash isn’t sitting there, they aren’t able to muster $300,000 in cash to buy a house. 

Prices need to come down eventually, so many people are at a disadvantage. But until then, people may have to wait or maybe work a deal with someone who can step in with the cash. What goes up eventually has to come down though. 

The earning season just kicked off and observations are in

First quarter earnings season just kicked off this past week and the financials are rolling in. What we’re observing so far is an expected 6 percent earnings growth for the overall stock market –– but most of the growth largely stems from the energy sector. 

The energy industry is forecasted to have an earnings growth of over 200 percent –– a strong majority of all S&P 500 companies earning growth expectations. 

The market has been acting irrationally lately –– war, inflation, Fed hikes, slowing growth, lack of consumer confidence can all explain that. We can all agree that there are many substantial economic conflicts opposing us right now; the likelihood of a recession continues to increase as inflation rates and credit card debt rises and disposable income and optimism plummets. No one likes it when we hit a recession –– and for good reason –– but they’re part of the cycle and bound to happen. 

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Keep Listening to The Capitalist Investor:
Episode 15:
Spending Strategies in a Bear Market, Ep #15
Episode 31:
Handicapping the 2020 Election, Ep #31
Episode 47:
11 Investments in Your Home That Pay Off, Ep #47
Episode 63:
Jeff Bezos and Amazon: Past, Present, and Future Ep #63
Episode 79:
7 Ways Biden Plans to Tax American Families (Part II), Ep #79
Episode 95:
5 Beaten Down Stocks to Buy on the Dip, Ep #95
Episode 111:
Special Episode – Talking Energy with Daniel Turner, Ep. #111
Episode 127:
Retail Earnings Tank & What The Heck is Greenflation? Ep. #127