I hate to tell you I told you so… However, we’ve been telling you that the market was peaking and the economy was degrading for a few months now. I’ve repeatedly said to move to cash, precious metals, as well as electricity producers.
In this space, I’ve written that the top was in on July 17th and it looks like that prediction has come to pass. Furthermore, we’ve noted that housing is rolling over, unemployment is climbing and the Fed will wait too long to cut rates.
You may have noticed that reservations at restaurants aren’t so hard to get or that the venues aren’t quite as packed as they used to be. Maybe your friends and family have stopped bragging about their new car because that buy was two years ago.
People have run out the Covid surplus, switched to credit cards, and have used up the room on those. And they still can’t make their car payments. Automotive repos are up 23% in 2024 compared with the same period last year, according to data from Cox Automotive.
That’s a big surge in people who can’t make car payments. Credit card defaults are also bad. The next step is housing. Look for housing prices to come down as people ditch their COVID boomtowns because they lost their remote jobs or otherwise can’t afford their lifestyle.
Right now home sellers still believe those Zillow numbers and think their house value really jumped 50% in the last two years. They won’t think that in a few months, at least not in places like Florida and Texas. The North East seems to be holding up much better.
Stocks
The market is down today because the unemployment number came in worse than expected adding just 114,000 jobs versus the expected 175,000.
The U.S. Burrow of Labor Statistics reports:
“The unemployment rate rose to 4.3 percent in July, and nonfarm payroll employment edged up by 114,000. Employment continued to trend up in health care, in construction, and in transportation and warehousing, while information lost jobs.”
Household Survey Data
“The unemployment rate rose by 0.2 percentage points to 4.3 percent in July, and the number of unemployed people increased by 352,000 to 7.2 million. These measures are higher than a year earlier, when the jobless rate was 3.5 percent, and the number of unemployed people was 5.9 million.”
The unemployment rate is now at its highest level since October 2021 though it is low by historic standards. For the past few months, a number like this would have been greeted by the market as “bad news is good news.” An increase in unemployment means that the Fed would cut rates. Lower rates are good for business and therefore should be good for the market.
That is not the case anymore. The Fed said it won’t cut rates until late September which is far away. The market is starting to treat bad news as the bad news it is. I’ve been selling for months now and hope you too have locked in some gains. But if you haven’t don’t worry.
The deal with the unemployment rate is that it moves in broad multiyear trends that follow the business cycle. Once the trend turns it keeps going for years. Direction matters more than the current level.
But the stock market is a different beast. Topping patterns are a process. The market loves to suck people into buying big sell-offs near the top. If you have patience, the market should bounce back and threaten to go higher sometime around the first of September. All the Wall Street hotshots will be back from the Hamptons and bidding up stocks with an eye on their Christmas bonus.
That will be your last chance to sell.
All the best,
Christian DeHaemer
Outsiderclub.com
India is still rocking along:
https://www.reuters.com/business/healthcare-pharmaceuticals/indias-medplus-health-posts-q1-profit-surge-strong-organised-sector-growth-2024-08-02/
Hey, MSM finally catches up with the Outsiderclub:
https://finance.yahoo.com/news/jobs-report-stokes-fears-fed-may-have-waited-too-long-145226930.html
Brit killed it again:
https://www.outsiderclub.com/an-angry-stock-market/
