 🗞️Hot off the press, last week's economic data included: 🏠New Single-Family Home Sales Increased by 10.6% in July. This was the largest monthly increase in nearly two years and exceeded consensus expectations. Although this surge pushed sales to their highest level since May 2023, it's still roughly in line with pre-COVID levels from 2019. 🏚️ Existing Home Sales Increased 1.3% in July.Meanwhile, existing home sales rose, breaking a five-month decline. However, they remain near the slowest pace seen since the aftermath of the 2008 Financial Crisis, as affordability continues to weigh on the housing market. 🤷🏽 On the employment front, the U.S. job market wasn't as robust as initially thought in 2023 and early 2024. A recent revision by the Bureau of Labor Statistics revealed that employers added 818,000 fewer jobs in the 12 months ending in March 2024 than previously reported. This revision brings the average monthly job growth down to 174,000, a significant drop from the originally reported 242,000. These adjustments highlight the inherent challenges in economic forecasting, as key statistics like employment and GDP are often subject to significant revisions long after their initial release. The details matter. Yet most economic statistics are published based on the presumption that some of the data is enough to predict all of it. Even after initial adjustments, there are revisions years later due to data that is deduced at first and replaced later with real figures. Yes, employment, along with GDP, is both closely watched and subject to significant revisions, which is not a great combination. 📉 The Powell Pivot Part Two. All of which is the preface to the real news last week coming out of Jackson Hole, Wyoming. There, Jerome Powell said, in effect: “Rate cuts? Heck, yes!” And with a weaker labor market and softer inflation, the time sure seems right. But that estimate may also be subject to revision later…much, much later.
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August 26, 1910: Mother Teresa, who became a Catholic nun and missionary known for her humanitarian work, particularly in India, was born in Skopje, Macedonia.Mother Teresa, born Anjezë Gonxhe Bojaxhiu, was the youngest of three children. At 18, she joined the Sisters of Loreto, an Irish community of nuns with missions in India, and took the name Teresa in honor of Saint Thérèse of Lisieux. She moved to Calcutta (now Kolkata) in 1929, where she would later experience a profound "call within a call" in 1946. This spiritual awakening led her to leave the convent and dedicate her life to serving the poorest of the poor. In 1950, Mother Teresa founded the Missionaries of Charity, a religious congregation that eventually grew to include thousands of members. They operated schools, hospices, and leper colonies worldwide, with a focus on caring for the destitute, the dying, and the sick, particularly those suffering from leprosy and AIDS. Her tireless work earned her global recognition, including the Nobel Peace Prize in 1979. Despite facing health issues in her later years, she continued her mission until her death on September 5, 1997. Mother Teresa was beatified by the Catholic Church in 2003 and canonized as Saint Teresa of Calcutta in 2016. Her life remains a powerful symbol of compassion, humility, and unwavering dedication to helping those in need. A quote from her opns my most recent book: “We know only too well that what we are doing is nothing more than a drop in the ocean.But if the drop were not there, the ocean would be missing something.”
With all due respect to Mother Teresa, the amount that is given charitably in the United States each year (around $485 billion from all sources) is larger than the Gross Domestic Product (GDP) of ENTIRE COUNTRIES like Tonga and the Marshall Islands. Though those countries are literal drops in the ocean size-wise, where I come from, that is still a lot of money. I’ll let you in on a secret: Americans are wealthy and generous. But what good is our generosity doing? Are the charities to which we give fulfilling our personal mission? Are they reflecting our personal values? Are they making any difference in the real world or are they merely drops in the ocean? The truth is that most of us have absolutely no idea. A more strategic approach to philanthropy may sound daunting or only for “rich people.” In reality, it is the practice of philanthropy where donors use thoughtful approaches to maximize the impact of their giving. Not so hard, right? It is just a planned and purposeful approach to generosity that seeks to achieve measurable results. And you don’t need to be Mother Teresa to have an impact in this world. Of course, there are no guarantees on the next world, even for Saints. If you would like a complimentary copy of my new book, The Gifts That Keep on Giving, CLICK HERE or email me requesting a copy. August 19, 1848 - The New York Herald reported the discovery of gold in California, igniting the Gold Rush and a massive migration to the western United States.
The California Gold Rush began in January 1848 when James W. Marshall discovered gold at Sutter's Mill in Coloma, California. News of the discovery quickly spread, leading to a mass migration of people from across the United States and around the world, all hoping to strike it rich. This influx of prospectors, known as "forty-niners" (after the peak year of 1849), dramatically increased California's population, transforming it from a sparsely populated region into a bustling area with booming towns and cities. The Gold Rush had significant economic, social, and political impacts. It contributed to California's rapid economic development, as the influx of people and the need for infrastructure spurred growth in various industries, including mining, transportation, and commerce. San Francisco, in particular, grew from a small settlement into a major port and commercial hub. Politically, the Gold Rush expedited California's admission to the Union as the 31st state in 1850, just two years after the discovery of gold. This rapid statehood highlighted the significant demographic and economic changes occurring in the region. However, the Gold Rush was short-lived. By the mid-1850s, the easily accessible gold had been largely exhausted, and mining became more industrialized and dominated by larger companies. Many individual miners, unable to compete, left or found other work. Despite this, the legacy of the California Gold Rush persisted, leaving an indelible mark on the history of California and the United States. Here are five Lessons for Modern Investors from the California Gold Rush: 1. The Power of Timing: Early Entry is Often Key. In 1848, James W. Marshall's discovery of gold at Sutter's Mill set off a frenzy. Those who arrived early, known as the "forty-niners," had the best chances of striking it rich. The lesson here is clear: being early to recognize and act on opportunities can make a significant difference. Whether it's a new technology, an emerging market, or a stock poised for growth, early entry can yield substantial rewards. However, it's also important to remain cautious and avoid rushing into investments without proper research. 2. Diversification is Essential: Don't Put All Your Gold Nuggets in One Basket. Many who flocked to California hoped to strike it big by panning for gold. But only a few actually found fortune in the gold itself. Interestingly, some of the biggest winners of the Gold Rush were those who diversified their efforts—selling supplies, tools, and services to miners. Levi Strauss, for example, capitalized on the need for durable clothing, laying the foundation for a global brand. For modern investors, this underscores the importance of diversification. Rather than betting everything on one high-risk investment, spread your resources across various assets to mitigate risk and increase your chances of success. 3. Beware of Hype: Not All That Glitters is Gold. The Gold Rush was fueled by stories of easy riches, drawing people from around the world. However, the reality was far less glamorous. Many prospectors left empty-handed or worse off than when they arrived. The modern equivalent can be seen in market bubbles, where hype drives prices to unsustainable levels. Think of the dot-com bubble or the cryptocurrency frenzy—investors who bought into the hype without understanding the fundamentals often faced steep losses. Always do your due diligence and avoid making decisions based solely on market noise. Price action is only one data point. 4. Adaptability Wins: Be Ready to Pivot. The Gold Rush was an unpredictable venture. Some miners, after failing to find gold, pivoted to other endeavors like farming, real estate, or starting businesses to serve the growing population. Those who could adapt to changing circumstances often found success in unexpected ways. For investors, this highlights the importance of flexibility. Markets are dynamic, and economic conditions can shift rapidly. Pivoting your strategy in response to new information or changing market conditions is crucial for long-term success. 5. Long-Term Vision: Wealth Isn't Built Overnight. While the Gold Rush is often associated with quick riches, the true wealth was built by those who had a long-term vision. Many of the most successful individuals were not the ones who struck it rich quickly, but those who invested in the infrastructure, communities, and businesses that arose to support the growing population. This lesson is vital for modern investors: wealth is rarely accumulated overnight. Long-term investments in solid companies, real estate, or other assets that grow steadily over time often yield more reliable and sustainable returns. Remember, investing is not just about chasing the next big opportunity; it's about building sustainable wealth through informed and strategic decisions.  THE WEEK IN REVIEW: Aug. 11-17, 2024
Not enough just yet The Producer Price Index (PPI) and Consumer Price Index (CPI) readings for July were reported last week. Both showed that inflation is declining but is inching downward in an almost painfully slow manner. The decline from 3.0% to 2.9% in CPI year-over-year is an important psychological threshold, just like the unemployment number rising above 4% was important and signaled we had crossed a line that should cause concern. An inflation print below 3% is significant. The problem is it was only down 0.1%, which is not materially different from 3.0% or 3.1% and will not prompt the Fed to cut more aggressively than the 25 basis points (0.25%) markets have priced in for the September meeting. We still believe that a deteriorating jobs market is the thing that will cause the Fed to accelerate its rate-cutting schedule. The major issue is that if we continue to see jobs unravel at the pace we’ve been seeing over the past five months, we will likely be sliding into recession, and inflation will take care of itself via a decline in spending as a result of people being unemployed. We have been saying for months that the Fed risks driving us into a recession if it remains focused on driving inflation to 2%. The challenge is that the Fed has a problem juggling just one ball (inflation or price stability), let alone two balls (inflation and jobs). Trying to thread the needle of mitigating job losses and lowering inflation seems like a Sisyphean task; if you fix one thing, you immediately need to start paying attention to the other. It would probably be more beneficial for the Fed to work on stabilizing prices (which it can control to some extent through its open market activities) and allow the rest of the economy to create or eliminate jobs. For now, inflation is below 3%, July sales are still fairly healthy and unemployment isn’t out of control. It all adds up to a Fed that isn’t willing to move boldly on interest rates and risks being sidelined as events move faster than they can react. Market stages a quick comeback There was a lot of handwringing and worry a couple of weeks ago, with people screaming for an emergency 50-basis-point (0.50%) rate cut between Fed meetings. But after a very quiet first half and a pretty strong summer, the market, like a sleeping dog caught unaware, decided collectively to let off some steam. This sort of market action isn’t unusual, but it seems the violence and the speed of the sell-off on the back of a sleepy and undramatic first half was what threw people off. All of a sudden, we had volatility where we had none before, and there was uncertainty and fear. Fast-forward just one week: We not only made back most of our losses but are once more closing in on record highs, and volatility is back to levels prior to all the mayhem. In fact, we had the best week of the year so far. What happened? After the soft weekly unemployment claims sparked a rally the week prior, the data last week confirmed inflation was continuing to decline, consumer spending was still healthy and nothing new by way of an escalating conflict in the Middle East had occurred. Volatility dropped and all seems right again. But is it? Sure, it made a Fed cut in September more certain. But the numbers also ensured we would see a miniscule cut and that higher rates (albeit 0.25% lower) would still be with us. The same factors that drove markets the past two weeks are present. The economy is weaker, and many people already “feel” we are in recession or it’s just a question of time before we slip into one. There doesn’t seem to be any progress in the Middle East, and anything that happens will probably be bad rather than good. Plus, we’re headed into what could be the strangest election in U.S. history (at a minimum in our lifetimes). Our advice? Stay the course. Trust your plan, do not engage in market timing and avoid making decisions when you are emotional or stressed out. The volatility we just saw may return soon, and if it does, our resolve will be tested. However, we’re still in a solid place as we head into the last four months of the year. Coming this week
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Patrick HueyPatrick Huey is a small business owner and the author of two books on history and finance as well as the highly-rated recently-released fictional work Hell: A Novel. As owner of Victory Independent Planning, LLC, Patrick works with families and non-profit organizations. He is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Advisor in Philanthropy® and an Accredited Tax Preparer. He earned a Bachelor’s degree in History from the University of Pittsburgh, and a Master of Business Administration from Arizona State University. Archives
September 2024
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