Koenig Mortgage, NMLS# 207159

Sizable Shrink, too much theft:
Pre-Covid, shrink (a fancy word for retail store theft) was about $50 billion/year and 1.4% of retail sales. In 2021, shrink rose to $94 billion but declined to 1.4% of retail sales with less in-person shopping. Since then, it’s steadily risen. In 2022, it was $112 billion and 1.6% of sales, and in 2023 shrink totaled $142 billion and 2% of sales, the highest percentage since at least 2015.
Elliot F. Eisenberg, Ph.D.

Political Parties

Political Parties:
Voters who are fiscally and politically liberal overwhelmingly vote Democratic. Conversely, voters who are fiscally and politically conservative vote overwhelmingly Republican. Voters who are fiscally conservative yet socially liberal are too few to matter. That leaves voters who are fiscally liberal and socially conservative. They are a large group, and vote in large numbers for both Democrats and Republicans. They are the proverbial swing voters that politicians should focus on.
Elliot F. Eisenberg, Ph.D.

Interest Incurred:
As recently as 20Q1, interest on the public debt was $549 billion at a seasonally adjusted annualized rate. During Covid, rates collapsed and despite a rapid rise in the debt, carrying costs declined to just $516.1 billion in 20Q3. They have since steadily risen to $648.4 billion in 22Q2, $736.8 billion in 22Q3, $856.2 billion in 22Q4, and most recently $928.9 in 23Q1, and are rising rapidly. This is troubling.
Elliot F. Eisenberg, Ph.D.

Lost Lending:
Banks are currently experiencing rising deposit costs. If those costs can’t be fully passed to borrowers, profits will fall, reducing lending. It’s estimated that a 10% reduction in profits reduces lending by regional and smaller banks by 2%, and based on prior rate hiking cycles, a 4% lending reduction is possible. That’s likely to lead to a painful reduction in GDP growth of as much as 0.4%!
Elliot F. Eisenberg, Ph.D.

Pot Perceptions:
Last week was 4/20 or “fourtwenty”, the unofficial high holiday of weed/stoner culture. Since California legalized medical ma*****na (THC) in 1996, recreational cannabis is now legal in 21 states and D.C., and medical use is legal in 19 additional states. 46% of Americans say they have used ma*****na, 59% say it should be legal for medical and recreational purposes, and 30% for medical use only.
Elliot F. Eisenberg, Ph.D.

Dwelling Dollars:
The national median existing-home price fell 0.9% Y-o-Y in 3/23 to $375,700 from $379,300. Prices have now fallen Y-o-Y for two straight months, the first time in 11 years. Median home prices peaked during 6/22 at $413,800 and are now 9.2% off that high. As for sales, they declined 2.4% M-o-M in March after surprisingly rising 13.75% M-o-M in February and have declined in 13 of the last 14 months.
Elliot F. Eisenberg, Ph.D.

Market Moves

Market Moves:
In the rush to safety during the week preceding the Credit Suisse failure, the biggest gainers among commodities included silver, up almost 10%, and gold, up about 6%. The biggest decliners were crude oil, down over 10%, gasoline, down about 6%, and copper, down almost 4%. Bitcoin was a huge gainer, up almost 40%, and Ether gained over 25%. Importantly, it’s now been two days since the last bank failure!
Elliot F. Eisenberg, Ph.D.

Dwelling Dollars:
We are entering peak home selling season. The months with the highest premiums over asking price are March (8.9%), April (9.2%), May (12.6%), June (10.7%), and July (10%). The five days when sellers are likely to receive the highest premium over asking price all happen during the third and fourth weeks of May. Lastly 5/23 is the day when the premium over list is tops at 18.3%.
Elliot F. Eisenberg, Ph.D.

House Hunting:
Home sales eased for the 12th straight month in 1/23, the longest streak of monthly declines since 1999 when data collection began. Sales fell to a seasonally adjusted annualized rate of 4 million, from 4.03 million in December, and 4.1 million in November. The increasingly tiny declines suggest the sales bottom is here or fast approaching. Prices rose 1.3% Y-o-Y, the smallest rise since 2/12. Y-o-Y prices will soon decline.
Elliot F. Eisenberg, Ph.D.

Starter Shortage:
From 1976 through 1979, 418,000 entry-level single-family houses/year were built, 34% of all new homes constructed. In the 1980s, the number fell to 314,000/year, still 33% of all new homes built. In the 1990s it shrank to just 207,000/year, and in the 2010s about 150,000/year. During the just completed 2010s, starter homes averaged just 55,000/year, or just 7% of new residential construction. Yikes!
Elliot F. Eisenberg, Ph.D.

Valuable Valentine:
In 2023, persons in a relationship plan to spend an average of $187 on Valentine’s Day gifts, down from a record $208 in 2022 but up from $144 in 2021. More interestingly, those in a dating relationship expect their partner to spend $148, while those who are married expect $111 in gifts from their spouse. Similarly, the longer the relationship the lower the financial expectations. Don’t take anything for granted.
Elliot F. Eisenberg, Ph.D.

Landline Losses:
As recently as 2004, 90% of US households had a landline phone. By 2008 it was 80%, by late 2010 it was 70%, and by mid-2013 it was 60%. In mid-2015, landlines were in just 50% of households, and by late 2018 the percentage was down to 40%. By the end of 2021 it was 30%. At this rate, by 2030 there will be no landlines left.
Elliot F. Eisenberg, Ph.D.

Rural Redefined:
In 2010, the percentage of the U.S. population living in rural areas was 19.3%. Today, the percentage is 20%. This is not due to some Covid-induced movement. Rather, the Census Bureau has redefined the definition of an urban area from one with 2,500 persons, which has been the definition since 1906, to now one with 5,000 persons. Using the old definition, the rural population would have shrunk to 18.7%.
Elliot F. Eisenberg, Ph.D.

Plummeting Prices:
As recently as 2/22, M-o-M house prices appreciated 1.9%, and in 3/22 they rose 2.1%, the two strongest months ever. Then appreciation rates slowed. In April appreciation was 1.7%, in May 1.3%, and in June just 0.2%. Then prices started falling. In July prices fell 0.5%, in August they declined 0.9%, and in September they sank 0.7%. The housing market went from scorching hot to stone cold in six months.
Elliot F. Eisenberg, Ph.D.

Perfect Party:
45% of U.S. adults consider wishing friends and family a happy new year an essential part of a New Year’s celebration. At 36%, the second most popular thing to do is watch the countdown on TV, followed by watching the ball drop in NYC at 30%. In fourth at 29%, is a midnight kiss, followed by a midnight champagne toast and enjoying fireworks/firecrackers at 23% each.
Elliot F. Eisenberg, Ph.D.

Healthier Housing:
Despite rising rates and recession fears, because of the top-to-bottom redesign of the home mortgage market resulting from Dodd-Frank and other laws and regulations, which have culminated in substantially tighter underwriting standards, it would take a 40% to 45% decline in home prices to cause damage like what occurred during the 2006-2009 Housing Bust. Moreover, back then the average price decline was 28%. This time really is different.
Elliot F. Eisenberg, Ph.D.

Soccer Score:
Looking at all World Cup winners from 1962 through 2018, economic analysis suggests winning the WC boosts domestic GDP by at least 0.25% in the two subsequent quarters primarily due to export growth. For example, 1.12 billion people watched the 2018 WC final and that increased exposure boosted global demand for French products. Hosting the WC does nothing, I guess all stadium interiors look identical. Congrats Argentina!
Elliot F. Eisenberg, Ph.D.

Low Layoffs:
Initial jobless claims, a proxy for layoffs, fell to 222,000 for the week ending 11/18/22. While that is up significantly from the lows of the spring and fall, the last time first-time claims were lower than they are now in November was 1969! Firms are clearly hoarding workers as they are so hard to find and train, and those who are laid off seem to find new work very quickly.
Elliot F. Eisenberg, Ph.D.

Crypto Collapse:
Once the third-largest cryptocurrency exchange, FTX recently declared bankruptcy. It’s hard for an honest exchange to fail, FTX wasn’t. It lent billions of its customers’ crypto to a sister firm who used the borrowed crypto to make failed bets. Once this was discovered, the crypto involved, as it has no real value, instantly became virtually worthless. As there is no government-backing or regulation involving crypto, these shenanigans were probably legal.
Elliot F. Eisenberg, Ph.D.

Manufacturing Momentum:
The latest reading of October U.S. manufacturing activity came in at 50.2, its lowest level since May 2020. Moreover, the index has been steadily declining since peaking at 64.70 in March 2021. A reading above 50 indicated activity is expanding, below 50 activity is contracting. If manufacturing enters recessionary territory, which is very likely as soon as next month, it would be manufacturing’s fifth recession since the Housing Bust.
Elliot F. Eisenberg, Ph.D.

Camera Clicks:
In 1951, global cameras sales totaled one million. By 1980, that number had risen to 15 million, and by the late 90s, sales approached 40 million. Digital cameras made an appearance, and sales hit 121 million in 2010. Then the advent of cell phones killed standalone cameras and in 2015, camera sales were just 30 million. By 2021, sales were just a paltry eight million.
Elliot F. Eisenberg, Ph.D.

Beijing Behavior:
While Beijing was to release its GDP data today, it’s been postponed indefinitely. Hours before that announcement, China’s top planning agency said growth had “rebounded significantly” and remained “outstanding”. A raft of other economic data was also suddenly and indefinitely postponed. These delays are all you need to know about the current condition of the Chinese economy, which grew a dismal 0.4% in 22Q2, and the role economic data plays.
Elliot F. Eisenberg, Ph.D.

Tough Treasuries:
The interest rate on the 10-Year Treasury has risen for 11 straight weeks. This is the first time this has happened since at least 1978. Until this recent streak, the longest such run had been nine weeks on just two occasions, once in the 1980s and once during the aughts. Eight weeks rate rises occurred just five times over the same time-period. There have been seven runs of seven weeks.
Elliot F. Eisenberg, Ph.D.

British Battering:
August UK GDP declined for the second time in three months. Moreover, service activity also fell in August, and industrial production and manufacturing activity are sinking. Additionally, option bets on further pound weakness are at their most extreme since Brexit and markets have lost confidence in the government. Were it not for repeated massive emergency BoE market interventions, things would be much worse. The UK is slipping inexorably into recession.
Elliot F. Eisenberg, Ph.D.

Mortgage Mayhem:
Mortgage rates are getting hit twice over. On 9/27/22, the 10-year Treasury briefly hit 4%, up from 1.52% on 12/31/21, the fastest rise since 1981, as inflation fears worsen. Additionally, the spread between the rising 10-year Treasury and the 30-year mortgage is approaching 200 bps, the largest gap since the Fed raised rates during the Housing Bust. The gap is so large because investors fear more unexpected rate hikes and want protection.
Elliot F. Eisenberg, Ph.D.

Troubling Transportation:
The Dow Jones Transportation Average, which tracks 20 large US firms including trucking, airlines, and railroads fell 12% month-to-date, double the decline of the S&P 500. Declines in transportation suggest less need for goods, materials and travel, unsurprising given high and rising rates. Overall, the index is down 26% this year, slightly worse than the 23% fall in the S&P 500. This is yet another recession warning worth heeding.
Elliot F. Eisenberg, Ph.D.

Awesome Ale:
US per capita beer consumption is tops in North Dakota at 45.8 gallons/year followed very closely by NH at 43.9, and Montana at 41.0. SD is next at 38.9, WI follows at 36.2. In 26th, the median state, is IL at 29.1. NY and NJ are tied for 48th at 22.4 gallons/year, with CT next at 22.1. UT is last at 20.2. BTW, 23 gallon/year equals 8oz/day.
Elliot F. Eisenberg, Ph.D.

Forceful Fed:
While the 75bps hike in the Fed funds rate was fully anticipated, the surprise was the committee’s plan to raise rates another 125bps at their two remaining 2022 meetings. Moreover, they now finally forecast the unemployment rate to rise to 4.4% by 1/1/23, a rise of almost one percentage point from its 7/22 low. That large an increase is almost always accompanied by a recession. The soft landing has surrendered.
Elliot F. Eisenberg, Ph.D.

Sizable Strikes:
In a historically strong labor market, with two job openings/unemployed person, and a labor friendly administration in the White House, it’s unsurprising that in the first half of 2022 employees at 1,400 workplaces filed unionization petitions with the NLRB, up 69% Y-o-Y, and the highest level since 2015. Moreover, through 8/15/22, 15 strikes involving at least 1,000 workers have occurred compared to 16 in all of 2021.
Elliot F. Eisenberg, Ph.D.

European Energy:
With European energy prices stratospheric, the pressure on governments to intervene is profound. However, all solutions aren’t equal. Capping prices is the worst solution; it encourages consumption by making energy artificially cheap. A subsidy on the amount of energy consumed by the median household is OK, it discourages demand beyond the subsidized quantity. Ideally, give sufficient cash to poor households. Price signals are maintained and fear of freezing is eliminated.
Elliot F. Eisenberg, Ph.D.