Category: Business

2022 Week 40

Notes, thoughts and observations - Compiled weekly


Raw Materials

Two out of every five people on Earth today owe their lives to the higher crop outputs that fertilizer has made possible. - Bill Gates

  • (Clips that Matter) :: Lumber futures are back to 2020 levels
    • Prices are notoriously volatile, but the last 2-3 years was crazy
    • Changes in the housing market, changing import rules, weather, and labor shortages were just some of the factors generating big swings
    • Prices have been softening ever since a war-driven rally last winter.
    • Housing construction seems likely to diminish as the Fed pushes mortgage rates higher.
      Regional real estate sales graph

THOUGHT :: Price decline is more a predictor of home builder activity and outlook

Labor Market

Maintain austerity in good times to avoid layoffs in bad times. - Carlos Slim

  • (Clips that Matter) :: American workers are confident they can quit.
    • The “quits rate” is best understood as an indicator of worker confidence.
      • Theory: People don’t quit their jobs unless they are sure another one is waiting or available
      • Employers didn’t have to compete for talent like this until the last few years
      • Could change if the Fed generates a severe recession that raises unemployment much higher… which seems to be their goal.
        Regional real estate sales graph

THEORY :: Idea that labor shortage will become a surplus ignores the demographic facts and long COVID numbers

Real Estate

Location, location, location

  • (Calculated Risk) :: Case-Shiller: National House Price Index “Continued its Deceleration” to 15.8% year-over-year increase in July

    • FHFA: “House prices fell nationwide in July, down 0.6 percent from the previous month”
    • MoM decrease in Case-Shiller was at -0.24%
      Regional real estate sales graph
  • (Wall Street Silver) :: Everything is fine …… 🔥 🔥 🔥

    Regional real estate sales graph

  • (Liz Ann Sonders) :: Average 30y mortgage rate now back to late-2008 levels

    Regional real estate sales graph

OPINION :: Rates matter, houses are expensive, buyers are stretched.. prices will decline


It’s a recession when your neighbor loses his job; it’s a depression when you lose yours. - Harry S Truman

  • (Liz Ann Sonders) :: Unbelievable decline in shipping rates … cost to send 40-ft container from Shanghai to Los Angeles has fallen by 74% from peak and is back to August 2020 levels

    Regional real estate sales graph

  • (Mohamed A. El-Erian) :: For the history books: 1-week move in the yield on UK 30-year government bonds This 1-week journey

    • 270 basis points from bottom to top and back—was essentially unthinkable for most economists market participants, and policymakers.(Remember, these are long duration UK bonds)
  • (John Ellis) :: Levels of Stress

    • Around the world, financial markets look increasingly distressed.
    • At the heart of the turmoil is the relentless rise of the American dollar and global interest rates.
    • The DXY, an index of the dollar’s worth against a basket of rich-world currencies, has climbed 18% this year, reaching its highest in two decades.

OPINION :: Dollar remains strong, Europe in energy induced recession, Asia not sure