Economy Notes

June 30, 2018

  Thoughts on what’s happening

  • Our notes were dead on last year saying that Crude would not blossom up to a $75 range as projected by the experts. We see prices remaining flat below that number. We were also correct when we said Gold would drop down below the $1250 range as it has. On the construction side we predicted declines in lumber and copper which have also occurred and will continue.
  • We were also correct when we said auto sales would peak last year and decline in 2018 with used autos coming off lease plentiful and the overall public not all that interested in a huge monthly payment. The next 12 months will see a hot used car market.
  • Housing is a great opportunity for the upper 5% with interest rates not being a key factor and pricing expected to see a continuing downward slide in value. On the new home side we predict a sizable decrease in sales (actual contract sales) moving forward as “what buyers can afford” and “what builders are constructing” are worlds apart.
  • We have been predicting an across the board movement towards increased frugality which is and will continue to impact big box retail, non-essential items, clothing, food, even communications. Everyone’s feeling the pinch and cutting back is the name of the game with fewer restaurant meals being sold, cord cutting on cable and even healthcare changing from a preventative mode to a bare necessities mode. Trump needs a middle-class tax cut and since May we have heard rumblings of such. Companies employing minimum or near minimum wage workers will feel a double whammy with sales flat or worse and workers jumping ship to firms offering higher hourly rates. The pressure will be how to pay employees more while cutting expenses & having weak sales.
  • Inner city businesses will continue to have a difficult time as the cost of simply doing business in the city grows out of control. You can’t keep raising taxes, tolls, parking and fees while the general population sees their buying power stuck at 1990 levels.
  • We’ve been preaching the merits of suburban living for years in opposition to the “experts” claiming that millennials and seniors wanted to live in a walkable downtown neighborhoods. The 3-C’s of city life (cost, crime & citizenry) will this year highlight the reality of the ongoing big city exodus. The upcoming mid-term elections will ignite this movement.
  • With the Fed raising interest rates twice this year we expect to see a third bump upward yet we cannot figure out the logic for such a move. It will indeed hurt consumer consumption for the balance of the year putting a damper on holiday retail sales.

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