Ceasefire - Now What

0:00As expected, we got that cease fire yesterday. Again, it appears to be a two-week ceasefire while both parties get together and hammer out the details. I do have a couple of questions. I'm sure you do as well. I listed, I don't know, let's call it five questions. I am asking myself as we see the stock market race higher, bond rates fall. These are the questions I have for myself. I'd love to see if you have any questions as well. Sometimes your comments help me kind of articulate or research other details. So let me know if you have any additional questions now that this ceasefire is in force. Number one, obviously needs to be will it hold? We are operating in an environment where there are multiple parties and it will only take one party to do one thing and this ceasefire implodes. So my first question is, will it hold for the two-week duration as we hammer out details? Number two, what happens to the straight of Harmou's operations?

1:10It appears that we are not going back to February. What do I mean by that? In February, the straight of Harmou's was basically free-flowing traffic. Now it appears that there will be some kind of toll or charge to transition through the straight. The next question I have for myself is if you are a ship owner and your ship has been stuck for a month or six weeks or whatever it's been, will you send that ship back? I don't know the answer to that. Think about it. Your ship owner, you've got ten cargo ships and six of them have been stuck. Might you decide once you get your ships out to not send them back, at least for a little while? Seems reasonable to me.

2:10Number four, Harmou, one, two, three, yeah, number four. How much damage has truly been done to oil infrastructure? Pipelines, facilities. And the question there is obviously followed up by how long do we get back to quote-unquote normal operations? I've heard some people say, and I have no reason to believe or frankly not believe these, but some people are saying full operations will not be achievable until 2027 or even 2028. So those are the kind of questions I have. Let me know in the comments below if you have other questions. Mark Zandy, Mark Zandy has been out and rather negative for quite a while. Mark Zandy says the job market is sending signals that we are already in a recession.

3:12Interesting, right? We've seen retail sales up. You know, we haven't seen weekly jobless claims break yet, but Mark Zandy says we are in a recession. Reading an article about the American populace and specifically the middle class. Once again, folks, the middle class is shrinking, but what they fail to tell you is the upper middle class. So up, upper middle class is now the largest group. Folks, at the end of the day, I'm hoping by now it is painfully obvious that you must own assets. Specifically, if you own assets that pay the mortgage, i.e. rental properties, investment properties that produce cash flow that are held for a decade, that's like magic. It's sorcery. How easy it is to become wealthy if you hold assets for a decade.

4:14Again, it is true. The middle class is shrinking, but don't get it twisted. Many of us are getting out of the middle class and moving up to the upper and ultimately to the rich category. So again, it just takes time. It takes a season. It takes sacrifice. It takes work. It takes all of those things. The upper middle class is now 31 percent. 31 percent of American households are upper middle class. That is three times, three times larger than 1979. I'll say that again. The upper middle class is three times bigger than 1979. Own assets. It is really that simple. Read an interesting article about France. France has decided and already executed on pulling all of their gold out of the federal reserve.

5:14Again, folks, one of the things I am watching is the cell America trade. This is frankly just another example of a quote-unquote friend, not having faith. They are pulling their assets from America and moving them over to Europe. So an interesting report about lows, right, lows, home improvement. The CEO says they are investing $250 million. That is a quarter of a billion dollars in training plumbers, carpenters, and electricians. CEO says that these trades are the key to our future. Again, folks, you really have to think about whether going to college is the right thing for you today. Maybe it's the trades. I've already told you a couple of times that the average person in my Rolex is over 60. For every five people that leave, only one or two are joining. These are not good ratios.

6:16In fact, if you are even half an animal and you're getting into the trades, you will dominate. Weekly mortgage apps are down for the first time in quite a while on a year-on-year basis. Purchase applications are down 7% year-on-year. Refi demand down 4%. But man, have you seen the 10-year note this morning? It is collapsing. So again, it will be interesting to see what happens to mortgage rates as we get through the week. Will it be enough to get this party started again? Will we head back to 6% or the high five? Let's hope so. One interesting thing about mortgage demand is FHA. Apps are actually up 5% week on week. So an interesting report from Arbor Data Science. Arbor Data Science was studying the American consumer. And across their categories, here are the top four areas where our money is spent.

7:20And I thought these were interesting numbers. Number one is housing. We have heard, at least I have heard for a long time, that housing costs are now 33-43% of your monthly spend. But according to Arbor Data Science, when you take the average across the American consumer, it is only 20%. Groceries, aka food, 13%, recreation, 11%, and finally savings at 10%. Again, this goes against the talk track that the media gives us, housing 43% of spend. Average American doesn't have $400. Well, according to Arbor Data Science, we're putting away 10% of our paycheck. So something is not jiving. Maybe the negative talk track is just wrong.

8:23Maybe we are a little better off than the media lets on. It's an interesting thought experiment. Wall Street has finally come out with their CPI expectations for Friday, and they are not good. But frankly, if you're in my audience, you are not surprised. I told you that I expected headline inflation to go up by 0.9. Wall Street nailed it, 0.9. Wall Street has said that they expect CPI headline inflation to be 3.3. What did I tell you? Folks, it's going to have a three handle. It is going to be ugly, and just for memory, it was 2.4 last time. One of the reasons that CPI is going to go up so much is because last year, we posted a zero. So again, a 0.9 just goes right on top of 2.4 and you get to 3.3. Core is expected to go up 0.27 to 2.7 last was 2.5.

9:26So again, CPI aka inflation, consumer inflation is going to scream higher on Friday. Real world oil prices, this is obviously before the ceasefire, hit $144.42 on Tuesday. That was a Tuesday print. That is actually the highest record ever. That was basically for oil due today. People were scrambling, right? The Philippines, Thailand and many other countries are short of oil, and they are willing to pay up. New York Fed report says households are more pessimistic about current and future financial situations. One year inflation expectations are up to 3.4%. That is not shocking. Consumers like you and I go to the gas station, fill our cards up and we see how high a gallon of gas is. Fed President Goolsbee says it's not the Fed's job to make the stock market or the president happy.

10:31I thought that was actually a pretty good line, and I agree. It's not the Fed's job to make the stock market or the president happy. I thought that was a pretty good quote. Also, Fed President Goolsbee's stagnation recession from oil price rise would be the worst case scenario. We agree. $5 gas will affect the supply chain. Again, folks, $5 gas doesn't only hurt you and I, the consumer, but it hurts all the stuff that's delivered to be afraid and trucks and diesel. Anything that takes that. So again, it will affect the supply chain. No obvious cookbook for the Federal Reserve in stagnation. Oil prices rising is a stagnationary shock. So we've got at least one Fed president saying the word stagnation, thinking about stagnation. Even though Jerome Powell doesn't want to do that. I wrote down shocking, not shocked, that a last minute Iran deal was done.

11:34Apparently it was negotiated by Pakistan's Prime Minister for two weeks. We will see where this goes. Lastly, I just want to say thank you for watching. Don't forget to like, subscribe, comment. I always forget to do that. We do these live shows five days a week. If you are a landlord, I strongly suggest you reach out to steadily. See if they can get you better insurance at better rates. They helped Olivia and I save over 20 grand in 2025 as we sent every policy to them. Some they saved, some they didn't, but when we netted it out, they saved us 20 grand. And of course, join school. It is the best place to be a wealth builder. Get around 600 plus other wealth builders going the same direction. Introduce yourself, be active, ask questions, comment, and just get the big virtual hug from our amazing community. Take care, have fun. We will be back tomorrow later.