FREE MONEY For First Time Home Buyers? (WATCH THIS)

0:00Nicky Glazer, this stunning tour. The thoughts of death I don't like to dwell on them for longer than like 10 or 15 hours a day, so... November 19th, Yamabah Theater No wonder women rushed to have kids were being trained for it since we were kids. They're like, here's a baby doll. Here's an easy-bait coffin! I got one of those, I stuck my head in it. I was like, I want out of this narrowness. Tickets on sale now at Yamabah Theater.com Don't miss Nicky Glazer, Yamabah Theater! Fall has never looked or tasted this good. Sweet Greens Fall Harvest Menu is back with seasonal favorites, dressed to impress and made to be devoured. Warm roasted sweet potatoes, crisp apples, maple glazed Brussels, and crave worthy flavors in the autumn harvest bowl, maple glazed salmon plate, and roasted bacon Brussels side. The season's most desirable menu has returned to sweet green. Featuring Fall's best dressed. Make your move. Order on the Sweet Green app.

1:00Alrighty folks, I don't know if you were with us last week, but Taylor was like omniscient. He said, if the 10-year note blows through 5%, watch out something might break. Well, if you're not paying attention, in simply seven days, the 10-year note as of right now is 5.27 up another 9 basis points. So we're going to talk about that. We're going to talk about what historically has happened when the 10-year note races ahead because something always breaks. We will talk about Torsten Slock and his thoughts on a bank run caused by AI. We will talk the big week. We got two massive numbers this week. We got PCE. We got jobs. And of course, we got a Fed meeting coming up. And if we have time, we'll talk about a diesel export ban because again, all of this stuff is going on right now. Taylor just wow so much stuff going on. There's a lot. And I'm not going to get into any of this because I'm going to fire one back at you. This is your area. Not mine, man. Home ownership promise act.

2:03What? What do we have going on here? You got to break this down for me because I was scratching my head and thinking and I'm like, you know what? I'm not going to put too much time in this. I'm just going to ask Michael. There you go. So this is another attempt by the government to let's just call it reinvigorate restart the housing market, right? The housing market in general has been in a recession arguably for three years, probably going into a depression with rates over seven and a half now heading to eight home builders. It's all bad in real estate and government officials realize that their constituents can't afford homes. So instead of fixing the supply problem, which is hard and convoluted and tough to do, they are going after the easy side. So the home ownership promise act is well intended, I suppose. But going to be financially destructive. So what is it in a nutshell?

3:07First and foremost, any first time home buyer at any income level could qualify. So there is no income threshold. Second, it could potentially give a down payment all the way up to 50 grand. All you have to do is save 10 grand. So as I've read the act in its current form for every one dollar that I save the government kicks in five with a max of 50. So if you do the math, I saved 10 grand. The government gives me 50. Now, why is this financially destructive? Well, what we have today, in my opinion, is a supply problem. The low end of the housing market doesn't have enough inventory. People are stuck, no trade ins, stupid land, landlords like me, we own a lot of that stuff. And we've owned that stuff for a long time. And they're not building more, right? It's just has been built since the 1950s. So if this gets approved, we are going to see rabid dogs hunting for low end home.

4:16And you know, the last caveat is you need to buy below the median. So you're not going to be buying three, four, five million dollar mansions with this money. You're going to force everybody to the low end. And there's just no inventory. And my rough calculation, Taylor says this will increase prices by 10 to 15 percent almost immediately. Just in the low end, are you saying or across below the median below the median is going to pop. So they will match your $10 with $50. And you need to buy below the median. What's what's defining the median? The local median average. So they can probably be the MSA, right? Because I was just looking at this and go and listen, if you're putting down 60, which is 10, get matched with five, 50 at 5 percent. That's a $1.2 million house. But you're like, no, no, no, no, no, no. But that might be the case in San Fran, by the way. No, for sure. I mean, there's plenty of markets with seven figure medians.

5:16Yeah. And you know, this will be, this will be the worst at the lowest price points. Think about a market whose median is 250. And you just unlock, you know, all of these folks, you know, you know, they have three grand saved up. So now they have 18, right? So they have three plus 15. And you know, there's 12 listings. You're just going to create a just like bidding. Oh, yeah, this is, this is, this is every government. You know, basically project that they begin working on and barking on, you know, stimulus checks like well intended, but also they flush inflation in the market in 2022. That was the highest we've seen in decades. Johnny is not respected. Free money is spent. Willie Nilly, the only people that are going to benefit from this will be real estate agents and mortgage brokers. Because again, demand will skyrocket. Yes, skyrocket. So again, we will go from four million existing home sales to five and a half like, or a patient Michael Zuber to what I mean by that is the ability to sell now,

6:19sit on your hands for a while, wait for an opportunity and then redeploy assets. I'll go one step further. Fucking Mike Zuber is going to repeat what he did last time in about six to nine months after this passes, I will sell every single family home I own and 1031 into destroyed commercial properties. And I will go from eight to 80 on steroids. That's what I did last time. I'll go from, I don't know, 37 to 500. It'll just be, it'll be a windfall for Michael Zuber. It'll be crazy. I love it. Yeah, so again, I am not a fan of this. You know, I know people in real estate are struggling and starving and, you know, this might feel good in the moment, but this will, this will leave us in a worse spot a year from now, two years from now. Yeah, I mean, the moment will be higher. Well, not only that, but just think about inflation. If we have inflation right now without a problem in the without without any home selling, which homes, you know, depending on which statistics you look at, the housing market trickles down to be 15% of the economy, 15% of the economy right now is in a disinflationary kind of market. That a lot bang. Yeah.

7:26And unlocked and with the, you know, galloping gasoline and a match to this is this is this is exactly what I would call this, right. We have a very, we have a fire that's smoldering it has been lit in a while, but they're still heat there. Right. We're still doing four million transactions. Yeah, not like we're doing zero, right. But you come in with some freaking gasoline and port on there to it'll be a forest fire. It's the It's buying votes at the end of the day, too, is it is a big part of what's happening here. And again, to your point, on surface level, if you don't understand the economics behind everything and how the economy functions at large and the reverberating cycle that you start off there, it does sound great. At face value because it probably at the end of the day is not really a massive chunk of the government's spending like even if everyone took them up on it probably the dollar amount isn't all that impactful at the end of the day. It's just the domino effect that you end up putting in place.

8:28Yeah, we so again, the only people will benefit is the people that strike first. It's kind of those, you know, they'll get an artificial bump. It'll feel good. Again, in two years, two years after this program is launched, the only people that get richer are the people like me who own stuff going into this. This is just bad. Every bit of of intended low end stimulation trickles back through to the rich. Correct. It does. That's just that that's the economics 101 and it it feels good on the onset and it gets votes and then that that begins a popularity contest and it perpetuates into that person becoming office. And then if they ran on that and that's how they garnered the votes, people demand the action that they put it. So I think this is a well intended disaster waiting to happen. And if it does again, hey, I'm only one vote. Actually, yeah, I'm only one vote. So I would not vote for this, but if you give it to me, I'll take, you know, this will probably hand me three to five million dollars. And this is like, you know, when people fault rich folks for taking advantage of tax policy, and it's like, okay, well, I'm not saying that I think it's the right thing for the government to do.

9:36But if you put that situation in front of me, I'm going to take advantage of it. I'm just doing myself in the service at that point. Yeah, so again, I think this is a horrible idea, but hey, lots of horrible ideas get created. And if it does, I'm going to take advantage of it. I'm 100% you're not there. You go. Let's move on to something more fun. Cause I actually saw your Instagram post on Tuesday, which was the day after we recorded. Basically, saying how it was on this podcast saying if the 10 year runs ahead. And boy, I mean, it's up like, I think it's a 29 basis points since we spoke last week. Because I think it was, it was it was sub five when we chatted. Yeah, it was because because we were, I was saying there's a bit of a glass ceiling there. Right. And if it goes through slowly, was the entire point of this that goes through slowly, then the market can, can digest it. If it smashes through, I don't think the market can. And I'm actually surprised because obviously it smashed through. It's match. Yeah, to be clear, 30 basis points sense that point, which is in a week. That's the, that's the seismic nature of like a 10% drop in the S&P 500.

10:38Oh, for sure. Yeah. So something to the extent of that. So it did do that. And I'm actually impressed at how well the stock market is hanging in, even though we've got that massive move. Now it's, now it's bleeding right now, the stock market is selling off. Don't get me wrong. But it's not to the extent that it's not the gusher. Yeah. Yeah. Yeah. And sometimes it takes things, you know, time to leak through or it's the other side of this. And, and the markets telling me like Taylor, you're an idiot. The reason this is moving so much higher, so much quickly or so quickly is because listen, economic growth is, is there and sustained and GDP now as we talked about last week is, is at a 5% real rate somewhere in that ballpark. Yeah. And at the end of the day, if you look at a GDP that's, let's not even call it 5%, let's call it 4% or 3.5%, and you tack inflation at 3 on top, like where would you anticipate the 10 year treasure to be? Yeah, exactly. Yeah. And this isn't, this isn't out of bounds. It's just the scary nature of what's happening is just the velocity of the movement because that's where things start to come and glued.

11:42And then the other part of it is, is this is like a real political problem as well, because you've got Scott Besson saying, I'm going to control the long end. I am the house. I am the house. Yes. Comment of I am the house and clearly like, well, you are. House is on fire, buddy. You're incapable of that, my man. Like that's proven in spades. The market just said, don't open your mouth like that again because you look foolish right now. That was bad. Well, this is, this is my big question, because again, I'm always a student of history, because I don't know that it repeats, but it certainly does rhyme. And I did find someone he did some research on this is named John Roke R O Q U E if people want to look him up 22 V research. I don't know the data behind it, but the thesis makes sense to me. So apparently he went back to 1970 and he found 16 one six instances where the 10 year note accelerated higher. And according to him, something always broke. And that's really my question for you, because again, the 10 year note is as we just said, right, a 30 basis point move in a week is like a 10% drop in stocks.

12:46Something has to break, right? We can't have nine basis points every day for the foreseeable future without something breaking, right, Taylor? Yeah, and one of the one of the great investors I can't attribute it. Maybe it was more about fitter maybe it was Peter Lancer, whomever was I don't know, but they said, listen, interest rates are a gravity. So the higher interest rates go, the harder the gravitational pull up and and so like you would think in that nature, it makes sense. Listen, if gravity gets a lot hot, a lot more powerful, and it's going to suck down the stock market. And when you look at those, I saw that report too, and you looked at the 16 underlying instances, it was interesting to see what they were because you had them in natural times that you can think about like, hey, 2022 inflation just got away from us. So that one made sense, right? And you had interest rates pop very quickly. Pain is coming, Jerome Powell, Jackson, yep. Yep, yep. But you had another instances that that weren't as, you know, explainable, you had a 1987. Flash crash, it took place. And there wasn't any real explanation as to why that took place, but bang as soon as it happened, then all of a sudden you have this mysterious 22% drop in the S&P 500 day.

13:56Right. And no one's been able to really pinpoint that instance that that was I've done some research on 1987 in the last 24 hours, because I incorrectly in one video said, wasn't that long term capital management and it wasn't that long term capital was 1998. Right. But so I've gone back and looked at a seven, they do call it a flash crash. And the only thing again, I went pretty deep on this. They were talking about there was a potential proposal for tax changes, which was like the spark that caused this and then the algorithms took over and it was look out below. Yeah. So that's why they call it a flash crash is just the machines went nuts. I because so I wouldn't say that because the algorithm trading maybe it was taking place there in hedge funds in very early adoption. And that would make sense because maybe that was the earliest iterations of these. Yeah, they had the controls and all the self perpetuating cycle just got nastier than it does now.

14:56But the quantity of trading wasn't merely to the extent that we have it today, but maybe the quantity of trading today has more sophistication and then when things start to go, it pushes it hard and then maybe those quants understand the other side, OK, now there's real value and they flip very quickly into a seller, I'm sorry, a buyer from a seller. But yeah, there's never really been a pinpointed 1987. This is what caused it. This is why it happened. Yeah, the nature was was the fact that you had that massive movement higher in rates right before it's like, you know, it's interesting. Where is it? Is it happenstance is a causative, whatever it is, like you look at the inverted yield curve and the inverted yield curve took place right prior to COVID. And again, I'm not saying that that caused COVID by the way, you say, but like those things happen to take place at the same time when the history books, they will always be linked. Yeah, yeah, which is just interesting, right? And so, but, but no, just by nature of what it is, the 10 year treasury number is the most important number financially to the world.

16:04Because it's the it's quote unquote risk free rate of return, right? It's where all risk or all interest is kind of this where it all starts, right? Everything, everything gets compared to that. So all borrowing is effectively at the corporate level is a function of where the 10 year treasury is. So as the 10 year treasury goes rate, the rate goes higher, all the debt finance out there that is due for refinancing or new debt that's taken on is all going to re rack at a higher interest rates and higher interest rates and the rate is compressed profitability. It's like you and me going to take out a credit card and you have a really good rate and I have a really bad rate like I can't take on as much debt because of that because it would be so, you know, burdensome to me. So everything, the 10 year treasury far and away, no questions asked is the most important number to the financial system of the world. So I don't know if you have this, but I'm going to ask anyway. Last we were talking, we talked about the 10 year, 5% being the glass ceiling, we were just below it, it blew through it like hot knife through butter. Have you looked at the chart and thought about what the next resistant was, is just a round number like six or I mean, where does this thing go?

17:11Hard to find resistance when you all suddenly are at a point where we haven't been since 2002, right? Where is the 20 24 years? It's been a while since we could since we could find that I haven't I haven't looked at it that no I think this is where you're in no man's land and that's the reality of it and that's the scary nature of it is this is just now a function of buyer and seller demand and that that's what it is and the narrative. Here's the positive to it. I don't know when the narrative could I don't know how the narrative could give worse than it is right now. You've got you've got Iran reflaring right you've got oil repopping you've got every country in the world effectively right now with debt rates that are just unsustainable you've got a fed treasury. I'm sorry not a fed treasury treasury secretary that says I'm going to be the Berlin wall and stop things here and then the Berlin wall topples and everyone runs through and did you hear what best said yesterday I got a quote what did he say I hope the fed keeps an open mind and doesn't hike into an oil shock sounds like he's begging now.

18:19You say you know what I I was very clearly on the don't hike train as well right now and I pivoted before just because it was so natural to say like to go against 95% or whatever. Yeah into weeks before it was like 70 and I'm like it's going to be really hard for them not to move now but I was certainly on the I was certainly on best on side. Listen don't let us supply shock impact fed decision we're going to wind up chasing her tail and I stand by the fact that we're going to wind up chasing her tail but in the defense of wash he said like listen what we need to do is go off a oil price shock becoming a broader inflationary shot and I think that was the best line of his presser just to say like listen guys this is you know precautionary as much as is anything else because if this starts to spiral we're behind the curve we've seen what happens when we get behind the curve and that's the environment of 2022 yeah well let's talk about let's talk about October because I think you just did an Instagram wheel again you do an amazing job five minutes of value in 60 seconds I don't know how you do it.

19:28But we got two critical numbers this week PC and jobs I personally think October is locked in already but you were pretty adamant that these two numbers might get us there what what are your thoughts on PC and jobs this week. Yeah so the one that gets us out of jail of another rate hike that I think is not improbable to happen and I don't have any crystal ball here let me be clear but just looking at the jobs data the directionality of the jobs data it's been broadly a slowing jobs market and then we got one nasty nasty good right yeah good news is bad news and so odd to be saying this way but we got one nasty number which was a really significant pick up and hiring in the month of August and that was what put them in a scenario where they were back to the court and they had the height. Yeah given how bad their data is I think that that aberration that we had last week or last month rather get smoothed out and either it just gets revised away or this month looks worse just to get us back towards where trend was where trend was was about 50,000 jobs a month.

20:39That's we posted one 60 or somewhere between 150 and 160 which was just massively outside the realm of what anybody had imagined which painted that fed into the quarter they had a hike. Yeah so you're saying the Friday jobs number what's called BLS is the most important so you know reading between the lines you think anything over a hundred again kind of a repeat and there's not a big revision to the previous month again paint something new or corner is that yeah and I don't necessarily think it's any more important in the PC I just think it's the one that they literally have no idea what. Yeah because PC if you guys don't know it could be basically calculated within a within a tenth just by taking CPI and PPI inputs correct it's a math they they've got that that one never blows out of the water in either direction I don't think it ever will. And therefore I think it's almost a non event it's hard to say it's a non event because they say it's the number one number they're tracking so it's clearly important but to your point they just back into the number based on what the underlying inputs are then the jobs number because they are not. And the jobs number becomes a flyer especially again.

21:42Yeah so that yeah well I guess the last thing I wanted to talk about is you know obviously diesel is one of the things that the Fed has is concerned when they talk about you know oil shock bleeding into the economy has to be diesel because diesel is that last mile it's everything shipped and it's getting crazy expensive out there it's like 10 bucks in California or something nuts. But I've talked I've heard Trump is considering in this morning the headline was strongly considering a diesel export ban yeah don't know if you have thoughts on that but you know I don't know this is one of those things that again like we are on the press of mid terms mid terms are a month and a half less than a month and a half out like five weeks anything you can do that seems like it's productive regardless of whether it is or is not actually going to be productive. Is going to be something that they're going to play so so he says listen like people in the truck industry and you know just people think about inflation more broadly speaking they know that the trucks are what's taking things to the stores that they're buying and if that last mile to use your words and your rights.

22:47It's causes things to be $5 more expensive okay well if we just close down the gates and shut the garage door and keep all of our oil here domestically then there won't be competition for buying and therefore diesel prices come down give them given the other side of that because I think well again I think again I think you're point about the mid terms is is the only reason you would consider doing this because in the short term and you can define short term probably is 90 days or less maybe maybe six months. Diesel will come down in the US let's be clear the rest of the world is fucked right because again we are one of the largest suppliers of diesel and frankly countries count on us to deliver that stuff. I'm going to keep going but I'm going to talk to that again in a second yeah because and if we don't deliver it it's just another black eye for America because again we're hurting the people that trust us. So again in the short term we will see diesel fall but this is just another you know external force interacting in a market and what will happen after the short term is the producers of diesel will produce less diesel because they don't have as much buyers here they will just produce less and guess what happens then prices go right back up.

24:01Yeah so you're right it gets them through the mid terms they can they can point at them you know the lovely sign that used to say 999 and out says 799 look at me I'm I'm great but it'll be right back at 999 and oh by the way we would have pissed off our partners again. Yeah and and that's where that's where I wanted to go with this not to be overly political on it but look at it from this perspective think about it your Europe Europe uses two times the amount of diesel we use in the United States. So just to give a level of importance there then rewind the clock eight months there all good they've got diesel fuel it's what it is worshipping them some they're getting some from the Middle East and then we fly over in Iran. Fucking blow up everything there and all of a sudden now there's no more diesel coming out of there that was not their decision that was our decision and now we're like oh by the way you're only other source of diesel is basically coming from our partner in the United States and they're like fuck you. We're out we're closing our doors not cool. Yeah you want to become a pariah that's the way I mean so what are they so again let's just play this out if I was Europe and we did this I would sell every Treasury we owned.

25:14I would sell and what a car that is right now what I know shit right exactly you want to see the 10 year note interest rate rise get Europe dude get China get Japan. Just to sell just just to say you know you hurt us we're going to hurt you and it's not like those countries don't use any mean Japan's the number one owner of treasuries outside the United States today. Exactly not like they're not oil price sensitive they don't have oil. No they're not making a lot of diesel in Japan yeah my father said this lives be the day was making some comment on something he's like who needs enemies when you have friends like that. Yeah that's where I went with this this this this would be cutting off your nose despite your face it would feel good for a second probably just through the midterms. And you're numbers there I know they were off the cuff but I don't think your numbers are seen where it goes from 999 to 799 I don't I don't think that you said 999 to 799 again I know you're just speaking but yeah I will be a momentary blip down that's all I don't think it would be that big though that's the point I'm trying to make.

26:20So it's like really worth it be careful we got to be careful and to your point like I was thinking as you were saying I knew where you were going I didn't know you were going to treasuries with that I knew you were going with how they're going to react to it yeah the treasury know being as fragile is right now that would be the one I pull. That would that would be a tough one of those oh yeah that would not be good all right folks it is never boring never it always it's always fun never boring again Taylor thank you for being. Here each and every week working with the 1% of the 1% gives us an hour each week so we appreciate that working they follow you because you put out 5 minutes of content inside 60 seconds daily. You're the man you're the man yeah find us at Instagram is is where we're most prominent Instagram TikTok LinkedIn we're at life goal investments and doing daily videos folks if you didn't catch it over the weekend I think he did one on home buyers writing disrespectful offers. I thought we're not going to get that one credit wonder what it's to. I wonder who said. All right family have a good week appreciate you man.

27:23Nick Eek laser this stunning tour the thoughts of death I don't like to dwell on them for longer than like 10 or 15 hours a day so. November 19th Yama about theater no wonder women rush to have kids were being trained for it since we were kids they're like here's a baby doll here's an easy cousin I got one of those I stuck my head in it I was like I want out of this narrative tickets on sale now at Yama about theater dot com don't miss Nick Eek laser Yama about theater. Fall has never looked or tasted this good sweet greens fall harvest menu is back with seasonal favorites dress to impress and made to be devoured warm roasted sweet potatoes crisp apples maple glazed Brussels and crave worthy flavors in the autumn harvest bowl maple glazed salmon plate and roasted bacon Brussels side the season's most desirable menu has returned to sweet green featuring falls best dressed make your move order on the sweet green app.