Is A Financial Crisis Coming? When This Happens Something Always Breaks

0:00Flowing ad-bunch it on metrics that look great, till the CFO sees them, that's Bullspend. And marketers are calling it out in dashboard confessions. I remember telling my boss, it'll be good for the brand when leads were slow. Yeah, it wasn't. Cut the Bullspend. LinkedIn lets you target by company, job title, and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit go to LinkedIn.com slash campaign Terms the conditions apply. Last week we learned that every single time the 10-year note has risen of 50 basis points or half a point above its 200 day moving average, something broke. In fact, since 1970, this has occurred 15 times, or I'm sorry, 16 times with now being the 17th and something has always broken. But when we had that discussion,

1:01I didn't have the facts. I didn't know what AKA broken meant. But I had a discussion with Taylor from Lifegold investments, somebody who has worked on Wall Street for over a decade. Somebody who currently serves the top 1% of the 1%, and he has done some research and shared the list of the 16 things. I will go through it quickly because I think it's important to understand that when debt costs rise substantially, again, half a percent over its 200 day moving average, something always breaks. And we just don't know what it is. So, and again, it is happening today for number 17. So if we go all the way back to October of 1974, that was the first time it occurred since 1970. And Franklin National blew up. You're going to hear a lot of names that you may not have heard

2:03before, that's because these folks are dead and gone. But these are essentially financial institutions who were not protected or had leverage or downside protection. And they were just wiped out as rates went higher quickly. So again, October 74, Franklin National. Next up March 1980, first Pennsylvania, September 1981, S&P bear market, meaning 20% down or more. July 82, Penn Square Bank, May of 1984, Continental Illinois, September 87, Flash Crash, Black Monday, April 90, 1990, SNL crisis, November 94, Peso crisis, Orange County bankruptcy. Does anybody remember Orange County going bankrupt? Yep, that occurred November of 94, August of 96, South East Asia crisis, January of 2000, tech bubble,

3:07May of 06, housing bubble, December 09, GFC, December 13, 2013, emerging markets, November 2018, balance sheet runoff, 2022, everything. And then finally 2023, Silicon Valley Bank, signature bank and others. So again, it is not often we have a fact, i.e. the 10 year note rises 50 basis points over its 200 day moving average. That is perfect. Again, it is possible, it won't be perfect after today or after this instance. But I do think it is interesting to look at the last 16 times it happened. And again, something always breaks. All right, folks, we got the latest and greatest housing data and the doomers aren't going to like it, but what do doomers like? I really don't know. Anybody know what they like? Do they ever smile or are they just cramudions

4:07who live in the dark swampy areas? I don't know. They need to go outside and touch some grass. We have case, Schiller, up 1.9% year on year. FHFA up 2.6% year on year. As always, with case, Schiller, remember, it is a lagging report. It is likely roughly two months old. We won't hear about today's market for another couple of months, but yes, very, very interesting. We did get our first two updates on jobs. The big number will come out Friday. The Jolts report came out and significantly disappointed. All right, what does that mean? Well, inside the Jolts report, we are looking for signs that the job market is growing or shrinking. That is essentially what we look for the Jolts report. And it disappointed. It came in at roughly 7 million. It was expected to come at in at 7.23 million.

5:09So it came in under. What does that mean? Well, generally speaking, it means employers are less excited about the future. That is not good. And again, it missed to the downside. However, on the flip side, ADP or private payroll, beat expectations. Last month, just so you remember, it came in at 36,000 was a significant disappointment. It was expected to increase to 68,000. It actually came in at 90,000. So again, more than expected. The big number is Friday. It's always the BLS report. Right? Did we add jobs? Did we revise last month? Because last month was a barn burner. Did the unemployment rate stay at 4.1 or go up? Lots of things to look at. We did get the PCE report today, but did we really?

6:10Why do I say that? Well, if you don't know, the PCE calculation, the formula, the math's been tweaked. Yes, the government is playing with the measurements and guess what happens when they do that? They always seem to go lower. So what happened? Inside the report, they tweaked at least three input metrics. They tweaked legal services. They tweaked computer software and accessories and they tweaked portfolio management and investment advice. They may have tweaked more, but those are the three that I found in my readings. And guess what, folks? It went down. PCE headline was a 3.7 last month. It came in at 3.4. Again, a significant beat to the downside. PCE core was 3.3, came in at 3. All right. The reason I was doing a lot of reading about PCE is I wanted people to estimate

7:12the impact of these changes. And near as I can tell, there seems to be agreement that the model changes, the model tweaks was responsible for 0.2 of the 0.3 drop. I'll say that again. The model tweaks were responsible for two thirds of PCE falling. And only one third was actually disinflation. Will the masses understand? No, of course not. Will the media pick it up? No, of course not. But it does make the number look better. That it does. So there we go. We got some Fed talk. We got Fed president Williams. He threw out a hand grenade yesterday. What did Fed president Williams say? He said the Fed has no urgency.

8:14No urgency on Fed action. He sees inflation at 3.5% this year. And not to get this. We are not getting to 2% target until 2028. That means the Fed will have failed at one of their two mandates for like seven years. And yet Fed president Williams, you have no urgency. Again, I think it bears repeating that Fed president Williams is a known dove. He did obviously vote for the rate increase last month because it was a 12-0 vote. So we know he voted yes. But going into that meeting, he was the lone dove. We have had plenty of other Fed presidents talk about an October rate increase being likely. I think Fed president Williams wants to at least make that a debate and it is working.

9:15Before Fed president Williams spoke, the odds of a October rate increase were 72%. They now are a coin flip. One Fed president, one message about no urgency and bingo, we went to a 50-50 coin flip for October rate increase. Fed president Barr also spoke. AI today is driving up costs. Yes, it is not only oil that is driving up costs, but AI as well. Again, IA build out, IE tech, chips, things of that nature. Fed president Barr also said, I expect GDP growth to pick up in the second half. Yeah, we are still showing a 5% GDP now for Q3, which ends today. Folks, Q3 ends today. Tomorrow, Q4. I'm just curious. Are you excited about what you've accomplished so far in 2026?

10:18You got some work to do. Are you trying to get your finances right? You're trying to get healthy. You're trying to have a better relationship with your significant other, your kids, church, whatever. Just curious. No reason to wait to January 1. I harp on this all the time. January 1 is not magical. If you want to change your life, start today. You can change your health in 90 days, six months on the outset. Getting wealthy takes a decade, but getting healthy. You will see noticeable changes in 90 days. And I say that is somebody who went from 34.8% body fat to sub 12. And feel great, right? Went from an extra large shirt to a medium. So again, are you happy where you are? Look in the mirror. Are you happy? Did you accomplish what you wanted to? Well, good news. You can make changes starting tomorrow. Get after it.

11:20What else do I got? Let's see. Oh, mortgage demand. Let's talk about mortgage demand. It's Wednesday. We always get a report from MBA on Wednesdays. Purchase applications down 4.3% week on week down 10% month on month. Refi demand down 8.7%. Makes total sense. Mortgage rates are at, I don't know, 100 week highs. Something crazy like that. Certainly 52 week highs. Inflation expectation, 5.1%. And I think it's time to start talking about stagflation. Stagflation is something we should at least consider. But again, it could go away as well. Think about what I just said, Q3 GDP at 5%. You can't have stagflation at 5% GDP growth. You need something below trend. Something call it one and a half or lower, more like one or lower. So again, lots of stuff going on. That's what I got for the daily financial news. We will obviously be back tomorrow.

12:21Tomorrow in case you want to join live, we do go a little bit early at 7 a.m. It is the one time each week we go early 7 a.m. Pacific because one of my interviews starts at 7.30. Usually we started at 8. Folks, at the end of the day, don't forget that steadily is the sponsor of the daily financial news. If you are a landlord, you need to give them a chance. Maybe they can help, maybe they can't. They saved your Libyan eye over 20 grand in 2025. So I will be forever thankful for that. And of course, don't forget to join school. You can join school for either 67 pennies a day, month to month, or 55 pennies a day for the year, which I think is crazy. We did have some folks join school in the last 24 hours. Jillian, Stephanie and Jeff, thank you for joining. Make sure you introduce yourself. And just to show you how awesome my community is, Emily, Emily put out a post inside school saying, hey guys, if you're coming to the ORAT event in January,

13:22let's start a health and fitness accountability group. So not only are the community coming together to celebrate, learn, inspire, but they're also going to get healthy together, which I think is awesome. All right, folks, take care of yourself. That is the daily financial news. Take care. Later. See you tomorrow. Brussels clean up nicely at Sweet Green. Maple glazed, roasted, and edges perfectly caramelized. Sweet Green's fall harvest is back on the menu. And the season's most overlooked little green vegetable is dressed to be devoured. You know what to do. Order on the Sweet Green app. Now at Ralph's, your point set up to more ways to save every trip. Use them your way to take dollars off groceries at checkout or save at the pump. You can even save up to $35 on your next fill-up. Same points, more choices.

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