The Higher Standard

Fed Chairman Jerome Powell has affirmed that more interest rate increases are likely ahead until additional progress is made on bringing down inflation. Speaking a week after FOMC officials decided for the first time in more than a year not to push rates higher, the central bank leader indicated that the move likely was just a brief respite rather than an indication that the Fed is done hiking.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a forecast by London-based research firm Capital Economics, indicating that US office buildings are unlikely to regain their peak pre-pandemic values until at least 2040 as demand for desk space weakens.Chris and Saied look at a Labor Department report, stating that initial jobless claims held at 264,000 in the week ended June 17 after a slight upward revision to the previous week’s figures. This was above the median forecast of a survey of economists, who estimated 259,000 new claims.They also offer some thoughts on data from  S3 Partners LLC, showing that total US short interest, or the amount traders have spent betting against US equities, exceeded $1 trillion this month as the S&P 500 Index extended its advance. The tally reached the highest since April 2022 before retreating slightly with stocks down for a third straight day.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why the FOMC has never explained the reasoning behind the four separate 75-point rate increases.Why housing makes up the largest component of the COnsumer Price Index (CPI) report.The definition of a bull market.And so much more...Resources:"Senator Elizabeth Warren pressures Federal Reserve Chair Jerome Powell on the SVB and FirstRepublic bank failures" (Bloomberg via Instagram)"Higher Interest Rates Hit Home Prices Again" (The Wall Street Journal)"Powell expects more Fed rate hikes ahead as inflation fight ‘has a long way to go’" (CNBC)"Fed Chair Powell says smaller banks likely will be exempt from higher capital requirements" (CNBC)"US Office Owners Get Dire Warning: Rebound Unlikely Before 2040" (Bloomberg)"US Jobless Claims Hold at Highest Level Since October 2021" (Bloomberg)"Short Bets on US Stocks Hit $1 Trillion, Most Since April 2022" (Bloomberg)"Existing Home Sales Unexpectedly Improve in May Amid Multi-Family Gains" (MSN)

US Federal Reserve officials struck a hawkish tone in their first comments since the central bank held the policy interest rate steady at its meeting this week but signaled that rate hikes will likely resume. Federal Reserve Governor Christopher Waller said that changes in US credit conditions since the failure of Silicon Valley Bank in early March were 'in line' with financial tightening that was already underway due to Federal Reserve interest rate increases - comments that downplayed the idea a worse-than-anticipated contraction in credit might make further Fed rate increases less necessary.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a report by John Burns Real Estate Consulting, indicating that the monthly premium on home ownership is up to $1,030 per month — up 17 percent from this month last year, when the difference favored renters by $884 per month.Chris and Saied look at the staggering $1.3 billion every day the government pays in interest on its debt. This means that a substantial portion of taxpayer money is being allocated solely to cover the interest costs of the national debt.They also offer some thoughts on Economist Nouriel Roubini's doubling down on dire warnings about the US, saying the nation is headed for a recession as a combo of higher interest rates, sticky inflation, and a credit squeeze barrel the economy.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Nouriel Roubini's assertion that recession is now 'certain.'Why economists are saying say it's a near-certainty that housing inflation will fall.Why the hiring boom is hiding the fact that employees are working fewer hours.And so much more...Resources:"...there will 'certainly' be a recession: Nouriel Roubini" (Yahoo! Finance via YouTube)"Fed policymakers deliver hawkish vibe after pause decision" (Reuters)"Why economists say it’s a near certainty that housing inflation will soon fall" (CNBC)"The government is paying $1.3 billion in interest on its debt every day" (Wealth via Instagram)"Tech-Stock Boom Pits AI Against the Fed" (The Wall Street Journal)"Lots of Hiring, but Not So Much Working" (The Wall Street Journal)"Biden Touts Job Growth in First Re-Election Campaign Rally" (The Wall Street Journal)"A recession is ‘at our doorstep,’ but investors are falling for a goldilocks scenario, Wells Fargo says. It ‘isn’t going to end all that well’" (Yahoo! Finance)"U.S. Apartment Values 'Will Plunge A Further 20%,' Economists Say, But Wall Street Still Sees Major Upside In These REITs — Be Greedy When Others Are Fearful?" (Yahoo! Finance)"Buying costs $1000 more per month than renting" (TheRealDeal via Instagram)

The stock market is growing more optimistic about US regional banks, but the lenders still face serious pressure. A credit "contraction is invariably coming," Soros Fund Management Chief Executive Officer Dawn Fitzpatrick has said, adding that additional banks will fail because "there are more problems under the surface." One further source of trouble for the industry will be commercial real estate, an area that in recent years smaller and regional banks have become a bigger force in.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a report stating that the Federal Reserve will pause its historic rate-hiking campaign as it waits for the effects to trickle further through the economy, while also signaling that additional rate hikes are likely this year.Chris and Saied look at data from the Labor Department indicating that the inflation rate cooled in May to its lowest annual rate in more than two years, likely taking pressure off the Federal Reserve to continue raising interest rates.They also offer some thoughts on the Consumer Price Index showing that inflation has been cut by more than half from last year’s peak. On an annual basis, prices rose by 4% compared to a year ago. That’s a significant decline from April, when annual inflation was 4.9%.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why a terminal rate of 5.6% will likely be necessary.Why consumer spending has been the number one thing propping up the economy up until now.Why community banks are in serious trouble at the moment.And so much more...Resources:"The Fed holds rates steady, pausing its rate-hiking campaign" (CNN)"Fed Chair Powell says more rate hikes coming this year" (CNBC via Instagram)"Instant Reaction: Fed Decision June 14, 2023" (NARresearch via Instagram)"Westfield leaving downtown San Francisco amid declining sales" (NBC via Instagram)"Goldman Sachs CEO David Solomon says the U.S. economy has been incredibly resilient" (CNBC via Instagram)"Inflation rose at a 4% annual rate in May, the lowest in 2 years" (CNBC)"Here’s the inflation breakdown for May 2023, in one chart" (CNBC)"CPI Report Shows Inflation Has Been Cut in Half From Last Year’s Peak" (The Wall Street Journal)"Regional Banks Face Years of Trouble" (The Wall Street Journal)"The Richest Person In Every State" (Forbes)"Fed Holds Rates Steady but Expects More Increases" (The Wall Street Journal)"Fed, SEC Probing Goldman Sachs’s Role in SVB’s Final Days" (The Wall Street Journal)"Goldman Sachs Is at War With Itself" (The Wall Street Journal)"Renters Are About to Get the Upper Hand" (The Wall Street Journal)"There’s More Trouble Coming for Regional Banks" (Bloomberg)

The Federal Open Market Committee (FOMC) is expected to maintain its benchmark lending rate at the 5%-5.25% range, marking the first skip after 10 consecutive increases going back to March of last year. While officials’ efforts have helped to reduce price pressures in the US economy, inflation remains well above their goal. Investors’ focus will be on the Fed’s quarterly dot plot in its Summary of Economic Projections, which is expected to show the policy benchmark rate at 5.1% at the end of 2023. In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss comments from Goldman Sachs CEO David Solomon, who claims to be surprised at the way the US economy has weathered higher interest rates, elevated inflation, and banking turmoil over the past year.Chris and Saied look at recent Fed data, indicating that Americans have a record amount of credit card debt right now — close to $990 billion.They also offer some thoughts on a revised home prices forecast from Goldman Sachs strategists, who now predict a smaller decline this year — 2.2% decline in 2023, down from 6.1%. Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:The little signs that people are noticing that signal a recession.Why people are reluctant to change their living standards.Why consumers will start cutting back on discretionary spending.And so much more...Resources:"The U.S. economy has been incredibly resilient,” Goldman Sachs CEO" (CNBC)"Americans have almost $990 billion in credit card debt" (Marketplace)"The hidden risk on bank balance sheets" (Axios)"'I told you so': Dave Ramsey made the correct call on US real estate 18 months ago — but is he still right about housing in 2023? Here's what the financial guru thinks now" (Moneywise)https://moneywise.com/real-estate/dave-ramseys-2023-real-estate-predictions"Wall Street is divided on the outlook for US house prices. Here's what 6 experts have recently said." (Markets Insider)"Fed Is Set to Pause and Assess the Effect of Rate Hikes" (Bloomberg)

According to Michael Gapen, Bank of America's chief economist, the US economy will likely face a mild recession later this year, but the risk of a severe economic downturn appears low as of now. A correction of labor-market imbalances is needed to bring inflation back down to the Federal Reserve's 2% target, and that typically looks like a mild recession. With risks receding, stress in the banking sector stabilizing, and macroeconomic trends looking good, Gapen said the Fed faces a tough decision regarding interest rates and investors can't completely rule out the possibility of another hike.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a report from the Labor Department, indicating that initial filings for unemployment benefits totaled a seasonally adjusted 261,000 for the week ended June 3, an increase of 28,000 from the upwardly revised level of the previous period.Chris and Saied look at data from Realtor.com with the National Association of Realtors, showing that the popular 30-year fixed mortgage rate hovered in the high-6% range in May. At that level, buyers with an annual income of $100,000, slightly above the national median, could afford a house with a maximum price of about $341,000, however just 39% of the homes for sale were listed at or below that price point in May.They also offer some thoughts on a new real estate transfer tax in Los Angeles, that was supposed to give the city an average of $56 million a month in its first year. However, in its first month, the Measure ULA tax took in $3.6 million. For transactions closing in April, the city received the revenue from five deals that were subject to the new tax.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why growth is often used as a metaphor of prosperity.Why a credit crunch has already begun in the commercial office real estate.Why Larry Summers thinks the Fed has made a huge mistake, and why that's wrong.And so much more...Resources:"The US will face a mild recession, but the risk of a 'hard landing' is currently low, Bank of America's chief economist says" (Business Insider)"Jobless claims increase more than expected to their highest since October 2021" (CNBC)"U.S. consumer-credit growth accelerates in April to fastest pace in five months" (MarketWatch)"The shortage of houses is hitting some people and areas harder than others" (CNBC)"The “mansion tax” was supposed to bring in $56M monthly. It took in $3.6M" (TheRealDeal)"Larry Summers says that the Fed should consider doubling down on interest rates in July if it pauses in June because the risk of ‘overheating the economy’" (Fortune)"Are home prices falling? See what it’s like in your area." (Washington Post)

The Securities and Exchange Commission filed 13 charges against Binance, the world's largest crypto exchange, and its founder, Changpeng Zhao, alleging both commingled billions of dollars worth of user funds and sent them to a European company controlled by Zhao. The U.S. regulator alleged on Monday that Zhao and his exchange worked to subvert ‘their own controls’ to allow high-net-worth U.S. investors and customers to continue trading on Binance's unregulated international exchange.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a story stating that Christian radio host Dave Ramsey is facing a $150 million lawsuit from 17 listeners who claim he played a role in defrauding them by promoting a timeshare exit company.Chris and Saied look at a report from the Labor department indicating that payrolls in the public and private sector increased by 339,000 for the month, better than the 190,000 Dow Jones estimate and marking the 29th straight month of positive job growth.They also offer some thoughts on the latest Markets Live Pulse survey, which found that roughly one in two people who work in finance would change jobs — or already have — if their managers required them to spend more time in the office.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why air travel is the highest-ranking inflation item at 26%.Why realtors are bowing out of the real estate industry.The concept of timeshares and their benefits.And so much more...Resources:"Christian radio host Dave Ramsey faces $150 million lawsuit from listeners who say they were defrauded by a timeshare exit company he promoted" (Yahoo! Finance)"SEC sues Binance and CEO Changpeng Zhao for U.S. securities violations" (CNBC)"Payrolls rose 339,000 in May, much better than expected in resilient labor market" (CNBC)"Don’t Ask Us to Come to the Office More — Or We Will Quit, Investors Say" (Bloomberg)"A $1.5 Trillion Backstop for Homebuyers Props Up Banks Instead" (Bloomberg)"Why the U.S. Remains Far From Recession" (The Wall Street Journal)

Goldman Sachs is preparing for its third round of layoffs since September as Wall Street firms adjust to a slump in deals activity. The company is expected to trim fewer than 250 jobs in the coming weeks. Goldman Sachs, led by CEO David Solomon, was among the first major Wall Street firms to trim jobs in September, cutting a few hundred positions. It then slashed more jobs in January, releasing about 3,200 employees. Morgan Stanley announced about 3,000 job cuts this month, and JPMorgan Chase cut about 500 jobs. However, Goldman is more tied to the ups and downs of Wall Street than its rivals. Its combined 16% drop in first-quarter trading and advisory revenue contributed to a disappointing start to the year.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a report from Refinitiv's FedWatch, indicating that U.S. rate futures on Wednesday priced in a pause in interest rate hikes by the Federal Reserve at next month's monetary policy meeting, a massive turnaround from indications of a 25 basis-point increase earlier in the session.Chris and Saied look at a report from payroll processing firm ADP, showing that the U.S. labor market posted another month of surprising strength in May as companies added jobs at a pace well above expectations.They also offer some thoughts on the tumble the stock market took on Wednesday, as the Dow Jones Industrial Average fell 0.4%, or 150 points, by 3:15 p.m. ET, while the S&P 500 and the tech-heavy Nasdaq slid 0.5% apiece.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:The concept of market capitalization.Why inversion typically precedes a recessionary economy.Why the data is showing that employment is headed in the wrong direction.And so much more...Resources:"Dow falls 130 points after FDIC reveals record plunge in bank deposits" (Forbes via Instagram) "US rate futures expect Fed pause in June in sharp turnaround from earlier" (Reuters)"Goldman Sachs is cutting jobs again amid Wall Street deals slump" (CNBC)"Job openings show surprise increase in April" (Yahoo! Finance)"Private payrolls rose by 278,000 in May, well ahead of expectations, ADP says" (CNBC)"Pending home sales unchanged in April, down 20% year-over-year" (CNBC)"Market Capitalization: What It Is and Why It Matters" (NerdWallet)"State Farm Halts Home-Insurance Sales in California" (The Wall Street Journal)"Apple Customers Say It’s Hard to Get Money Out of Goldman Sachs Savings Accounts" (The Wall Street Journal)"Downtown LA's office distress shows the pain coming for cities" (Bloomberg)

U.S. consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month. The growth picture was further brightened by other data from the Commerce Department on Friday showing a surprise rebound last month in orders of manufactured non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss the debate among Fed officials, centered on concerns over inflation not cooling fast enough and the labor market’s persistent strength. Chris and Saied look at the increase in real GDP, which reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment.They also offer some thoughts on a jump in consumer spending of 0.8% last month after gaining 0.1% in March. Economists had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, would rise 0.4%.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:The difference between Gross DOmestic Income (GDI) and Gross Domestic Product (GDP).Why the National Bureau of Economic Research has not declared a recession.Why the additional stress placed on all corporations and profitability will be very visible in July.And so much more..."Gross Domestic Income GDI Suggests US Is In Recession Right Now" (Zero Hedge)"Strong US consumer spending, inflation readings put Fed in tough spot" (Reuters)"Fed officials debated need for rate hike at last meeting, minutes show" (CNN)"A Housing Bust Comes for Thousands of Small-Time Investors" (The Wall Street Journal)

Deposit runs have led to the collapse of three U.S. banks this year, but another concern is building on the horizon. According to JPMorgan Chase CEO Jamie Dimon, commercial real estate is the area most likely to cause problems for lenders. U.S. banks have experienced historically low loan defaults over the last few years due to low interest rates and the flood of stimulus money unleashed during the Covid-19 pandemic. However, the Federal Reserve has hiked rates to fight inflation, which has changed the landscape. Commercial buildings in some markets, including tech-centric San Francisco, may take a hit as remote workers are reluctant to return to offices.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss an academic paper from economist Olivier Blanchard and former Federal Reserve Chair Ben Bernanke, who guided the central bank and the U.S. economy through the Great Recession, in which they argue that central bankers still have work to do to bring down inflation.Chris and Saied look at news that San Francisco has the largest sublease market of any U.S. metropolitan area, with 7.2% of its overall office inventory available for sublease, having doubled that figure since late 2019.They also offer some thoughts on the rise of asset managers, private equity funds and insurers, as the regional banking crisis supercharges the expansion of these non-bank lenders into areas such as providing consumer car loans and mortgages, or financing the construction of buildings.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why the debt ceiling 'crisis' is a non-event.Private equity and how it differs from real estate syndicators.Special Purpose Acquisition Companies (SPACs): a new way to take companies public.And so much more...Resources:"Here's how much emergency savings you need amid economic uncertainty, according to financial advisors" (CNBC via Instagram)"Fed Chair Powell says rates may not have to rise as much as expected to curb inflation" (CNBC)"Jamie Dimon warns souring commercial real estate loans could threaten some banks" (CNBC)"Analysis: Private equity steps up lending as U.S. banks pull back" (Reuters)"Former Fed Chair Ben Bernanke says there’s more work ahead to control inflation" (CNBC)"What's the right emergency fund amount?" (Vanguard)"These Companies Are Trying To Shed Massive Amounts of San Francisco Office Space" (SF Standard)"The Majority of U.S. Businesses Have Fewer Than Five Employees" (Census.gov)"PacWest to Sell $2.6 Billion Real Estate Loans at Discount" (Bloomberg)"Fed Rate Increases Hit Small Businesses the Hardest" (The Wall Street Journal)"Regional Banks Rallied Last Week. Traders Continued to Short the Sector" (Bloomberg)"Fed Official Is Open to Forgoing June Rate Hike" (The Wall Street Journal)

Federal Reserve Bank of Cleveland President Loretta Mester has said that she does not think the U.S. central bank is at a point yet where it can hold interest rates steady for a period of time, given how stubborn inflation is. Federal Reserve Chair Jerome Powell has signaled the central bank may pause further rate hikes as it assesses the impact of its past tightening, as well as the effect of recent bank sector stress on lending and credit.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss news that JPMorgan sees treasuries as the best hedge against a slowdown, and sees the possibility of 10-year rates falling below 2.5% in the event of a deep recession. The 10-year Treasury rate was trading around 3.53% on Wednesday, after rising as high as 4.09% earlier in the year.Chris and Saied look at comments from Atlanta Federal Reserve Bank President Raphael Bostic, who said that, if he were voting on monetary policy today, he would vote to hold interest rates steady, but added there is still a lot of data to come before the Fed's meeting in June.They also offer some thoughts on Elon Musk's assertions that he doesn’t care if his inflammatory tweets scare away potential Tesla buyers or Twitter advertisers.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why most people believe that a recession is inevitable at this point.Why, despite the fanfare in the media, we're not yet in a credit tightening cycle.The importance of looking at the actual data, not the intentions.Why Atlanta Fed President Raphael Bostic says he would not cut rates unless inflation fell farther than to mid to high 3%.And so much more...Resources:"Default Fears Rattle Main Street Investors" (The Wall Street Journal)"JPMorgan Asset Says Markets Are Right to Bet on US Rate Cuts" (Bloomberg)"Home Prices Posted Largest Annual Drop in More Than 11 Years in April" (The Wall Street Journal)"Fed's Mester says not yet at point where it can 'hold' rates" (Reuters)"Fed's Bostic: if vote on policy were today, would vote to hold steady" (Reuters)"Elon Musk: ‘I’ll say what I want, and if the consequence of that is losing money, so be it’" (CNBC)