Interest Trap Trust
“He who asks is a fool for five minutes, but he who does not ask remains a fool forever.” — Old Chinese proverb
Hey, Risers!
Credit karma.
Let’s talk about risks.
In the U.S., market sentiment is deteriorating, and whether this is a buying opportunity remains to be seen. Inflation is still falling, and the economy is still growing, albeit slowly. However, growth headwinds are still intense, and the unemployment rate may rise if the consumer pendulum continues swinging back toward goods.
Abroad, while Japan’s Q2 GDP surged 6% quarter-over-quarter, China’s turmoil continues to worsen. China’s new-home prices dropped for a second month while the value of all homes sold hit their lowest level in nearly six years. Recent sales declines are hurting builders as they try to balance the completion of purchased homes with repaying debt.
As Bob Hope said, “A bank is a place that will lend you money if you can prove that you don't need it.” There are risks out there, which is why we believe in a consistent, long-term approach.
99rises performance: Our three main long-short blocks are flat to up in 2023 after outperforming the Nasdaq 100 Index by 23-38% in 2022.
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Economy & Markets
Resilient.
No Mo’ Data
In a surprising move, China withheld July's unemployment rate for people between the ages of 16 and 24. Unemployment hit a record high of 21.3% in June, up from 20.8% in May, and we posit that July was even worse. Holding back such data, while aimed at maintaining social stability, is likely to further dampen growth.
Our take: Retail sentiment is deteriorating rapidly.
Mixed
U.S. retail sales for July were strong, coming in at +0.7% month over month, beating Street estimates of +0.4%. The Empire State Manufacturing Index (ISM) for August came in at a very weak -19, down from +1.1 in July and worse than the Street's -1 forecast. This is the first negative reading since May.
The decline was broad-based, with new orders and shipments falling significantly. Delivery times held steady, and inventories moved lower. Labor market indicators pointed to stable employment levels but a shorter average workweek. Input and selling price increases picked up, but from low levels.
Our take: Manufacturing sector is still facing headwinds.
“Mort” Gauge
The US 30-year mortgage rate rose to 7.16% last week, matching the highest since 2001 and crimping both sales and refinancing activity. A lack of homes listed for sale are also pushing prices higher, as about nine in 10 owners with mortgages have interest rates under 6%.
Our take: Homebuilder sentiment remains jittery on higher borrowing rates.
Learning Block: In Shadow Banks They Trust
China’s $2.9 trillion mess.
Chinese trust companies are loosely regulated firms that pool household savings to offer loans and invest in real estate, stocks, bonds and commodities. No other Chinese companies operate across these asset classes. Let that sink in for a moment. The sector is the playground for wealthy investors to park their money and get hefty returns.
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