Jobs, PMI, Home Sales, A Credit Downgrade, What is a Giacometti, and the Summer Selling Season
Jobs, PMI and Home Sales – it was a slow week, but it’s all good.
The is pretty key, folks. Initial jobless claims came in at 227,000, below expectations of 230,000 and last week’s 229,000.
This means that 90 days into the tariffs, we still have not seen an impact on jobs. That doesn’t mean it won’t happen, but people are starting to wonder.
Fingers crossed.
Both the services and manufacturers Purchasing Managers Index, aka PMI, increased. That was also above expectations and above last month’s report.
The numbers were 52.3 for both indices. Some folks had expected 50.6 and 49.8, respectively, but they went up.
Anything over 50 means those purchasing managers are seeing growth in their sector. Let’s cross those fingers again.
Finally, new home sales. That number came in higher than expected, too.
This is a number, produced monthly but shown on a trailing twelve-month basis.
Last month, it was 670,000 on an annualized basis. Expectations this month were for 695,000 annually.
It came in at 743,000. This is a 10.9% increase and the highest in 3 years.
This number came out Friday, so it was buried in the Memorial Day exodus from the office, but that is good news.
Oh, and some companies didn’t even bother to open on Friday. While we’re at it, why not take Tuesday off?
Whatever.
Credit Ratings
Companies and countries are significantly impacted by the credit ratings given to them by the Big Three credit rating agencies: Fitch, Standard & Poor's, and Moody’s.
There are other credit rating agencies, but these are the leading players.
Of course, these are the same fellows that thought that all of the mortgage-backed securities in 2007 were AAA.
Speaking of AAA…
AAA is the highest credit rating, followed by AA, A, and BBB.
Those are the scales that S&P and Fitch use, with +’s and –‘s to further define it.
Moody’s uses Aaa, Aa, A and Baa, and using a 1, 2 or 3 in place of plusses and minuses.
The equivalent FICO credit score would be 850, 790, 730 and 670. Roughly.
All those ratings are what are known as investment grade. In other words, deserving of good borrowing interest rates, as you would be if you went to get a car loan with those FICO scores.
Anything below that, such as BB, B or below, are rated as speculative, with a significantly higher risk. Like a 600 FICO.
And I mention this because?
In 2011, S&P downgraded the debt of the United States to AA+, a mere 3 years after they completely missed the mortgage debt crisis. Hmm. It seems I have repeated myself.
In August 2023, Fitch downgraded the U.S. Debt to AA+.
This month, Moody’s downgraded the U.S. Debt to Aa1.
All three have cited rising debt and fiscal matters.
Just like your credit report would show increased balances on your credit card and new inquiries for additional debt. But you're not late with your payments. Yet.
So, what does it mean?
The S&P downgrade in 2011 impacted the stock market, but it recovered.
With Fitch, I don’t even recall it making the news.
With Moody’s, suddenly, it’s like E.F. Hutton speaking. Boomer alert, Google it.
The 10-year treasury hit 4.63% before settling down to 4.5%. The 30-year hit 5% as people (hedge funds, governments, big investors) sold their U.S. treasury holdings to rebalance their risk in their portfolios.
Johnson & Johnson, along with Microsoft, now have higher credit ratings, AAA, than the United States government.
It should be noted, however, that Microsoft’s yield on its debt is still higher than Treasury bonds, which means that Uncle Sam’s debt is still very good.
This downgrade has been coming for a while, and S&P called it in 2011.
The question “When does the debt level start to matter?” has been answered: it’s starting to matter now.
As California and Los Angeles have discovered, you can’t spend more than you have. If it turns out you do, you must make cuts, and no one is happy about that.
When Washington spends more than they have, it borrows to fund the gap. This has resulted in a national debt of $36,202,000,000,000.
That’s $36.2 trillion if the zeros made you cross-eyed.
With a population of 340,000,000, that is $106,476 per person.
For a family of four, their household owes $425,905.
If you had $425,905 in revolving credit, your FICO would be impacted too.
That’s what happens when your expenses exceed your income by 38% every year.
And that, Ladies and Gentlemen, is why the United States of America has lost its AAA credit rating.
What is a Giacometti?
Actually, it’s a who. Alberto Giacometti, that is, and he died in 1966. He is a sculptor whose work is revered. Just not as much as it used to be, evidently.
The headline was ‘Widely Anticipated Giacometti Sale is a Bust’. And it really was.
It is a bust about 25 inches tall and depicts the head and shoulders of Alberto’s younger brother, Diego. The title is “Large Thin Head”. I’m guessing they weren’t close.
It was expected to sell for $70,000,000.
Evidently, it is common for auction houses to set up a ‘guarantee’, where they arrange for an interested party to guarantee that they will buy the piece for a specified price.
The seller had no interest in setting up a guarantee; they were arrogant enough to think that the sculpture was a lock to sell big, and in auction house parlance, the sculpture went to auction ‘naked’, without a backup buyer.
They felt they could get at least the target price; similar sculptures sold for $53,000,000 and $50,000,000 in 2010 and 2013.
Everyone was excited when the auctioneer said the starting bid was $59,000,000.
And… crickets.
No one bid on it; there weren’t even any tariffs on it.
The wealthy must be keeping an eye on their pocketbook to walk away from a $59,000,000 sure thing. Even the folks who can write a check for that are not completely sure about the economy.
No caviar dreams and champagne wishes from that lot.
What was that job description from two weeks ago? I’m currently in the early launch phase of optimizing real-time cross-platform content engagement through sustained trend immersion.
“I’m currently in the early launch phase…” - unemployed.
“…optimizing real-time cross platform content engagement…” - looking through social media across their various apps – Instagram, tiktok etc.
“…through sustained trend immersion.” – viewing those apps for a long time, monitoring the trends on their posts.
A Gold Star goes to James Tapper with Tower Glass in Santee, and Deb O’Hara with Deb O’Hara Real Estate in Idaho who came very close to picking the job description.
I know summer doesn’t start until June 20, but this past Memorial Day kicked it off. This is when the average performer slacks off, rationalizing that prospects and customers aren’t really keen on meeting, and everyone is out of town. That’s why average performers will always be average performers.
Folks, this is the summer selling season. I have learned that if you out-work everyone by going the extra mile, you’ll see that it’s a lot less crowded (attributed to Dr. Wayne Dyer). For your top prospects, drop by a bottle of your favorite barbecue sauce with a recipe attached for their grill, or a nice refreshing bottle of summer white wine. Separate yourself from the rest of your competition.
You only have half the year left to make your annual revenue target.
