Rates, Trade Deficit, Jobs, Consumer Credit, Renting, GTE, Eggs, and Stablecoin.
This Week in the Economy
Well, there really wasn’t very much meaningful data, but there was news: the Fed held interest rates steady.
Steady being between 4.25% to 4.5%. That’s the rate that the Fed charges Banks to borrow from them. Banks then add about 3% to the higher number, and that is what becomes the Prime rate, which is 7.5%.
So, your borrowing rate did not decline this month. The next Fed meeting is June 17 & 18. Keep an eye on the job reports!
The trade deficit hit a record, with goods imported to the U.S. exceeding goods exported from the U.S. by $140,500,000,000. It was expected, with a forecast of $137,600,000,000.
That’ll happen when everyone is trying to bring in goods from China and other countries before they get tariffed.
That’s what also caused the GDP to go negative. A trade deficit subtracts from Gross Domestic Product since it means the U.S. is buying relatively more goods and services from foreign suppliers instead of American producers.
At some point, that will reverse, giving a shot to GDP.
Initial jobless claims were within expectations: 228,000 vs. 230,000 expected and down from 241,000 the week before. That’s good. For the same week last year, it was 229,000.
Things are holding steady, folks.
Finally, consumer credit increased by $10,100,000,000 after dropping by about $600,000,000 last month.
Yep, tariffs. The expectation of paying more for things motivated folks to go out and buy big-ticket items before prices increase. And they put it on the charge card.
And using the same logic as bullet point #2, there will come a month where the spending goes the other way.
California Renters
Renting in Southern California is a mixed bag. For example, you can rent a 4 bed/3 bath house in Claremont for $3500/month. Or you can buy a house for about $900,000, putting down $180,000, that would generate a loan payment of $4500/month, taxes of $937/month, and insurance of $400/month for a total PITI (principal, interest, taxes, insurance) of $5837.
That doesn’t include the upkeep, new floor, paint, and the water heater that will stop working two weeks after you move in.
But you don’t get the interest deduction of $46,563 for the first year or the property appreciation.
However, in the last year and the last six years:
L.A. County Rents were up 4.9% and 26%
Inland Empire rents were up 4.9% and 44%
San Diego rents were up 5.9% and 37%.
And they haven’t come down.
It’s almost like you can’t catch up, and according to the California Association of Realtors, only 14% of southern Californians could afford to buy a house at year-end 2024.
Spring Cleaning
I dug up a GTE Sprint bill for April, 1984. No judging, please.
14 calls for 179 minutes totaled $41.45.
That’s $125.47 today.
Mint Mobile will do as many minutes as you want for $15 if you have your own phone. Which I did in 1984. It plugged into the wall via a six-foot cord. An option at the time wasn’t more gigs, it was a longer cord that you had to buy.
That $15 today is $4.96 in 1984 dollars. While many things have increased over the years, there are items that have not.
Of course, a dozen eggs in 1984 were about a dollar. That would be $3.03 today. At Stater Bros. Markets, it’s $5.99 for cage-free eggs, without an option for imprisoned eggs. I guess if you want eggs on parole, it’s more expensive.
Speaking of Eggs…
What is Cal-Maine Foods?
They are a producer of eggs based in Jackson, Mississippi.
Not just any producer. 20% of all the eggs in the U.S. and 14% of egg-laying hens.
They have 39,900,000 egg-laying hens that produce 13,200,000,000 eggs a year.
That gets them $2,100,000,000 in sales.
That comes out to $1.90/dozen.
And a little-known fact: there is an Egg Clearinghouse that facilitates the purchase and sale of eggs as demand increases or decreases, between producers and retailers.
The stock price for the company – CALM – is at $91.23. It peaked at $113 in January and is up from $57.84 a year ago.
Nothing scrambled about that.
Stablecoin
Sounds like something you give to your ranch hand to thank them for caring for your horse.
Nope, not that. It is a cryptocurrency that is tied to a stable asset, such as the US dollar.
U.S. Lawmakers have introduced a bill that would provide guidance for cryptocurrency. Oddly enough, it’s called “Guiding and Establishing National Innovations for U.S. Stablecoins Act.
Also known as the GENIUS Act. How many hours did some intern take to come up with an acronym for that?! Sometimes I think they come up with an acronym and then create a bill to fit it. At any rate…
This would create a cryptocurrency that would be very stable as it would act the same way as the U.S. dollar.
This is in the beginning stages; there will be more to come but it’s a signal that cryptocurrencies are getting more and more imbedded into the financial system.
Reader Challenge: What is the occupation in this elevator speech?
“I’m currently in the early launch phase of optimizing real-time cross-platform content engagement through sustained trend immersion.”
Earlier this year, I talked about cutting through the noise, focusing on what you do, and not getting caught up in all the media hype. I also counseled to wait until May to see how things start working out. Well, here we are, and things are starting to settle down. It’s still volatile, but the market is becoming less so. That’s not to say you don’t need to be mindful of tariffs. You do, but also look at the economic numbers and see what trade agreements are presented from week to week. As you grow your business or career in up and down economic cycles, you gain the experience to sense what is coming next, but only if you pay attention.
Here are some quotes on experience:
Experience is simply the name we give to our mistakes. – Oscar Wilde
The only source of knowledge is experience. – Albert Einstein
A man who carries a cat by the tail learns something he can learn in no other way. – Mark Twain
Keep learning!
