MECHFI'S SENTIMENT:

Markets: The Market over the week was wild with the uncertainty in the air. There was hope that the market mechanics would push the S&P above 4100, which has been a resistance line for the market. There aren’t enough vibrations left in market operations to continue rolling the rally forward. However, because of that, we are probably transitioning into one of the roughest six months the market has seen for a long time. It’s going to be and feel so long before any material news that the underlying economy is finding a good center for another growth cycle.

There is a good chance that somewhere between Q1 and Q2, the economy will see a new low due to the economic drag the economy will feel from high rates.

Prices will be low, and a great opportunity, especially if you have a 5+ year time horizon. It will also be a great time to be extra productive and store assets away, either as cash or something appreciable. It’s worth considering doing a few extra side projects over the next two quarters if within arms reach.

Do it.  

Economics:

“It’s going to get worse before it gets better.”

-Dalton, P Sway, Road House (1989)

I respect people who can stay positive and optimistic all the time. It's a skill that requires a lot of discipline and practice. That’s a belief you can’t talk me out of. I, on the other hand, need to be more pragmatic, which includes an unnecessary amount of morbidity. Discounting the havoc in the market, we will see many families go through a rough … rough times. If we refer back to the quote there, in a roundabout way, I’m saying we are right about to go through that “worse” part.

However, things will get better, it will just take time before it feels that way. We are looking like it won’t feel that way until close to later Q3.

There’s no graph this week. Only some philosophy from an ’80s classic.

Positive:

1. Nuclear Fusion, according to WSJ, is defined here:

“The lab’s National Ignition Facility uses nearly 200 lasers to heat hydrogen atoms to temperatures of more than 180 million degrees Fahrenheit and pressures more than 100 billion times Earth’s atmosphere.  The extreme conditions create a state of matter known as plasma, in which hydrogen atoms fuse and release vast amounts of energy. The same process powers the sun and other stars.”

Now, I don’t know what that means, however, WSJ further reported that this form of technology is designed to split atoms instead of combining them. This process is said to save resources as opposed to burning them. Nuclear Fusion is believed to be more sustainable if we have the appropriate technology to extract energy because of the abundance and low pollution.

The economy for this tech is becoming more robust given the recent federal subsidies in the inflation reduction act bill and the interests of large investors. Diversifying energy sources and diversifying portfolios is very much a positive current.

Ref:

1. U.S. to Announce Nuclear-Fusion Energy Breakthrough https://www.wsj.com/articles/u-s-to-announce-nuclear-fusion-energy-breakthrough-11670881298

Negative:

1. Homelessness: Unfortunately, this current is becoming a powerful one, and worse, it is going to get a lot more powerful in the near future. The Fed just went through the large portion of rate hikes necessary to control rising prices (still don’t know if they did enough). This adjustment in rates slows down demand; companies lay off workers. Sometimes those layoffs turn into individuals and families falling behind on bills, eventually leading to homelessness.

Now, there was a time when we had better control over the matter. According to the National Alliance to End Homelessness, Homelessness declined from 639,784 to 580,466 (Sheltered + Unsheltered) between 2008 and 2020. Drawing a line back to the pandemic and the response from the Federal Reserve bank, this trend is about to reverse there is no saying when it will reverse back in the right direction.

What sparked this small summary was a piece recently published in the WSJ describing one of the hottest housing markets, Boise, Idaho. In the last decade, the rising prices locally have far outpassed the average, and therefore traditional income streams, like Social Security, haven’t been able to keep up. This is especially true for the boomers who couldn’t bounce back from the 2008 crisis. Rents there have risen to $1,778 from $1,213 in January 2019, according to Zillow Group (link). Combine this with the labor problems that many cities are facing, like the issues the assisted-living industry is facing in the Boise area. Apparently, nine facilities closed down because of labor shortages.

Both will be issues that will persist there and nationwide.

Ref:

1. https://endhomelessness.org/homelessness-in-america/homelessness-statistics/state-of-homelessness/
2. Homelessness Worsens in Older Populations as Housing Costs Take Toll https://www.wsj.com/articles/homelessness-worsens-in-older-populations-as-housing-costs-take-toll-11670733558

Firm Updates:

• Mechfi opened a second account.
• 1st purchases were made for the firm's mascot - ‘79 MK1 (She currently needs a name)

Reads/Beats:

• Nino Man - “What About Me”
• Black Rob - “Woah!”
• Lawsuit Over Taylor Swift’s ‘Shake It Off’ Lyrics Dropped https://www.wsj.com/articles/lawsuit-over-taylor-swifts-shake-it-off-lyrics-dropped-11670899755
• https://www.wsj.com/articles/homelessness-worsens-in-older-populations-as-housing-costs-take-toll-11670733558
• U.S. to Announce Nuclear-Fusion Energy Breakthrough https://www.wsj.com/articles/u-s-to-announce-nuclear-fusion-energy-breakthrough-11670881298

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