Sometime around 2006, Wachovia sent me to LA for a week to see if I would consider moving to open up and run the west coast region. The very first area I toured with the agent was Pacific Palisades. It was surreal. I didn’t know places like that existed. It was gorgeous without being overwhelming. It felt like a giant neighborhood. I fell in love immediately.
I ended up in South Bay, but I will never forget that first impression. Surreal. And that’s the same feeling I had last week. I am struggling to wrap my brain around these fires.
Southern CA is like a second home to us. We are there all the time. We have countless friends and clients there. To see such a beautiful area…just gone…is so painful. And these damn winds just won’t let these fires die. Brentwood is in the crosshairs as I type this.
If I have a hope for the rebuilding effort, it would be to streamline the zoning/permitting/insurance process. It’s not enough to throw money at the situation if it’s not coupled with reasonable regulations. The Coastal Commission isn’t exactly known for its efficiency.
I would appoint a Pacific Palisades Czar. They are charged with facilitating the rebuild by year end 2027. This temporary position ends 12/31/28 and can’t be extended. It has to be a real estate pro from the private sector. You could fill two internets with what I don’t know about development, but I know lots of people that do. Permits are fast tracked for the next five years. Tax incentives for companies that contribute to the rebuild. Bureaucracy is punished. If you aren’t part of the solution, you’re a part of the problem – and that will have consequences. Insurance companies have 72 hours to pay out claims. If residents demonstrate you aren’t honoring the contract, you lose your business license. We can’t stop you from suing LA as a stall tactic against paying out, but we have insurance auditors on speed dial who might randomly choose your company for an extended visit. Do not mess around with claims. Just don’t do it.
The 2028 LA Olympics showcasing Pacific Palisades, Pasadena and the other areas destroyed by the fires…resiliency…cooperation…community…the human spirit…the manifestation of the Olympic spirit.
Surreal.
Good luck to all our friends.
Last Week This Morning
- 10T: 4.76%
- 2T: 4.38%
- SOFR: 4.40%
- Term SOFR: 4.30%
- Nonfarm Payrolls: 256k actual vs 165k forecasted
- Unemployment Rate: 4.1% actual vs 4.2% forecasted
- Texas did better than I expected, and Penn State did worse than I expected…stupid hope.
- Hopefully the Birds can help me get over my Happy Valley blues
- Speaking of blues, my inspiration for “when my grandmother in central PA knows about XYZ, I know it’s become a mainstream topic” passed away on the last day of 2024. Me and The Real Boss lost our final and closest grandparent last year. Getting old sucks, but I guess it’s better than the alternative.
Rate Cuts Caused Friday’s Hot Jobs Report!
No. Have you heard a lot of people say, “I wasn’t gonna hire anyone this year, but then the Fed cut last month so…”?
That was a strong job report, assuming they don’t revise it down a bunch next month. Before everyone freaks out that rate cuts are causing the economy to surge, take a look at the monthly NFP averages since covid.
NFP Monthly Average
2021: 604k
2022: 377k
2023: 251k
2024: 186k
Friday’s report showed a gain of 256k jobs – pretty much the average of 2023. Isn’t that a good thing? It’s still 60% lower than 2021.
600k per month is overheated. 250k per month isn’t. The hiring rate fell to 3.3%, the lowest level since 2013. Professional services hiring is at 2009 levels. Private payrolls averaged 149k last year vs 192k in 2023. Plus, government/healthcare still made up 40% of the jobs – let’s see how that holds up under the DOGE microscope.
Call me back in four months after revisions. If we’re averaging 377k per month, I’ll be open to discussions around rate hikes.
This feels mostly like positive business sentiment from the Republican sweep. And more like stabilization, not spiking.
Rate Cuts Are Making Everything Surge!
No.
Remember when everyone agreed that rate hikes took like a year to work their way through the system? But now a cut last month is causing everything to spike? C’mon.
CPI Average
2021: 4.7%
2022: 8.0%
2023: 4.1%
2024: 3.0%
GDP Average
2021: 5.7%
2022: 1.4%
2023: 3.2%
2024: 2.6%
CC Delinquencies
2021: 0.91%
2022: 0.86%
2023: 1.11%
2024: 1.37%
What about those trends scream “overheated!”?
We still have positive real rates (rates higher than inflation). Until that changes, the Fed is still applying the brakes – albeit less than six months ago.
We can’t complain the Fed is always behind the curve and then cry foul when they try to get ahead of it.
Rate Cuts Are Causing the T10 to Spike!
Sigh. No.
Do you agree that the T10 should be higher than Fed Funds? The yield curve should be positive, right?
Then what’s so hard to understand?
The Fed is signaling fewer cuts. Maybe they’re done for the year. Markets now have about a 20% chance of hikes before year end. If the traditional delta between Fed Funds and the 10 Year Treasury is 1.40%, and market thinks FF will finish the year at 4%, doesn’t that imply a T10 above 5%?
A T10 above 6% would be the market panicking the Fed had screwed up.
A T10 at 5% is recalibrating to new Fed Funds expectations.
There is some minor technical resistance at 4.74%, but really the next key resistance level is 5.02%.
Rate Cuts Caused Franklin to do Franklin Things!
Well, at least that would explain why he was preparing for a fake FG instead of trying to block it as time expired.
For the first 28 minutes of the semi-final game, I allowed myself to feel hope. We were the better team. I was frustrated with stalling out inside the 10 again (bet you wish you had those extra 4 points, don’t you coach?), but otherwise we looked good.
Then we let the Irish sprint down the field and snag 3 points right before the half. And then we let them march down the field to open the second half. I knew we were in trouble. A classic Franklin choke was on.
I know you probably don’t watch PSU like I do, so let me tell you something that casual observers wouldn’t know – our wide receivers are all-time underwhelming for a top 10 team. I could get as much separation as they do. The QB threw an INT at the worst possible time, but this coaching staff did him no favors in the WR department. Ohio State churns out first round picks at the position year after year and we don’t have a single guy that will play in the NFL.
I would have liked an opportunity to lose to Ohio State again. Friggin’ Ryan Day redemption story.
This Week
CPI will likely dictate whether the T10 surges to 5% this week, but we also have PPI and Retail Sales.
CPI is likely going to come in at 2.9%, up from 2.7% last month. The headlines are going to scream inflation reacceleration! But you won’t overreact, right? You’ll remember that demand is less than half of the current inflation readings. That a big chunk of that is used cars and airfare. You will remain calm in the face of the onslaught. CPI was over 9% two years ago, don’t freak out over 2.9%.
Don’t Franklin.
