By Gary Kaltbaum- March 17, 2018
We just wanted to alert you to some very important facts. Not opinion…facts! These numbers must be watched as very important costs continue to go up. Cost of energy, cost of borrowing, cost of doing business. All evidence in is that the economy remains in decent shape. After all, markets just held longer term support. (The market is a pretty darn good forecaster.) We just know there continues to be massive debt and deficits (a long term headwind) and not sure the following numbers do not start to affect things shorter term. The good news is that even with these numbers, a bunch of RETAIL names broke out of range yesterday. We doubt the economy gets in trouble when that type of action occurs.
The following are yields from the short to the long term. The 1st number was at the start of the year. The 2nd number is from yesterday. That’s a darn big move in just a few months. Savers are finally doing better but loans, mortgages and cost of capital are all going up. It is not an accident that the most interest rate-sensitive areas (housing, utilities, real estate) are some of the weakest areas in the market.
3-Mo: 1.39% –> 1.92%
6-Mo: 1.53% –> 2.09%
1-Yr: 1.76% –> 2.32%
2-Yr: 1.89% –> 2.58%
5-Yr: 2.20% –> 2.76%
10-Yr: 2.40% –> 3.09%
30-Yr: 2.74% –> 3.21%
And oil prices. One year ago, the average price at the pump for regular was $2.336. Today, it is $2.902…and counting as we expect another bump in the next week or two. Estimates are that every 10 cents at the pump over a year’s time takes $10 billion out of the consumer’s pocket. You can add up and multiply the numbers yourself. That’s a lot of cake that would otherwise go towards anything but gas. Keep in mind, this does not include the cost to business and businesses that use oil in their manufacturing process. (Many!) And again, by no coincidence, 2 of the worst areas in the market right now are airlines and cruise lines.
