What’s up two-track economy? Which track do you lie on?

Dear Climber,

The two-sided American economy.

1. The economy is booming, the stock market is near a record high, wages are rising, more job openings than applicants, household wealth hit a record high and consumer confidence is back.
2. Americans are suffering, inflation-adjusted wages are stagnant or even declining, gas is expensive from rising oil prices, healthcare is brutally expensive, rent rates have been rising, households have too little savings and pensions are underfunded.

This describes the rich versus the poor; dependent on who you are, where you live, your job and your educational background. Things can either be pretty great or pretty bad.
 
The Intercontinental Exchange, commonly known as ICE, is giant in the trading world.They own 23 exchanges including the New York Stock Exchange, 6 clearing houses, and now plan to offer Bitcoin futures. ICE has launched a startup called Bakkt and teamed up with several other giants including Microsoft and Starbucks to help bring Bitcoin to the public. Bakkt plans to offer physically delivered bitcoin futures, and warehousing. This will allow investors and everyday consumers to trade and speculate the price of bitcoin and in a way that is faster, safer, and more convenient than ever before. As of this writing, ICE has a market cap of $43 billion dollars and Bitcoin of $115 billion. When these two titans come together, we may see these values vastly increase.
Mind over matter. In your brain, messages from the thalamus travel to two important destinations simultaneously: your amygdala and your prefrontal cortex. The amygdala handles emotions like fear, anxiety, arousal and aggression. The prefrontal cortex deliberates decisions and moderates social behavior. But, it takes 40 milliseconds for the prefrontal cortex to get a message compared to the amygdala’s 12. You’re emotional before you’re practical. Learn how to not act out of fear or anxiety and give yourself some time to process what’s happening before you act hastily.


 Another Fed rate hike with 3 more in the pipeline. This is the 3rd rate hike this year boosting the federal funds rate to 2.25%. The hike has caused mortgage rates to reach levels not seen in more than 7 years. The average rate for a 30-year fixed mortgage is 4.72% and the average 15-year rate climbed to 4.16%. The Fed’s strategy is to, “Engineer a soft landing of the economy by raising rates just enough to prevent overheating, but not so much that they trigger a recession”.
The pork is going bad. This week’s addition to the Trump-China Trade War Saga is causing industry leaders to freak out. Walmart, Ford, Proctor & Gamble, and Coco-Cola have all released public statements stressing that the new tariff will cause price inflation. One of the biggest losers is the US Pork Industry. Since May, prices for a lean hog have fallen by 19%, the predicted overall losses for the pork industry are estimated to reach $2 billion this year. Reports in July have suggested that pork and other meats are “piling up” in storage facilities. Without the Chinese market, there are simply not enough mouths to feed. In response, the USDA has pledged to hand out over $700 million in grievances to the pork industry.


Consumers are confidently confident. Among the plethora of economic data to be released this week is the Consumer Confidence Index. For the month of September, Consumer Confidence beat expectations and hit an 18-year high. Essentially, this indicator represents how optimistic consumers are about the future of the economy and of their own personal, financial health. The more optimistic they are, the more they will spend/consume, which all lead to a greater stimulation within the economy. The Organization for Economic Cooperation and Development recognizes this metric as a leading indicator for the economy. With September's number coming in so high, this reiterates what Fed Chairman Jerome Powell said this week as well: the U.S. economy is in good shape…for now.


Conspicuous consumption. Also known as, buying goods to show off. When people indulge, they want to feel like there’s some sort of rational excuse for their behavior. Some say this is being “fake”, but what they don’t know is acquiring something luxurious can temporarily increase one’s self-esteem. Increasing your self-esteem temporarily might seem good, but it is in the consequence of not making friends. A study shows that people would rather befriend someone who doesn’t display high-status, but rather more neutral makers. An explanation of these findings is that people, when looking for friends, don’t like feeling inadequate (when their friends outperform them) and they are less okay with a friend’s success than with a stranger’s.
 
Average-American household data. The average US household has a net worth of $692,100. The average net worth for a college-educated person is $1,511,000 versus $249,600 for someone with just a high school diploma. The average net worth for a homeowner is $1,034,200 versus $91,100 for a renter.
 
Kindness with the reward of nothing. There are two types of kindness: altruistic (no hope of gaining something in return) and strategic (when there’s something to be gained as a consequence). Scientists discovered that the reward areas of the brain are more active when people are altruistically kind than when they are strategically kind. This study shows that self-interest is sometimes not so rewarding, and that it might be better to give out of true altruism.
 
The recent rally can put new retirees in a dangerous place. After such a long bull market, we are likely to see slowing growth or even a sharp decline. Here are two strategies to assure steady income for that “Palm Spring’s” lifestyle:

• Buy annuities or market-linked notes that guarantee income to cover fixed expenses
• Move out of equities and into bonds and cash

In the world of sports. Last night on Thursday night football, we had an offensive explosion from both sides of the turf. The Los Angeles Rams beat the Minnesota Vikings 38-31 at home in a game where Jared Goff and Kirk Cousins both aired it out for over 420 yards and no picks. Jared Goff became the fifth quarterback in NFL history to throw for more than 450 yards with five touchdown passes and no interceptions in a game. The Rams improved their record to a perfect 4-0 and will look to keep their undefeated streak going next Sunday in Seattle. For golf fans, Tiger finished 11-under for his first PGA Tour win since 2013 on Sunday. His last victory on Tour before Sunday was the WGC-Bridgestone Invitational on Aug. 4, 2013. Lakers will open up their preseason at the Staples Center this Sunday.



Keep Climbing,
          The Alchanati Campbell and Associates Team



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