The Memo

To:

Everyone

Re:

• Savings (401k components

• Jobs (initial claims and construction employment)

• Shelter. A variety of it.

• Today in EFFing Time

Comments:

Sometimes there isn’t much to say. Other than modern day baseball has mostly been ruined by people who can’t hit a baseball, who throw their bats, and look even more lost in the field when a ball comes their way. That and a group of youngsters who think radar guns were invented in 2008, and don’t know there exists a difference between measuring an object’s velocity at it’s point of exit versus it’s velocity 60 feet away, without said velocity being constant. Because it’s thrown by an arm not perpetually propelled by an engine. So a game of physics and mechanics played by a group of people who understand neither. Kinda like modern day economists not understanding economics. But I digress.

I hope your tax bill was nonexistent, you all work too hard to not keep more of your money. By the way, tax day was the last day for employers to contribute funds to their prior year 401k contributions, as well as for self employed contribution funded adoptions. Not coincidentally, the stock market set a new all time high. Which changes nothing about my prior statements or projections. As the charts below show. Even though this isn’t financial or investment advice. It may be baseball advice though.

On to the picture show.

End Memo. For the new people: What(s) the EFF is at the bottom

Savings

Nasdaq looking less like 08 and more like 2020 again. Can we make up our mind which mess we want to deal with? Please?

Now vs 08

Now vs 2020

Vs both cycles end. Zoomed in.

Nippon Professional Baseball League is still amazing. Saduharu Oh!

SOX index vs 2020

Jobs

Initial claims. By the way, roughly half the state’s unemployment benefits have been cut to nearly nothing. Also, self employed (including 1099 like delivery/app based workers) don’t qualify for unemployment benefits most places.

Seasonally adjusted.

Construction employment.

Shelter

NAHB

Lennar’s Stock

Multifamily Real Estate Prices (percent change from year ago EFF Indexed)

Still Interesting. But not really to me.

Today in EFFing time it is:

Have a wonderful weekend everyone.

4th Rate Turning Explanation Revisited

I’ve wrote at length about how we’ve experienced 15 Effective Federal Funds Cycles since 1944. Each cycle has a:

• Spring

• Summer

• Fall

• Winter

They can be summed up as: Initial Reaction to EFFR (effective federal funds rate) changes, Growth despite of EFFR Changes, Stagnation/Inability to further grow as EFFR tops, and outright contraction even as EFFR chases said contraction.

The Mean cycle time going back to 1944 is 238 Weeks. Or 4 1/2 Years. The Median cycle time is 225 weeks, or 4 3/10ths Years. So 4 Cycles is roughly 20 years.

(4 1/2Years x 4 =18)

Coincidentally, Neil Howe’s Fourth Turning seasons average 20 years each, or roughly 80 years start to finish. Each of those seasons represents:

So an EFF cycle is the time from rates commencing their rise, to the time they bottom, before the cycle begins again. OR, that’s what(s) the EFF.

Those cycles consist of days/weeks and months. So we can pinpoint today in time to the day/week/month of the previous cycles, and compare the economic reactions, behaviors and outcomes to the current cycle. I call those days: Today in Effing Time.

We currently just completed the 214th week of the cycle.

The original 4th Rate Turning Premise can be found here:

Subscribe now

Share

Thank you for your attention to this matter

Date: April 5th 2026

Time: 6:45pm

The Homebuilding Situation (Composite index measuring sales, inventory, price and mortgage rate direction change) Nationally from January (March Release) 2026 stands at 6.86 This is 93.14 points below the Average Situation for Homebuilders. The situation decreased by >13 points.

Regionally:

• Northeast Census Region stands at 134.4

• Midwest Census Region stands at 69.86

• South Census Region stands at -16.6

• West Census Region stands at 25.63

Sales

January sales fell to 48,000 units sold from 55,000 in December. 7,000 less than the average monthly sales rate across the last 52 years. January sales were down >-14% year over year.

Inventory

There are 472,000 new single family homes for sale . No change over the past month (revised). The past 18 consecutive months have been revised to remain range bound. Despite the 23% increase in Spec Homes for sale during the same time period.

Price Direction

Median Sales Price decreased year over year by -6.7%. The Median Sale Price for a New Home was $400,500. Prices have been declining for 40 months going back to October 2022.

Mortgage Rates

Mortgage rates decreased by -1.4% month over month. January’s average 30yr Fixed Mortgage Rate was 6.1%..

Additional Commentary:

This report contains builder earnings analysis, per share analysis of publicly traded builders, Lennar Earnings analysis, home price component breakdown and Crude Oil + Diesel price impact on new home sales. Comments and charts for those are below the Situation Component Charts (Figures 2-8).

Fig. 2

Fig. 3

Fig. 4

Fig. 5

Fig. 6

Fig. 7

Fig. 8

Publicly Traded Builders

Through the end of Q4 2025 and into Q1 2026 (both fiscal and calendar) builders continue to face difficult conditions to move product. Of the 13 builders measured for this segment, only 2 saw an increase in volume of home sales. Those being DR Horton and Green Brick Partners. Beazer Homes reported another loss, quarterly and saw the largest decline at -23% in home closings, while Tri Pointe had the smallest decline of -1%. The average decline was -6.9% year over year.

Fig. 9

As Figure 10 will show, none of those 13 escaped declines in net income. Removing Beazer from the pool (due to actual loss) the average decline in net earnings came in at -45% year over year. 61% (8/13) of Builders studied saw declines greater than -50%

Fig. 10

Going back to Mid 2024 highs, the average share price decline is -39%.

Fig. 11

Compared with an average -42% decline in Earnings Per Share (when excluding Beazer Homes) year over year.

Fig. 12

Net Margins have continued to decline as well. 5 of the same 13 builders have net margins < 5% while 10 have net margins below 10%. Lennar for Q1 2026 reported it’s lowest net margin in 11 years.

Fig. 13

Figures 14-16 will show the largest of these builders year over year change metrics. There should be no surprise if we see another -5-10% share price reduction for big builders by May.

Fig. 14

Fig. 15

Fig. 16

Lennar Earnings

Lennar’s Fiscal Q1 2026 average sales price came in at $374,000. $16,000 below it’s 2025 Annual Avg. Price point, and fully back to prices last seen in 2017. 9 years of price impairment heading into what will be another difficult spring market.

Fig. 17

Net Income came in at the lowest since Q1 of 2019 with $225 million.

Fig. 18

Net margins were compressed to the lowest in 11 years going back to 2015.

Fig. 19

SG&A costs (selling, general and administrative) were nearly 3 times net earnings, clocking over $600 million. Most of this has come as incentive and buydown spending.

Fig. 20

While those expenses have helped keep closings relatively apace, the bottom line is trending the opposite direction. Figures 21-23 will show trend lines in spending, income (both gross and net) as well as delivery vs backlog changes.

Fig.21

Fig. 22

Fig. 23

Active Community Count for Lennar remains near all time highs. 2024 saw huge increase in community opens, while 2025 added to those via the Feb. 2025 closing on the acquisition of Rausch Coleman Homes (Fig. 24). The same time Lennar spun off land holdings to Millrose.

Fig. 24

Home Price Components

While Lennar may have lost public pricing power on the sale side of homes, they maintain the power to push what pricing components they can lower. Lennar is the 2nd largest publicly traded home builder in the United States. They represent nearly 12% of home sales market share by volume of sales as of 2025. Figure 25 compares the costs of building, such as land and construction costs vs additional incentives and sales price of 3 other builders (shown in order of increasing build costs). Only DR Horton (The largest publicly traded builder in the US) is building for lower construction/lot costs.

Fig. 25

To further highlight Lennar’s ability to push pricing downward on hard costs, despite its record high $62,700 per home incentive spending, Figure 26 will show a sample of costs over 5 years. Since 2022, build costs have been pushed down by -18%. These costs savings come from a combination of:

• lower cost of lumber and building products

• lower cost of fuel

• lower cost of trade partner pricing

That last component is effectively shifting some margin compression from Lennar to it’s smaller skilled trade partners. Too much push however can have serious impact on Lennar’s ability to deliver timely product and thereby earnings, as smaller firms cannot withstand the margin compression in the same fashion large builders can. Firms under $15m in revenue have vastly different access to credit and capital than larger firms, and an outsized share of the trades companies building America’s homes operate well under that revenue figure.

Fig. 26

To further illustrate those build costs, we’ve pulled from internal files to show similar tract build cost components. Those are shown as dollars in figure 27*, and as percent of build cost in figure 28.

Fig. 27

*Depending on location, concrete/foundation and excavation/site work costs can vary greatly. This is due to regional code requirements, weather and subsurface soils that create conditions ranging from “scrape and pour” (often with post tension slabs) to excavation 4’ below grade at minimum, with concrete footings and frost walls. In areas where these costs are less, they can often be replaced by higher costs of cladding including tile flooring, stucco exteriors, and tile roofs.

These figures represent the breakout of what goes into building a tract home. They include finished lot costs (after turning raw land into buildable lot in a new neighborhood), utility connections, permits, and unless noted separately, turn key trades such as MEP’s (mechanical, electrical and plumbing). Turn key suppliers provide both material and labor for projects. 2-10 Warranty represents an insurance program commonly used by builders, to insure statutory warranty requirements can be met in the event they are unable to.

Fig. 28

Using these nearly identical build cost components to Lennar, we can break down and compare projects, both in reported earnings format vs what you’d look at developing said project internally in figure 29.

On the right of Figure 29, we pulled from Lennar’s 10-K, to analyze what that $62,700 in incentives looks like compared to our internal client project file.

Lennar separates their SG&A into two categories: Corporate and Non Corporate. Corporate represents costs such as their construction manager, accounts receivable/payable salaries, office portion allotment etc. Whereas non corporate accounts for commissions, special marketing, and for some builders: buy downs.

Though in the case of Lennar those can also be represented in the separate “incentive” category. This comparison clearly shows the impact of those additional cost, while trying to maintain pricing, delivering a lower margin than the project on the left which sold for nearly $50,000 less.

Fig. 29

While the internal project represents a nearly $50,000 price savings, on a monthly cost basis supposing:

Lennar buys down rates to 4.1% vs 6.1%, using 80% LTV ($273,200 vs 312,576 financed) the $390,720 purchase, principal and interest only payment would save $145 per month for the buyer vs buying at $341,500 at 6.10%. Suffice it to say, the market is challenged.

Fig. 30 shows regional incentives offered by Lennar in specific communities.

Fig. 30

That additional spending isn’t the only thing delivering diminishing returns though, as share repurchases are doing less in the way of returning more net earnings, as shown in figure 31.

Fig. 31

Crude Oil, Diesel and Regulations

With the current environment of escalating prices of diesel, which is used to transport all manner of construction materials, and on job site build equipment, we took a look at the last 40 years of diesel prices overlaid onto new home sales. Higher diesel prices correlate to lower new home sales volume, both as the price per gallon rises and more so as it spikes. This is illustrated in figure 32, with orange dotted horizontal bars showing sales rate changes as diesel is elevated. It becomes even more smoothed when crude prices are overlaid on the US Homebuilding Situation Index as shown in figure 33. Both figures show Jan sales conditions as published vs up to April oil/diesel prices.

Of significance, a large portion of builder communities exist in new ring/outer ring/further out locations to city centers. This helps reduce costs, however extends commute times for perspective buyers. While gas and diesel prices escalate, this may further weigh on “consumer” sentiment taking into account increased monthly gas expenses for commute vs any savings from buy downs (and from higher rates than Q4 25/Q1 26) or incentives.

Fig. 32

Fig. 33

While diesel is creating a headwind for builder’s spring season, lumber prices are still 88% higher than their 46 year average price of $316 per 1,000 board ft. vs last Thursday’s closing price of $596 per 1,000 board ft.

Softer spring demand may help lower lumber costs for the remainder of the year beyond Q2.

Fig. 34

Options for industry participants

Builders can and will be looking to change up product selections and supplier bases for savings in build costs wherever possible. Less upgrades and more closing cost/price reductions may be more attractive to spring buyers.

Trade Partner Contractors can evaluate necessary overhead, supply chains, and operational efficiencies to reduce costs while maintaining margins. For those in the right positions, turn key solutions can present new revenue and better overall margins. For others still, shifting from turn key to labor on;y can also present potentially preferable returns.

Suppliers can continue to look for volume pricing discounts where possible, alternate materials, and altered payment terms.

Brokers can look for increased commission splits from new build communities if the home fits their client’s needs. Many builders are currently offering broker luncheons, community tours and larger commission splits as a means to gain new buyers. They can also potentially help their client’s navigate negotiable pricing in the right new build communities as well as closing cost assistance.

US Property Services is a contracting and consulting firm, specializing in construction management, cost estimating, construction risk mitigation and research. For information on this publication, specialized research or a consultation, you can contact us at:

info@uspropertyservices.com

The method and research for the index can be found here.

The next Situation Index will be published in May 2026 after the US Census Bureau Survey of Construction is released. Until then:

The Memo:

To:

All Staff

Re:

• What(s) the EFF

• Today in EFFing Time

• Unemployment

• NASDAQ

• Technical Difficulties

• West Texas Crude Oil

Comments:

I’ve wrote at length about how we’ve experienced 15 Effective Federal Funds Cycles since 1944. Each cycle has a:

• Spring

• Summer

• Fall

• Winter

They can be summed up as: Initial Reaction to EFFR (effective federal funds rate) changes, Growth despite of EFFR Changes, Stagnation/Inability to further grow as EFFR tops, and outright contraction even as EFFR chases said contraction.

The Mean cycle time going back to 1944 is 238 Weeks. Or 4 1/2 Years. The Median cycle time is 225 weeks, or 4 3/10ths Years. So 4 Cycles is roughly 20 years.

(4 1/2Years x 4 =18)

Coincidentally, Neil Howe’s Fourth Turning seasons average 20 years each, or roughly 80 years start to finish. Each of those seasons represents:

So an EFF cycle is the time from rates commencing their rise, to the time they bottom, before the cycle begins again. OR, that’s what(s) the EFF.

Those cycles consist of days/weeks and months. So we can pinpoint today in time to the day/week/month of the previous cycles, and compare the economic reactions, behaviors and outcomes to the current cycle. I call those days: Today in Effing Time.

We currently just completed the 211th week of the cycle. Or,

Today in EFFing time it is:

As of last Friday that is. Read the report, as we turn to what I believe will be a Quarter to remember for a long time.

End Memo

The Report

Unemployment

February brought a new cycle high U3 Unemployment rate of 4.7%. The highest in 4 years of steady slow rise. When I say we’ve been here before, this is what I mean.

I do not expect this to decline in Q2 as I see no magic wand or phrase to stop the march of the machine. And we bear no similarity to the green soft landings in the chart.

NASDAQ

We have entered “Winter”, the final phase of this rate turning. Despite yesterday’s headlines, we are in the 21st week of drawdown for the NASDAQ. As of Monday it was down 13.5%, which is halfway to my last stated target of between 20-30% from peak.

With unemployment rising higher, oil spiking, economic uncertainty and war escalating, I expect “sentiment” to capitulate within the quarter. I hadn’t ruled out following the trajectory of the 2008-2009 cycle, instead of the 2019-2020, and it does now appear to be closer to where things are headed (on a drawdown phase).

This one has been updated with Past and Future dates to tie the “today in effing time” component together. (Friendly reminder 8/7/2008, Fannie Mae {Federal National Mortgage Association} into conservatorship). May and June are looking lit.

Divergence.

1997 - We’re just months away from the “Asian Tiger Crisis”. In the past.

February of 1980. 4 Months of continuing unemployment to 6.7% that would eventually reach 11.7% U3 in the W recession.

And just for fun, let’s take a look at the most similar cycles, from last post, in their conclusionary stages. From Cycle week 198-239.

Before I get to targets, comparative draw downs and cycles, of the past in NASDAQ.

Technical Difficulty

Or analysis. By magic and other means. First though this is your reminder:

None of this is investment or financial advise. I am not a stock trader, I am not a market maker, I am not actually in control of the markets.

I am, though paying attention to human behavior and when reactions shift.

That said, my target levels for where the NASDAQ ends up: Between 16,110 and 19,304 with midrange being 17,707, by end of July, with most of the damage being done in Q2.

There’s two ways I’ve come to this conclusion, 1st, from my last post:

-20% from ATH of 24,019 = 19,215

-30% from ATH of 24,019 = 16,813

The next way, as I’ve broken out in past posts, is by measuring the cycles “Spring,Summer,Fall, Winters” and the pattern that has emerged from behavioral reactions to index levels. I’ve laid out the reasoning for these already, I’m just going to sum up, by saying, each mini season has points by which we can see where future support levels will likely arise. And when I say “support” I mean humans seeing a number and remembering it, thinking “I should probably buy here”, “the price looks cheap here” etc etc. And when using this method, we can see price targets and by what manner of magic they are derived. Target range highlighted in red below to the right on the technical analysis

Sometimes anomalies just need time to be understood.

There is always a potential for this too of course.

WTI Crude Oil

Nothing escapes the cost of money or human behaviors patterns. The only difference between past and present, is that we started this cycle with $100 per barrel oil. 100 remember is the price/point where the cycle begins (price divided by itself, multiplied by 100) Therefore 100 on the index is also, $100. Fun.

If we see a significant drop in oil prices this time (again), it will likely be because the current price tapped everyone out. Again. Demand destruction is not just a theoretical exercise, and government limitations on use can also be the cause.

You can’t say I haven’t told you we’ve been here before.

Subscribe now

Share

The Memo:

To:

Everyone

Re:

• The Seasons, and patterns of NASDAQ (+ Dow Jones and Nikkei 225)

• Turning Japanese

• Contract(ion) in Contract(ing). I.E. The decline in Residential Construction

• Gold

• Breakfast: is 277% more expensive than when this Century of EFF Cycle’s started. (+10.65% increase per year annualized) What in the actual EFF………..

• It’s all just about the cost of money

• Today in EFFing Time

Comments:

Greetings and Salutations. It’s been a minute.

A very warm welcome to all the new folks around here. Thanks for joining the team.

A year and a half ago, I had the notion that we may have the greatest example of a controlled group study in macro-economic history. That being, measuring economic data based on the cyclical changes in Effective Federal Funds Rates. I had no idea what to expect other than I thought I may find some similarities, and the curiosity of studying something I hadn’t ever found anyone else doing, publicly to my knowledge. I used the concept of the “Fourth Turning” because we are undergoing the 4th rate turning (of fed funds) since the start of the new century. Which was my only intention to study (this century).

I would later find the framework of the Fourth Turning could actually apply across the spectrum of Effective Federal Funds cycles going back to Bretton Woods in 1944. With some evidence that it could possibly go back at least to the Civil War. Talk about controlled focus group study results.

To recap, what I’ve wrote at length about (in shorter memos, and definitely funnier memos, if I do say so myself):

We’ve experienced 15 Effective Federal Funds Cycles since 1944. Each cycle has a:

• Spring

• Summer

• Fall

• Winter

They can be summed up as: Initial Reaction to EFFR (effective federal funds rate) changes, Growth despite of EFFR Changes, Stagnation/Inability to further grow as EFFR tops, and outright contraction even as EFFR chases said contraction.

The Mean cycle time going back to 1944 is 238 Weeks. Or 4 1/2 Years. The Median cycle time is 225 weeks, or 4 3/10ths Years. So 4 Cycles is roughly 20 years.

(4 1/2Years x 4 =18)

Coincidentally, Neil Howe’s Fourth Turning seasons average 20 years each, or roughly 80 years start to finish. Each of those seasons represents:

So the 1st turning was roughly 1944-1964ish (Post WWII-JFK Assasination/Vietnam/Civil Rights Movement in 68), The 2nd being 1964-1984ish (Vietnam-Nixon Shock/Farm Bust/Plaza Accords), the 3rd being 1984-2004ish (WTO/Dot Com/Patriot Act/Afghanistan War longer than Vietnam) and the 4th being 2004-now ish. (Post GFC, Financial repression, ZIRP, populism, COVID, AI and the normalization of troops in American Cities). Not perfect 20 year time stints, but the concept remains intact.

We are currently living in the 208th week of the current cycle. Read on as the weather just changed.

End Memo:

One Of The Three Most Important People in the World: It’s you!

Ted: Yeah! It’s us!

to Bill

Ted: Who are we?

the strangers start playing air guitar, so Bill and Ted play also; more people come out and join them

Ted: Bill, I think they want us to say something.

Bill: What should I say?

Ted: [shrugs] Make something up.

Bill: Be excellent to each other.

room murmurs appreciatively

Ted: Party on, dudes!

room approves

Bill: [to Ted] Good one, dude.

to room

Bill: Well, we gotta get back to our report.

Ted: Yeah. We’d take you with us, but it’s a history report, not a future report.

Bill: Later.

The Three Most Important People in the World: Later.

The Report

Let’s take the framework we discussed, and apply it to the NASDAQ. Each cycle has its four seasons. The fourth of which, winter, can be summed up as “destruction”. Or in money management terms, bull/bear markets. Each cycle and it’s seasons, as I’ve written about here, have associated Peaks and Troughs (bottoms) in NASDAQ terms. Winter, being the biggest drawdown/bear market territory of each, prior to resetting and growing again.

Here are the last 9 cycles (going back almost to NASDAQs inception). 1972-1976 being the first measurable EFF Cycle in terms of NASDAQ. This chart represents the weeks that markets Peaked and the week they bottomed/troughed before recovery and a new spring.

This chart shows the number of weeks of drawdown/bear market corresponding to each cycle.

I’ve broken them down into 3 most similar types. As measured by weeks into the cycles.

Early Peaks:

1972-1976 Peak at 48 weeks with 80 weeks of drawdown -60%

1980-1983 Peak at 47 weeks with 5 weeks of drawdown -29%

1999-2003 Peak at 45 weeks with 134 weeks of drawdown -77%

Mean Drawdown of 55%

Late Mid Cycle Drawdowns

1983-1986 Peak at 174 weeks with 9 weeks of drawdown -15%

1986-1993 Peak at 154 weeks with 53 weeks of drawdown -32%

2004-2012 Peak at 172 weeks with 72 weeks of drawdown -62%

Mean Drawdown of 36%

>Late Winter: 200+ week Late Drawdowns

1976-1980 Peak at 208 weeks with 5 weeks of drawrdown -21%

1993-1999 Peak at 212 weeks with 14 weeks of drawdown -12%

2015-2020 Peak at 221 weeks with 6 weeks of drawdown -30%

Mean Drawdown of 21%

Overall:

Mean Drawdown-38% over 48 weeks

Median Drawdown -30% over 53 weeks

Here’s what they look like in chart groupings:

Early Peaks

150-200 Week Peaks

>200 Week Peaks

We can eliminate “early drawdowns” from the past equation as most similar to today.

That leaves, as Duder said “Best two out of three”

And, while the charts showing peaks at > than week 200 would lend the possibility of a big spike in NASDAQ level prior to it’s eventual fall (bottom at July 4th 2026????) I feel the need to remind us all that NASDAQ hasn’t made a new ATH (all time high) since October 28th 2025. Or the 190th Week of the cycle. Which is < than 200 weeks. Which would mean things have further to fall sooner. Based on average of the broken out cycles as mentioned, the next drawdown should see between -20-30%

But, bottom still by July 4th 2026?????? What kind of EFFing timeline is this anyway?

Turning Japanese (while still loving the US and Ulysses)

The current day USA bears some resemblances to pre “bubble” burst Japan. This has been well documented by the good folks at at lenght.

Using the EFFing timeline (Effective Federal Funds Cycles, for the new folks) comparing today’s NASDAQ to the 1985-1993 Nikkei Cycle, there’s some remarkable resemblances.

This chart shows the two in their natural index levels.

While this one puts them into their EFFing Index place.

But that’s not the only similarity. Let’s take a look at a 35 year timeline of population rate of change.

Below: Japan 1961-1996 vs USA 1991-2025 (current)

And for those who claim that’s cherry blossom picking: an extended timeline.

Currency

Economics is the study of: The Production, Distribution and Consumption of Goods and Services (and money). What’s in your wallet?

The Yen should appreciate against the dollar from here, if the past is any lesson.

And here’s the recent past, from which the first EFFing study was conducted.

Other Indices

The Dow Jones Industrial Average in the 21st EFFing Century.

Gold

Pictures are allowed to speak for themselves.

Yields

This kinda is like watching paint dry. Also, why the EFF do we tolerate such a small yield on lending the government even more money?

(S)Mortgage board when you have indigestion.

Contract(ion) in Contract(ing)

Residential units under construction have contracted by 28% since the shift in EFFing rates began. While that’s not a small number, it’s worth remembering that contraction is coming off a peak of ALL TIME HIGH in units under construction. As in the most amount of housing being built in recorded history.

Here’s the contraction in comparison to other cycles:

And here it is again in terms of the time periods it most resembles. In fact, it matches exactly through 46 months, where we were 46 months into the 2008 contraction.

All that contraction while the number of “Spec” homes for sale keeps growing. Just one vertical bar away from tying the all time high.

A Reminder: A “Spec” home is one that’s built on “speculation” that it will sell.

Here’s all the recorded, permitted “spec homes” for sale in government cheese chart format.

Breakfast

This is just the change in cost of the American breakfast staples since the fourth rate turning began.

And the cumulative price change over said time, in percent.

10.65% increase year over year for breakfast annualized in 26 years? Tell the “proletariat” to eat cake at your own peril.

It’s all just about the cost of money

The flip side, because there is a flip side to everything:

Markets tend to recover, resets in basis pricing are great opportunities to grow.

But it’s “Winter”. Like we haven’t lived through winter before? Store your nuts, help others store their nuts. Do good, be good, enjoy the ride.

There are so many places in the US that are growing, there’s ample opportunity to build housing, businesses and more.

Margin power disappearing? Find way’s to lower actual costs, deliver better service, products and terms.

Turning Japanese? As if there weren’t still heavily populated areas with ample opportunity in said physically beautiful nation. And while internally selling $1 homes to people willing to invest may seem counter to growth, what better way to attract the capable and willing than offering an inexpensive “home” so long as one renews its usefulness. Plenty of said opportunity here too.

Mitigate risks, maximize outcomes and returns. Live. Today is just another day. Life goes on. It’s not like we haven’t been here before.

Today in EFFing Time:

It is:

Just another day that ends in Y. We’ve been here before. 15 times at least. Even if it is winter.

None of this is investment or financial advice. I just quoted a fictional Abraham Lincoln Character Dudes and Dudettes. This is for educational and research purposes only. And hopefully some entertainment value.

Share

Subscribe now

To:

My Fellow Americans

Re:

Housing Debt: The days are long but the years are short.

Comments:

End Memo.

I don’t even know what street Canada is on. - Al Capone

The Report

This past weekend, the nation received word (via Xtwitter) that preparations for 50 year mortgages were underway as a solution to the “affordability crisis” (funny how the “shortage crisis” doesn’t really exist anymore.

The online outrage was swift. The “defense” to the public outcry was:

“People sell their homes on average after 10 years…..it doesn’t create a debt problem”.

The truth (all of it), is that this notion of extending mortgage debt doesn’t help anyone. Not even the future loan originators and home brokers.

Since no one else (to my knowledge, which I acknowledge is not omnipotent) has bothered to produce a financial reply, I thought I’d do so here and now.

The Situation

If someone were to purchase a “median” home in today’s market, and close on December 1st 2025, we can actually forecast the (relatively) precise valuations associated with their purchase money mortgage and cash at closing in 10 years.

We can even compare them across 50 vs 30 year loan terms. Caveat Emptor: This is only regarding the purchase of a house to live in.

Here’s a pair of amortization schedules: 50 vs 30 year:

Now looking forward 10 years to selling the home in 2035, we can apply the 36 year average home price “appreciation” rate of 2.15%, as measured by the median sale price of an existing home since 1989, tracked and published by the National Association of Realtors, and calculate the costs and returns associated with a sale price of $519,00+ in 2035.

The results aren’t great.

• The ending loan balance at 10 years, for a 50 year loan is higher.

• The interest paid is higher.

• The cash at closing is less

• The cost of money borrowed (purchase money) is higher

• The principal and interest paid by the closing date is higher. By $50,000. or roughly $6,000 more than the down payment applied. Yikes.

But we can even measure this in “rates of return” on “forced savings” of said mortgage. Another familiar quip from those who know no maths.

Diminishing Returns

There’s multiple ways of looking at the situation, financially speaking. Gross dollars is one. Percentage return on initial investment (especially for your cold, hard earned, cash).

So let’s take a look. I’ve used the same metrics to look forward, but included sales commissions (at 4% split however you choose) plus $4,500 in closings costs (very conservative) to cover taxes, proration etc. etc. etc.

What becomes evident:

• Future down payment ability is reduced after debt settlement in 10 years

• Closing results in fewer dollars and percent of future necessary invested down payment %

• Cost of the purchase money loan outweighs the initial invested cash returns

• The rate of return on 20% cash down payment is cut in half.

All to save $230 per month, under the (maybe) misguided assumption that a 50 year loan would have the same interest rate as a 30 year loan. Which is about the equivalent of “not drinking Starbucks + canceling Netflix + canceling Amazon”. I’m sure that’ll improve home sales from 30 year lows.

So clearly, this isn’t “it” for home buyers. What about lenders and originators?

If cancelling netflix, amazon and starbucks is enough to meaningfully improve the current 30+ year low in home sales, we have much bigger problems than term extensions of 20 years to the debt burden. And if that instant gratification problem (allegedly) from buyers is causing lenders to “suddenly cry out in terror” at the lack of sales volume, imagine the shortsighted instant gratification implications on future sales.

Future implications

If current buyers, have less money to put down on future transactions at the “average” ten year hold of current mortgages, how will that improve their ability to qualify and pay for the next loan?

If current extension terms, only save the equivalent of $230 per month (again under the misguided notion the loan rate will be identical, despite the 20 year (240 extra payments), how does this help the other “loan growth” metrics that require some form of “discretionary” income”

Current FNMA (Fannie Mae) debt to income (DIT) ratios are at 38.2%. Meaning 38.2% of the average buyers income goes to paying the debt service on their home. (only other time this happened outside of 2023-2025 was 2005-2007)

Using the Median Household Income in the U.S., of $82,500, lowering the payment $230.75 brings the DTI ratio down to 35%.

I’m sure that’s gonna solve the lack of qualifying mortgage applications.

By the by: Housing and Urban Development (HUD) defines “affordable” as 30% DTI on a monthly basis.

Not only does that keep the DTI 10% above the current lending “standard” DTI, the future outlook leaves buyers with less down payment, higher principal paydown at closing, which furthers risk THAT WHICH SHALL NOT BE NAMED or “negative equity” (because of course I’m going to say it out loud) becomes a reality, and thereby reduces even more sales opportunity, which would necessitate a higher risk premium than the 30 year loan rate, which was the entire point of the 50 year idea.

Only slightly less well known is this:

EFFing Policy

So what is helpful?

Leave real estate alone. Or better yet, protect gains, for everyone:

1. Through ordinary inflation/devaluation of currency

2. Through improvement of blighted real estate

Legislatooors have tossed about exempting capital gains on 1st homes. Which are already exempt (up to $250k/500k in gains/single/married) and isn’t going to move the needle, especially for seniors who would and do need a place to live, a reduction of expenses and reduction of taxes to live the rest of their lives without undue burden of risk at an old age.

1. Ordinary inflation/devaluation of currency

By removing capital gains tax entirely on REAL ESTATE (all real estate), perhaps some of the 6 million second homes (US Census Bureau ACS estimate) could come to market, as well as some of the 18.6 million investor owned homes.

Investors facing capital gains tax on exit at current median sales prices compared to 2015 could face up to $39,760 in capital gains tax (on a $198,000 basis) by doing nothing other than holding the property for 10 years. Not exactly a “gain” via effort. If anything, it’s a “gain despite stupid monetary policy”.

Furthermore, facing depreciation recapture increases the burden they face on exit. On a 3% per year depreciation rate, on basis of $223,000 acquisition, this could add an additional $13k+ in recapture taxes due on sale.

And lets face it, a home with 10 years of deferred maintenance probably needs $13k in upgrades due to real depreciative lifecycles.

These two removals alone potentially reduce the necessary sale price of 24.5 million US Homes on their 2015 cost basis. (combined 17% of US Housing units)

Which is good for buyers, sellers, loan originators and home brokers. A sizeable tent.

Not to mention it reduces the time sensitive nature of 1031 exchanges which capture price increases and reduce potential improvement to capital deployment which could go towards job creation and the CRE (commercial real estate) apparatus in general.

And in the event someone actually takes an empty or dilapidated property, spends the time, money and effort to turn it into something useful, that created job opportunities, that benefits the users and community around it: taxing them for doing seems: genuinely idiotic.

2. Improvement of blighted real estate

The current administration need look no further than: the current administration’s previous administration.

The 2017 Tax Cuts and Jobs Act cemented “Opportunity Zones” into law. Theses “OZ’s” were low income census tracks, as designated by all 50 State Governors (a truly bipartisan effort among all US States) in their State. All of which were considered blighted, or extremely low income due to lack of jobs, growth or upward mobility hopes, among other reasons.

Think East St. Louis, Gary Indiana, West Virginia towns, etc. But every state has these areas.

The opportunity zones reduced tax burdens for developers who improved the value basis of real property through development in said zones.

The results are undeniable. According to Novogradac as of 2023, Opportunity Zone Funds had raised $150,000,000,000.00 (one hunnit fity billion) of capital. At 20% LTV that equates to $750,000,000,000.00 in real estate development/redevelopment in blighted US areas alone.

These helped fund the most amount of apartments ever built in the United States at any one time in recorded history, for 5 years straight from 2018-2023.

Which have begun to help alleviate rent prices, and offered “affordability” options to would be buyers.

In other words, this policy has helped create jobs in multiple sectors, reduced rents (eventually and if you discount what FEMA spent on housing, this is a different story), created more supply, redeveloped parts of cities with the lowest incomes and most blighted real estate, helped create loan originations, brokerage commissions, management fees, created new businesses, and reduced the overall tax burden for doing so.

At the end of the day, you’re either under-pacing inflation via home purchase and expenses that go with it, (not a gain) or you’re trying to improve the property/area and taking a lot of risk to try to outpace inflation. Capitol Gains really innit.

Tent, meet revivalists.

Unfortunately, what we’re getting is a lot of mumbo jumbo about ten years, thirty years and fifty years.

Subscribe now

Share

The Digital Report

NASDAQ

It’s been 4 weeks of up down up down, all within a few percentage points of ATH, despite ending last Friday down 3.5%”.

I haven’t ruled this out entirely.

Pattern behavior matching both cycles, albeit at slightly early and late on the timeline.

With 5 cycles having ended, the comparisons can be whittled down to the previous 10 remaining timeline behaviors.

Which brings me to recent discussions of “SOFR spiking” amongst analyst and televisioneers.

SOFR-itas

When viewed on it’s Index level, SOFR “backstops” the rise in “excess” funds being used in overnight reverse repurchase agreements. Or: banks and cash holders “lending” cash overnight to the Federal Reserve.

But when you index both to the start of the 2020 Recession, you get the next chart, which is the same data, clearly showing SOFR as the level of desired level of cash, or target, of excess cash/liquidity.

And reverse repo value is approaching the SOFR indexed level of the start of the 2020 recession, when indexed to the same. Now SOFR is based on the value of the “collateral” pledged, namely US treasuries. So the higher the treasury rate, the higher SOFR.

This is important, because SOFR replaced the London Interbank Offered Rate or LIBOR, for two reasons:

1. There was ample shenanigans (alleged fraud and misuse of funds) using LIBOR and:

2. As a way to force large banks, dealers and parties that partake in such transactions, to pay evermore interest for needing short term/overnight transactions as such, and would require evermore “collateral”.

Which is a long way of saying what can be simply explained as:

“Want more collateral? Buy more Government Debt”.

The Federal Reserve will provide ample “liquidity” for those with the collateral it desires for trade.

And here we are, watching yields on said debt get bid, not precisely by my initial forecast, but accurate by way of direction.

I’ve said here many times, the situation we all face is the cost of money, and while I’ve heard endless “the fed has lost control” commentary from people who genuinely do have more daily experience with said volume of bonds and swaps, remember, the entire purpose of the Federal Reserve is Monetary Policy.

And to that end, if we view the “target” as the levels of liquidity at the start of the 2020 recession, we can compare it to other data, affected by the cost of money.

In lieu of JOLTS (Job openings and Labor Turnover Survey) from the BLS, which is on hiatus from collecting and publishing data, let’s turn to the private sector.

Job postings on Indeed have gone back to levels last seen in February of 2021.

The same month the US had an unemployment rate of 11.6% non seasonally adjusted.

The same month we still had 10.8 Million Americans Unemployed, waiting in lines for food shelves.

Labor-atory

Since the BLS isn’t going to publish the federal data, I borrowed state level data and tallied the last two weeks of Initial Unemployment Claims. And we just bounced upwards again on a non seasonally adjusted basis.

When you seasonally adjust it for smoothness, this is where we left off.

I’ll be updating and applying the SA formula myself as we go along in “shutdown” mode, lets move along to the next set of Effective Federal Funds Monetary Policy brought us back to….

Construction job postings are back to November 2020 levels. I heard that was a fun time.

Yeah but “more people/population growth”….Yes. Yes exactly. More and yet, still less.

US CON. STATS. Homes & Home Accessories.

Which brings us to we’re back to April 2021 levels of privately owned housing under construction 1-multifamily. Which is still more than all other time periods outside the last 3 years and 1973-1975. From August. Because we won’t ever get September data. (Wake up, September is gone)

Here’s the current situation as was left off in EFFing time, compared to the bigger contraction cycles.

And the longer term effects as we’ve left a couple of those cycles in the past.

And the two cycles we currently most resemble.

Mortgage Asset Transactions

Commercial mortgage assets are near to going negative, across all sectors. We’re back to 2014 levels.

Delinquency values and non performing (asset quality measures) are still at (slightly higher than) Q4 2007 levels for commercial real estate loans.

While you see stories of farmers on tv regarding the banner crop yields this year, the low commodity prices and trade wars, keep in mind, delinquency values are climbing and match 2008 levels. And this is backward looking (Q2). Welcome to Q4, the harvesting season.

Despite all that, spreads for residential mortgages are dropping for now. Based on pricing and incomes, at present, I don’t see a major bounce in existing sales soon.

No Mr Bond. I expect you to die.

Large holders of gold probably have a nice liquid market to take profits into right now.

But never lose that Goldfinger entirely.

Just plain Rude

West Texas Intermediate Crude futures continue to drop. None of the expected bounces have been remotely “bouncy”.

Keep Calm and Chive On

Remember, we’ve been here 15 times before. And in even worse situations.

The bright side to the construction data, is that right now, despite the decline in units, and the price contraction ongoing (NAHB reported today, 6% declines) right now is actually a fantastic time for actual innovation, ingenuity and quality of service/craft.

3 Years ago, builders “would hire any contractor”. Today, builders are still saying “we’ll hire any contractor”. Wait….wut? 3 Years ago, nearly anyone who said “I’m a contractor” was offered work (shortage this, shortage that, EFF it all). Today, nearly anyone who offers a way to help ameliorate the cost, and consistency of product delivery, has an open door, open phone line and open invitation to land an opportunity. (“nearly anyone” meaning contractors)

You just have to walk the line. But that’s why you keep your eyes wide open all the time.

THE TACO TRADE

Ok, on one hand, Jack in the Box just lost $460,000,000.00 (Four Hundred Sixty Million and 00/100 Dollars)

On the other hand, a franchisee just bought the entire brand and 550 stores for $0.20 (twenty cents) on the dollar. (were you expecting a different topic?)

That’s $209,000 and change per store. All they need to do is net $41,818 per store (Forty Eight Thousand Eight Hundred Eighteen dollars) per store, to have a themselves a 5 year payback. In CAP rate terms, they just snagged a 20% CAP rate on 550 taco stores.

If they really wanted to stretch, they need to make $52,000 to have a 4 year (25% CAP rate) payback.

Granted they’ll be closing some non performing stores, but a Net return of $41k per store over 4 years, is a pretty low bar to make this one hell of a Taco trade. I doth tip my cap to Yadav Enterprises.

Go find your TACO trade. Offer what you want. From Franchisee to Lock Stock and Two Smoking Barrels.

Relatedly, if you’ve never slept on the side of Pacific Coast Highway 1 next to the Pacific Ocean, waking from the waves and sunshine, only to then venture from Malibu down to Venice for a breakfast Del Taco, you’re missing out on some Americana.

TACO trade FTW.

Today in EFFing Time

Today is October 17th, 2025 Anno Domini (though I’d understand if you thought otherwise for multiple reasons)

Other current days in past times:

• July 12th 2019

• February 1 2008

• August 8th 1996

• April 20th 1990

Keep Calm and Chive On. No matter what.

None of this is investment, financial, or business advice. It’s for entertainment and hopefully educational purposes.

Subscribe now

Share

Date: September 25th 2025

Time: 7:00am

Today marks the 1 year anniversary of the very first published US Homebuilding Situation Index. In that time, the index has lead the way, as a leading index should, from seeing the situation deteriorating in Q4 2024 to seeing the rise of the August 2025 sales all ahead of when “analysts” and “Consensus” could imagine. But then again, when you’re scanning the horizon as you drive, you see and react differently than when you’re staring at the pavement in front of the hood. Just drive down your local highway en route to work, and you’ll notice the traffic jams form at bends and hills for no particular reason, other than not seeing whats more than 2 feet in front of the car.

Or, go ahead and layout a new house from foundation to finish, while keeping it flush, plumb and level, with a string, tape measure, pencil/notepad and your own wallet. Spacial awareness required.

This report contains analysis of Lennar’s most recent Earnings, and compares Lennar’s Fiscal Quarter Earnings to the US Census Bureau Survey of Construction data.

The Homebuilding Situation (Composite index measuring sales, inventory, price and mortgage rate direction change) from August 2025 stands at 28.97 This is 71.03 points below the Average Situation for Homebuilders. The is the best situation since April 2024.

Sales

August sales jumped to 66,000 units sold from 56,000 in July. 11,000 more than the average monthly sales rate across the last 52 years. Sales made up 66.85points for the index, up from 64.

I believe this warrants a special note: from what I see, from analysts in the space to everyday friends, this number doesn’t seem to garner the attention it deserves. 50-60,000 sales in one month, is roughly equivalent to the size of an entire 5th ring suburb (pick your MSA) in new homes sold every month. The number of new homes sold in one year, the lowest year of the current cycle (2022) saw 641,000 new homes sold. That’s 4,000 fewer homes than the entire population of Detroit Michigan. 2020’s 822,000 new homes sold, is the equivalent of the population of San Francisco California. No seasonal adjustment necessary.

Inventory

There are 490,000 new single family homes for sale . Down 14,000 over the past month (revised). The past 12 months have been revised to remain between 490,000-505,000. Last months 508,000 was revised down to 504,000. This is currently the most inventory in recorded history outside of the two years from November 2005-October 2007. Current inventory contributed -53.5 points to the index. The average number of new home for sale every month, since 1971, is 319,000. In other words, current inventory is 53% above average. After downward revisions.

Sales do not include cancellations, which have been elevated this year. Current “speculative” inventory, consisting of completed homes for sale and lots with specific permitted homes for sale have reached 228,000 units , down 2,000 units month over month. This is within 15% of the all time high spec inventory.

Publicly traded builders b(u)y and large increased community count this year, increasing permitted spec homes for sale. Lennar was a leader in community count growth at 29% Year over year increase in active communities as of last week’s Q3 earnings report.

On a community count level, Lennar has: 381 more communities at the end of their Q3 2025 Fiscal year than they had at Q3 End of Fiscal Year 2024.

The number of homes for sale may, and should, statistically speaking, increase again.

Price Direction

Median Sales Price increased year over year by 1.9%, ending 7 consecutive months of negative slide. The Median Sale Price for a New Home was $413,500. The past 5 months received revisions to pricing, including bringing the new cycle low price of $395,100 in July, tying August 2024 for second highest negative YOY change in price this cycle.

Mortgage Rates

Mortgage rates decreased by -1.9% month over month. August’s average 30yr Fixed Mortgage Rate was 6.59%. Comparatively, August 2007’s 30 year average mortgage rate was 6.57%.

Additional Commentary:

Lennar Earnings and public doubt

This month, I’ve witnessed multiple industry analysts question the validity of the Census Bureau’s Survey of Construction data. Mostly questioning this months (by mostly I mean only) units sold number. These are the same people who ignored the signs of growing inventory, increasing COGS (cost of goods sold), increasing SG&A (selling, general and administrative costs), increasing cost of money (mortgage rates) and increase of publicly traded builder commentary highlighting stress over the last two years, in favor of the narrative that, “the housing shortage will never end and home sales will only ever increase”.

I’m only slightly exaggerating the last phrase, and under whelming the prior realities.

I find it curious, that only now, do these folks question the published data. And of all the data, only the recent sales data. Which, if you’ve read this report, you expected, because I told you to, that August would see a sales bump. And September also won’t be nearly as bad as “word on the street” says it will. All while missing the coldest quarter of them all, if they’d just look beyond the pavement in front of the hood to see where Quarter 4’s bend in the road takes them.

Especially when that’s the least questionable form of the data reported.

Take for instance, in the last 12 months, the Census Bureau, with zero explanation other than “times were tough don’t judge us”, altered the median sales price of new homes data collected, going back to 2020. Erasing over $50,000 in gains to the previously reported Median sales price.

When I publicly challenged that, analysts responded to me “the builders didn’t report that big of an increase”. Nevermind that I literally worked for then the 10th largest publicly traded builder, and witnessed it first hand, day in and day out, let’s let Lennar “reporting” vis a vis earnings, compared to the Census Bureau’s sales by Conventional Finance type. Which makes up >75% of sales.

By the way, Lennar just erased 7 years of price gains. With Avg. Sales price back to 2017/18 levels.

I guess everyone forgot about that, since this is the new “official” monthly sales numbers:

Even though the monthly high price in November 2022 for all purchase types was $496,500 median sales price.

Just a reminder, Lennar is so large, they make up the same footprint in sales as the 3rd, 4th, 5th and 6th largest builders in the United States. (Pulte, NVR, Meritage, KB Homes) by themselves.

Nevermind the 12 months of “units for sale” revisions to stay within that 490-505k range, despite Lennar’s deliveries being “Up and to the right”.

Nevermind the publicly acknowledged previously shared here “incentive wars” ongoing by builders.

Nope, today, the analysts question August being a strong sales month. I guess they’re all just looking at the pavement in front of the hood.

They probably also missed that Lennar has officially eclipsed the > $1 in SG&A Cost for every $1 in Net Income Earned bit too.

Which means they definitely lost the plot after telling me “The debt load is great” while Lennar went from net positive Cash and Cash Equivalents to net negative vs their Debt.

The same people tell me that “Opendoor” has gone parabolic in recent weeks.

If they say so. Speaking of which, Lennar was an early investor in

What’s Opendoor you ask?

All of which means:

They’ve lost money every quarter of their existence, save for 2 quarters. Someone get them a string, tape measure and a notepad. Plumb, flush and level.

Then again, Lennar benefits from “technology” company investments losing money, to reduce tax burdens. While they have them.

While Lennar and “NAHB” sentiment continue to plummet, I look forward to seeing what the industrious smaller builders, local developers, and bigger hungry builders do in the coming months.

And don’t shed a tear for Lennar, even if their worst is yet to come. They’ll be fine. The Situation just improved, even if the “consensus” says otherwise and even if temporarily. The last time the situation improved by this much, was April 2008. Remember, the improvement comes from stopping that which makes the situation unhealthy.

For those who proscribe to “consensus” housing data, “The beatings will continue until moral improves”

Build your own path.

I want to express my gratitude, on this occasion to the people who helped make this anniversary possible, you know who you are.

And a very special thank you to the 1k+ readers here.

A note: The Federal Reserve Federal Funds Effective Rate does not set mortgage rate targets.

The research and method for the index can be found here: US Property Services

Charts

Sources:

• US Census Bureau: Survey of Construction; New Residential Sales

• Lennar Public Earnings, 10-Q/Press Releases/Quarterly Presentations

• US Property Services (All Rights Reserved)

• Analysis by Ulysses Awsumb

Subscribe now

Share

The Memo:

To:

The Team

Re:

• Things that make the markets work

• Bondage

• Today in EFFing Time

Comments:

Credit unkown.

End Memo. This is not investment advice. This is for research and entertainment purposes only. You should share it with your friends though.

The Report

I last wrote about the leap at Rhodes, and the caution that the current market situation should warrant.

In the last week of news, we’ve seen initial unemployment claims rise, the unemployment rate remain elevated, remembered the events and losses of September 11th 2001, witnessed a young man get assassinated, witnessed a young woman get murdered, saw an entire manufacturing plant of employees arrested, read about Russian incursions into NATO allied Poland, heard from farmers across the country facing dire crop sales outcomes, read some heinous commentary,

And ATH (all time highs) in the Nasdaq.

Ulysses, you said we’d see another drawdown.

I did.

And we probably will.

That ATH has arrived despite some whiplash.

And ended the week with this nice red candle.

In other words:

© Warner Brothers | DC Comics | The Dark Knight

In EFFing time, we’re less than 4 weeks away from the passing of Heath Ledger, in January 2008. R.I.P.

Notes, Bills and Bonds have had an equally volatile time period.

And are tracking the direction of my May 2025 forecast, directionally.

With some heavy red candles also.

Despite ending the week where it began.

While headlines showed we’ve reached the highest number of initial unemployment claims since 2021, (on a seasonsally adjusted basis) the non seasonally adjusted data just turned up as well, despite being lower than the SA claims.

The seasonal factor increasing claims this time of year, can likely be traced back to the longstanding practice of holiday (read seasonal) hiring done this time of year. As retailers gear up for the Q4 holiday slate including Halloween, Thanksgiving and Christmas buyers shopping, which was such a staple, it lead to the now forgotten term: Black Friday. As in the day that retailers finally went from in the red (losses) to in the black (profit) for the year.

Despite all the legislation to curtail claims and use of unemployment, including in states like Texas who reduced benefits, the current situation still found a new cycle high. By the way, the claims spike was lead by: Texas.

One thing the seasonally adjusted data does nicely is smooth the noise.

The Unemployment Rate (U3) dropped by 1/10th of 1 percent. Or 10 Basis Points.

Some things to remember regarding the current unemployment “rate”: we’ve just come off 3 years of excess deaths, and decreased participation in the workforce, from disabilities, retirements and age. If the workforce size decreases by two people no longer participating, and 1 additional person loses their job: Does the unemployment rate go up or down?

Now for some bad news, that presents some good opportunity:

The JOLTs (Job Opening and Labor Turnover) survey showed construction hires continuing their downward trend.

Lumber futures pricing continues to decline.

Lennar just rolled over again, and heads into the seasonal worst Quarter for sales, while BuilderOnline just published a piece on the current “Incentive Wars”.

The drop in mortgage rates has coincided with the uptick in unemployment. Which probable does as little for sales as last years Fed Rate “Cuts” that we were told by very professional people would unleash a fury of buying.

Meanwhile, we just saw the second upward bounce in mortgage spreads. Ticking away, the moments that make up a dull day.

Let’s check in on this weeks bonus: XLF

What makes up XLF?

Fun.

But wait, I did say this presents opportunity. And it does.

If construction employment softens, construction commodity prices (i.e. lumber) drop, mortgage rates drop even if spreads widen, and big builders are compressing margins even futher:

The next 12 months may present some very interesting opportunities for developers in good markets to build cheaper, redevelopers looking to acquire distressed assets for less, real estate operators looking to acquire at depressed prices, and business’ expanding footprints with increasing incentives to fill space. (Just please no more chicken joints, thanks) Among other opportunities for many folks.

Even if the general public and general media says otherwise.

Today in EFFing Time

EFFing time is the same day/week/month in past time, that today is, since the first raise of federal funds effective rates. We’ve been here 15 times before.

It is the 183rd week ending of the EFF Cylce, or:

6/7/2019

12/28/2007

10/25/2002

7/5/1996

4/13/1990

7/25/1986

8/24/1979

8/8/1975

4/30/1971

10/2/1964

5/16/1958

7/2/1948

I don’t have anything to say about 9/11, or the events of this week. I’m not the character in those stories, and my opinion is irrelevant. But I will share a pair of songs that were released back to back in June-July 1991 that I think can offer something for those looking to make sense of the year that has been this week.

If this time is different, let it be the best kind of different:

Subscribe now

Share

To:

Everyone

Re:

• Labor Day

• BLS Appointements and Labor Dayta

• Nobel Prizes

• Microchips

• Stock Markets

• Today in EFFing Time.

Comments:

On this Labor Day weekend, we are on the cusp of potential changes to the way American data gets published. New Bureua of Labor Statistics chief E.J. Antoni has floated the notion of doing away with monthly publication of employment reports. This comes after firing the current head of BLS after what was termed a “bad jobs report”.

On a non seasonally adjusted basis, it wasn’t as bad. But then again, the trajectory isn’t exactly great.

Today’s Report is brief, but highlights that “We’ve been here before”. From Microchip trade battles, the soft stock market numbers we knew were coming, to tariffs and even Nobel Prizes. This is the story of measuring the economy and world headlines, from the cycles of comically Effective Federal Funds cycles.

Oh right, there’s also an interesting link to the past cycle of Japan.

Happy Labor day everyone. I hope you all enjoy the long weekend.

End Memo.

Today in EFFing Time

August 29th 2025

Now on to the past todays, which are the same as today’s today. Or something like that.

May 5th 2019

December 14th 2007

October 11th 2002

March 30th 1990

Labor Day

We’ve been here before too.

Etc. Etc. Etc.

Nasdaq

There’s the roll over we discussed.

Draw.Down.

Same as it ever was. Same as it ever was.

The land of the rising sun

As I’ve noted in previous reports, each cycle can be compared to cycles past. Including other Nations. We’ve covered the Eastern Autumn of the Soviet Block. The Chinese turning from Mao to Tiananmen Square, the Iranian Revolution and more here. But one ally’s past cycle seems familiar, in a different way.

Or in our favorite EFFing format. A very special hat tip to Don, Six and friends at for being on the Jaws of Kyoto story.

Identical? No. Similar? Yes. The headlines over the next few weeks should be interesting. 1 Leg down beginning. Another leg down sure to come. After the 1st one bounces.

The seasons, economics, and monetary realities of the current system are changing before our eyes. The sun is beginning to set earlier as the summer ends.

Subscribe now

Share

There was however an error in publication and commentary associated with it. Mine.

The time to save a down payment required for the conventional finance purchase of a new median priced home, is 52 months. Not 52 years.

Mea culpa. I’d rather be accurate and forthcoming than ignore an error. The original publication has been updated to reflect this accurately.

Date: August 28th 2025

Time: 7:40pm

The Homebuilding Situation (Composite index measuring sales, inventory, price and mortgage rate direction change) from July 2025 stands at 1.89 This is 98.11 points below the Average Situation for Homebuilders. The situation increased by 2 points.

This report contains builder earnings analysis and Price Targets for 20 Metropolitan Statistical Areas, as well as the index.

Sales

July sales fell to 56,000 units sold from 57,000 in June. 1,000 more than the average monthly sales rate across the last 52 years. Sales made up 64 points for the index.

Inventory

There are 505,000 new single family homes for sale . Up 2,000 over the past month (revised). The past 10 months have been revised to remain between 490,000-505,000. Last months 511,000 was revised down to 503,000. This is currently the most inventory in recorded history outside of the two years from November 2005-October 2007. Current inventory contributed -58 points to the index.

Sales do not include cancellation rates, which have been elevated this year. Current “speculative” inventory, consisting of completed homes for sale and lots with specific permitted homes for sale have reached 230,000 units (Completed units revised down).

Publicly traded builders by and large increased community count this year, increasing permitted spec homes for sale. Lennar was a leader in community count growth at 29% Year over year increase in active communities.

Price Direction

Median Sales Price decreased year over year by -5.9%. The Median Sale Price for a New Home was $403,800, down month over month after revisions as well. The past 4 months received revisions to pricing.

Mortgage Rates

Mortgage rates decreased by 1.4% month over month. July’s average 30yr Fixed Mortgage Rate was 6.72%.

Additional Commentary:

Builder Earnings

Q2 Earnings have been released for the majority of the 20 largest publicly traded homebuilders. Amongst the 16 builders analyzed, the average Net Income change on a same quarter year over year basis was -36.6%. The biggest change was -101.2% as Beazer Homes reported an operating loss. Rounding out the bottom 4, K Hovnanian saw net income decline -80%, Century Communities -58% and Lennar -50%.

Only 2 saw increase in earnings per share. American Homes for Rent and Taylor Morrison. Only American Homes for Rent saw increased net income on the same basis.

The average Net Margin for Builders analyzed came it at 8.9%, with Beazer Homes in negative territory and American Homes for Rent at 23% Net Margin. The only builder to exceed 15% net margin.

The combination of prices and rates present a challenging environment for builders, as two years of incentive to transact become heavy, compressing margins further. 10 of the 16 builders had single digit Net margins. 7 of which were below 7%.

While August likely provides a modest boost to closings for the seasonal strengths the month offers, the remainder of the year could see further sales stalling.

Builders will welcome the recent 19% decrease in lumber futures, bringing cost back to spring level, and should look for ways to further compress costs as an alternative method to induce sales and avoid operational losses in major markets.

Price Targets

A study of the same 20 Metropolitan Statistical Areas (MSAs) and Cities used for the S&P Global Case Shiller 20 City Home Price Index reveals much of the battle builders have faced reducing prices and increasing selling and general administrative (SG&A) cost for 2 years, to balance sales beyond their current bounding on average.

The 20 MSAs comprise a total population of 112,594,464 people as of the 2023 US Census American Community Survey (ACS). This should not be confused with marketshare or households.

The Median Household Income for these 20 MSAs was $89,515 with ranges from $67-127,000. By using a 25% DTI (Debt to income) ratio, Median Price targets have been calculated for two sales methods. (25% of monthly income used to approve mortgage).

Those two methods consist of:

• Conventionally financed buyers with down payments of 25% of purchase price

• FHA financed buyers, with 3% of purchase price down payments

For Conventionally financed buyers in these areas, the overall Median Price target is $390,144, supposing buyers have a $97,536 down payment. (

For FHA, the overall Median Price Target is $301,658 with a down payment of $9,049.

To further highlight the conventional finance decline ($494,500 Median Price to $403,800) over two years, the average time to save the required down payment, if one were to save the exact mortgage payment long enough for the required down payment, is 52 months.

To further expand sales targets using FHA, Median Price Targets should expect to decline as much as another $103,000 unless and until both incomes increase, and or rates decrease. Dramatically.

A note: The Federal Reserve Federal Funds Effective Rate does not set mortgage rate targets.

The research and method for the index can be found here: US Property Services

Charts

Sources:

• US Census Bureau: Survey of Construction; New Residential Sales

• Freddie Mac Primary Mortgage Market Survey

• Public Builder Earnings, 10-Q/Press Releases/Quarterly Presentations

• US Census Bureau American Community Survey

• US Property Services (All Rights Reserved)

• Analysis by Ulysses Awsumb

Share

Subscribe now

The Memo:

To:

The Board

Re:

• A Special Today in EFFing Time

• Equities: As a percent of Household Assets

• GDP

• Collateral Damage

• Plight of homebuyers

• Ancient Wisdom: 2,500 years later

Comments:

First, welcome to the new board members. I appreciate your time. Secondly, I realize it’s not Friday, but I needed some time for this one. Thirdly, I realize it’s Aesop’s Fables, not ESOP’s, but then again, this is my Memo, and my Report.

Normally, I combine a bit of Mad Magazine with my Macro research/commentary. Not today. Today I have some things that need to be said, some reminders of how stories end, and some information from the future that I see. This represents the next chapter in what was preceded by:

• Chapter 1 The Fourth Rate Turning

• Chapter 2 No Clucks Left to Give

• Chapter 3 The Fourth Turning

A reminder, as this represents Chapter 4 in the ongoing research, this the continuous study of the effects of Effective Federal Funds rate cycles on the economy at large and small. The EFF indices are economic data indexed to the first time Effective Federal Funds Rates elevated off of their trough. Which should not be confused with the first time the F.O.M.C. (Federal Open Market Committee) raised rates deliberately. Yes, there is a difference. But today is not that story.

Today in EFFing time is: the same day/week/month/quarter ending since Effective Federal Funds Rates began to rise. That is to say: Friday August 22nd was the 180th week ending of the 4th Rate Turning of the 21st century, and can be compared to the 180th week ending of any prior Effective Federal Funds cycle.

End Memo.

Belling the Cat

None of this is investment or monetary advice. This is for research and entertainment purposes only.

The Report

Equities and ESOP

Today, actually as of Q1 because we collect and publish government data in reverse, (which is unnecessary now but was necessary in olden times) we are just under all time highs in allocation of household’s financial assets into Corporate Equities. Also commonly referred to as Stonks Stocks. We have never sustainably held above 35% allocation. Ever.

To expand the horizon beyond the turn of the century, let’s use a government chart:

To further understand this, there was a reason why this data set troughed and rebounded in the early 80’s, and why it launched to new paradigms (until it fell back to earth) in the 90’s.

One of those reasons are: ESOPs (Employee Stock Ownership Plan). More Commonly and of late referred to as ESPPs. (Employee Stock Purchase Plans).

Employee ownership is nothing new, in fact it’s as old as Aesop’s Fables. But in 1974, Le Congress passed ERISA, aka: The Employee Retirement Income Security Act of 1974. Further legislation in:

• 1975

  The Tax Reduction Act created a tax credit specifically for ESOPs.

• 1978:

  The Revenue Act of 1978 added new formalities to ESOPs, including the creation of IRC § 409A.

• 1984:

  The Deficit Reduction Act of 1984 (DEFRA) introduced major tax incentives, making it even more attractive for businesses to establish ESOPs.

• 1986:

  The Tax Reform Act of 1986 continued the trend of providing incentives and refining ESOP law.

All boosted the deferred cash payments of salary/wages to employees through stock ownership participation. This has prevented the much discussed, rarely seen “wage price spiral” that economists like to reference, amongst other things they don’t actually understand, from ever happening.

The ESOP eventually transitioned to the Employee Stock Purchase Plan, or ESPP, which is more commonly associated with publicly traded companies.

During the 1990’s, this became a prevalent payment method for employers to attract talent. See Federal Reserve Bank of New York paper below:

They have become so prevalent, that employers now have to fight employee indifference to them. As JP Morgan so handily points out here in a “content” post titled “Every employee on board”:

The concept is simple:

Offer stock in lieu of actual wages paid. Promote the benefits, downplay the risks, make everyone understand the “goal” and sing “Kumbuya Jambalay Crawfish Pie Me Oh My Oh” when the stock hits “internal targets”. All while the company controls more share volume through employees passive purchase options upon each paycheck, as a percent of their wages. A percent of their wages which then becomes a percent of their Household Assets.

Which is at all time highs, as a percent of Household Assets. Now, same chart, but in EFF format, which measures change since effective federal funds rate trough:

Which shows, less raise from trough, despite the all time highs. So which cycle is most similar?

Oh, the 2004-2009 cycle. Fun. Compare this with the next 3 weeks of projected NASDAQ further below.

Here’s the past 6 cycles going back to 1986.

None of this should be misconstrued with criticism of taking on equity or success pay in companies or people you believe in, nor in taking on stock compensation.

In fact, Aesop has a Fable about that too.

The Tortoise and the Hare:

No Warren Buffet (and Charlie Munger) wasn’t an employee buying into company stock, but he did believe in the concept of: Buy into companies that are well run, have a future, and are focused on returning money to their investors/employees future, wait, profit.

The flip side is also true, especially for those who care not about their employee’s well being, those who seek to sign up participants just to shirk payments in wage and make a bonus on stock sales participation.

Perhaps one of Aesop’s most misunderstood and forgotten morals of a story:

The Wolf in Sheeps Clothing.

You can’t eat stonks, and a dollar today is always worth more than a dollar tomorrow, an economic reality expressed as the Time Value of Money.

Something J. Wellington Wimpy is known for expressing in another fabled form:

(C) E.C. Segar via Popeye

Adding insult to injury, there’s plenty of folks still in the workforce, who worked at pre dot com blowup companies that were investing into their ESPPs/ESOPs where the per share price of what they were purchased at, are worth the same or less than they were 30 years ago. Case in point:

After Uncle Sam took his cut of the company, but not before he takes his cut on selling those shares at 1996 prices.

By the way, U.S. Challenger Job Cuts have reached their highest level since 2020. Which I heard was a fun year for everyone on Earth. +75% YOY. I’m sure the highest salaries won’t be on the chopping block. Right?

And don’t get mad at the Wolf either. Wolves gotta eat too, same as ants and grasshoppers. Plus everyone has to answer to the Shepherd (Uncle Sam or The CEO/Board) when they fancy their favorite Mutton Tax/Cost Savings dish.

Which brings me to the next of Aesop’s Fables. The Ant and the Grasshopper.

I’ll segue using the same timeframe, because there’s a colossal economic misunderstanding about the “Boomer” population in the country, or just the older demographic in general. These are the first generation of Americans to require their 401k’s to fully function because of those previously mentioned legslative acts that helped U.S. Conglomerates kill pensions.

Existing Home Sales

Equities aren’t the only source of Household Assets being discussed and heralded by Wolves with something to sell. The National Association of Realtors, Zillow, Redfin, and everyone else who requires sell side research tools love to discuss the “record” equity in housing today, as a bolster to the narrative that all is well and Boomers are all loaded, hoarding wealth and immune to the fiscal and monetary policies set forth by Uncle Sam.

Using the National Association of Realtor’s home sales data, published this week, we just clocked the second lowest sales total on record for the month of July.

The combination of the existing home Median Sale price (July’s figure of $422,400) and current interest rates combined are clearly impacting sales transactions. One figure that continues to get tossed about is the Median Age of homebuyers right now, which is 56 years old. Back in 1995, the Median age of buyers was 34.

But let’s look at the reality, of the 56+ age set, and transacting to buy a home in the current market.

To illustrate, we’ll use the following example:

In August of 1995, a 30 year old couple decided to purchase a brand new home. They found a great neighborhood and bought the Median Priced ($134,900 on 8/1/1995) new home from Lennar. They put 25% down because they had saved money since graduating college, both worked and wanted to start a family.

Fast forward to today. They just paid their last mortgage payment, and want to net that sweet difference between $134,900 and the $422,400 they’ll get right now. Nice profit eh? “Record Equity”. Ant saving away innit.

Ahem, aren’t we forgetting something?

Right, interest.

But they also paid for homeowner insurance (PMI wasn’t required). And of course, property taxes. Let’s also figure, that they each increased on average 2.5% per year. Since the Fed is terrible at that 2% target.

Lets add it all up:

OK, so they still made money, right? Hold on. Let’s sell it for $422,400 first. Because they had a top notch broker who understood their market, and double ended the deal, they only paid 3% brokerage fee, or $12,672 in extra cost to take off the top.

The Profit:

“But they would have refinanced at a lower rate at some point!”. Glad you also thought of that. If they refinanced at the first rate trough in October 2012, they could have cut their mortgage interest rate in half.

They would be refinancing $70,647. However, that would have only decreased their total interest paid to today by $14,348, going from $162,533 to $148,184 YTD and they’d still have 17 years left to pay principal and interest if they stayed. However, if they sold in July this year, they’d have to credit their lender $48,620. in remaining principal owed upon sale, wiping out all that profit. Of course, that’s if they never used a HELOC/Cash Out Refi.

Even if they had gone with a 15 year mortgage at the same 2012 rate, it would increase the interest paid to $199,408 YTD, eliminating all “profit” at sale, and at best 3 more years to go before being free of making payments if they stayed.

Keep in mind, the “profit” as pointed out, includes zero maintenance or repair cost. So either the lawn is in absolutely wild shape, and it’s in need of a lot of repairs including a roof, mechanical upgrades etc., or the real profit is actually, a loss.

Do they have the $409,728 cash in hand after the sale though? Yes, they do. And now, at 60, with the kids out of the house, they have to decide what to buy below median price to have no mortgage, or how much of that to put down on another house, to make payments on until they’re 90, along with the taxes and insurance at higher price basis.

As Aesop’s Ant and the Grasshopper shows us, saving is good.

But it should never be confused with profit. Such is the time value of money.

If equity is used, does it still exist? If a tree falls in the woods, does it make a sound?

NASDAQ

The Leap At Rhodes:

I called the drawdown earlier this year, the bottom, and now I’m calling it again. Because regardless of what I did then, that’s Rhodes, and this is here.

The next drawdown appears to have begun, right on scheduled time. This will mark the second drawdown of the year the EFF indices have shown coming, and their timeline. We will see between -3-9% (we alredy hit -3% this week before Friday’s up day). Because this is the story of how people react to the cost of money, and when they react, regardless of the newfangled things of our time.

This from last week, updated.

And each of the prior EFF cycles back to 1986.

So while we’re currently trending closest to the 2015-2020 cycle:

That does not preclude a repeat of the aforementioned closest cycle of 2004-2009

The difference will be how we rebound at the end of September. Beware the next 4 weeks of markets the way one would have been cautious of the Ides of March in ancient times. Caveat Emptor.

Gross Domestic Product

GDP for Q2 came in positive, after a negative Q1 print. Here it is in EFFing time.

That does not preclude the situation from being “all Clear”. In fact, in the same chart below, I’ve added three storypoles (vertical markers). The first on the Left represents the 2001 Recession. The Second represents the 2007-2009 Recession. The Third the 2020 recession. Or the 3 cycles of the 21st century. Having regained the growth post loss does not make a positive growth story. It makes for a flat note.

Which happens to most closely resemble of the prior 3, the 2004-2009 cycle.

Collateral Damage

I have no desire to see this yield drop for anyone on Earth. Especially given the rampant spending this country is embarking upon.

Unfortunately, If I were to buy these notes in any quantity, it would pale in comparison to those who have obligations to provide liquidity (read cash dollars) to investors and depositors upon demand. Should the need arise to have collateral to pledge overnight, this yield stands to lower further. Which is sadly by design, despite its negative affect on the elderly, the savers, and those who expect and demand responsible behavior of their, by their and for their elected representatives.

The North Wind and the Sun dispute this injustice, but replace cloak with “your tax dollars”

To add further complication to this matter, wrote an interesting note this past week about collateral fragility and the changing market for government debt instruments. Its worth the read:

Lighthouse Macro

Collateral Fragility

August 19, 2025…

Read more

9 months ago · 8 likes · 4 comments · Lighthouse Macro

Those comments I made about bonds aren’t sour grapes mind you. Just like accepting the wolf is a wolf, we must accept that which is out of our control, and for the things that are within, focus on those.

The Fox and the Grapes:

Inflation is a feature, not a bug. One should invest and act accordingly. It’s never too late to make the next effort, the first effort, or the best effort. But there’s no sense in throwing away the effort for a taste of something better in life just because it isn’t easy.

Today in EFFing time:

The purpose of this segment, or “moral of the story”, is to show that we’ve been here before, and that which is proclaimed to be a new threat, a new reason to fear, is nothing new at all, and we have the roadmap to thrive regardless of the claims to the contrary. To that end, here are a select group of news/articles/highlights of the past todays, and links to read more for those who wish to do so. Also if you thought today was the first time we’re facing a conductor/chip trade battle, see below: 1986

Today in EFFing time it is:

• 4/12/2019

• 11/30/2007

• 9/20/2002

• 6/07/1996

Yay soft landing for US. Ever heard of the Asian Tiger Crisis, the end of US balanced budgets, LTCM and Dot Com bubble? I remember.

• 3/16/1990

• 8/1/1986

• 7/27/1979

• 7/11/1975

• 4/2/1971

• 9/4/1964

• 4/18/1958

• 11/12/1954

• 6/4/1948

I think I made my point.

Aesop: 620-564 B.C.

Subscribe now

Share

To:

The Farm Committee

Re:

• EFFing Commodities

• Yields

• Equities

• Job(lessness)

• Japanese Yen

• Why buy new when gently used will do?

Comments:

Apparently, there’s no “wheat” in that song, despite my recollection to the contrary. Pretty sure its a conspiracy theory. Like how there was never a cornocopia in the Fruit of the Loom logo or how Sinbad wasn’t in Shazam. Whatever, you’re gonna read about wheat in a minute either way. But first I’m gonna pair unserious humor with serious charts. Enjoy!

End Memo.

There's a hole in my bucket, dear Liza, dear Liza,
There's a hole in my bucket, dear Liza, a hole.

Equities

From now until September 2026, the market will be flat. Even though it’s going to go up further. If that’s a challenging proposition, the equation looks like this:

- + -

(Gabe, I promise that isn’t the other chart update you asked for)

This is basically the most ridiculous, large, social control focus group experiment on earth. Past overlayed onto the future, as measured by the same week in EFFing time.

Yields

Just want to remind everyone, the Federal Reserve has no control over what yield you are willing to buy this for. That’s entirely up to you. Maybe if we take Nancy Reagan’s advice and “Just say no” to lower yields, the people jonesing to borrow more money that taxpayers have to pay for, it’ll change.

One can hope anyway.

I think more people know Honda Accords than they do the Plaza Accords.

Either way, my charts are as reliable as Honda Accords. (not financial or investment advice, pure conjecture. In fact I object to my outlandish statement. Allegedly) Also that 10 speed transmission isn’t nearly as reliable as the old models used to be. (Conjecture!)

Initial Claims

Rounded the corner into another upturn. Despite it being small.

Oats, beans and barley (and lumber and hogs) So basically Land revenue sources

Much ado about lumber futures contracts plummeting again this week. But, as I wrote HERE in February about lumber:

About those sales,

As for the other part, backlog replacements keep disappearing (Spelled it right Kat)

So naturally, demand for board feet of lumber is also declining. As for the timing of the drop, I present to you:

Wheat futures continue their longer term trend in decline. Which is unfortunate. Especially coupled with reports from the University of Illinois showing it might be a banner year for crop harvest. Not just wheat but for corn and soybeans. Which are 50% of US planted fields.

This wheat price is really……something.

Things aren’t going much better for American Ranchers, despite the upcoming bankruptcy filing of Beyond Meat, and the increased prices at the grocery store/restaurants. As ranchers aren’t seeing the increase in prices paid for their part.

So we’ve got trends in less demand to buy farmland to replace new housing units, prices paid for crops and commodity animals decreasing, and prices for timber dropping. We may actually dent the undentable: Land.

Why buy new when gently used will do?

At least this made new highs in June. It even bounced above my may trendlines.

That is until it gets revised. Why? It always gets revised. That’s the nature of the series.

Wheat from the chaff innit.

Subscribe now

Share

The Memo

To:

The Team

Re:

• Realty, Real(i)tors, Reality, Real Income

• Nasdaq

• Employment

• Yields

• Playing Swiss

Comments:

“This is one time where television really fails to capture the true excitement of a large squirrel prediciting the wather. I, for one, am very greateful to have been here.

From Punxsutawney, this is Phill Connors. So Long”

End Memo.

Hey! Phil? Phil? Phil Connors! Is that you?

{Punches Ned in the face}

The Report

Equities

Bull this bear that. Not much happening here outside of the same script.

If you remember the last EFFing Memo, you’ll know this is the direction from here. Now adding the actual current timeline. (Green right Axis)

Yields

What goes up, must come down.

And on the others side of the see saw we get: spread thin.

Builders

We’ve now got 14 of the largets pulbicly traded builders reporting Q2 or “Spring” quarter earnings. And the spring came in and left like a lion. While YOY share prices don’t seem too bad, when comparing 52 week highs, the same senitment becomes a ghost.

The best share price performance belongs to American Homes For Rent, at -15% while LGI Homes sits at the bottom having lost 54% of their per share value.

But stock prices are never the whole picture. Dot com should be lesson enough in that regard.

Spring Q year over year change in earnings per share is hardly any better. American Homes for Rent once again leads the pack at +12%, while Tayolor Morrison leads the For Sale bunch at a whopping +2.69% 3 months ending YOY EPS. Beazer Homes takes the cake at -101.1% and becomes the first publicly traded builder to report a loss (an actual loss) this cylce. Good job Eric et all at LGI. I had you penciled in for a loss this Q.

Net Income changes were no better than the other marks. AMH again at +12.1%. Every other builder saw negative YOY change in Net Income. The boom we heard was not liftoff.

Century Communites lead the way to the bottom, at -58.4% change in Net Income.

While other analysts keep talking about Gross Margins, the concept of Net seems to be lost enitirely. In case anyone thought builders were loving their “advantages over existing home sellers”, allow me to show you some Real(i)ty. AMH again tops Net Margins for the Q, while Green Brick Partners as a “For Sale” builder lead at 14.9% net margins. Century Communities brings up the back of the pack at 3.6% (for those who saw positive net margins). Beazer drops off here.

Loans

Now for a bit of a different perspective. Large lenders (mortgage originators) have had a wild year so far. So wild, that big builders are actually holding their own in regards to net income on loan origination business. DR Horton, “Americas Builder” and largest builder in the country, has stopped reporting thier gross/net, loan level data.

But we can compare #2, #3 builders: Lennar and Pulte Homes to: Rocket Mortgage, United Wholesale Mortgage and Loan Depot.

On a 52 week per share price change, the picture is as ugly as builder revenues.

On loan origination net income change, UWM and Loan Depot fared the best.

While Lennar and Pulte netted more income than all but UWM on the quarter in loan originations.

But it hasn’t been all roses for any of them.

Rocket is reporting YTD losses:

Loan Depot can’t seem to make money":

and UWM just came off a big loss in Q1.

Jobs

Meanwhile construction hires continue to trend inline with 2004-2001.

And Initial Unemployment Claims nearing it’s springboard.

Swiss Chocola…gold

Come Mr. Tarrif Man Tariff me banana

Daylight come and me wanna go home.

Making money

Someone needs to start offering to take builder inventory off their hands at a healthy discount. August will likely be a decent month as it typical is, seeing closings before school years kick off. After that, ask for all the goodies, and discounts.

Today in EFFing time it is:

Subscribe now

Share

The Memo:

To:

The Board of Directors

Re:

1. Human Behavior

2. The Next Leg down in NASDAQistan is just around the corner

3. U23: Rattle and Hum

4. A pair of magic tricks

5. Today in EFFing Time

Comments:

As I track data sets week in and week out, I find myself more interested in the similarities to previous cycles. Maybe that’s introspection, maybe it’s the confirmation that there isn’t much new under the sun. And maybe some of it is knowing this is probably the last cycle this information will ever be useful again, as what lies beyond is likely a New World Order. Which will still be made up of the same human behavior, we’ll just need a new EFF index when the dust settles.

That is to say, human behavior rarely changes. In 1818, Mary Shelley wrote the Novel:

“Frankenstein, Or The Modern Prometheus.”

Prometheus, being the Greek Titan who defied Zeuss, gifting humans with the knowledge of Fire. Which is important. As the years have gone by, the concept of the story continues to be lost, or deteriorated upon the generations. But at its core, its origin, the story isn’t so much about Monsters or Horrors of the unkown or those cast as villains as it is:

The monsters and horrors of those cast as the main characters, those who throw aspersions upon their own percieved villains. Or to remove even the impropriety of the apperance of aspersion, all of our human behavior as we face a goal, conciously or subconciously, surmountable or no. And our subsequent response to it.

You see, Victor Frankenstein’s Monster wasn’t really the Monster of the story. Victor was chief among the villains. From his obsession with Alchemy, to creating life with zero regard for the life itself, to making no objection in the false prosecution of his brothers alleged murderer, to his willingness to create yet another Monster, only to make the decision to destroy it when the concept of their potential procreation worried Victor so, that the life forms he created indeed had their own free will. Part and Parcel of the moral of the story.

Much in the same fashion, those who say recognizing deteriorating economic data is a horror story, they miss entirely the story of hope, humanity and opportunity that comes with life itself, even the life of alleged monsters. Despite all the horror that Victor wraught, his creation mourned his passing, and saught his own life, liberty and pursuit of happines. However imperfect it may have been.

While the novel references Paradise Lost, and the previous literature before it, so too we can recognize the passing of time, and that which is and is not similar to the lives we’ve all lived, and the effect of monetary and fiscal policy, while we all strive for our own pursuit of life, liberty and the pursuit of happiness. Mary Shelley’s mother happened to author “A Vindication of The Rights of Woman”. Some struggles take longer than others to come to pass.

The constant brightness is: we always have choices, and knowledge only offers more choices.

End Memo.

The Report:

A quick revisit of Nasdaq performance, and the Time Flux Capacitor that I laid out in January of this year. Along with the results.

Using the Effective Federal Funds rate as a timeline, I created entry/exit points, with the idea in mind that:

• Drawdowns in markets have happened many times and will happen again

• Finding a place to exit and re enter without losing capital was a necessary component to this exercise.

• Having some sytem for not just understanding, but explaining them would be vital.

To that end, after pouring over data, finding patterns, studying rate changes and of course, needing to find behavioral reasons behind them (actual human behavior) , I set out creating this chart. Overlaying the EFF cycles across number of weeks since rates began increasing. The Storypoles are the “safe out” points I described in a previous memo. As in, the point at which the drawdowns in question would find future suppport.

Compare that with this chart, in which I elaborated in The Memo, the level we would likely see support, based on the last 44 years of cyclical behavior.

And again, comparison of the same, using only a single linear time frame, of the current cycle. Found support at and reached my previous estimate post recovery.

Proof of Life.

NASDAQistan and Magic Trick #1

We stand at a crossroads. Not because we don’t know what happens next. Instead, it’s evaluating the conditions that are most similar, and disimilar to those we have already experienced. More momentarily.

This is a chart of the NASDAQ EFF index comparing today to the 2015-2020 Cycle.

And this to the 2004-2011 cycle.

Similar. And disimilar. I will provide a factual, data and behavioral based argument any day needed, that 2020 was a natural end to the cycle. But I also recognize the differences between each cycle, and the behavior that goes along with those specific circumstances.

To that end let us simplify the situation, and walk through our Magic Trick.

The Pledge:

The day and date has changed, but the human behavior has not. We will repeat what we have done.

Each chart I’m about to show you, can be traced back to this origin. They are identical.

The only difference is: I have indexed them to the first day of the rate cycle (day one =100). This is the same chart. But instead of NASDAQ levels, they are EFF Index levels.

I deliberately overlaid the previous cycle weeks over the current future 20 week period, because despite what you may hear about the past not repeating, we aren’t discussing the past. We are discussing human behavior, and responses to economic conditions.

The Turn

The end of the 1986 cycle from week 178 on.

The 1986 and 1990 cycle, from weeks 178 to 198

Adding 1996

And 2002 alone. Due to how much lower the level was relative to the other timeline comparisons. After all, the Dot Com impact was felt even years after, only recovering in 2003.

2007 into 2008 included.

And finally, 2019 onto the future 20 weeks. August may see up to 3 more weeks of NASDAQ increase, but by mid September, we are going to repeat the same thing we have, for the last 44+ years. Drawdown incoming.

The next 6 weeks we will see drawdowns. But to further illustrate this point, let us break them down. As I have published here before, comparing these cycles to those of “The Fourth Turning”, we are on the precipice of the change from the Final Autumn to the Final Winter, of the Fourth Rate Turning of the Fourth Turning.

The exodus of “Fall” sees a drawdown in each cycle, followed later by another fall in “Winter”. Or behaviorally, an effort to reshift and shuffle the deck chairs, only to later accept the cycle has concluded before another cycle begins.

Here is a comparison of each “Next” drop in NASDAQ level, compared to the subsequent final drop at or just prior to the cycle’s end. There are two exceptions: Black Monday was immediately following the 1986 soft landing, and Dot Com was also at the beginning of the next cycle, albeit a 2+ year nonstop runup was inbetween. Things had deteriorated so much, that by the time “Winter” came around for this data set, the second drop was actually the third, and ended higher than the second. Regardless, they all share the same behavior, with two exceptions to the rapidity of response due to their prior “soft landings." Said another way, a soft landing is assured of a hard start. Alchemy may have its place in this world, but it is no match for human behavior.

All that to say, even if after this next leg down, the subsequent drop after recovering, will leave the index, at it’s level best: even, across the timeframe regardless of how much higher it goes through its bounce. On the correct timeline.

The Prestige

Ladies and Gentlemen: the EFFECTIVE Federal Funds rate.

I give you:

1986