Optimal Capital’s Post

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Scott, Martin with us. Francis Newton Stacy with us. Scott, to you, is that a justified concern now that rate hikes or at least rate cuts are off the table? One Fed governor was talking about a rate hike. Where where are you on? I'll tell you, Neil, I think the market got a little ahead of itself thinking at first we are going to maybe get 6 cuts, then four, then two. As you and I have talked over the years or over the year, we've talked about having no rate cuts or no rate hikes coming. And I think really that's still what the market needs to get its arms around. And so when you see a day like today, that perpetuates probably no rate. Hudson Then we get data that will be down the pipe that says hey, there's not gonna be a rate hike. The markets gotta react accordingly and so far it doesn't like it. Alright, market rates have been backing up Francis and and that's something over which served as their little control. We can try to jawbone to influence them, but it's not working right now what Where do you think this goes? Well, I think that if we don't have a credit event, I think that the Fed is gonna have an extremely hard time. What is a credit event? Sorry. A credit event means that something in the system, you have a lot of defaulting either on credit cards or commercial real estate or bankruptcies or foreclosures, similar to the financial crisis, though it may not be housing this time around. But if we don't have some kind of crisis, the Fed is going to continuously have a hard time justifying this, you know, this notion of cutting rates and remember that all of these components and. CPI have lagging effects. So if these commodity prices continuously go higher on a lag, CPI is only gonna get worse this year. So probably won't have a rate cut and hopefully not a rate hike. You know, Scott, the wind at everyone's back has been the strong markets, you know, 10% gains and thereabouts where they have to be 500 for stocks in general look like a good year to you. Does it still look like a good year? It does, but there's challenges ahead, Neil. I I think the market is probably gotten a little ahead of itself and I think these hopes of a rate cut that would perpetuate more of the gains is obviously overdone and overblown. So the market actually has to go back to fundamentals. You have to watch earnings, you have to watch company announcements and of course we got this tiny little thing in November regarding an election coming up that obviously has its effect going forward. So there's a lot of pitfalls maybe ahead that we didn't experience in the previous three months and investors should be ready for those. You know for instance, I was thinking if if we hold around these rates for the 10 year note. I wanna get too arcane here, but that's kind of what mortgage rates are attached to a lot of other rates and that would translate roughly into a, you know, a 7 and a quarter 7 1/2 percent, 30 year fixed rate that could at least cool housing. What do you think? Yeah, it could. You have this other anomaly in housing where you just have this low supply and the low supply comes from the fact that people don't want to sell their current houses even if they want to leave because they don't wanna lose their low rate mortgages. So it is creating a lot of that. In commercial real estate you have some of those mortgages that have, you know that are coming from maturity that are 4%. They're going to maybe even be 9 to 11% depending on what kind of mortgages they are. You know the back in the office thing hasn't totally taken hold, particularly in the small business you can't do. AI from home, but that's only a small sector of the economy. So you know we have some, we definitely have some headwinds ahead. But the thing that has been keeping this economy stable despite the fact the Fed raising rates is we have very high fiscal spending. Private credit has come into you know backstop these loans and you know people have been putting things on credit cards. So if any one of those things falls apart it could change. Outside of that everything would be perfect. Alright guys, thank you both very much. Something to worry about and think.