Feed me fat gains

🧠 The Big Brain
Feed me fat gains

If you didn’t know already, we’re a BIG fan of food stocks as a theme.

And we’ve just noticed one that is down 25% YTD but has absolutely NO right to be…

And it’s just started to pique the market’s interest again.

David has recorded a video on this stalwart of American food (yes, that part is important), and no, it’s not McDonalds.

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⚡ The Spark
Soft Landings For The Economy

Consensus is usually wrong. But what IS the consensus?

According to the BofA survey, there’s going to be a soft landing.

Now, a soft landing is basically utopia: It means inflation falls back to central bank targets, hardly anyone loses their job (and if they do, it’s just a temporary blip, and they find work elsewhere soon after).

Central banks will cut rates back to neutral, the economy keeps growing at a steady pace while we all hold hands & sing kumbayah watching the sun go down behind a dramatic mountain landscape.

It sounds impossible.

In fact, plenty of people are doubting the narrative and chuckling knowingly because “we always do this”.

Except that one time…

All of which means it’s hard to distinguish one consensus from the other.

So many think there’ll be a soft landing, while another sizeable group think it’ll be a hard landing and this is just the usual pre-hard landing nonsense.

Which got me thinking:

Although, if previous cycles are anything to go by, the trend in jobless claims is looking ominous…

And the narrative is already shifting towards Fed cuts next year while inflation trends are way down.

Inflation’s basically beaten. What if it suddenly dawns on central banks that policy is way too tight and they’re fighting the last war?

(maybe asking too much of central banks to actually notice this)

Takeaway: Everything about this economic cycle has been abnormal and weird. Being prepared for the unexpected isn’t as mad as it might seem.

💡 The Lightbulb
I’m From The Government And I’m Here To Help

The nine most terrifying words in the English language

That famous quote from former US president Ronald Reagan proves that he was a time traveller.

He’d seen the UK’s ‘Help To Buy’ scheme and travelled back to warn the world.

We didn’t listen.

Instead, the government scheme helped borrowers buy 387,195 homes with £24.7bn of equity loans

Leave aside any moral view on whether this scheme was actually any good.

It is what it is. Government money to keep home prices propped up while ‘solving’ the problem of getting first time buyers on the housing ladder.

Rude awakening: Interest payments going up.

See, not only do these lucky homebuyers have to contend with rising mortgage rates now.

If they bought more than five years ago, the interest only period is running out. Sixth year is at 1.75%.

Then the interest cost starts rising.

If you only borrowed 20k, you’ll barely notice it.

But the scheme allowed for up to 15% of the purchase price (maximum of £600,000).

And those interest costs will keep rising each year…

The structure means the longer you keep the loan, the more expensive it’ll be to service that debt…

Government Loan Sharks: Compound interest is often referred to as the eight wonder of the world.

If you’ve got a help to buy loan, it’s gonna be compounding against you. Every. single. year.

Yet you can guarantee lessons won’t be learned.

In the Autumn statement, Sunak is bound to come up with another convoluted scheme to ‘help’ first time buyers. Thanks mate.