Issue Two: Jobs, Yield Curves, Rates, Fires, Davos, and Who was Alice Brock?
So, what has 2025 brought us? Let’s talk rates…
The jobs report came in, and it was pretty strong. This is wonderful for the 256,000 people who got jobs (155,000 expected), but for the borrowers who want lower rates, not so much. Why?
As long as inflation is higher than 2% and jobs are still going strong, the Fed will be unlikely to reduce rates.
So, what is the impact of the jobs report?
Rates on the 10-year treasury went up because folks were already baking lower rates into the 10-year yield.
Rates were 4.76%. Remember how I talked about the yield curve last week? Well, it’s becoming somewhat more of a curve, rather than just a mildly sloped upward line.
The stock market went down.
After all, some folks would rather get 4.76% on a bond than 2.3% dividend yield on a stock, without the risk.
It’s when rates drop to 1% or 2% that people will take the risk in the stock market to get a better return.
And of course, mortgage rates also went up.
To 7%. On December 9, it was 6.53%. In November of 2023, it was as high as 7.76%. You have to go back to the year 2000 to get rates higher than 7.5%.
On the flip side, you can get a one-year CD at Marcus/Goldman Sachs for 4.25% or a money market at LifeSteps Bank for 3.6%. Just ask me.
Oh, and job openings went up to 8,100,000, hourly wages are up 3.9% year over year and the unemployment rate fell slightly from 4.2% to 4.1%.
So Cal Fires
Yes, portions of Southern California are experiencing Dante’s Inferno. Having gone through the gates of hell, some affected homeowners will then have to deal with purgatory as they navigate the California FAIR plan.
With some insurance companies electing to stop insuring in the last few years, Sacramento felt they could do it and have amassed $385,000,000 to pay claims.
That’s on $24,000,000,000 of policies in the affected zip codes, per the San Francisco Examiner.
That sounds like the 9th circle of Dante’s hell to me.
What is a Davos?
You’ll be hearing a LOT about Davos starting next Monday, so I thought I’d provide a refresher.
Davos is a small town of 10,000 people in the Swiss Alps at an altitude of just over 5000 feet. It has one of the largest ski resorts in Switzerland.
It’s been around for 800 years; the town, that is, not the ski resort.
It also happens to have a conference center.
And this conference center is where the World Economic Forum has its annual conference, also known simply as Davos. And that is what is going to be going on all next week.
It started out decades ago as a bunch of economists and very wealthy people getting together and trying to solve world problems on the back of a napkin at whatever restaurant they happened to be in.
“I say, Sport, what do you think of this idea?” “Smashing, Mortimer. Who shall we get to fund it?” “Klaus, who can we bring in? Do you think Gwyneth will support it?” And so on.
It then grew into a massive conference with thousands of people attending and has evolved into a type of Oscars after-party for Fortune 500 CEOs, political leaders, and well-meaning celebrities.
Last year, the Salesforce party featured Sting as entertainment, and Sheryl Crow was featured at the Microsoft venue.
Most attendees will admit it is the ultimate business mixer, where you may be standing in the coat line and Bill Gates is standing just behind you.
Assuming you are prepared to take advantage of such a meeting.
It’s better to be prepared and not have an opportunity than to have an opportunity and not be prepared. One of my favorite sayings, but I digress.
The theme this year is “Collaboration for the Intelligent Age” with the focus on AI, quantum computing and blockchain. So I guess AI, quantum computing and blockchain will solve the collaboration bit.
I can’t even get Teams to work 100% of the time, so how is AI supposed to solve that? But I digress. Maybe I’ll ask Bill Gates in the coat check line.
Who was Alice Brock? (Warning: Boomer material below)
She was just an ordinary restaurant owner. However, it was her friendship with Arlo Guthrie that immortalized her. How so, you ask. And who is Arlo Guthrie? Ask a Boomer.
“You can get anything you want at Alice’s Restaurant…” is how the chorus starts for the song “Alice’s Restaurant Massacree”. It came out in 1967 and was an anti-war song, but ever since, some have classified it as a Thanksgiving song because the 18-minute story it tells revolves around a Thanksgiving dinner party hosted by Alice Brock.
She died in November at the age of 83, which made her about 26 years old when she invited Arlo Guthrie to Thanksgiving.
She was not a business titan, just another struggling restaurant owner throughout her life. Which makes her more like most business owners.
This is more of a personal interest story for me; I mention it because I first heard the song in high school, 12 years after it came out.
It's 18 minutes long, and you can hear it on YouTube. Or not; it’s your 18 minutes.
I’m curious how many of my readers have heard the song. Survey says:…
I’m also curious as to how many readers feel this segment was a complete waste of time.
With the second issue in the books… Economically, I think things will continue to go steady, barring an ‘event.’ Locally, California may be having its ‘event’ with the fires still going strong one week later. Ultimately, it is the policyholders of every insurer in California that will pick up the tab for the fires; that is written into the FAIR plan.
If you have an employee whose house was destroyed, give them a lot of slack. Ask them how you can help and then rally your other employees to do the same, and then do it, but give them some time.
