yikes!!!

oh no it finally happened the US is AAA

credit rating was downgraded to AAA Plus

by Fitch but is that really a sign of

what's going on with the economy and are

we actually trending towards recession

or do the ADP numbers that just came out

tell us something different well let's

analyze all of this together so first

many bears are already cheering that

finally the US has had its credit rating

downgraded and quite frankly you can't

really blame your Fitch for downgrading

the United States as credit rating after

all they have a fancy way of saying

11th Hour resolutions have eroded

confidence in our ability of the

government to essentially not default on

its debt it's the fancy way to basically

say we're tired of the political drama

and Congress and basically our

politicians not getting off their awss

and gay getting things done like

managing our fiscal house Fitch isn't

exactly wrong when they compare the

United States to other AAA rated

countries where other triple rated a

countries have around

39.3 percent debt compared to their GDP

I know that sounds complicated but think

about it for a moment if our GDP is a

hundred dollars and our debt is 39.3

dollars then we're about in line with

other AAA rated countries whether those

are you know Germany or other countries

uh that are AAA rated when we compare to

America though we go oh America's had

over 100 percent debt to GDP and we

expect I think we expect to be at a

hundred and eighteen percent of debt to

GDP by

2025. that's not great now most of the

AAA rated countries again averaging 39.3

Germany a little higher on that others a

little lower on that but still most of

them much lower than the United States

and the drama we've had going on here

are honestly reasonable that you would

expect to downgrade here Fitch warned us

that something like this was coming it

happened in August of 2011 before when

standard and Poor's the s p uh

downgraded us as well and we could see

how the market reacted then it

expectedly wasn't good but it was

transitory take a look this is Weeble

and it shows you this drop right here

which was actually already occurring

because of the European sovereign debt

crisis again big fancy words here let me

just put it this way you've heard of the

Euro right the euro currency used in

Europe okay well in 2011 it was

undergoing a massive real test of

existence there was an existential

crisis of is the Euro actually going to

be able to survive are people actually

going to trust this paper money and the

Euro survival came into real question

during this time that led to additional

heart palpitations but if you zoom

specifically past some of the red that

started here at the beginning of August

2011 and you go specifically to August

5th you on August 5th had uh and this is

on the average candlesticks mode so what

I always like to do is when I want to

know what actually happened that day I

try to go to the non-average

candlesticks that's generally important

you had about a 0.62 percent drop uh on

August 5th usually they make these

announcements after the market closes so

that means the next day what happened oh

the NASDAQ fell

six percent

six percent the day after the s p

downgraded the United States and guess

what promptly happened after the sixth

let's go back to our average

candlesticks mind you this this right

about here let's zoom out and as you can

see this ended up being a whole load of

nothing because over the next decade

that would have been a great opportunity

to potentially buy the dip as you can

see the market trended up some pain over

here in 2018 and then of course we get

covet pain again and then somewhere over

here we get our 2022 pain and then we

have our Nike Swoosh recovery and what

are we dropping today on the cues about

one percent

it's probably going to be a little bit

of a red week thanks to this downgrade

but what is the actual economy doing is

this something we should really be

fearful of or are the Bears winning here

because theoretically a downgrade of our

U.S credit rating should increase

treasure yields excuse me I'm at like

it's such a long day yesterday all right

so my voice is a little lost then we

traveled to two different states and saw

about 15 different properties for my

real estate startup house hack by the

way we're probably going to be raising

money for that uh with non-accredited

investors very very soon so go to

househack.com if you want to sign up for

notifications on when that's ready but

anyway uh we did have a slight move up

on yields we have the 10-year moving up

to 4.08 however this is happening at the

same time as we have a larger treasury

auction it just basically is reiterating

what Fitch is saying anyway and that is

we're issuing too much debt our fiscal

house is a disaster in our government so

it's really not a surprise we're getting

downgraded here but it does reiterate

this idea that oh we might end up seeing

higher yields for longer which is also

very important to pay attention to if

you are a real estate investor because

higher yields for longer could

eventually start biting real estate

prices more than what we saw in the

second half of last year so it's a lot

to pay attention to but there are going

to be some great opportunities

so what did we just get though about the

economy well we had an estimate for an

ADP labor report of 190

000 jobs and this is very important

because it's also going to give us a

guide of are we going to get

inflation-free growth or are we going to

grow and reanimate inflation after all

that's what the Bears say the Bears say

we're going to have growth and then

we're going to reanimate inflation or

we're going to get recessionary figures

and then we are going to have inflation

as we stimulate again that's the bear

argument well the bear argument so far

isn't looking very good Bank of America

just became one of the first major Banks

to withdraw their recession prediction

they just flip-flopped on that today

that's a massive flip no recession call

anymore from Bank of America and we had

a 190 000 job estimate for the ADP

employment report and what did we get

folks we got an unemployment or a well a

jobs report uh for ADP this is the

private sector jobs report we'll get the

government version on Friday I like to

call this the report to keep the

government more accountable more

accountable it's tough to keep them

perfectly accountable and we should be

able to but we can but anyway private

sector employment increased 324

000 jobs in July oh no is the economy

overheating are we going to have to

raise rates oh well let's find out oh

look at how look at this median change

in annual pay 6.2 percent and for job

Changers 10.2 percent how does that

compare to last month well last month we

were at 6.4 and 11.2 in other words we

are decelerating faster and we are now

at the lowest

pace of job wage gains since November of

2021 this is fantastic because it means

workers are still making more money but

the rate of growth is slowing down

you'll notice that it's larger employers

that are adding fewer jobs actually

they're Contracting and it's the smaller

businesses that are adding to the labor

force more with the bulk of the job

gains coming from smaller establishments

which is also interesting because the

small firms are the ones offering the

lowest pay increases just actually what

you want to see and expectedly most of

the jobs are coming from Leisure and

Hospitality where we have contraction in

manufacturing yes a lot of people look

at manufacturing and say oh but is that

a leading indicator of everything

collapsing not necessarily especially

since manufacturing is an interest rate

sensitive industry look at the pain that

you're seeing at an end face or

potentially even a stock like Tesla

these are very very interest rate

sensitive Industries now of course they

are off some of while Tesla at least is

off some of its lows that it saw at the

end of last year but usually what

happens is you need interest rates to

start falling and then you can see an

explosion in manufacturing stocks again

so that gives a potential opportunity to

buy the dip off of some of these s p oh

I'm sorry Fitch downgrade SMP downgrade

was back in 2011. so this is actually a

very very strong report and it's quite

frankly a good thing so congratulations

to the US economy now some people wonder

okay well how can you sustain this you

can't keep this going like at some point

it's going to lead to more inflation

right

not necessarily that's because we have a

chart here that talks about Labor Force

participation the red line is the trend

line guess where we are oh my gosh

unsurprisingly we are below Trend Bears

have a really bad tendency of ignoring

what the trend is Bears have a really

bad tendency of just trying to compare

to changes that only happen since covid

and not comparing to pre-covered levels

and when we actually compare to

pre-covered levels we have more room to

grow getting more people in the labor

force without actually creating

inflation because we're adding workers

to the labor force where this is

fantastic because when you increase the

supply of labor you can expand an

economy without high wage gains remember

the target for wage gains is about three

percent so just go above Target but we

already know that even Jerome Powell is

willing to be patient on this number so

this is actually in my opinion all

fantastic news The Fitch downgrade was

expected it's not that big of a deal

China is trying to stimulate but they

have their own sets of problems I guess

now they want to ban miners from using

the internet from 10 pm to 6 a.m and I

mean we all know that's when all the

best gaming happens so it's kind of

crazy I guess they're going to fall

behind on all that rust gaming they

could be doing uh okay anyway uh we

talked about Bank of America revoking

its inflation forecast we talked about

Labor Force participation Rising we but

still below prior trend

talked about the ADP blow up we've got

the jobs report coming out on Friday

I'll be live for that at 5 30 a.m so

stay tuned for the jobs report on Friday

go to househack.com so you can sign up

for notifications on when we're

available to raise money from anyone

we're still going to have that same

one-to-one valuation which is extremely

rare for a startup for a startup to

raise money on a cash valuation is

insane nobody does that it's insane it's

my way of giving back to my subscribers

because my goal is to take this company

to IPO

that's my hope so uh yes we have a

little bit of a move up on treasuries

and yes we would expect some pain in

stocks because of this downgrade but

then again it's probably a near-term buy

the dip opportunity although we wonder

how much the dip will continue to dip

because right now it is dipping anyway

thank you so much for watching hopefully

this was insightful and we'll see you in

the next one goodbye

now I want you to know this when it

comes to AI time is what's going to make

you money and if you can prove that

value to an employer you'll always be

able to be employed so this is another

way of making sure that you don't get

replaced by artificial intelligence if

you can Master AI by starting on the

ground floor

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