Welcome To Our Hawley Advisors Blog

We hope you find the articles on our blog informative and helpful. You are always welcome to chat with us if you have any questions about your personal financial situation.

What The HEC’onomy! Deciphering What is Actually Happening in The Economy and The Potential Implications - Part Two

In this second installment of "What the Hec'onomy. Deciphering what is going on in the economy and markets" we will examine what the impact of rate hikes have been to date as well as other market forces at work in the economy.

The Residential Real Estate Market

Let us start by looking at the residential real estate market. If you were a homeowner with a mortgage during the close to zero interest rate era, it is likely that you would have taken advantage of refinancing your home when 15- and 30-year fixed mortgage rates were in the 1.7-3.25% range. At today’s mortgage rates of 6-8% you are less likely to move if you do not have to for work or other pressing reasons. For homeowners in this category, mortgage related costs have not gone up, which means that their overall purchasing power has been less impacted.

...
Continue reading
1580 Hits

Fed Now and The Crossroads to a Global Digital Payments Economy

The Biggest Upgrade to the US Financial Payment Rails Since SWIFT

The biggest upgrade to the payment rails of the US financial industry - since the SWIFT system was introduced in 1973 - is going to be unveiled in July 2023. The system known as FED NOW will enable instant payments that take seconds to complete and can occur 24/7, 365 days a year, all with integrated clearing functionality allowing financial institutions to deliver end-to-end instant payment services to their customers. This means the recipient of funds will have immediate availability and access to utilize these funds. To put this in perspective ACH transfers typically take anywhere from one to three business days to complete, domestic wire transfers can take 24+ hours to complete and international wire transfers can take up to a week to complete. Fed Now will not replace the Automated Clearing House Network (ACH) - at least not anytime soon - and is expected to complement ACH services. However, the writing is clearly on the wall as Fed Now grows its track-record, adoption, sophistication, and capacity.

Instant payments are digital payments which have the capacity to be "programmable" and generate rich data. What is rich data? Rich data is the process of compiling data to determine when and where a person is most likely to buy something, as opposed to relying on trend forecasts. Rich Data is used to predict consumer behavior. While this may sound like a godsend to businesses of all types as well as the Federal Reserve and other agencies who rely on financial data for forecasting and decision making, this "potential to invade privacy" will simultaneously cause consumers to sound the "alarm". Who wants their every transaction to be trackable?

...
Continue reading
904 Hits

AI, The Singularity & Quantum Leap Beyond

In this article we are going to discuss the evolution of AI, its origins and development to here and where it may be heading. Many books have been written on the subject, so this is going to be a short but hopefully informative and abbreviated history to here and a peak into the beyond. We will continue to write about the evolution of AI in our blog and bi-monthly newsletter and build upon this article.

The Singularity

We are entering a period of technological accelerated change over the next 3-20 years, the likes of which has never been experienced by humankind. Some technologists have identified or labelled the culminating point to which this accelerated change will lead as "The Singularity" which can be viewed as the "end of the beginning" after which the singularity epoch of human history begins. What exactly is "The Singularity"? The “Singularity” is a projected future point in time when exponential developments in computer (artificial) intelligence and computational power result in the most dramatic and irreversible change in human history. The origins of the term lie in physics where "The Singularity" is described “as a point at which a function takes an infinite value, especially in space-time when matter is infinitely dense, as at the center of a black hole. “The emphasis in this sentence is "takes an infinite value".

...
Continue reading
678 Hits

The Credit Squeeze, Banking Crisis & Resulting Economic Headwinds

The impact of the banking crisis is still unfolding despite assurances from the Federal Reserve and the Big Banks that the banking system remains strong and resilient. With over 100 banks in similar situations as SVB the mismanagement of "duration" risk is clearly widespread among many regional banks. In addition to the current "risks" that have the headlights focused on them are the significant commercial paper "risk" that regional banks hold and will need to be refinanced in the coming years. These are valued in the trillions of dollars. A significant portion of this debt was financed when interest rates were around zero. As this debt rolls over and needs to be refinanced there is a high probability this will occur in a market with higher than zero interest rates, lower property values and less liquidity in the short term, due to the banking failures and call for tighter regulation of regional banks.

COVID accelerated a comprehensive change in employee remote work arrangements. While the trend has generally moved towards a hybrid approach of remote and in-office work arrangements, companies are down-sizing their office space requirements as they consolidate use with shared employee spaces. This trend will impact demand for commercial office space. The commercial real estate market is struggling as a result. Before the pandemic, office space occupancy was close to 95% whereas last December it was at 47%.. Lower rental income equates to declining values. An office building in San Francisco for example that sold for $397 million in 2019 was on the market in December 2022 for $155 million.

Regional banks carry significant risk exposure to commercial paper and commercial real estate companies that are in a market downturn and this will be or should be a forward looking concern to investors and depositors. Columbia Property Trust’s default on a $1.7 billion floating-rate loan, and Brookfield Asset Management’s default on $750+ million in debt in Los Angeles are early warning signs. Commercial real estate leases can span several years so it will take approximately a couple of years for this to unfold during which millions of leases will expire. Companies renegotiating their leases will have the upper hand. They may lease less space or no space attall. Either way, this trend will impact the value of commercial real-estate if rental occupancy and rates decline. This in turn will impact the value of commercial loans on regional banks books and impact their capital ratios.

...
Continue reading
706 Hits

Mixed Signals as the Federal Reserve Shifts into Second Gear

In a widely anticipated move Federal Reserve Chairman Powell announced the slowdown in the magnitude of rate hikes to .25%. While the markets were waiting impatiently for a signal that the Federal Reserve will lower rates later in the year, they did not receive this gratification. Chairman Powell is right to be cautious. While early signals do suggest the desired impact of raising rates is leading to disinflation, it is still too early to say for sure. The Federal Reserve's caution and prudence is warranted and a signal to the markets that they are trying to get this right without unnecessarily sending the economy into recession. A wait and see mode makes sense.

Today's unemployment report only underscores this fact. The Bureau of Labour reported that the unemployment rate fell to 3.4% and the economy added 517,000 jobs exceeding the most optimistic forecasts. While some debate how accurate these numbers are, the labour market remains strong, the strongest it has been since 1969.

This presents challenging issues for the Federal Reserve as part of their desired impact from rate hikes is a weakening in the labour market to stifle wage inflation. The markets are having to digest conflicting data and discern the future. January wage growth for example has cooled with average earnings dropping from 4.8% in December to 4.4% in January. Until the signs of the wage push inflation cooling are more clearcut, the Federal Reserve will continue to wait, watch and act.

...
Continue reading
702 Hits

Main Menu

The Hawley Communique

Sign up for free to receive our signature quarterly reports.Not only will they keep you informed, you will get a unique and up to date objective financial perspective to navigate your pre and post retirement. You will also receive our retirement planning article series that provides helpful information about a variety of topics.

Subscribe Here

Hawley Advisor Publications

Download our free marquis papers written to provide valuable and actionable information to help you plan for your retirement and asset protection

Download Here

Company Info

Hawley Advisors
1600 South Main Street, Suite 190
Walnut Creek, CA 94596
Phone: 925-906-9800
Fax: 925-906-9884
info@hawleyadvisors.com

 

 

Hawley Advisors is an investment advisor, registered with the State of California. Any investment ideas or strategies on this website are for the purposes of education and general information only and should not be construed as specific investment advice. For more information about our firm please check the SEC Public Disclosure website: https://www.adviserinfo.sec.gov/

 

Copyright © 2024 Hawley Advisors. All rights reserved.