The Lowry Letter®

Week of 8/3/2023

Happy August Greetings! There is a lot of good news out there. Even the Fitch downgrade of the U.S. credit rating is an echo of the 2011 move by Standard & Poor’s. We don’t think it has a meaningful impact or is telling us anything we didn’t already know about our country’s fiscal governance.

Brad McMillan’s market thoughts for August can be viewed here.

David Kelly’s discusses the “soft landing” that the Federal Reserve hopes to achieve.

Suicide rates among teens in the U.S. have NOT increased, at least according to this data. Unfortunately, there is a strong increase in the population, but it is actually found in people 20-34 years of age.

Reaching certain ages can make a marked difference in the medical care you receive, such as testing for heart attacks in men 39 vs 40 years-old.

There is a 103 year-old lobster harvester in Maine! Ginny Oliver has been doing it since she was 8 years old. For some people, the go-go years never end.

The popular rise of the bicycle in the 1890s is one of the reasons the traditional women's dress of corsets, bustles, and long voluminous skirts fell out of fashion.

Q: You talked about the housing market last week. Can you share more about why it isn’t in worse shape with rates being so high?

A: This commentary from major institutional real estate investor Blackstone has some very helpful data on this question. As to why rates haven’t had a bigger impact on the economy, Joe Zidle writes:

“Consequently, the economy shows less sensitivity to interest rate changes than it has had in recent hiking cycles.

For instance, approximately 42% of owner-occupied houses had no mortgages at all as of 2021. Additionally, around 75% of mortgage holders carry 30-year fixed mortgages with interest rates below 4% (see Figure 1). I would argue that these folks don’t care very much about the Fed’s strategies. This scenario is in stark contrast to the previous tightening cycle from 2006 to 2008 when only 32% of owner-occupied houses were debt-free, and the popularity of interest-only loans and HELOCs exposed mortgage holders to greater interest rate risks.”

Companies also built up cash and refinanced debt when rates were low, giving many a helpful buffer during this time.

Basically, fewer homeowners have mortgages, and many homeowners have very low rates locked in for long-term.

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