Week Five - Home Sales, Inflation (PCE), GDP, Walmart v. Amazon, The Boomers, and the Hoosiers.

Jan 25

The Economy in Week Four

Due to the MLK holiday, it was a short week for reporting, and we are still catching up. For instance, Construction Spending was up 0.5% for… October. While it is a nice to know, it really doesn’t apply to January, 2026. We have to wait for the December report.
What we do know is that pending home sales for December dropped 9.3% from the previous month.

That seems like a lot, and it is the largest monthly drop since April 2020.
However, the overall trend is still higher than prior to the “pandemic that will not be named”.

Prior to 2020, pending home sales usually peaked in the summer at around 445,000 units, and would drop to around 260,000 in January. That makes sense, as folks move in the summer.
The pandemic that will not be named caused havoc, and at its peak in June 2021, pending home sales hit 659,000, with the lowest point being in January 2022 at 444,000.
Since then, the index has been slowly coming back down to earth, but is overall still higher than prior to, well, you know.

The Personal Consumption Expenditures index, or PCE for those of us in the know, for October and November were revealed, and yes, we are STILL playing catch-up with the information.

Both months had a 0.2% increase on a monthly basis.
The TTM – Trailing Twelve Months – ending November was 2.8%. That equaled expectations – depending on who was expecting - and the September report.
The Core PCE – the index less energy and food – also came in at 2.8%.

That may be higher for January; we’ll see how this winter storm in the Midwest and south plays out with energy costs.

Finally, GDP – the Gross Domestic Product, aka the country’s paycheck for Q3, was revised up, from 4.3% to 4.4%. That’s good. We’ll see in February how it looked in Q4.

Walmart v. Amazon

Pop Quiz!! In the first 9 months of last year, what was Walmart’s revenue? How about Amazon? The answer… when we come back from this commercial break…

And they are now neck and neck. Walmart is currently the largest retailer in the US and worldwide. Amazon is number two.

Walmart started with bricks and mortar and has embraced online retail.
Amazon started online and has spread out to brick-and-mortar, with very mixed results, resulting in the shuttering of many branded stores and more than half of its Amazon Go stores. Amazon Books didn’t do well either. Yes, they really tried that.

Half of the store will sell groceries, general merchandise and “food prepared on site”; why not say ‘restaurant’?.
The other half will be order fulfillment from both online and kiosks in the store.

Sounds like Amazon is taking on Super Walmart’s, Costco and Sam’s Club to me. Game on, baby!

The Boomers

I am on the tail end of this generation. The oldest are turning 80 this year. The youngest will be 62.
This group has anywhere from $40,000,000,000,000 to $80,000,000,000,000 in wealth that is locked up, just waiting to be inherited. Or spent.

For many of my long-time readers, you know I type out the 0’s; it has more of an impact.
Back to inheritance… Some of it already is being inherited, because the average life expectancy for someone born in 1946 was 64 to 67 years at that time. Because of improvements in healthcare, that number for the same cohort has gone up to 73 years of age.

Big Pharma bought us 6 more years, or more accurately, we bought those six years – have you seen your healthcare premiums lately?

Every day is a gift, that’s why it’s called a present; so live in it. I think I got that from a Hallmark card.

For the youngest boomers, their use-by date is estimated at 2039 for men, and 2045 for women.

So, in the next 20 years, at least $40 trillion is going to flow into someone else’s pockets. It’s starting already. Some folks say you’ll see that much in the next 10 years.
That’s one of the reasons I think spending is holding up. For the older boomers, time is running out to spend it, and the younger ones are retiring and starting to spend their savings.

For the ones that have passed on, the kids now have the money, and you know what happens when you give kids a bunch of money…

To be clear, no new money is being added to the economy. The kids are just taking it out of their parents' long-term retirement accounts and putting it in short-term accounts. If it’s in regular IRAs, it has to be spent in 10 years once it passes to the next generation.

The Indiana Hoosiers Win the College National Football Championship

I know, some of you are yawning at this, or rolling your eyes. Bear with me; I’ll make it worth it.
The college sports fans may already be familiar with the story, but it bears repeating.
The coach, Mr. Curt Cignetti, was hired before the 2024-25 season. The Hoosiers are well known as a basketball school, so there were no expectations of anything from the football team.

They had just finished a 3-win, 9-loss season, at the bottom of a 14-team conference.
He promised things would change, as every new boss has promised. If he had 5 wins and 5 losses his first year, they would be pleased.
Instead, they were 11-2 and finished 2nd in an expanded 18-team conference.

This year, they won not only the conference, but the National Championship and went 16-0.

They did not have any 5-Star recruits. However, all but three of their players had played at least three years of college football.
They beat #9 Alabama, #2 Ohio State and #5 Oregon (twice).

A quote from one of the players: “There’s no secret, there’s no magic pill, the secret is in the work.”

On to Week Five. If you haven’t already, it’s time to get to work.

Week V: Durable Goods, Factory Orders, PPI, Consumer Confidence, Public Hearings, a Fire Update, and a Business True Story