The Middle Class may serve two masters …
Real estate analyst Melody Wright made an observation today on the Julia La Roche Show that is in line with my thinking over the past few months. This economy, she noted, is becoming one where labor services the rich or the less fortunate. Restaurants, financial services, etc., will service the wealthy while labor in the social services arena will support people in need of a safety net. It is an interesting take on the carve out of the middle class.
Those of us in the middle will be serving either those with most of the capital and those without any capital. It sounds dystopian but that is the energy I am picking up from the commons that lurk on social media (which is coming as increasingly bad as mainstream media).
You can argue that it has always been that way where the wealthy, those with the coin, have paid us to generate yield. And the “us” included those on the middle and lower rung. What I did not consider is that the lowest and highest classes would more blatantly feed off the middle and that the middle class may have fewer opportunities to carve out their own lane without being increasingly tethered to the upper or lower classes.
For investors looking for a long-term play on the American market, this potential reimagining of the middle-classes role in the economy may guide you in identifying the industries within which to park your money.
For those of us who take a dollar at 9:30 am and flip it into $2.50 by 3:59 pm, I do not see an immediate or short-term opportunity from that reimagination of labor. Help me out if you can.
The 4:15 pm fix …
Decrease in US ten-year treasury yields between 11:00 am and 4:15 pm gave me flight-to-safety tease. The yield was at 4.231% at 9:46 am, falling to 4.224% at 11:00 am and settling to 4.170% at 4:15 pm, according to data from Reuters. I also saw a wee bit of dollar strengthening with the EUR/USD moving from 1.1398 to 1.1383 between 9:46 am and 11:00 am, settling at 1.1389 by 4:15.
Could investors have been spooked by today’s job openings report from the U.S. Bureau of Labor Statistics? According to BLS, job openings was little changed at 7.2 million in March. Job hires were at 5.4 million while total separations were at 5.1 million.
And yesterday the U.S. Treasury did not help me with its blah assessment of the economy. In its economic statement of the Treasury Borrowing Advisory Committee, the Treasury painted a not so robust picture, in my opinion, of growth in the economy. The report notes a slowdown in payroll growth to an average of 152,000 per month, down from an average of 209,000 per month during 4th quarter 2024.
The good news, according to Treasury, was the decline in inflation with the March 2025 consumer price index at 2.4%. The slowdown in inflation was offset by the increase in the price of eggs (once an inexpensive source of protein for we weekend warriors).
We monetarists know better …
While the majority of Americans consider the change in consumer price levels as inflation, we monetarists know better. Inflation is an increase in the money supply. As more money goes into more hands, prices get bid up (that’s our story and we are sticking to it.).
The money supply increased 4.12% between March 2024 and March 2025, according to data from the Board of Governors of the Federal Reserve System. Total reserves (the money that depository banks hold in federal reserve bank vaults) decreased 3.8% over the same time period. However, bank reserves have increased since October 2024 by 6.12%.
The supply of reserves is important because of its contribution to the setting of the interbank overnight rate or the fed funds rate. All things equal, the greater the supply of reserves, the likelihood of downward pressure on the fed funds rate, which in theory signals commercial banks to reduce their interest rates.
So, where do we struggling blokes place our cash?
Like many of you, I have a family to feed, and in an environment of stagnant labor opportunity, there is a growing demand for the opportunity to deploy capital for growth. The sea looks placid and stagnant. Where is the froth?
Alton Drew
29 April 2025
Disclaimer: The above post does not constitute investment or trading advice. This is a thought exercise, and I am merely sharing my trade journey.
In need of a review of your broker agreement or forward contract? Contact me at altondrew@altondrew.com.
Alton Drew
Thank you for your support.
$10.00
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