On The Agenda

1. Real Profits ^TIMELY 

2. Unreal(ized) Losses ^LUMINARY

3. How we as consumers feel about the economy ^TIMELY 

4. Consumers are still dropping a bag ^LUMINARY

5. What I learned from the richest digital entrepreneurs in the game ^LUMINARY 

Real Profits^TIMELY

From Jon Scott, Lead Author 

Consumer bank earnings came back positive last week. Profits at JP Morgan rose 35% versus a year ago, while Wells Fargo and Citigroup saw increases of 61% and 2%, respectively. Net interest income, the difference between what banks pay on their loans and what they pay for deposits, beat expectations at both JP Morgan and Wells Fargo.

US brokerage firm Charles Schwab reported better-than-expected earnings pushing the stock price up more than 5% on Monday. However, the company’s deposits continued to fall with net interest revenue falling 23.5% and revenue falling 16.2%.

Taken as a whole, the financial sector—which kicks off the earning season each quarter—is showing strong results for Q3. This is a good sign for the rest of the economy, and it appears as of now that this will be a healthy quarter for most companies (don’t quote me though).

Three graphs on consumer beliefs about the economy  ^TIMELY

From Bennett Fees, Economic Research Associate 

There are many measures of consumer behavior and sentiment, but three popular ones come from the Conference Board, the University of Michigan, and the New York Fed.

While I’ve spent a bit of time covering the improvements in inflation and the strength of the labor market, it’s important to remember that consumer’s views of the economy are not always equivalent to what macro data indicates. Below are three graphs, the first is an expectation of unemployment, the second a measure of consumer sentiment, and the last a survey of present and future conditions.

In all three cases, the data is to the downside, either in the sense that sentiment is decreasing or that unemployment is expected to rise.

So what does this mean?

For one, when people tell us how their finances are, we should believe them. Most immediately this is because consumer expectations, even if some analysts don’t find them grounded in statistics, affect future spending and the economy. My luminary section takes a closer look at whether this has actually taken place yet (hint: no).

Consumers are still spending ^LUMINARY

This week we received advance estimates of U.S. retail and food services sales for September. On a monthly basis, these sales increased by .7 percent and 3.8 percent year over year. This is shown in the chart below which breaks up sales into total, total minus automobiles, only autos, and general merchandise.

What’s interesting is that using the date mentioned in my previous post, economists have been expecting retail and food service sales to decrease. As seen in the sales data above, however, this is yet to happen. Even food services and drinking places, which are particularly sensitive to consumer expectations, increased by .9% in September.

So what’s going to give, people’s expectations or behaviors?

Most significantly, this will depend on the severity or arrival of an economic downturn or recession. This is why I included the graph on unemployment expectations in my previous post: even as sentiment decreases while spending remains strong, there is unlikely to be a drastic move in either measure unless we escape this inflationary cycle recession free, or if an economic downturn decreases provides a check on people’s spending i.e. through more unemployment. A strong labor market makes analysts hopeful for the former but in either case, stick around for more updates!

Hello from New Orleans! ^TIMELY

From Nate Hoskin, Founder & Lead Advisor

I’m so full of seafood that this email is physically painful to write but we’re HERE!

I have been on a whirlwind tour of FinCon, a conference dedicated to money nerds and finance content creators.

Here are my three biggest takeaways from meeting some of the best digital entrepreneurs in the game.

1. Cash is not king, cash flow is king. Not a single person I have met is focused on the money in the bank or the cash on hand. They are fully dedicated to producing new active and passive streams of income. Our group of creators is between ages 20 and 30 and dead set on being millionaires within the next year (except the ones who already are of course). I conducted a casual poll and the average number of income streams per person is THREE! For most, one of those streams is a 9-5 job.

2. F*ck your ego. No one here thinks they know best. Our consensus is that it doesn’t matter what we think people need to hear, it’s about what will truly help them thrive. I’ve never met a group of people more dedicated to the enrichment of the audience they serve. We don’t make content for us, we make content for you.

3. Just go. Everyone in our group has built multi-six-figure businesses from their bedroom with a laptop and a phone. They started from 0 just like everyone else and they had the belief that they could build something spectacular. More than anything, they have the grit to stick through the late nights and stinging defeats.

When standing in a room, you can’t spot the difference between the person with 100,000 followers and the person with 20 million followers. The ultra-successful ones aren’t operating on a level the rest of us can’t reach, they are just a step or two further in the process.

I have never been more fired up to create content and continue sharing the incredible world of financial freedom with all of you. Thank you for trusting me to do what I do best and believing in me every step of the way.

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