The Whole System is Broken

A patient went to the Doctor and asked him to check his leg. “Doc, something is wrong. Just put your ear up to my thigh, you’ll hear it!”

The Doctor cautiously places his ear to the man’s thigh only to hear, “Give me $10! I’m begging you! I need $10!”

“I’ve never seen or heard anything like this before! How long has this been going on?” the Doctor asked.

“That’s nothing, Doc. Put your ear to my knee.”

The Doctor put his ear to the man’s knee and heard it say, “Please! I really need $5! Just $5! Please, $5, that’s all I am asking for!”

“Sir, I really don’t know what to tell you. I’ve never seen anything like this.” The Doctor was truly dumbfounded.

“Wait, Doc, that’s not all of it. There’s more. Just put your ear down on my ankle,” the man urged him.

The Doctor did as the man said and was amazed to hear his ankle plead, “Please, I just need $20! Please lend me $20, please! I am really desperate!”

“I have no idea what to tell you,” the Doctor said. “There’s nothing about it in any of my books,” he said as he frantically searched all his medical reference books. “However… I can make a well-educated guess. Based on life and all my previous experiences, I can tell you with some certainty that your leg seems to be broke in three places.”

Just when everyone kept promising that inflation was under control, we got the March Consumer Price Index. The CPI report, an important metric for tracking inflation, showed that overall inflation rose 0.4% for the month, which was hotter than estimates of 0.3%. Year over year, inflation increased from 3.2% to 3.%, which was hotter than the 3.4% that most expected.

Breaking down the numbers, we see that “Shelter costs,” which make up 45% of the core index, rose 0.4%. Shelter remained up 5.7% year over year, and is not making any progress. Rents rose 0.4% last month, and Owners’ equivalent rent, which tries to capture the increase in homeownership costs, rose 0.4%. Of significant note, the biggest spike was 22.2% for auto insurance.

This persistent inflation will make it hard for the Fed to reach its 2% target rate. Unfortunately, as I have been saying, the only thing that will help lower inflation is a higher unemployment rate. We see the underlying cracks, but the Fed will likely wait for the jobs market to break before appropriately addressing rate cuts. Like I said, the whole system is broken.

Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at Shmuel@approvedfunding.com.

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