Latest / The Jon Sanchez Show / The 10 Year Treasury Yield Just Hit 5%-Here's Why It Matters To You
Transcript
- Jon G. Sanchez: Good Tuesday afternoon to you. Welcome to the John Sanchez show on Newstalk seven eighty Kowitch. Pleasure to be with you and a pleasure to be with my co host, Mr. Cory Edgevedz Reality. How are you, Big C? Did you get an did Cory Edge: I'm doing fantastic, sir. How are you? Jon G. Sanchez: you get a new haircut? Cory Edge: It's not new. I mean it's the same one Dwight Millard: Wind blown. Cory Edge: I always get, but I I just took my hat off and ran my fingers through it. Jon G. Sanchez: Looks good man. It looks good. Why do Dwight Millard: Does it? Jon G. Sanchez: you take that off? Aaron leaves his on on Thursdays. Cory Edge: I do, you I gotta talk to him about that. He's very laid back, very very casual. Yeah. Jon G. Sanchez: Aren't we all? Well, I was gonna say as old as we are, th that doesn't include you, it just includes Dwight and I. But you know, as long as we've been doing this, it's like we are who we are. Yeah. Dwight Millard: Yeah. And it it's a long Cory Edge: Yeah, yeah, that's true. All good. Dwight Millard: ways away for John when we were used to wear the suits and the ties. Remember it and the and the yeah. Yeah. Yeah. Jon G. Sanchez: suit and tie every day. you couldn't you couldn't pay me enough to do that again. Cory Edge: Mm. Jon G. Sanchez: Dewy Millard of OnQ Home Loans. How are you, my friend? Gollies. You know, folks, I I want to tell you. Dwight Millard: Yeah, I've had better days, John, but we'll we'll live to fight another day, I guess, right? Another year. Yeah, yeah. People aren't gonna believe it, you know. Jon G. Sanchez: Yeah, yeah, exactly. I I want to tell you just right from the beginning what what we're going to be discussing today. And and in a way I want to kind of issue an apology because we touched on this last week. And the title of today's show is the tenure treasury hit five percent today. It's where we closed. But why does it matter to you? Right. Last week Dwight did a phenomenal job explaining, you know, what's going on in the world of mortgages. But, you know, that seems like an eternity ago. I mean, we were we were complaining Dwight Millard: Mm, yeah. Jon G. Sanchez: when when was it last Tuesday, Dwight, when I was said, Hey, you know what? We're just a couple basis points away from seven percent, Dwight. And Dwight Millard: Mm-hmm. Jon G. Sanchez: you know, and and sure enough it happened the next couple of days. And then of course on Thursday we touched about it being, you know, slightly above seven percent. And here we are today. We closed at seven point two two percent according to Dwight Millard: Yes. Jon G. Sanchez: Mortgage News Daily on the 30 year mortgage. And so the reason I I kinda wanted to apologize is it's gonna seem like we're doing this topic again, but we're really not, because today we're gonna really switch things over to what it means for you. And this is where I really want Dwight Dwight Millard: It is. Jon G. Sanchez: and Corey to to to bring it to the level of You know what it means to you from from the buying and the selling side of things, obviously Corey will handle that. Then Dwight's gonna handle the mortgage side of things. We gave you some solutions last week, and then I'm gonna handle the financial side of it, which is you know, this isn't just about mortgages, guys. I mean, with 19 year high on the 10 year treasury day. Dwight Millard: Mm-hmm. Jon G. Sanchez: And this comes, by the way, let me remind everybody, this comes on the heels of a interest rate increase that the street is expecting tomorrow. As of we where we sit right now, ninety-four percent probability. Dwight Millard: Mm-hmm. Jon G. Sanchez: So it's it's a done deal. It's a done deal in Wall Street's eyes that the Fed's going to bump rates a quarter percent. But it'll all be about what they have to say about it, right? That's always the key. What will Walsh Worsh, excuse me, say at the press conference afterwards? the street is really looking at, you know, is he gonna hint that this is kind of a one-time deal? I think he's gonna say, as all Fed chairmen do, we're data dependent. We're gonna look at this. But, you know, guys, I I didn't get a chance to go back and look. Maybe I'll have a chance during the break, but it seems to me. you know, doing this for so as long as you guys have, you don't just get one interest rate increase. You usually you're gonna get a couple, if not more, until they get through that interest rate increasing cycle, right? So I I think that's that's the part I think that, you know, we had another rough day in the market today. I mean, heck, you know, we're we're down a couple thousand points. We, you we hit fifty four thousand and some change on the Dow at our our high not long ago. And here we are at fifty two thousand ninety three. We're barely clinging to fifty two thousand right now. And so This thing is starting to unravel as as we predicted. We kept saying this over and over again. Rising interest rates are not good for the boys' world, for my world, and you know, obviously for your pocketbook. so it's it's a tough situation. And we had a huge run up in oil prices today. So, you know, it's the same old thing we've been talking about. But again, let's we're gonna bring this really twist this around over to you know, you as the as the investor, the consumer, etc., and and kind of give you some ideas of you know how this is gonna impact you, Corey. Cory Edge: I I still don't I I've said multiple times I didn't think he would raise. We'll see if he does it tomorrow. Apparently he will, with 95%. But I still, and maybe you can explain to Dwight and I and everybody else. I still don't understand why A, they would raise the rate. And if they get on a rate raising cycle, it makes absolutely no sense to me. You're not gonna produce more oil doing that. Oil's driving all this. You're not if you try to slow down this economy, the only thing propping this economy up is the data center build and the AI stuff and Jon G. Sanchez: That's right. That's right. Cory Edge: You think you got a problem now? Try start slowing that down and see what happens. Jon G. Sanchez: Yep. Yep. No, you're right. And Cory Edge: it go ahead. I'm just I I just still don't understand the theory behind it. Jon G. Sanchez: Go ahead. Yeah, no, no. Well, I'll I'll I'll give you I'll Dwight Millard: Okay. Jon G. Sanchez: give you the perspective. and this is the way today's show is gonna be, folks. We're we're gonna get into the stock market recap, but this is the way today's gonna be, it's just really gonna be you know, three guys sitting around, you know, giving their opinions on what's going on, trying to again make sense of this for for all of you listening. so according to your point, so I think it's an excellent, excellent question you raise. And and again, so many people have the same question. So, you know, we go back as it again, you guys know this, so Forgive me. I'm not trying to insult your your int vast intelligence by any means. But you know, you go back to the basics and say, okay, why does the Fed raise interest rates? The Fed raises interest rates to slow down the economy, right? Plain and simple. To your point, Corey, you got one side of the equation, which is a booming economy. The jobs numbers look great. A lot of things in the economy look great. But as I've said over and over again, it's being held up right now by AI. And we got a slap across the face yesterday when, you know, anthropic CEO on Saturday you know, basically said, with the backing of Sam Altman of of OpenAI and with the backing of Elon Musk, we need to slow this thing down. It's just getting too crazy. We need to slow this thing down. He wasn't referring to builds and so on and so forth, even though of course that would be part of slowdown. He was referring to look at you know, this AI, and and if you missed, you know, this AI topic, please pick up my podcast or YouTube from yesterday because I spent the entire show talking about this. It's fascinating, of course, that If it wasn't for AI, in my opinion, I think we'd be in a ten ten to fifteen, if not twenty percent correction in the market. It is again the only thing that's holding us up at this point. Okay, great. Thank you for guys for agreeing. So if you take that away, now the economy slows. But Corey to your point, the Fed's not gonna I mean the Fed's watching this. Today Congress, you know, is launching all kinds of investigations and committees and everything else trying to figure this AI thing out and guardrails to make sure the AI agents don't go rogue and you know t wipe out humanity as some Or sane and so on and so forth. But back to the economy. So if you're warsh and you're going, okay, yeah, we had that comment yesterday, market didn't like it. You know, we lost significantly in the market. But again, as the Fed always says, one month or one bit of data is not a trend. So we're not going to pay attention to that. So what they're going to do, they're looking back and they're going, okay, here we are with an economy. Again, great jobs picture, so on and so forth. But these bond traders, they're fearful of inflation. Inflationary numbers come out. We had CPI and PPI last week. You know, for the most part, the numbers were hotter than expected. So the the data is now showing that inflation is rising. you know, I Dwight Millard: Yeah. Jon G. Sanchez: I hate to see it being a diehard Republican, but Trump's got himself, you know, in a in a pickle at this point. These oil prices, because again, oil is about seven to eight percent of the calculation of CPI. With these oil prices going up, it's just a a given that CPI is gonna raise. So what do the bond traders do? They're forward-looking, right? They're again, they're the drivers Dwight Millard: Okay. Jon G. Sanchez: of the bus. We're the passengers in the stock market. So they're they're looking down the economy and going, okay, today, you know, I'll give you an example $4.59 gain on oil, $105.82 close. $105. Think about that for a second. You know, you're talking to a guy that that, you know, I've got one gas vehicle in all of my vehicles, and everything else is diesel. I I can't tell Dwight Millard: Yeah. Jon G. Sanchez: you the pain that I'm feeling, you know, because we we buy probably not a lot compared to some, but probably four to five hundred dollars of diesel a week. Well, that four to five hundred dollars now has become, you know, we just paid, gosh, what was it? Six twenty-eight, six thirty a gallon, you know, just the Dwight Millard: Mm-hmm. Jon G. Sanchez: other day. That's painful, you know. And so you you you factor that into the trucking industry and and we're all gonna feel the price increases at the at the grocery store because everything comes in via truck. So to your point, Corey, diesel prices are skyrocketing right now, fuel prices are skyrocketing right now, therefore That's going to you know slow the consumer down. They're not going to be able to afford to go out and spend. Or again, here comes inflation because that Walmart diesel, you know, semi that just delivered a, you know, a semi-load 56 feet of of groceries to your favorite Walmart. Guess what? You think Walmart's gonna absorb Dwight Millard: Mm-hmm. Jon G. Sanchez: you know double fuel or triple fuel prices that that they weren't paying a couple months ago? Probably not. It's gonna pass on to the consumer, which which which bodes for the inflationary argument. So I think. The bottom line is the bond traders are looking down the road. That's why they're driving these yields up. That's why you're seeing the mortgage rates going up. It could all change, right? It it I mean, Trump said yesterday, you know, Iran wants to make a deal badly. You know, I don't know how many times we've heard that. The street didn't pay any attention to it whatsoever. but if something happens where, you know, these oil prices come down, then I think you we'd Dwight Millard: I'm coming sounds. Jon G. Sanchez: be in a different position and the Fed wouldn't wouldn't even be talking about raising rates. But to me, my perspective is they don't have a choice right now. Right? Inflation's staring them in the face. And all three of us know we've all lived through what happens in a Fed that does not react in a forthcoming manner when when inflation is staring you in the face. If they wait too late, it takes years to get inflation back under control. So I think they'd rather sit back and go, you know what, is a it in I wouldn't be surprised if War says this tomorrow. In a precautionary note, we're raising interest rates to you know slow things down a little bit, almost like the the CEO of of Anthropic said regarding AI. That's just my Cory Edge: But I d I guess I don't understand what he's slowing down. You're not gonna you're not gonna increase the amount of oil. I mean, this is supply driven inflation. It's not demand driven. So you can increase interest rates to to bring down the demand so people won't shop as much, but you can't increase interest rates to get Saudi Arabia to push more oil into a pipeline. Jon G. Sanchez: N no, interest rates have nothing to do with s interest rates are a byproduct Cory Edge: Correct. Jon G. Sanchez: of of oil, right? They're the byproduct of oil. But Dwight Millard: Yeah, Jon G. Sanchez: but it but but at the top of the list, so if we had to make a priority, you've got you've got oil, next level, you're feeding into inflation, and then you're feeding into interest rates. So that's kind of the level. Oil, you know, right on down the line, because if where where the emphasis really needs to be is to get this stupid conflict resolved. Cory Edge: Absolutely. Jon G. Sanchez: somehow, because if you did that, that's that's worth the Fed coming out and Cory Edge: Yeah. Jon G. Sanchez: giving us a a one percent decrease, not an increase, but a a one percent decrease. So Dwight Millard: Yeah. Right, right, right. Jon G. Sanchez: I think to your point, your very valid point is always they're missing the mark on this, but what else can they do? Wars can't go to the president and say you need to end this war to get these fuel prices down, which will get inflation down, which then you can you know your dream can come true. You could we can be at a two percent inflation, as you know, Warsh has said and the president wants, but As long as these prices remain, it's just not gonna happen. And so the Fed, the Fed's in a pickle. You they're kind of like Trump. They're in a they're they're the backs up against the wall. They don't have any choice. Cause I think I think also if they did not raise rates tomorrow, Corey, I think you'd see a major, major blowback by Wall Street, mainly on the on the bond trader side, because the bond market's Cory Edge: I guess. Jon G. Sanchez: already yeah, the bond market's already done the the the the dirty work, right? The bond markets, I mean, look at these rates. Poor DeWise, you know, surprised the guy has any hair left. Dwight Millard: I know. Jon G. Sanchez: they you know bond market's done a lot of the work. And I matter of fact, I think I think tomorrow if we get a quarter percent, I think you could see a muted reaction or even a positive reaction in the market. It's all gonna be b, yeah. It's all gonna be based upon, again, the comments at the at the news conference by Kevin Morse. as far as Wall Street's understanding as is this going to be the beginning, is this one and done, or are there more to come? So let's hold Dwight Millard: Yeah. Jon G. Sanchez: these thoughts. Great discussion, guys. Way to start the show. Good job. Welcome back to the John Sanchez Show on News Talk 780 KOH with Corey Ezrelated Dwight Millard of OnQ Home Loans. Again, the 10-year treasury hitting 5% today, a 19-month high. Why does this matter to you? All right. We were just chatting during the break. And we're kind of continuing our discussion that we started before we went to break. And I told the boys, I said, look, it we're a couple thousand points off of the high. This is this is what we got to be careful about. This market can just drift down. You know, we have Two or three days where we dropped three hundred, two hundred, whatever. Then we have a day where we bump up a bit a little bit, and then we're down, down, down. You have to look at the charts right now to to see what the trends are at this point. So I just did the calculation. We hit our our our fifty two week high, which was a little over fifty four thousand back on August the sixth. Where we closed at today just using the Dow, we've lost two thousand six hundred and fifty one points. So rough number down about five percent from our high that we hit back in August. See how fast that happens? Cory Edge: Yep. And you don't even realize it. Yeah. Jon G. Sanchez: So, and you don't even realize it. That's that's exactly right. That's exactly right. So, anyways, okay, so let's get back to our topic. So, let me tell you where the market finished, and then we're gonna we're gonna jump right in because we have a lot of things to cover today. So, we ended up losing again with this rise of oil prices, rise of the 10-year treasury yield. We lost 328 on the Dow, 0.63% loss, closing at 52,093. NASDAQ got 205 point give up down 0.78% to 25,981. SP lost 34.45% to 7,585. Oil skyrocketing, $4.59 gain to $105.82 a barrel. Gold gave up $18.70, closed at $4,333.60 an ounce. And a four basis point increase on that 10-year treasury again to a close right at 5%, as I said, a 19-month high. Dwight, let's get things rolling. I'm gonna skip what individual stocks did Dwight Millard: Thank you. Jon G. Sanchez: today. We don't have enough time. We need to talk to our audience about how this is gonna be affecting them if this holds. So let's move right into the mortgage side of things. Seven twenty two, thirty year. Dwight Millard: Yeah. Yeah, John. I mean, I talk now it yeah, Jon G. Sanchez: Put this in perspective for people. Dwight Millard: when I talk to people now, I talk and hey, that that was a quarter point ago, a half point ago, not not three days ago, right? So I mean, John, Jon G. Sanchez: Right, right. Dwight Millard: 722, I just i I you know, and I don't see we've talked about this, I don't see any end in sight. This is gonna basically shut the pipeline off. Anybody that was thinking they needed to move or buy, it's gonna be tough. It's gonna be tough to convince them. I did a a two one buy down quote today. Even on a two-one buy down quote, John, I mean, you're still sitting in the fives, you know. So I mean, it's it's just a tough market. And it's just gonna get tougher for people, especially if they raise the rates. We'll get into that. It affects everything. So, I mean, you you've Jon G. Sanchez: Yeah. Yeah. Dwight Millard: always said the market does not like turmoil, it does not like chaos, and it's full of it everywhere. You know, I had a a dear Jon G. Sanchez: Absolutely. Dwight Millard: old friend of mine today. I said, he says, How's it going? I go, Well, you know, eighty-five percent's pretty good. And he goes, It took less than one percent to seek the Titanic. So You know, it doesn't take much, you know, like you talked about. You know, fifteen's Jon G. Sanchez: Yeah. What'd you mean by eighty five percent? What do you mean by eighty five percent? Dwight Millard: bad. You know, I go, fifteen's not really good. Eighty-five's not bad, you know, we're doing a little bit of business and all that. I I just meant Jon G. Sanchez: Okay. Dwight Millard: that most of it's good. You know, I mean life's good, everything's good. But I s I I meant I made the emphasis on the fifteen percent. He goes, Well, remember that Titanic sunk sunk with less than one percent, you know, and I thought, it doesn't take Jon G. Sanchez: Okay. I see. you're talking about life in general, yeah. okay, gotcha. Yeah. Dwight Millard: much, but that goes to what you say. You know, there's there's a lot of stuff just lurking underneath, you know, right now that just Jon G. Sanchez: Yeah. Yeah. Dwight Millard: could keep this elevated for longer than I mean, what happened to higher for longer? I mean, now this is gonna go higher and higher for longer. You know, I mean it's just people are getting very worn out on this, very worn out. Jon G. Sanchez: Corey, again, you know, I ask you this every week as these rates continue to rise. Give us your your your pulse on on the consumer at this point from a real estate buying selling standpoint. Cory Edge: I I it it it doesn't show up in the numbers yet, right? Because even the numbers that we're gonna get over the next, you know, couple weeks or whatnot are the old rates. and I don't know that people have really been smacked with it yet, you know, because it's just happening as we speak. And so they haven't really felt the effect of it yet. I am curious, I was trying to look on this chart while you guys were talking. Dwight, when was the last time we were at seven and a quarter? Call it. Dwight Millard: I mean you were probably you know, my guess is what is that right there? Twa Jon G. Sanchez: I was just looking at it the I'm showing Monday, May twenty seventh of twenty twenty four. Dwight Millard: yeah. Yeah. Cory Edge: So is that Reese? That's what I was curious about if we had Okay. Jon G. Sanchez: We're at seven twenty seven. Yeah. Dwight Millard: Tw yeah. Jon G. Sanchez: Yeah. So twenty twenty four. Dwight Millard: We we were there quite a bit in twenty three, the end of twenty three, but yeah, that's probably the most recent. Jon G. Sanchez: But but let me here's here's a stat that I I saw today and I thought of you guys because we were all you know, all three of us were together on the radio back then. In eight, this was the last time or excuse me, two thousand seven was the last time the tenure treasury was at the level that it is today at five percent. That one didn't th yep, that one did that one didn't end well the next year. Yeah. Cory Edge: Yeah, nineteen years, yep. Dwight Millard: Wow. Wow. Yeah. Yeah. Yeah. No. Yeah, Cory Edge: Yeah. Dwight Millard: I think you said nineteen months Cory Edge: Yeah. So I Dwight Millard: earlier. Nineteen years, right? This did you mean nineteen? Yeah, you said months. I I yeah, I knew you yeah, yeah, yeah. Jon G. Sanchez: Yeah, I'm sorry, said months. yeah, I'm sorry. Yeah, nineteen years, pardon me. I'm sorry. Nineteen years. Yeah. Cory Edge: Nineteen years. Yeah. So I Jon G. Sanchez: There's there' there's a lot of marbles rolling around right now, Dwight. Dwight Millard: Yeah, yeah. Cory Edge: I d I think you'll you're gonna see some ill effects from it, right? The buyers get frustrated, the prices are still obviously super high. Now you've got the affordability thing in there with the rates where they're at. And even regardless of that, you've got the oil and the costs and the insurance, everything else we've talked about. And I haven't looked at a chart lately of how wages have kept up, but I don't think they've kept up very well with any of this. Jon G. Sanchez: No, no. No they haven't. No they haven't. No. Cory Edge: and so I do it not to get back on the what we were talking about earlier, but Trump has got himself into a huge bind. And there may not be an easy way out of it, but oil's the key to all of it to me. That makes sense. Jon G. Sanchez: It is. It is. I a hundred percent agree. Hundred percent agree. Dwight Millard: I I I mean, John, look at somebody's you know, the their daily routine right now, right? You're getting up, you gotta go to the grocery store or something. You just get a notice from your insurance company that your your premium just went up. You go to the you can't get to the grocery store 'cause you don't have enough gas. You go to the gas station, it's seven bucks a gallon. Whatever you know, I mean, it's it's and Jon G. Sanchez: Yep. Yep. Yep. Dwight Millard: then you go to the grocery store and I mean you you didn't even get to and from the grocery store without you know Jon G. Sanchez: I hate when my wife comes home from the grocery store. I really do, because they hear that, you know what, and moaning. And I'm like, yeah, I stupid is yeah, stupid me. You know, the other day Dwight Millard: I throw the receipt away as I walk out, so I don't I I it's frustrating. Jon G. Sanchez: we we don't buy a gallon of milk because it's just, you know, her and I. So she buys the, you know, basically the half gallon. And she told me the price of it the other day. And I I I don't quote me exactly. It was like four fifty or five bucks a gallon. And I said, Couldn't you used to buy a gallon for five dollars just a few years ago? She goes, Yeah, absolutely. You know, it's like Is I is I Dwight Millard: And it feels like they're moving the expiration dates around too, John. I don't I can't figure that one out either. Let's just shorten the expiration dates to get everybody to buy it twice. Jon G. Sanchez: Yeah, right, right, right. She goes she goes and gets one of the sh she she goes she goes and gets one of our trucks washed the other day. Fifty bucks to get it washed. And I'm like, Dwight Millard: Yeah, yeah. Jon G. Sanchez: that used to Cory Edge: Wow. Jon G. Sanchez: be twenty four ninety nine a couple of years ago. You know, Dwight Millard: Yeah, mm-hmm. Yeah. Jon G. Sanchez: I know I'm dating myself here, but yeah, we're all we're all feeling the pain. We're all feeling the pain, but you Dwight Millard: Mm-hmm. Yeah. Jon G. Sanchez: know, we gotta we gotta watch it. Go ahead. Cory Edge: And I think I was just gonna say and I think that's why it confuses me so much that you're gonna raise interest rates. Like they're the the it's the I don't think that I know Jon G. Sanchez: Yeah. But they don't care about the consumer. They don't care about us. Remember, they don't care about us. No one cares about us. Cory Edge: But I do think that to again, not to be on a soapbox, Jon G. Sanchez: They will admit term elections. Dwight Millard: Yeah. Cory Edge: they will for elections and the ultimate consumer of all this AIBS is the consumer. Like we we are the ones that have to pay these companies for them to make money. And if they don't pay for it, then all that thing goes downhill. So it whether they care about the consumer or not, the consumer is what drives the boat. Jon G. Sanchez: Well, remember, the bulk of AI revenue, what is being generated, is business. Consumers very is very small part, you know, but it's businesses that have borrowed, as we've discussed, you know, circular accounting and so on, so it's businesses that have borrowed over and over again. And this was my my my fear yesterday that I said on the show, we gotta go to break. I said, look at in and you and I, Corey and and Dwight, we've touched on this many times. If that you wanna watch where AI is going, watch the data center builds. If if the data centers stop building, then this house of cards on the AI side is going to come crashing down. I'm not saying AI technology is going to go, you know, out the door, but as far as this this Cory Edge: yep, agreed. Jon G. Sanchez: yeah, this rapid expansion, because Dwight Millard: Mm-hmm. Jon G. Sanchez: there's a lot of major companies that are in major debt because of all the major expansion of of AI infrastructure. And that's the house of cards that I have said for a long time. That worries the heck out of me. I've been down this this you know, played this game, been down to been to this party before. And you have to watch when there's significant spending in one area of the economy and that's where it is right now. It's the AI side. Surnor to Jack Saban in the go ahead. Cory Edge: Well and let me just say god. Jon G. Sanchez: Go no good. Go ahead. Cory Edge: I was just gonna say just real quick, I totally agree with you that right now it's business to business on the AI, but those businesses need the consumer at the tail end of that. Do you know what I mean? Like all these businesses need the consumer. Jon G. Sanchez: Eventually. Yeah. Eventually. Yeah. Right. Right. Businesses are are are are forth you know, are spending ahead of the consumer catching up to generate revenues for the business. Yeah, exactly. Cory Edge: Correct. Yep. Jon G. Sanchez: Welcome back to the John Sanchez show on New Stock 780K, which with Dwight Millard of UnQue Home Loans and Corey Edge of Adrility. All right, once again, when oil prices surging, 10-year Treasury yield closing at a level that hasn't been at in 19 years, which was pretty painful. 5% right on the nose is where that 10-year closed at. Oil up $4.59 to $105.82 a barrel. The reaction to the market down $328 on the Dow. NASDAQ lost $205. The SP gave up 34. All right, once again, back to our topic. The 10-year Treasury hit that 5%, as I just said. Why does this matter? to you. All right, guys, let's let's get down to this because I want to I want to break some misconceptions. we always try to do this when there's an important Fed meeting coming up. And once again we do have a Fed interest rate decision tomorrow. 11 o'clock we'll have the decision. Right now as we sit, 94% probability according to the CME Fed watch tool that the Fed's going to raise rates a quarter percent. But then again it will have 1130 with a press conference with the new chair Kevin Wars. But why do you care about the 10 year treasury, right? How does this get to you? So remember Big misconception. People think, raising, you know, quarter percent if this is what happens. Remember, folks, that is what's called the Fed funds rate. That is the rates banks charge one another to borrow money from each other. Okay. So as we were discussing during the break, let's kind of put this in a theoretical sense. Why does the Fed raise rates? To slow the economy down. Analogy I always get: they're driving a car, either tap the brake, which is raising interest rates, or they hit the gas pedal, which Dwight Millard: So Jon G. Sanchez: is cut interest rates. But if Bank of Corey and the bank of John, let's say I've got an extra $100 million in capital. Corey's like, man, I could really use that. I've got a bunch of real estate projects I need to fund. So Corey borrows 50 million from me overnight, right? Well, guess what? I just raised or the Fed just raised that borrowing cost by a quarter percent. So now Corey is gonna have to pay me a quarter percent more than where it was before tomorrow's interest rate decision if they raise rates. Dwight Millard: I've always used the picture. Jon G. Sanchez: But to me, as the bank, I'm like, hey, thanks, Fed. This is really nice. I just got an extra interest and I didn't have to do anything. So you start to see the interest income of the banks go up, you know, based upon how many Fed increases we get. But at the same time, Corey's like, you know what, John? Maybe I don't want to borrow that 50 million because I had I just had to go to Dwight, who's my developer, and say, hey, buddy, remember I told you it was going to be 7% to borrow this money for that shopping center development? Well, now it's 7.5%. And Dwight's like, to heck with that. I'm not borrowing that. Dwight Millard: Amen. Jon G. Sanchez: So therefore, there goes all those jobs Dwight was going to create by building the shopping center and on and on and on. So when the Fed raises rates, it doesn't directly impact us as consumers, but it impacts us in in other ways. Dwight, anything you want to add to that? Dwight Millard: No, I I you y you're absolutely correct. And it does take a little time for to circle, you know, through it, but I mean John, it is so far reaching because it's taking away credit, it's taking away people's ability to grow and manufacture and the biggest one I think is employment. You know, we've been sitting on some nice hot employment numbers, Jon G. Sanchez: Yes. Dwight Millard: and you know, this is gonna have some some effect on that. And it's just eventually, like you said, it it it trickles down to the consumer indirectly, y y you know, in in some cases, but then eventually directly, you know, it just it takes a lot more for us to borrow. Jon G. Sanchez: So let's let's let's let's so I wanna I wanna ask you this following question, but first I wanna give a little answer on something related. I'm gonna ask you the question, cor Dwight, here in a second. How are mortgage rates in the tenure treasury correlated? and and even the Fed future or the the the Fed funds rate. But before I do that, remember as Dwight started to allude to how this impacts us as a consumer is lending institutions. I'm gonna exclude mortgage lenders like Dwight. I'm talking your credit card companies, your auto loan companies, et cetera. you start looking at that, they're they're the ones that are looking at the 10-year treasury. They're sitting back right now going, my gosh, 5% on the 10-year treasury, highest level in 19 months, 19 years. boy, consumers aren't going to be borrowing from us. So now if this lasts, they start going through job you know layoffs and so on and so forth. So the Fed raising rates a quarter percent. Could have a negative impact on the mortgage or a positive impact on the mortgage rates. We've seen that where Fed raises rates, mortgage rates come down. But one thing that never changes is if we get the quarter percent increase, you will see credit card rates go up. You in my opinion, you will see auto loans go up, in my opinion, et cetera. So with that said, Dwight, back to my question. Explain to the audience the correlation between Dwight Millard: She's good. Jon G. Sanchez: your tenure and mortgage rates, et cetera. Dwight Millard: Well, John, to your point, it it it's the closest indicator of the movement. So the ten year ties really close into the movement of the third year. It's been the best predictable model that we've had ever since I've been in this business. And, you know, it it you know, the fact that most people keep their mortgages, I don't know if that's a you know, a coincidence, Jon G. Sanchez: Right. Dwight Millard: you know, inside of 10 years, but it's it's it it it's the closest one that you can watch to go, okay. And But John, if they, you know, if we didn't have they I've heard before, and you can agree or disagree, they said if we didn't have the debt load that we had, the ten the the the the interest rate that the the the the one year treasury and the mortgage rates wouldn't be that far off. You know, that if you had a five. Jon G. Sanchez: correct, correct. Dwight Millard: So what we're doing is paying for our debt, you know, over and over. And people don't understand that that four Yeah, yeah. And so I th Jon G. Sanchez: A trillion dollars a year, Dwight, we're paying an interest. A trillion dollars a year. Dwight Millard: Yeah. So I just think that people and now like you said, home equity loans will go up if they raise it a quarter. Home equity I mean, I guarantee you people who thought they were getting home equity loans a year ago or six months ago didn't think rates were going to go up. That they were thinking rates were going go down. So, but that's just been the closest model to follow and especially with the movement. So it it has Jon G. Sanchez: So Dwight Millard: the best correlation between it. Jon G. Sanchez: So when we talk about mortgage rates going up, Dwight, we're talking according to your notes here, it's gonna affect the buying power, it's gonna affect qualifications, it's gonna affect monthly payments, debt to income or DTI, rate buy downs, seller concessions. Corey, w right, Dwight, you're saying yes. If they haven't already, but yeah. Dwight Millard: If they haven't al yeah, if they haven't already been affected, it just right, right. Jon G. Sanchez: Okay. So now when we come back, now we're gonna turn it over to Corey and say, Okay, Corey, at what point do mortgage rates force home prices to significantly adjust. That's your homework as we go to break, my friend. Welcome back to the John Sanchez show on New Salk seven eighty KOs. We'll continue our discussion of the tenure treasury hitting five percent today. Why does it matter to you? Let's get some phone numbers going, Dwight. Dwight Millard: Yes, two four zero two zero two two. Jon G. Sanchez: Thank you, sir. Mr. Edge. Cory Edge: Six seven three six seven zero zero. Jon G. Sanchez: Thank you. All right, Corey, as I said going to the break, you know, at what point do mortgage rates force home prices to adjust? Let's let's tackle that question quickly. Are we there? Cory Edge: I mean, we might be there. I don't know. We'll find out in 30 to 60 days when we see the reports. But anything above this is gonna start hurting people. And then I always go back to whatever's happening in the economy, whether it's interest rate induced or something else, that starts job losses, that's where you're gonna see big price declines. Jon G. Sanchez: Yeah, that's always been your big major indicator. Cory Edge: so that that's a one to watch. But this this is gonna, I mean, it's already been kind of slow, obviously. So this is really gonna have a an effect on. Jon G. Sanchez: Right, exactly. All right, let me jump into the stock market side of things today. So when we get up to these levels, again, we have not been at this tenure level, as I've said in numerous times today, you know, for nineteen years, the bond market becomes a major competitor to the stock market. Here's why I say that. If you can go give your money to the government, which knock on wood, has never defaulted on a bond interest rate payment, and they're guarantee you f guaranteeing you five percent for 10 years, would you take that versus The speculation of the stock market, right? Higher risk, higher return. So you start seeing people when you hit this 5% mark, again, taking money out of their stock market investments and not all of it, but putting it into the bond market. So that creates selling pressure. The other thing that doesn't get enough talk, guys, is remember higher yields can have an effect in a number of different areas. Number one, in the calculation of stock valuations, bond prices, corporate borrowing. Commercial real estate, business expansion, obviously consumer borrowing as we touched on, and retirement income planning. So it's not just about the Fed raising rates a quarter percent. It's what the bond traders are doing, driving the yields up ahead of time. Again, we may see an absolute reversal tomorrow. If we get a quarter percent increase, the street may go. And here's what the you know, a lot smarter people than me are saying. Look, if we get a quarter percent tomorrow, that's fine. We can handle it as an economy, as a market, as a bond market. But we need some clarity from the Fed as to what they think, you Dwight Millard: Mm-hmm. Jon G. Sanchez: know, is this one and done, as I said earlier, or is there there more to happen? So with that said, guys, Dwight, I I want you to let's let's kind of go around right now, around the horn real quick and and talk to your listeners and and potential clients about what they need to be doing right now in this tough environment. Dwight Millard: Well, I you know, John, I think they just need to be vigilant about, you know, the movements, you know, and they I wouldn't stop what I'm doing. I would just continue. I would just be mindful of what's going on and and and and you know, I these rates will they will they will come down at some point in time. So maybe there's an opportunity here to take advantage of, you know, an opportun you know, to a house or something that you're looking at that you hadn't been able to look at in a while. So I don't know. I just I think it's Jon G. Sanchez: How how can you even give a pre-call letter right now? Dwight Millard: It's tough. It's tough. It's tough because I mean you're prequall letters one thing. It's so hard to quote. You know, you quote, you know, on a Friday and then Monday comes around and you're, you know, half a point Jon G. Sanchez: Yeah. Dwight Millard: higher in the rate and people are thinking you're lying. It's like I, you know, I can't make this stuff up. So it's it's it's it's been challenging. We've talked about this several times, you know, on the airs that this is worse than 08 at times. You know, 'cause at in O eight you didn't have all this craziness and i it was bad, but yeah, it wasn't very disruptive. This is really disruptive in in in people's Jon G. Sanchez: Corey Summer's saying that that we need to get used to this seven percent mortgage rate for quite some time. Cory Edge: I I don't know. I mean, I was gonna say that I think the silver lining is, in my opinion, oil kind of brought us here and that can change itself very quickly. I don't know how it's gonna happen, but it can happen in a flash. and I agree with Dwight, these rates could come down very fast. I don't know if that is the route we're headed, but it just seems to me like we've gotten here very quickly for real really no reason other than a self-induced, you know, war that we shouldn't be in and a bunch of oil stuff that can be reversed. if cooler heads prevail, so Jon G. Sanchez: In in various turmoil time periods, Corey, you've used the term blood in the blood or blood in the water, right? Meaning home prices are suffering, people are suffering, there's blood in the water, the buyers, the sharks, they come out and they're like, Let's jump on this. We're not there yet, right? You haven't made any hints about Cory Edge: We're we're not even close to that. If you start see unemployment go up and hear about job losses and this and that, then you're still not close, but you're getting much closer. but I don't there's not a whole lot of panic right now, right? Like people like us talk about this, but if you go out on the street to a restaurant, I guarantee nobody else is talking about it. Because it hasn't Jon G. Sanchez: Yeah, yeah, I agree too. Cory Edge: filtered through to the public yet. Jon G. Sanchez: And I wanna I wanna piggyback on your comments. There there is no blood in the street, you know, or in the water at this point, as far as Wall Street's concerned. People are not panicking yet. I mean, is it painful again the slow drift down? Absolutely, but at least it's not a you know massive two, three thousand point drop and all bets are off, and that's when you see the panic. So I think you know, to leave everybody with an optimistic note, hang tough right now. Let's see what the Fed has to say tomorrow. Obviously, I'll go through significant details. And you guys are more than welcome to join me tomorrow if you want to chime in. and you know, let's see what the streets reaction is. Again, it could be a very positive reaction, both on interest rates as well as the stock market, but it's all going to be based upon what Kevin Worst has to say at that press conference. That's really the most important thing. Guys, great job as always. That was a lot of fun. We'll do it again tomorrow on the John Sanchez show. God bless. Have a great evening. We'll see you tomorrow. Beautiful job, fellas. That was outstanding. Outstanding, outstanding. Cory Edge: So do they do they know