Welcome to the Skeptical Investor, right here on BP! A frank, hopefully insightful, dive into real estate and financial markets. From one real estate investor to another.

Today, we’re talkin’ random market thoughts. I got a few things knockin’ around the ol’ noggin. Today’s issue will be a little shorter than normal. PLUS….A big announcement and gift! You’ll have to read to find out. Let’s get into it.

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Today’s Interest Rate: 6.83%

(☝️.02% from this time last week, 30-yr mortgage)

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The Weekly 3 in News:

1. --Amazon CEO: No inflation so far: “We have so far not seen prices appreciably go up (CNBC).”
2. --Wages for hourly workers are up 2% in 2025. One key reason, perhaps, why the consumer is holding up so well despite the confidence ups and downs (Treasury).
3. --Weekly Trade Watch:
   1. Forthcoming trade deals with Indonesia and Vietnam were just announced. U.S. exports to Indonesia would face no tariffs, while Indonesian goods would be charged a tariff of 19% in the United States. On the Vietnam front, the agreement is expected to include a 20% tariff on their goods with no such tax on US exports. Mexican President Claudia Sheinbaum is discussing trade collaboration with Canadian Prime Minister Mark Carney, focusing on countering U.S. tariffs set for August 1. South Korea also signaled progress toward a possible U.S. trade deal by August.

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The Economy: State of Play and This Week’s Numbers

Both Consumer and Producer (wholesale) inflation numbers came in slightly higher and below expectations, respectively.

This week’s Consumer Price Index (CPI) showed inflation at 2.7% YoY, slightly above the expected 2.6%. Producer Price Index (PPI) came in at 2.3%, below the expected 2.5%, YoY. MoM was flat, also below the expected .2% increase. Core PPI (excluding volatile food and energy) was flat MoM and 2.6% YoY, both also lower than expected.

Fun fact, PPI came in lower than all 50 economists in Bloomberg’s survey predicted.

What’s the difference in CPI and PPI? PPI measures the average change in prices received by domestic producers for their goods and services over time. It’s focused on the wholesale level, aka raw materials, intermediate goods, and products before they hit retail. CPI tracks the average price changes for a basket of goods and services bought by consumers, like groceries, rent, or gas, retail goods... So, PPI looks at prices from the producer’s side, early in the supply chain, while CPI reflects what consumers actually pay at the retail level. PPI can signal future consumer price shifts since producer costs often trickle down, but it’s slightly narrower, missing things like housing/shelter, which CPI covers. This is important to know because shelter cost was the primary factor for the monthly increase in CPI. Up 3.8% YoY.

Importantly, shelter costs have a massively outsized weighting, making up ~40%+ of CPI. This hefty weighting means shelter has quite an influence on inflation numbers. Moreover, it may sometimes overstate inflation numbers due to lags in how rent data is collected (leases are typically 12 months), which can trail real-time market trends by many months. Of note, shelter costs are likely not affected by trade/tariff policy.

Other notable sector increases over the last year include medical care (+2.8%), motor vehicle insurance (+6.1%), household furnishings and operations (+3.3%), and recreation (+2.1%).

So, what do these numbers mean to us?

Inflation is still not showing signs of reigniting, signaling a higher likelihood of lower interest rates in the near future. What’s the chance the Fed lowers rates in September? 40%.

Just kidding, nobody knows.

Side Note: Whenever I see a TV/Newsletter/Podcast pundit making a bold prediction by assessing the odds at 40% - I always think of this Wall Street Journal 2018 piece.

40% is 100% correct, all the time.

Tariffs Aren’t Derailing the Party Train

So far, while tariffs are important to the President’s agenda, they may not necessarily derail the economy. We have not seen a meaningful increase in prices, consumer confidence or job numbers.

Let’s remember that the economy has remained strong despite all the craziness in the world. Hell, the stock market had a waterfall decline in April because of the tariff announcement, and everyone thought the market wouldn't recover because the Fed wasn't going to unleash liquidity, but it was a V-shaped rebound. Once investors recovered from the shock of a worldwide reorganization of tariff/trade policy, things started to make sense.

Fun fact, today stocks are actually cheaper than they were on the eve of COVID in 2020, by 1.5x. And we have had six Black Swans in that time!:

• -We had COVID.
• -We had the supply chain shock.
• -We had the inflation shock.
• -The Fed's fastest hikes in history.
• -We had tariff armageddon.
• -And then we had the US bombing Iran nuclear facility.

US companies produced earnings growth the entire time. The economy is looking, dare I say, indestructible (Tom Lee).

So, the good economic times are still a movin’. I know it may not feel that way to everyone. There is plenty of political angst, uncertainty, frustration, and even fear in the air. And we real estate folks are agonizing over interest rates (me included!). But our little ol’ economy is chuggin along. Thomas the Tank Engine would be impressed. (Tangent: Did you know that show lasted until 2021? 1984-2021! Holy hell, what a run y’all).

The Campaign to Cut Continues

The President is getting ever more frustrated that the Fed has not cut interest rates. A reminder, the Fed cut rates last on December 18th, 2024, and has paused since.

The pressure on Powell to cut rates continues to escalate:

• -Powell’s stubborn stance on rates is starting to upset other Fed board members, with some now publicly saying they would support a rate cut.
• -The President wants the next Fed Chair to “be someone who will cut rates” and is expected to name Powell’s successor before the Fall, according to Treasury Secretary Bessent.
• -And, the President is now calling for the first 3% interest rate cut in US history.

Who will be the next Fed Chair?

Former Fed Governor Kevin Warsh is considered a top contender. He has

But then yesterday, when asked if the next Fed chair is going to be independent, Warsh said, "In a word, yes. I’ve strongly believed for 20 years, and history tells us, that the independent operations in the conduct of monetary policy is essential."

Guess he’s off the short list now. :)

Although he then backed off those comments, saying, “We need regime change in the conduct of policy,” and the Fed should have “[a policy alliance with the Treasury Department].” He also called their models outdated and a relic of the past.

I must admit I agree on the latter.

Ok, he’s back on the list.

My Skeptical Take:

The signal of a change in the Fed Chair is a form of forward guidance for markets. How far out will they look for guidance? When will Powell be considered a “Lame Duck?”

Prediction: The moment the President names a new Fed Chair, there will be a few days of volatility, and then rates will continue their stair-step downward. I do think we get a small .25% rate cut in September, but Powell seems increasingly stubborn, as he attempts to avoid looking political (to his credit this is a difficult position). Again, Powell’s effort to remain apolitical is beginning to appear political, as I have written about previously.

But time will tell. I’m gathering capital, selling some stocks and getting ready to fund my next real estate deal. Property prices are softening, and it's starting to look like a damn great time to.....

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There's more, just shoot me a message and I'll send you the rest. After all, isn't that what BP is all about. Let's get to know eachtoher! DM me now!

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Thank you. Thank you. Thank you…all you awesome Skeptical Investor readers out there.

Until next time. Stay Curious. Stay Skeptical.

Herzliche Grüße,

-The Skeptical Investor