Eye Witness.

My cousin Vinny is a cinematic masterpiece - don’t @ me, I will die on this hill.

The cross examination in that movie was actually used as educational material in law school. It was shown to us just after our Criminal Law professor showed us a video of a robbery. We were asked a series of questions about what happened. It was all of our “you sure about that five minutes??” moment. (If you don’t get the reference, you’re watching My Cousin Vinny tonight and you can thank me tomorrow).

Not one of us in a 60 person lecture could accurately describe what happened and who did what. The point was to show us that our memories are horrible. Even if you literally just saw something happen, you probably won’t remember it correctly. Vinny makes the point when he forces the witness to concede that hominy grits, not instant, take longer than five minutes to make.

The Mandella effect is a term for this phenomenon. It was coined by a researcher who believed - like many others - that Nelson Mandela died in prison in the 1980s. He died in 2013. Similarly, Vader never said “Luke, I am your father;” its the Berenstain Bears, not the Berenstein Bears; Mr. Monopoly doesn’t wear a monocle. These are all things you believed were true, that just aren’t. Our memory sucks, so let’s look at some data:

Excuse me, can you please move? By at least one account, the United States in the midst of a $84 trillion wealth transfer from one generation to the next. Problem is that much of American wealth is tied up in the homes we own. And no one is moving, which means that a lot of that wealth may stay concentrated in families rather than a first time homebuyer wresting a home from a boomer’s hands.

A little over 2 years ago when rates were below 4% buyers could afford to bid up prices on homes because at the end of the day their monthly outlay would be comparable to what they were paying in rent. But now, the opposite appears to be true: buyers are struggling to make full price offers because they simply cannot afford the monthly outlay of a 7% note.

This week we’ll get fresh data on rates and it will be interesting to see if seller’s finally relent, reduce home prices, and we see an uptick in existing home sales. We need that purple line below to creep up as that orange line falls - otherwise we’ll continue to experience this frozen housing market that is preventing some from buying into wealth; creating a smaller cadre of wealthy families.

Proficient in MS Excel. Data on job openings come out this week. The number of jobs open in corporate America has an impact on inflation. The chart below shows us that core inflation has been cooling toward that Fed’s 2% target rate. And that is due in part to that blue line - the number of job openings - going lower. If there are fewer jobs, and more unemployed, then there is less money in the economy. If worker’s aren’t being paid, they cannot spend; if they can’t spend producers will need to moderate prices (as McDonald’s did last week) in order to make sales. And as prices come down, core inflation continues to cool. So while it may be bad news in the short run, we need fewer job openings and an increase in unemployment - despite how painful that will be - for inflation to get back down to the Fed’s desired target. This week I’m looking for a continued decrease in job openings which may help restart the rally in equities that fizzled at the end of last week.

Placing orders. This week we get survey data from senior executives at 400 firms from nineteen different industries - it is an important leading indicator for the economic cycle. This survey is important because purchasing agents are near the beginning of supply chains. If these executives report an increase in spending, that means they are forecasting an increase in production, which should mean an increase in sales and profits. There’s another wrinkle here: as a rule of thumb when PMI survey data comes back under 49.2 it suggest economic contraction is coming and things are about to get worse; where as a reading above 49.2 suggests expansion and continued inflation. We can see how close we are to this level now, and if we hold steady, that would certainly be encouraging. If we get a middle of the road survey data, expect the market to react favorably since that will encourage the soft landing narrative that the street is looking to make reality.

Trust un-busting. In the late 1800’s a wave of vertical consolidation that saw some (::cough:: jp morgan ::cough::) very rich. Railroads were the new dominant technology. Farmers became reliant upon railroad trusts to get their crops to market. But as so many of these firms consolidated, they began ratcheting up prices until nearly every thing any American did in their commercial lives - down to buying a carton of milk - was largely controlled by a few rail road companies.

For the last few years, there have not been many IPOs or much to say in the way of consolidation. But the M&A market is thawing, as we saw last week with Conoco buying Marathon. Where some feel that this may be the end of consolidation in the energy industry, I have my doubts. As we speak Exxon is fighting with Chevron over ownership interests in Hess. Those are some very big energy producers who are fighting for control - it may only be a matter of time before they realize they have more to gain as collaborators rather than competitors.

For example, the chart below shows four companies in that are integrated oil and gas providers. This chart plots the growth rate for these two companies over the last year. The market cap for the entire industry is a little over $2 trillion. The four companies seen here already own more than half of that market capitalization. And even within these four big players we can see that Shell is growing at a stunning rate that puts them in a really strong position to start buying up strategic partners that are smaller players in the industry. This kind of consolidation, left unchecked, can wreak havoc on the consumer. This week I’ll be watching for more merger and consolidation talks in this industry and others. The more we see, the more worrisome.