You know I love a good conspiracy theory.

Our CEO called an All-Hands sales call yesterday, which as the name suggests is all hands-on deck – shit is going down. If you haven’t been following – the stock market has had some of its worst days in recent history followed by one of the most significant single day rallies in market history. It’s been a wild ride and it’s having a major impact on the stock market.

So today I want to dive into a couple theories on why Trump would want to create this kind of volatility. That will all be speculation. Then I will do something even less advised and make some predictions for the real estate market. This is going to be a good one friends.

Americans needed to get grounded.

Why would Trump want to destroy people’s retirement accounts and create global instability? Maybe because he is a jerk. Maybe because he is a genius. It remains to be seen. I’ve already discussed one theory on why he would have wanted to shock the economy, at least within our country, on a previous blog. It spurred a lot of conversations, some quite heated so I highly recommend you go back and check it out.

The US Debt is in an impossible situation.

I look at debt to income ratios all day long for a living. The US debt to GDP ratio (120% right now) would indicate a major risk to anyone analyzing us – at 36.22 trillion our debt far exceeds our total economic output. Interest rates – aka borrowing costs – are not only impacting you and me. They impact Uncle Sam who has a shit ton of debt. Let me explain how this works. The US government borrows money by issuing Treasury bonds. The 10-year yield (the same one we watch for its inverse impact on mortgage bonds) sets the benchmark rate for these treasury bonds the government is issuing. When the 10-year yield is up, that means the government is paying more money to borrow money. Think of it like this – if Uncle Sam wants to refinance ten trillion dollars of its debt – he would prefer a 3% interest rate over a 5% one.

For reference the 10-year yield is at about 4.5% right now. It is fluctuating at an insane pace right now though. Last week, on Friday the fourth, it fell as low as 4.01%. Our company locked in 25 million dollars in refinances that day because mortgage rates fell as low as 5.875% for certain borrower profiles. This is not just whipsawing us though; it is putting Uncle Sam and his massive amount of debt in a shitty feedback loop.

More debt → Higher yields → Higher interest payments → More debt.

Here is the conspiracy theory: If investors see consumer spending slowing or rising unemployment, they will flee to safer investments like bonds. As that demand increases, prices of those bonds go up, yields go down and with them interest rates. So maybe…Trump wants to create an economic slowdown or even full brown recession to bring yields down so the government can refinance its insane amount of debt.

Real Estate Forecast

I am going to take a bold stand here and make a prediction. If I am wrong, I’ll just delete this blog.

If we continue to feel the pressures of a recession, without things getting too scary…I’m talking mild economic softening or even just the Fed pivoting on their “wait and see stance” but not a full-blown job loss recession. THEN, I predict we will see a significant pick up in the real estate market supported by mildly cooler interest rates. Rates in the low 6’s high 5’s creates a significant boost in activity – fueled by folks wanting a safer place to tie up their funds. (Since the stock market is not friendly.)

And to be clear, I mean things picking up even more significantly than they have since mid-January.

Let us see my friends.