It’s The Economy, Stupid

If you’ve been a reader of mine for a while, you’ve probably seen the name Apex more than a few times. He’s been part of this community for years—first as a frequent and thoughtful commenter on Free Money Finance, and later as an active contributor here at ESI Money.

Apex’s comments have always stood out for being logical, comprehensive, and insightful—the kind of responses that make you pause and think. He also authored a popular series on real estate investing back in the Free Money Finance days that remains a reader favorite.

When I launched the Millionaire Money Mentors (MMM) community, Apex was one of the very first mentors to come on board. Since then, he’s become one of the most prolific and popular mentors on the site—sharing his experience and helping members navigate not just real estate, but nearly every aspect of personal finance.

It turns out, though, that Apex’s expertise extends far beyond personal finance. He’s deeply knowledgeable about economics, interest rates, and government policies—topics we don’t typically dive into at MMM since they often overlap with politics (which we completely avoid).

To explore those subjects more freely, Apex recently launched his own Substack, where he writes in-depth pieces on these broader economic themes. Today, he’s sharing one of those topics here so that ESI Money readers who are interested in these issues can get a taste of his work—and follow his Substack for more.

So with that said, let me turn it over to Apex for today’s guest post…

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In the 1992 Presidential election when Bill Clinton’s campaign strategist, James Carville,  was asked about the key issue of the campaign he famously said, “It’s the economy, stupid.”  He turned out to be correct because America was coming out of its first recession in almost a decade.

President George H. W. Bush had seen his approval ratings drop from an astounding 89% just after the completion of the Persian Gulf war in March of 1991 to only 34% just 20 months later on election night in 1992.  Bill Clinton won because he convinced the voters that the current President was to blame for the current economic conditions, and that he could do better.

It doesn’t matter if Bill Clinton was right that the recession was the President’s fault or that he could do better. The voters wanted something different.  When the economy is struggling, almost nothing else matters more to people’s lives.  President Bush found that out the hard way, and we have seen similar turning points based on economic events right up to the current day.  It’s always the economy, stupid.  The more you understand about economic issues the better equipped you will be to make decisions that best allow you to react to the economic realities of today.

But before I talk about the economics of today, I want to take you back 35 years to an epiphany moment in my economics journey. 

I have always been fascinated by the idea that everything I am seeing around me – from what products are being offered, to how they are priced, and how the forces of supply and demand balance markets – can be demystified using charts, data, and math.  So many people simply think this is just beyond understanding.  It just kind of magically happens.  Or worse yet, they think there is some cabal of dark forces and evil actors working behind the scenes to manipulate everything for their benefit.

If that’s how you see it, you will never be able to trust the system enough to make wise financial decisions.  When you demystify it, you learn it is so much simpler than that.  Adam Smith taught us about the invisible hand of markets in his 1776 book “The Wealth of Nations.”  250 years later those principals still work exactly the same.  Rather than be in the dark about how the economy works and affects every part of my life, I wanted to truly understand how the principles work.  

So I was thrilled as a computer science major when I realized that I could take a series of economics classes to knock out an entire category of my liberal arts requirements to graduate.  I promptly signed up for Micro Economics and would go on to take Macro Economics and International Economics classes as well.  I never gave it much thought at the time, but if I had taken a couple more classes I would have had an economics minor.  As I will explain, that would have been very abnormal. 

During one of those classes in 1990 I was having a discussion with a business major in the class who was required to take economics as part of his core curriculum.  As we talked he asked me what my major was.  When I told him computer science he said, “I didn’t know economics was a required class for computer science majors.” Do you see the implication here already?  If not you soon will. 

I said, “No, economics is not a requirement for a computer science major.”  Now he looked a little confused.  He said, “Oh, then why are you taking it?”  I said, “I am taking it to fulfill some of my liberal arts requirements. I find economics to be a more desirable topic than most of the alternatives.”  He leaned in and lowered his voice almost as if to let me know this was risky information to be sharing.  He softly and slowly said, “Don’t ever tell anybody else that.”

Woah.  He was serious.  This was an epiphany moment.  This is when I realized, oh, I’m weird.  Enjoying economics is not normal.  Normal people, even people who are required to understand these topics as part of their field of study, generally do not enjoy economic concepts or find them beneficial. They certainly would not voluntarily take a class on the topic.

So with that in mind I have tried to demystify and ameliorate the bleak view that people generally have of economics.  Even a cursory understanding of surface level economic forces operating in the economy at any given time can give people an advantage in understanding how to react to current conditions.  It can also provide a calm that keeps them from panicking and over-reacting to situations that they might otherwise be convinced are being manipulated against them by dark forces or simply by an out of control process which might cause them to make unwise knee-jerk reactions out of fear.

I am cognizant of a common objection that even a basic understanding of economic conditions and principles would not be useful or helpful to the average person who is not in an economic discipline.  That is an understandable objection, but I do not believe it is true for most people. 

It reminds me of a story about a wise math teacher I once heard.  During a particularly difficult topic in his calculus class one of his students in a moment of frustration blurted out the question when am I every going to need to use any of this calculus stuff?  The math teacher was wise enough to know that unless his students were going to be physicists or engineers they were never going to need to use calculus directly, so he told the student exactly that.  He said he would most likely never need to use it. 

But then he asked the student a follow-up question.  He said you are on the football team aren’t you?  The student confirmed.  He asked, do you engage in weight training every day for practice?  The student confirmed that he did.  Then the professor asked when the student was ever going to find a circumstance in life where he was going to be forced onto a bench and told he needed to bench press 200lbs 10 times?  The student kind of laughed and said never. 

But that’s not why you lift weights is it the teacher said.  You lift weights because it trains your muscles to accomplish the tasks you need to accomplish on the football field.  That is exactly why you are learning calculus.  You may never need to solve these types of calculus problems later in life, but you will have to solve ones that are just as hard or harder.  What you are learning here is much more important than calculus. 

What you are learning is how to solve the type of complex and rigorous problems that life will throw at you.  You do it to strengthen your ability to rise to the unexpected challenges of the future, just like you lift weights to prepare for the unexpected challenges you will face on the football field.

The student wasn’t expecting that type of an answer, but he understood the analogy.  The exact skill being learned was less important than the mind expanding exercise that was taking place.

Exposure to the interplay between the economy, geo-politics, The Fed, inflation, the job market, the housing market, etc. will expand your mind in ways that prepare you to handle the unexpected economic events that will inevitably happen throughout your lifetime.  There have been massive economic events every decade and they will continue. 

How you navigate them will depend on your ability to understand how they fit into the normal events of a complex interconnected economic and geo-political world without listening to the voices that are always there telling you that everything is about to blow up and cost you everything.  What you do with your personal finances at that moment will have as much impact on your financial future financial as anything else that happens.

There have been a lot of events and news affecting the economy this year between the Fed, the actions of the government, tariffs, inflation, and the job market to keep us on our toes about what comes next for the economy.  These are exactly the types of issues I try to demystify on my Substack at Apex Horizon.

I started Apex Horizon a few weeks after the announcement by the administration of the “Liberation Day” tariffs in April of 2025.  This was a time of considerable chaos in the markets and the news cycle as there was a lot of uncertainty about how this would play out. 

My first article addressed this chaos by acknowledging the reality of the situation, but it was really designed to build to the conclusion that it was all mostly noise that should be ignored as the American system continues to advance regardless of what chaos we face.  We have faced considerably larger obstacles in our past and come through each one stronger than before we entered them.  This was really nothing to panic about, and that is the key thing I am trying to impart with my economic analysis.  There will always be events and stories that shake our confidence, but that is when we most need to have a level of understanding that gives us a reason to retain our confidence when many around us are losing theirs.  

Over the course of the next month things mostly settled down which was the point of the first article I had posted.  The administration and some trading partners worked to de-escalate some of the tariffs especially with China.  The markets and the economy started to adapt to the situation and realize that it might not be as dire as originally feared.  Panicking at this time would have been a financially devastating decision as the stock market recovered all of its considerable losses over the course of the summer.

By the end of the summer the tariff news started to recede to the background as new events took center stage around the Federal Reserve and the job market.  

There has been a lot of pressure from the President on the Federal Reserve to lower interest rates.  It is not uncommon for a President to desire lower interest rates, but the Federal Reserve’s job is to ignore the pressure from Congress or the President and do their job with the long-term benefit of the economy in mind.  Their balancing of inflation and the jobs market throughout 2025 seemed prudent. 

However, after a 2nd concerning job print in August it became clear that the job market was starting to suffer enough that it was going to be increasingly difficult for the Fed to focus primarily on inflation in balancing their dual mandate.  I wrote a post discussing the dilemma the Fed would now find themselves in.  I laid out a series of data points and charts as well as shifting Fed governor sentiment that told the story that we should expect the Fed to shift their focus to rate cuts in September.  Long-term interest rates continued to drop throughout August as it became clear that the economy was weaker, and the Fed would need to start to cut interest rates.

I followed that up with two more articles that showed how tariffs were actually hitting jobs harder than inflation and what I think was a not widely understood but critically important understanding that 2% inflation target of the Fed is not the normal level we keep hearing about in the press. 

Many have questioned how the Fed can cut interest rates when inflation is not at the Fed’s 2% target and not moving closer to it either.  The truth is that 2% has almost never been an inflation level that America has been able to achieve long term.  3% inflation is a much more common and stable level that we have been able to maintain in the past.  Once that becomes clear, it is much easier to see how the Fed can cut interest rates to focus on the job market over inflation in the current environment. 

This is an important part of demystifying the inflation battle because the 2% inflation target has been elevated to a nearly utopian status in recent years.  History does not support such a status, and this is important to understand if one is going to properly analyze what to expect from future interest rate moves in light of current inflation levels even while the media and the Fed continue to preach the sanctity of the 2% inflation target.

September was really all about the tale of two job markets as it was becoming clear we were in a rather unique job market.  Even though the tariff story had settled down there was an underlying uncertainty that was affecting business decision making which filters into the job market, but this job market was different than any I had seen before.  It wasn’t bad.  It wasn’t good.  It wasn’t even just right.  It was just somehow off. 

I started my career in 1993 just as we were coming out of recession.  I worked for a company that was still doing massive layoffs at the time.  I remember what 2001 and 2008 felt like as well given that I was working in IT and felt the impacts of those recessions on the tech sector deeply.  Layoffs in all those instances were deep and widespread. 

We are not in a recession right now even though the media and some analysts have suggested one was imminent for nearly 3 years.  The job market continues to hold up on the numbers front.  Under the numbers, however, is this strange market that is behaving in ways most of us have never seen.  Some are calling it the “No hire, no fire” job market.  It’s a strangely frozen job market where most companies have not started to layoff employees, but they are also not hiring any new employees either.  

The data has continued to be a battle between inflation and jobs with inflation coming in mixed and the jobs reports also coming in mixed.  One report will show that first time unemployment claims are jumping to the highest levels seen since the pandemic and then a few weeks later another report will show that they have fallen back again near the lowest levels they have been.  This has been part of the story with the ongoing confounding job market.  One thing that continues to be consistent in the job market though is that the number of long-term unemployed (those looking for a job for over 26 weeks) has continued to slowly creep higher.  

This is consistent with this strange job market where you are likely to keep your job if you have one but will find it much more difficult to get a new job if you need one.  This has frozen the job market with quits down considerably and new college applicants finding it more challenging to land that first job than it has been in decades.  

All of this factored into the Fed implementing their first interest rate cut of 2025 in September with Fed Chairman Jerome Powell echoing some of the same job market sentiments and calling it a “low hire, low fire” job market.  But even as the Fed begins a new interest rate cutting cycle there is considerable political controversy around their actions.  This brings a lot of uncertainty around how fast and how deep they will cut interest rates because of questions around how much their choices are being influenced by political pressure. 

There is a lot of press around this topic which causes confusion about the stability of our financial system in light of these pressures.  However it is important to remember how these institutions work.  In my article on the Fed rate cut, I laid out the details of the pressure on the Federal Reserve Committee while also laying out how the process actually works and how much the committee was already working to rise above the political pressure and continue to do their job.  The institution is designed to have long term stability and independence that is not easily circumvented by short term actions or pressures.  For all of the relatively unprecedented level of noise about outside influence, if you just look at the Fed’s actions, words, votes, and policy directives you will still not see much evidence of bowing to any pressures.  

Now that the Federal Reserve is starting to lower interest rates, many have breathed a sigh of relief that some assistance will finally be on the way for the housing market in the form of lower mortgage rates.  The President has implied as much. However, this unique time continues to be filled with somewhat unexpected market moves. 

In a post on how Fed policy impacts the housing market I lay out how the mortgage rate follows the 10-year bond rate and not the Fed Funds rate that the Federal Reserve controls.  Most of the time these rates move in tandem because both are typically moving in response to changes in economic conditions.  However, the Federal Reserve is responding to conflicting mandates this time which is something they have not had to do for 40 years.  Nothing about this period of disruption after the pandemic has followed any of the normal patterns we have gotten used to over the past 40 years so why should this be any different.  The Fed does not have the luxury this time of responding exclusively to the same market forces that they have historically.

As an example of how competing economic forces can create unexpected results, I show data on how the Federal Reserve cut interest rates 1% at the end of 2024, but the 10-year bond rates and the 30-year mortgage rates both increased by nearly 1% during that same time.  This is not typical which is why people did not expect this type of response.  I discuss the economic reasons why this happened last time and what needs to happen for the results to be different this time.  Namely the economy needs to weaken some to bring mortgage rates down meaningfully.  A consistently strong economy is not generally compatible with lower long-term interest rates including mortgage rates.

Economic outcomes are not always easy to predict, and while they often follow similar patterns there is always something unique in each economic season that causes the results to be a little bit different.  This particular season has more differences than we have seen for quite some time which makes keeping your finger on the pulse of the economy that much more valuable this time around.  

Mark Twain famously said, “History doesn’t repeat itself, but it often rhymes.”  He could have just as easily been talking about the economy as there is a whole lot of economic rhyming going on right now.