San Jacinto Capital

Independent Texas market analysis, privately owned and operated, trusted by Texans. An @OldSanJacinto company.

[Archer @flyarcher]

Choosin Texas.

[San Jacinto Capital @SanJacintoCap]

San Jacinto Capital está considerando publicar en español además de inglés. Si usted leería análisis de los mercados de Texas en español, díganoslo aquí.

San Jacinto Capital is considering publishing in Spanish as well as English. If you would read Texas market coverage in Spanish, say so here.

[San Jacinto Capital @SanJacintoCap]

Texas at 29.5 percent Spanish speakers is the business story on this map.

The Latino Donor Collaborative puts the Texas Latino economy at $820 billion and the US Latino economy at $4.4 trillion, which would be the fourth largest economy in the world on its own. Latinos were about 20 percent of the population and 28 percent of US economic growth in 2024.

The wealth side is moving faster than the income side. The Fed's Survey of Consumer Finances showed Hispanic median net worth up 47 percent from 2019 to 2022, the largest gain of any group, driven by homeownership that is now near half of Hispanic households. Hispanic adults also start businesses at more than twice the national rate.

The gap is in who serves that money. Hispanic households are still unbanked at more than twice the national rate, Mexico receives over $60 billion a year in remittances mostly from the US, and almost no financial research or market commentary in this country is produced in Spanish.

The customer is here, is in Texas, and is being underwritten by nobody right now.

[San Jacinto Capital @SanJacintoCap]

Texas at 29.5 percent Spanish speakers is the business story on this map.

The Latino Donor Collaborative puts the Texas Latino economy at $820 billion and the US Latino economy at $4.4 trillion, which would be the fourth largest economy in the world on its own. Latinos were about 20 percent of the population and 28 percent of US economic growth in 2024.

The wealth side is moving faster than the income side. The Fed's Survey of Consumer Finances showed Hispanic median net worth up 47 percent from 2019 to 2022, the largest gain of any group, driven by homeownership that is now near half of Hispanic households. Hispanic adults also start businesses at more than twice the national rate.

The gap is in who serves that money. Hispanic households are still unbanked at more than twice the national rate, Mexico receives over $60 billion a year in remittances mostly from the US, and almost no financial research or market commentary in this country is produced in Spanish.

The customer is here, is in Texas, and is being underwritten by nobody right now.

[San Jacinto Capital @SanJacintoCap]

The spread went from about 0.75 to 1.6 points in a matter of weeks, which is the part to study.

France's debt at 116 percent of GDP and a deficit near 5.5 percent were both known a year ago. What changed is that the market stopped assuming an adequate plan would arrive.

That is the usual sequence. The number sits there for years, then the premium reprices in a quarter.

Italy at 135 percent of GDP now borrows at roughly the same yield as France because Italy runs a primary surplus and France does not.

Direction gets priced before level.

[San Jacinto Capital @SanJacintoCap]

The number is worldwide and about half of it is China, where gas-only cars are already a minority.

In the United States, gas-only vehicles were still roughly three quarters of new sales this year, and most of the shift has gone to hybrids, which burn gasoline too.

The fleet matters more than the sales mix. The average American car is nearly 13 years old, so even if gas-only fell to zero tomorrow, the fleet on the road stays majority gasoline past 2040.

Texas refineries run about a third of US capacity, and Valero($VLO), the largest of them, just posted the highest quarterly profit in its history at $6.8 billion on a $39.24 per barrel margin. Gasoline demand is not what is shrinking yet. The share of new cars is.

[San Jacinto Capital @SanJacintoCap]

CCC and lower yields hit 18 percent this week, the highest since 2020, and the spread over Treasuries is the widest since July 2020. A neocloud with one customer, leased chips and no other revenue is exactly the borrower that market just repriced.

The dividing line is the one named: revenue from somewhere else. SpaceX's connectivity segment earned $2.4 billion of operating income last quarter on $5.2 billion of revenue before any compute is counted. That is what a lender underwrites. A neocloud has the chips and the hope.

For Texas this is not abstract. Several of the largest neocloud campuses in the country are under construction here, Abilene and Denton among them, and county tax bases have been budgeting against them. Consolidation means the buildings get finished by someone else, or not at all.

What to watch: who refinances in November. The neoclouds with public debt have maturities and the price of that paper will say which ones the market expects to survive.

[San Jacinto Capital @SanJacintoCap]

The housing read on this:
Married couple households own their homes at roughly 80 percent, against about 65 percent for all households and under 50 percent for single parent households, per Census data.

A neighborhood where fewer than one in four families with children is married is a neighborhood where most of the housing stock is rented.

[San Jacinto Capital @SanJacintoCap]

Toyota sells roughly six times as many vehicles as Tesla and is worth a seventh as much.

The market is not pricing Tesla as a car company, and has not been for years. The useful comparison is what the other eleven would be worth if they were priced the same way, which is why none of them trade near it.

[San Jacinto Capital @SanJacintoCap]

Texas is missing from the arriving list for an arithmetic reason, not a migration reason.

The chart divides by population and Texas divides by 31 million people. In absolute dollars Texas has been second only to Florida in net income gained from interstate moves every year since 2020 in the IRS data.

The per resident gap with Florida is also about who is moving. Florida takes retirees with large incomes and no job. Texas takes workers in their thirties with a job offer and a smaller return. The second group pays taxes for forty years.

[San Jacinto Capital @SanJacintoCap]

The data supports the Dallas claim.

BLS puts DFW second only to New York in financial activities employment, ahead of Chicago, and the Texas Stock Exchange's first listings this month were all handled from Dallas.

Austin's piece is different and smaller. Virtu taking two floors is a market maker putting engineers near the talent, not a headquarters move.

The split that is forming is Dallas for the institutions, Austin for the trading technology, and Houston for the energy capital that pays for both.

[San Jacinto Capital @SanJacintoCap]

These are the city's 88 Super Neighborhoods, the planning units Houston uses instead of zoning.

Houston is the largest city in the country without a zoning code. Deed restrictions and these boundaries do the work the code does elsewhere.

Worth noting the map is the city limits only, about 2.3 million people. The metro is 7.8 million, so roughly 70 percent of greater Houston lives outside this map.

[San Jacinto Capital @SanJacintoCap]

Ranking debt in dollars mostly ranks economies by size. Here's a better read:

Japan's $8.66 trillion is about 230 percent of its GDP, and almost all of it is owned by Japanese savers and the Bank of Japan, which is why it has carried that load for thirty years.

The United Kingdom's $4.35 trillion is near 100 percent of GDP, but about a quarter of it is inflation linked, so every inflation print raises the interest bill directly. That is why gilts have been the most volatile major government bond market.

France's $4.21 trillion is about 116 percent of GDP with a deficit still near 5.5 percent and no budget majority to cut it. Its bonds have at times traded at yields level with Italy's, which was unthinkable five years ago.

Italy's $3.73 trillion is about 135 percent of GDP, the worst ratio on this list after Japan, yet it runs a primary surplus and its credit rating has been going up, not down. Direction matters more than level.

Singapore's $1.11 trillion is issued so its pension system has something safe to buy and is matched by assets, so its net debt is roughly zero.

Norway owes $261 billion against state holdings worth several times that.

The United States at $41.39 trillion is about 120 percent of GDP, with roughly a quarter held abroad.

The cost for the U.S. is the part to watch. Net interest now runs above $1 trillion a year, more than the defense budget, and every refinancing at current rates adds to it.

[San Jacinto Capital @SanJacintoCap]

Two different sellers, compared with Texas:

In DC it is the job. Federal employment in the DC metro division is down 31,400 over the twelve months through July, per the DC Department of Employment Services, and a seller who has to move does not get to wait for the price.

In Texas, at 7.8 percent, it is the purchase date. In the Austin metro, 63 percent of listings from owners who bought in 2021 through 2023 are asking below what they paid, against 2.4 percent for owners who bought before 2021, per a Neuhaus Realty Group pull of MLS data on October 2. The Travis County median is down 22.7 percent from its May 2022 peak.

The DC number will keep rising as long as the payroll keeps shrinking. The Texas number is a fixed pool of 2021 to 2023 buyers that gets smaller with every closing.

[San Jacinto Capital @SanJacintoCap]

The six year math assumes prices stop rising.

In Texas they already have. The statewide median was $333,628 in the third quarter, down 0.4 percent from a year ago, with 5.5 months of inventory and the highest share of listings with price cuts in the country.

Flat prices against rising incomes is the only way the ratio comes back without a rate move, and Texas metros are the ones running that experiment now.

The ten year metros on Redfin's list are the ones where supply never showed up.

[San Jacinto Capital @SanJacintoCap]

Crude futures opened tonight down 1.5 percent on WTI and 1 percent on Brent after Washington signaled no strike on Iran today. Natural gas fell 2.5 percent.

The gas move is the one to read. Roughly a fifth of the world's LNG leaves Qatar through the Strait of Hormuz, so the Iran premium sits in gas as much as in oil. When the premium comes out, Gulf Coast LNG exporters lose pricing against Asian buyers at the same time Permian producers lose it on crude.

For Texas the arithmetic is simple. The state produces about 5.7 million barrels a day. Every dollar off WTI is roughly $5.7 million a day less at the wellhead and about $260,000 a day less in severance tax.

What to watch: the Brent to WTI spread at Monday's open. It closed Friday above $13, which is a seaborne risk premium, not a supply story. If it narrows, the headline is being taken seriously.

[San Jacinto Capital @SanJacintoCap]

Permits below starts, 845,000 against 859,000, means the pipeline behind the current work is thinner than the work itself. An oversupply to put it simply.

Texas is where that shows first because Texas pulls roughly one in seven single family permits in the country.

Austin's permits are down 13.6 percent this year, lumber closed Friday at a two year low, and D.R. Horton, the largest builder in the country, reports Thursday after a quarter with a 20 percent cancellation rate.

The buyers are still there. They are waiting for a price that works at a 7 percent mortgage, and builders have decided it is cheaper to build fewer houses than to sell at that price.

The sellers with little incentive to take a price cut, the 3% mortgages, are another reason prices remain high instead of meeting buyers where they're at today.

[San Jacinto Capital @SanJacintoCap]

Twenty five percent of workers in the high reinvention group, where most of the day's tasks move to something else.

The Houston jobs table from last week is a preview:
10,500 of the metro's 33,600 new jobs over twelve months were in administrative support, which is mostly temp staffing, the category that fills in while employers decide what the permanent version of a job looks like.

Reinvention shows up in the staffing agencies before it shows up in the org chart.

[San Jacinto Capital @SanJacintoCap]

The $5.32 million is a household budget. A house, two cars, kids and a retirement describe a family, not one person.

The $3.6 million is one paycheck. A family that buys two cars usually has two, which puts lifetime earnings closer to $7.2 million. Against $5.32 million that is $1.9 million to spare before taxes, not $1.2 million short.

Where the squeeze is real is housing:
$1.28 million of the total and up 7.7 percent in a year, far faster than wages. That line deserves the alarm. The rest of the budget does not.

Divide a two income cost by one income and you can make anything look unaffordable.

[San Jacinto Capital @SanJacintoCap]

The Texas edition of that list:

Monday: 328 million SpaceX shares unlock.

Tuesday: Waste Management and Baker Hughes report after the close.

Wednesday: Fed decision, with Dallas Fed President Logan voting and oil above $100. Phillips 66 reports that morning.

Thursday: nine Texas earnings before the open. D.R. Horton, Cheniere, Enterprise Products, Quanta, KBR, Builders FirstSource, Tenet, Cullen/Frost and Caterpillar. PCE and GDP print the same morning.

Friday: ExxonMobil and Chevron.

[San Jacinto Capital @SanJacintoCap]

Same week, two reports.

JPMorgan: retail bought a record $540 million of tech in five days.

Bloomberg: hedge fund short positioning near a five year high.

One side is buying the dip in the names that fell. The other is selling them to it.

The Nasdaq is down two weeks running and about 3 percent off its high, so this is being fought over a small move. The question is who still has money left on the fifth dip.