Shiller CAPE Ratio Rises Above 1929 Levels (And Highest Since Bubble)

The recent surge in tech stocks (aka, FANG stocks) has resulted in the highest Shiller Cyclically-adjusted Price-to-earnings (CAPE) ratio since the bubble of 2000. And overall higher than 1929.

Of course, helping the inflated valuations is The Fed.

With Powell as “the leader of the pack.”

Of course, The Fed can always take valuations higher.

Top 10 City Office Occupancy Crashes To 17.6% (San Francisco Worst At 9.9% Occupancy)

The US office market occupancy rate has dropped to a new low of 17.6% (average of 10 cities) with San Francisco leading the way with 9.9% occupancy.

A close-up of Washington DC’s back to work barometer shows the Covid-crash in March and the slow non-recovery to today.

Fannie, Freddie Whipsaw as Mnuchin and Powell Discuss Capital

(Bloomberg) — Common shares of Fannie Mae and Freddie Mac pared double-digit percentage losses in Tuesday trading as Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell discussed the government’s control over the mortgage giants.

Powell and Mnuchin testified before the Senate Banking Committee

In response to a question from South Dakota Republican Mike Rounds on when the government can end FNMA, FMCC conservatorship, Mnuchin said it’s something that should be done but it takes time, while Powell agreed it’s something that needs to be done “carefully”

Mnuchin said he didn’t think FNMA, FMCC should be let out from conservatorship without appropriate capital

“I would certainly like to see the GSEs return to private hands over time,” Powell said “with a lot of private capital behind it”

Yes Jerome, if there were that much private capital available, we wouldn’t be having this discussion in the first place.

The cure (which no one in the US Senate is really interested in) is for Fannie Mae and Freddie Mac to focus on purchasing 5/1 ARMs (adjustable-rate mortgages) rather than the dreadnought 30Y Fixed-rate mortgage that the affordable housing community is obsessed with. Generally, the 5/1 ARM rate is lower than the 30Y FRM rate.

Or Quicken’s push for 15 year mortgages that enable borrowers to pay down their mortgages much more rapidly. And 50 basis points less expensive the 30Y FRM.

But what does Congress insist on F&F doing? Buying the riskiest mortgage product, the 30Y FRM.

Biden Appoints Labor Economist Yellen As Treasury Sec, Global Markets Decline (But US Pending Home Sales YoY Rises)

President-elect Joe Biden has appointed former U-C Berkeley labor economist Janet Yellen as US Treasury Secretary. The reaction in global equity markets?

But pending US home sales YoY are up 19.50%.

The US Dollar keeps droppin’ as Bitcoin keeps a poppin’!

The Wake of The Flood Continues: Refinance applications jump to highest level since April on low mortgage rates

Incoming Treasury Janet Yellen is working with Fed Chairman Jerome Powell to undo Treasury Secretary Mnuchin’s cancellation of Treasury stimulus programs.

After two weeks of decreasing numbers, mortgage applications increased 3.9% last week, according to a report from the Mortgage Bankers Association. Refinance applications climbed even higher.

MBA Mortgage Refi applications continue to rise as mortgage rates continue to fall.

On the hot button topics of US Dollar, Gold, S&P500 index, and Bitcoin, we can see Gold and the US Dollar continuing to fall while Bitcoin continues to soar. The S&P500 continues to “flood-up” with money printing.

Yes, the flood of easing continues.

Wake of the flood … of monetary stimulus.

US Home Prices Skyrocket 7% YoY In Infinite Liquidity World

Former bubble perpetuater Janet Yellen has been named as US Treasury secretary joining Jerome “Bubbles” Powell on the infinite liquidity squad in Washington DC.

Case and Shiller home price indices rose dramatically in September. With the National home price index rising 6.96% YoY.

Yes, infinite liquidity from The Federal Reserve is helping to push home prices to infinity … and beyond!

Mortgage Credit Availability Declines To 2014 Levels Despite Fed Easing

Mortgage applications decreased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 6, 2020.

The Refinance Index increased 1 percent from the previous week and was 67 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 5 percent compared with the previous week and was 16 percent higher than the same week one year ago.

Yes, Covid struck and moved the purchase applications window out 2 months.

Mortgage refi applications are level after the Covid burst in March, despite declining mortgage rates (yellow).

Mortgage credit availability is now the lowest since 2014 during The Fed’s QE2, but declined substantially during the Covid epidemic.

Because Of The Fed’s Backstop, Fallen Angel Volumes Soar

The title of the following graphic is “Even with Fed Backstop, Fallen Angel Volumes Break with History.” But that headline is misleading, it should be “BECAUSE OF Fed Backstop, Fallen Angel Volumes Break with History.”

The whole idea behind Quantitative Easing was to get the economy back on its feet following the financial crisis. But notice that corporate bond issuance started off hot in 2009, but began decreasing afterwards. But with the replacement of Janet Yellen with Jerome Powell on February 5, 2018, The Fed Funds Target Rate (upper bound) hit 2.5% in December 2018 as corporate bond issuance was back to 2002-2007 levels.

Any surprise about the surge in fallen angels (a fallen angel is a bond that has been reduced to junk status because its issuer has fallen into financial trouble. Its bonds pay higher returns than investment-quality bonds but are riskier)? What goes up must come down.

Mortgage Delinquencies Fall To 7.65% While Mortgage Foreclosures Decline To 0.59% (Covid /= Disaster For Mortgage Markets)

Covid-19 has been a disaster TEMPORARILY for the US economy, but the US economy is resilient. According to the Atlanta Fed’s GDPNow real time GDP is now at 3.514%, higher than GDP before the Covid outbreak.

While the US mortgage market saw a rapid increase in mortgage delinquencies thanks to Covid, it did not materialize into a foreclosure wave as did during the financial crisis.

The reason why? Forbearance. And loans in forbearance has been gradually declining.

So if states and cities discontinue their Covid lockdowns, we should see a normalization in mortgage delinquencies.