Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
US Q3 GDP numbers are out and they are … meh. Only Biden and Karine Jean-Pierre would cheer about 1.8% real GDP growth. At least real GDP growth wasn’t negative!
Real GDP rose 2.6% after -0.6% in Q2 and 1.8% YoY. But the most interesting data bit is the GDP Price Index. It fell to 4.1% in Q3 down from a whopping 9.0% in Q2.
But wait! Also declining at a stall speed is M2 Money.
And brace yourself for a cold winter. Heating oil is UP 162% under Biden.
As the midterm elections get close, the news for Americans gets worse.
On the housing/mortgage front, Bankrate’s 30-year mortgage rate (yellow line) just hit 7.20%, the highest since 2000. Also, the US Treasury 10yr-3mo yield curve (white line) inverted, historically a precursor to recession, before barely climbing back above 0%.
Meanwhile, M2 Money growth has collapsed to the lowest level since 2010.
US GDP numbers are due out at 8:30AM EST for Q3. The numbers are expected to show slow growth (around 2.4%) with rapid inflation (5.3%). While the GDP numbers are better than Q2’s numbers, they are still pretty lousy.
Another day, another lousy economic report under Biden.
Today, we found out that new home sales declined -11% MoM (from August to September) and fell -17.6% from last year YoY. With 603k SAAR sold.
The median price of new home sales was UP 7.8% YoY.
Here is the rest of the story as Paul Harvey used to say.
The housing and mortgage markets seem broken. Time for a new approach??
As The Federal Reserve continues to withdraw its massive Covid-related monetary stimulus, US mortgage applications continue to fall to the lowest level since 1997.
Mortgage applications decreased 1.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 21, 2022.
The Refinance Index increased 0.1 percent from the previous week and was 86 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 42 percent lower than the same week one year ago.
Under Biden, we have seen (orange line) a significant decline in mortgage purchase applications (peak 2021 to this week). Mortgage rates are the highest since 2001 (wait for it!)
Here is Jerome Powell of The Federal Reserve Board of Governors trying to figure out what to do after so many policy errors with increasing likelihood of recession while trying to withdraw monetary stimulus.
Biden’s policies are making Halloween and Thanksgiving MUCH more expensive.
The latest inflation figures released by the federal government show that the price of candy and chewing gum rose by 13.1% last month — the biggest jump ever recorded. And turkey prices are up a whopping 73%!
One reason is diesel fuel prices are up 102% under Biden’s Reign of Error. While inventory of diesel fuel down -37%. Meanwhile core inflation is up from a measly 1.3% to a whopping 6.6% at the latest inflation report.
Introducing Biden’s Thanksgiving dinner … in a can to cope with rising prices.
Just kidding. This is too clever for the clueless Biden Administration. But Karine Jean-Pierre might get as confused as Joe Biden and repeat it as one of the ways that The Biden Administration is helping consumers.
Damn it, Janet (Yellen)! Get your story on inflation correct for once.
Biden’s Famous Chili!
As I told my Chicago, Ohio State and George Mason University finance and real estate students, repeatedly, “Watch out when The Fed begins to tighten monetary policy. It will be a bloodbath for taxpayers.”
Well, here we are. I argue that Biden’ green energy knucklehead policies are driving inflation, or it could be the insane level of Federal spending that Obama economist Larry Summers warned us about, or rising wages (in part due to Federal spending) is to thank for inflation. Or all of the above.
Regardless of the cause, the bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years.
Rate hikes also involve central banks paying out more interest on the reserves that commercial banks park with them. That’s tipped the Fed into operating losses, creating a hole that may ultimately require the Treasury Department to fill via debt sales. The UK Treasury is already preparing to make up a loss at the Bank of England.
The Reserve balance has crashed into negative territory.
And Fed losses are skyrocketing.
Agency MBS prices are up today, but are down since August 2022. But risk measures duration and convexity are zooming upwards.
Alarm! US home prices are decelerating as inflation rages and The Fed tightens.
Home price growth in the US slowed the most on record as a doubling of borrowing costs (thanks to the US Federal Reserve) has sapped demand.
A national measure of prices increased 13% in August from a year earlier, but is down from 20.79% in March, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.
The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated.
While 13% growth sounds good, it is not good for renters looking to buy a home.
According to S&P/CoreLogic/Case-Shiller, Southern (red) cities Atlanta, Charlotte, Dallas, Miami and Tampa all still grew at over 20% YoY. Other cities like blue cities Detroit, Minneapolis, Portland, San Francisco, Seattle and Washington DC are grew at UNDER 10% YoY.
It looks like some people have taken three steps and left blue states for red states.
On related news, I always said in my classes that +/- 10 basis point in the US Treasury yield is a big deal. This morning, the US Treasury 10-year yield is DOWN -16.1 bps. In fact, the 10-year yields are down across the board globally.
Its that smell of impending recession.
Well, they certainly aren’t calling Biden “The Breeze.” Except for the recession that is going to clobber the US.
There is big trouble in big China. And the US economy too.
China’s Hang Seng stock market index is DOWN -6.36% this morning.
On the flippity-flip, the US S&P 500 index is UP over 1% so far this morning, mostly on big tech earnings expectations. And likely Fed pivot on interest rates.
Will Biden pull a Reagan and tell The Fed and Powell to “Mr Powell, tear down that excessive Covid stimulus”? I can’t believe that I used Reagan and Biden in the same sentence!!
Instead, Biden is pulling a Frank Reynolds and offering us an EXPENSIVE egg in these trying times. Egg prices up 97%!
The Federal Reserve’s DOTS PLOT shows where each Fed official’s projection for the central bank’s key short-term interest rate is headed. As of the September 21, 2022 Fed Open Market Committee (FOMC) meeting, the prediction of future Fed target rates is decidedly DOWNWARD SLOPING.
The Fed hawks, those that want to tighten monetary policy, are Bowman, Waller, Kashkari, Mester and George. The Fed doves (or those who are neutral) are Biden recent appointees Barr, Cook, Jefferson, Logan, Collins. Note that Brainard and Bostic are the only technical doves.
I call the hawks at The Fed “The Blackhawks” since their mission of fighting inflation may lead to a recession. And Bowman, Mester and George are Lady Blackhawks.
On a different note, I am always amazed at First Lady Jill Biden’s wardrobe. She looks like she shops as La-Z-Boy furniture stores.
25 days later. A real-life horror created by The Federal government.
Yes, according to the US Department of Energy, the US has only 25 days of diesel supply left.
The diesel crunch comes just weeks ahead of the midterm elections and has the potential to drive up prices for consumers who already view inflation and the economy as a top voting issue. Retail prices have been steadily climbing for more than two weeks. At $5.324 a gallon, they’re 50% higher than this time last year, according to AAA data.
Notably, National Economic Council Director Brian Deese recently commented on the emerging crisis. Deese said diesel inventories are “unacceptably low” and added that “all options are on the table.”
Everything EXCEPT abandoning green energy policies that is. Because Biden and Democrats hate diesels so bad.
Yesh, diesel fuels prices are surging again as diesel inventory is shockingly low.
At least the US gets to live out a horror story created by The Federal government because failed Presidential candidate Al “The Snore” Gore and a teenage Swedish girl (Greta Thunberg) told Biden and Democrats to hate fossil fuels.
How dare you … drive inflation through the roof because of your green energy lunacy.
See you at the truck stop at the end of the world! Hopefully, they have diesel fuel!!
Confounded Interest - Anthony B. Sanders 
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