Here is a lesson in Bidenomics. “Going Green” sounds great to some (like Al Gore, Leonardo DiCaprio and Greta Thunberg), but there are costs to not growing America’s energy supply.
Rising energy costs have helped create the rise in consumer prices and inflation. Not to mention chip shortages for car and trucks. The University of Michigan conditions for vehicles plummeted to 46 (100 baseline) as used vehicles prices sky rocket.
Under Biden’s reign of error, West Texas Crude futures prices have risen 87% (regular gas prices are up 49% even with Biden’s releasing two days of supply from the Strategic Petroleum Reserve.
On the housing front, the University of Michigan buying conditions for houses fell to 72 (baseline of 100) as home prices are roaring at a 18.81% YoY clip.
To paraphrase the comic strip “Gasoline Alley,” “Unca’ Joe, what have your done t’ US?”
This is a case of “Too much money” in the economy, courtesy of The Federal Reserve.
(Bloomberg) — U.S. inflation-adjusted consumer spending fell last month by the most since February, suggesting that Americans tempered their outlays amid the latest Covid-19 wave and the fastest inflation in nearly 40 years.
Purchases of goods and services, adjusted for changes in prices, decreased 1% from November, the Commerce Department said Friday.
The personal consumption expenditures price gauge, which the Federal Reserve uses for its inflation target, rose 0.4% from a month earlier and 5.8% from December 2020, the most since 1982. Unadjusted for inflation, spending fell 0.6%, while incomes rose 0.3%.
Yes, the PCE Deflator YoY rose to 5.8% as M2 Money Stock is growing at a 13.1% YoY clip.
REAL personal spending declined 1% in December as prices rose in part thanks to the 13.1% growth in M2 Money stock YoY.
Too much money! Time to slow down, Jay Powell! Stop sucking the life out people with inflation.
Pending home sales in the USA tanked 6.64% YoY. Yes, it was for December, but down 6.64% YoY means that pending home sales are lower than last December.
And the stock market was up across the board as Powell refused to take his foot off the monetary gas pedal.
Gold is down along with Bitcoin for you ALT investment types.
Yes, The Federal Reserve could have raised their target rate at their January meeting, but chose not to raise rates. Instead, Chairman Powell said that rate increases are a comin’!
I hope Powell wasn’t hoping for a slowdown in inflation, because today’s Q4 GDP report showed a surge in GDP to 6.9% QoQ. But with that GDP surge we also got a surge in prices paid by consumers to 6.9% as well. Thanks to the continuing massive Federal stimulus being poured into markets.
Despite the positive news on Q4 GDP, we are still seeing 7% inflation and a diving 10Y-2Y yield curve.
Along with that surprising GDP report, we are seeing the Bloomberg Commodity Index rising like a bat out of hell (RIP, Meatloaf).
Despite inflation growing at 7% (versus The Fed’s target rate of 2%) and U-3 unemployment being only 3.9%, one would have thought that Jay and The Gang would have started increasing rates at the January meeting.
But nooooo. The Fed actually sat on their hands and did nothing.
What did The Fed say?
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent. With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate. The Committee decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage‑backed securities by at least $10 billion per month.“
According to The Fed Funds Futures data, the market is anticipating 1 rate increase at the March FOMC meeting. And another at the June FOMC meeting.
The Taylor Rule (not used by Jay and The Gang), suggests that The Fed should have their target rate at almost 18%! NOT 0.25%.
US new home sales spiked in December by 11.9% from November, but were down 14% year-over-year.
But the median price of new home sales (YoY) declined to 3.4%.
The Midwest saw a surge in new home sales (+56%).
The MBA’s mortgage applications index shows declining purchase applications (-1.83%) and declining refinancing applications (-12.60%) as mortgage rates increased from 3.64% to 3.72% for the week of 01/21.
Now, mortgage purchase applications rose for the week of 01/21 if we used non-seasonally adjusted data.
Interest rate hikes from the U.S. Federal Reserve and other central banks are likely to worsen a global debt crisis, particularly for developing countries, according to a new report from U.K. non-profit the Jubilee Debt Campaign.
In a report published Sunday, the Jubilee Debt Campaign highlighted that developing countries’ debt payments rose 120% between 2010 and 2021, and are currently at their highest since 2001. The average portion of government revenues channeled toward external debt payments increased from 6.8% in 2010 to 14.3% in 2021, with payments shooting up in 2020.
The sharp increase in debt payments is hindering countries’ economic recovery from the pandemic, the report suggested, and rising U.S. and global interest rates in 2022 could exacerbate the problem for many lower income countries.
Kristalina Georgieva, managing director of the International Monetary Fund, said last week that Fed rate hikes could “throw cold water” on already weak recoveries in certain countries. Higher U.S. interest rates, and thus a rise in the greenback, could make it more expensive for countries to meet their dollar-denominated debt obligations.
“The debt crisis continues to engulf lower income countries, with no end in sight unless there is urgent action on debt relief,” said Heidi Chow, executive director of the Jubilee Debt Campaign.
“The debt crisis has already stripped countries of the resources needed to tackle the climate emergency and the continued disruption from Covid, while rising interest rates threaten to sink countries in even more debt.”
Chow called on G-20 leaders to stop “burying their heads in the sand” and argued that the global economy urgently needs a “comprehensive debt cancellation scheme which compels private lenders to take part in debt relief.”
The Case-Shiller National home price index “slowed” to 18.81% YoY in November as The Fed continues its monetary stimulypto. Notice that The Fed is easing even when there is limited inventory available. Result? Hideous home price inflation.
Which metro area is growing the fastest, making housing even more unaffordable for renters? Phoenix AZ is growing at a 32.2% YoY clip while Washington DC is the slowest growing metro area at 11.1% YoY. The second faster growing metro area in Tampa FLA.
Phoenix AZ is growing at the fastest rate in the nation as The Fed still has its monetary stimulus at FULL SPEED AHEAD.
It was a bad day in the markets … until The Federal Reserve and US Treasury came riding to the rescue. Yes, The Plunge Protection Team saved the market today.
The NASDAQ stormed back to up 86.21 points. But notice that Europe was still down 4%.
So, with all the chatter that The Fed will remove its stimulus suddenly took an about face as the Federal government decided to not let markets function, but rather manipulate them.
The stock market has never started a year falling as quickly as it is now.
The S&P 500 has dropped 11% — heading into correction territory — in the first 16 trading days of 2022 in its worst-ever start to a year, according to Bloomberg data that goes back over nine decades.
The downturn comes as traders brace for the Federal Reserve to tighten monetary policy and a surge in U.S. Treasury yields weighs on the outlook for stocks. A host of technical signals also suggest that more volatility may be coming up ahead.
“The Fed pulled the punchbowl, liquidity has evaporated, and the S&P and NDX broke below their 200dma for the first time since the Covid outbreak,” said Rich Ross, technical strategist at Evercore ISI.
A bear market down to the 3,800 level is likely for the S&P 500, Ross said, given “the dramatic erosion of the technical backdrop, in conjunction with the highest inflation, tightest policy, and most uncertain political and geopolitical condition in years” — not to mention its historic rally since 2020.
The Shiller CAPE ratio is extremely high …. not surprising how much air The Fed pumped into the market tires.
Confounded Interest - Anthony B. Sanders 
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