Gimme (Inexpensive) Shelter! Shelter Inflation Over 3x Fed Target Rate At 6.7%, Transportation Services UP 9.2% (Mortgage Rate UP 172% Under Bidenomics)

Gimme (inexpensive) shelter!

The good news is that The Federal Reserve finally cooled inflation.

Well, at least core inflation cooled to 4%, twice The Fed’s target rate.

At least The Fed is making progress. But on the housing front, shelter CPI is still up 6.7% YoY while transportation services are up 9.2% YoY. So, as long as you don’t have to rent or go anywhere, inflation looks good!

Shelter CPI is over 3x The Fed’s inflation target rate, despite mortgage rates being up 169% under Biden.

The 10-year Treasury yield cooled to 4.50% as investors see no further action from The Fed … at least until 2024.

Yes, investors forecast big cuts in interest rates in 2024 as the election approaches and The Fed attempts to push our befuddled, nasty Commander-in-Chief over the finish line. Instead of Mean Joe Greene (former Steeler great), we have Mean Joe Biden.

The US economy is still under the thumb of The Federal Reserve. Perhaps The Fed will annouce that the last rate hike was the last time. But you don’t have to be a fortune teller to know The Fed will be cutting rates like crazy as the election approaches.

At least California Governor “Greasy Gavin” Newsom cleaned up The Streets of San Francisco ahead of China’s XIe meeting with President Biden. Here is Biden singing his favorite song about China “If You’ve Got The Money, I’ve Got The Time.”

Fear The Talking Fed! Morgan Stanley Forecasts 315 Basis Point Cut In Fed Funds Target Rate In 2024 (Mortgage Rates Could Fall To 5.50% In 2024)

The Talking Heads at The Federal Reserve keep yammering about persistant inflation (which Yellen kept saying was transitory) and whether or not Fed rate hikes will be necessary to get infation to 2%.

Instead of muddling lectures (like by Atlanta Fed President Rafael Bostic) on Fed tightening to fight inflation, let’s address the elephant in the room (no, not Chris Christie or Hillary Clinton), but Morgan Stanley’s soft landing forecast of a Fed Funds rate cut from 5.50% today to 2.375% in 2024. This is a whopping 215 basis point cut!

Currently, the spread between the 30-year conforming mortgage rate and The Fed Funds Target rate is 1.981% of 198.1 basis points. While the better spread is the mortgage rate compared to the 10-year Treasury yield, I am going to use Morgan Stanley’s Fed Funds target rate forecast for 2024. Assuming the spread is constant, this results in a mortgage rate in 2024 of … drumroll … 5.50%.

In one sense, a 200 basis point decline in the 30-year mortgage rate would be welcome news to home buyers. On the other hand, Morgan Stanley is forecasting a soft landing and a rise in the unemployment rate to 4.3%, hardly good economic news.

So, fear the talking Fed. They are talking about fighting stubborn inflation while ignoring the slowdown forecast for 2024.

The Globalist Vision: “15 Minute” Prison Cities And The End Of Private Property (Smart Cities Are A Dumb Idea)


As I watch former Presidential candidate and US Secretary of State John F. Kerry (although the always bitter Hillary Clinton comes to mind as well), I roll my eyes at the staggering hypocrisy of “climate envoy” John Kerry flying the globe in his private jet while entering the US into climate scams that most Americans don’t want. And lecturing us in that droning voice on why we are bad people if we drive a gas-powered car. But Klaus Schwab and the World Economic Forum approves of Kerry’s message.

Even the American Enterprise Institute (AEI) is on board with the WEF’s and UN’s 15-minute (smart) city idea: herding people into highly dense, walkable cities (like walking around New York City). AEI calls it “Walkable Oriented Development.” And actually has a tool showing walkable areas that AEI wants cities to embrace.

As an example, I live in Columbus Ohio. Here is a map of my neighborhood. The gray areas are walkable areas. Although Sawmiill Road (70) is shown as a walkable area, I have NEVER seen anyone walking on Sawmill Road. Traffic is congested and it is primarily a large, disconnected outdoor shopping mall). My neighborhood is on this map, but according to AEI is not walkable, yet I chose this neighborhood for its limited traffic and walkability. Go figure. I would purposefully avoid a walkable city, but them I like driving my ICE (internal combustion engine) car and riding my bike. Riding a bike on congeted Sawmill Rd would be suicide.

Now, Federal, State and Local governments will all claim that they can’t force you to live in walkable areas. But governments can sure incentivize/punish you to meet their objectives. Yes, crowding people into walkable 15-cities creates congestion, likely increases crime, and makes for a population more easily controlled. I would argue that controlling the population is the most important perogative for politicians. When even the formerly free market-oriented AEI pushes the WEI/UN smart cities model, you know we are in serious trouble. Call it the Greta Thunberg approach to housing and urban development; scream about the horrors of what you don’t like and demand everyone do what you say. John Kerry is simply Greta Thunberg, an unelected social influencer who won’t answer questions from serious people. But pushes a biased narrative to influence public policy.

Here is an interesting articule by Brandon Smith via Alt-Market.us on walkable, 15-minute “smart cities.”

As a general rule I find that whenever the public scrutinizes any particular agenda being promoted by governments and globalists their first response is to act indignant, much like a narcissist would do when they are up to no good and they get caught.

“How dare you” question their intentions and suggest they might be nefarious.

How dare you suggest they are anything other than loving and benevolent.

Our “leaders” have only ever wanted the best for us, right?

They only want our lives to become safer, more comfortable and more convenient – This is what truly motivates your average elitist, right?

Obviously history tells us a far different story, and it boggles my mind when anyone tries to argue that things are different today compared to 100 years ago, 300 years ago, or 1000 years ago. There is nothing new under the sun. There will always be tyrants attempting to gain more and more power and those tyrants will always lie to the public, claiming they are good people with our best interests at heart.

When that doesn’t work and the citizenry remains skeptical, the tyrants go on the attack, accusing the public of “conspiracy theory.” This is meant to mock and shame free thinkers into silence – You don’t want to stand out, right? Why risk being ostracized from society? Why risk becoming a meme?

This tactic is rooted in the notion that the corporate media and government officials represent the mainstream, and therefore they represent the majority, and the majority represents reality.  None of this is true or relevant, of course. Only facts matter. Sophistry is meaningless. Opinions are meaningless. The truth should be the goal, and if it’s not someone’s goal then they must be a purveyor of lies and should not be taken seriously. There are only two paths to take, there is no in-between.

I will admit there is some value to the “conspiracy theory” accusation because whenever the establishment uses it, it’s a sure sign that you are too close to the target and they are getting nervous. They could simply try to outline any evidence they might have to prove that your position is wrong, but they don’t really do that. Instead of debating your arguments and evidence, they try to undermine you as a valid critic and inoculate the public against your ideas before people ever get a chance to hear them. This is the behavior of villains, not benevolent and caring leaders.

I mention this dynamic because there is one agenda above all others that is aggressively defended by the establishment media, and anyone who remotely questions it is automatically persecuted as a “conspiracy nut” or “denier.” I am of course talking about the climate change agenda.

I have thoroughly debunked the idea of man-made climate change in previous articles and I won’t be spending time on that here.

Instead, I want to examine the end goal of climate change policies – The ultimate solution, which is NOT to save the planet, but to dominate the populace.

The names used for the climate change “reset” vary, but it is often referred to by globalists and the UN as Agenda 2030 or Sustainable Development Goals.  These programs wear a facade of environmentalism but they are ALL rooted in economics.  That is to say, all climate change efforts exist to destroy industry and trade and establish a government/corporate partnership to dominate production.  Climate change is a Trojan Horse to introduce authoritarianism.

I believe one of the most important aspects of Agenda 2030 for globalists is something called the “15 Minute City”; a project which involves hundreds of city mayors from across the US, Europe and Asia working closely with groups like the World Economic Forum. Any mention of this idea in a negative light and the media erupts with anger as well as mockery as if it’s not a real issue worthy of debate.

The establishment paints an interesting picture of 15 Minute Cities – A Utopian future in which everything you need is only a short walk away and private transportation is superfluous (or banned). You might even live in mega-complex, much like a giant mall where you also work. You could spend months within one square mile of space, never having to leave for anything.

It’s no mistake that this idea was pushed hard during the pandemic lockdowns. The public was awash in fear propaganda over a virus with a 99.8% survival rate and that fear made the unthinkable idea of staying at home all the time suddenly thinkable. Media pundits continue to call the connection between covid lockdowns and climate lockdowns a conspiracy theory, but the idea is openly admitted in UN and WEF white papers.

Some people argue that most cities are already “15 Minute Cities” with necessities all within walking distance of their homes. These folks don’t understand what a 15 Minute City really is. As numerous establishment descriptions of the project note, it’s not just about convenience or close access, it’s about changing every aspect of our current philosophy of living. It’s not about gaining amenities, it’s about making an array of sacrifices in order to appease the gods of carbon emissions.

The 15 Minute City is more like a recipe, containing every single ingredient of the climate change and covid lockdown agendas in a single comprehensive Orwellian vision. It includes removing motor vehicles, removing private transportation and roads, smart city and AI monitoring of each person’s electricity usage, monitoring of product consumption and “carbon footprint”, biometric surveillance within a compact and stacked urban landscape, the cashless society concept, equity and inclusion cultism, population control, etc.

It is the culmination, the end game; a massive prison with no bars. A place where you are conditioned to grow accustomed to artificial limitations on privacy, no civil liberties, no private property, and no work options or mobility. You are tied to the land and the land is owned by the state (or corporation). If you want a historic comparison, the closest I can find is the feudal system of Medieval Europe.

Within these cities you are a labor mechanism, nothing more. You will never be allowed to own your own property and thus own your own labor. Everything you have is given to you by the state and can be taken away by the state if you defy them. You might be able to leave the village or community you are tied to for a time, but this will change with increasing restrictions on the public’s movement according to the dictates of climate ideology.

As long as you are productive and submissive you will be give the things you need to survive, but never to thrive. In the case of a technocratic feudal system you would not have any guarantees that the state would need your services. At least in feudal Europe a peasant was seen as valuable resource because of limited population.  In a world where many people are considered “population excess”, you could easily be replaced and booted out of the city to starve and die.

In 2016 the World Economic Forum published a document titled ‘Welcome To 2030. I Own Nothing, Have No Privacy, And Life Has Never Been Better.’ The article was meant to promote a concept called the “sharing economy” which was first publicly fielded to the press at Davos.  The article describes a “hypothetical” future in which a communistic system has ended all private property in the name of saving the planet from climate change. The benefits? Well, like all communistic systems, the big lie is that you will get to work less and most things will be free. This is how collectivist ideals have been sold to the populace for generations and it NEVER works the way the establishment claims.

The WEF has been promoting the sharing economy for years, but when it went mainstream and was widely criticized as dystopian, the media once again flipped the “conspiracy theory” switch and attacked anyone exposing the implications.

Multiple platforms published the article in 2016 but many have since taken it down (Forbes appears to have erased their published copy, for example). They are pretending as if the agenda never existed, probably because the article contains some revealing admissions, including a hint at the 15 Minute City concept. From the article:

My biggest concern is all the people who do not live in our city. Those we lost on the way. Those who decided that it became too much, all this technology. Those who felt obsolete and useless when robots and AI took over big parts of our jobs. Those who got upset with the political system and turned against it. They live different kind of lives outside of the city. Some have formed little self-supplying communities. Others just stayed in the empty and abandoned houses in small 19th century villages.

Once in awhile I get annoyed about the fact that I have no real privacy. Nowhere I can go and not be registered. I know that, somewhere, everything I do, think and dream of is recorded. I just hope that nobody will use it against me”

In other words, the globalists imagine a future were the malcontent free thinkers and people replaced by AI are outcasts, scratching and scraping out a meaningless existence in the wastelands of the old world. To stay in the bosom of the new world you will be required to give up all freedom, even freedom of thought. Keep in mind, this article is supposed to be a “positive” promotion of the shared economy and 15 Minute-related cities. Yet, this excerpt sounds more like a threat.

It’s important to understand that these compact cities will not be designed for your comfort.  They will not be designed so that you can have all the amenities you have today closer to your fingertips while also providing “sustainability.” That’s how the globalists try to sell it, but that’s not what it will be. Rather, these cities will be designed to better CONTROL you, so that you can be forced to make the sacrifices they say are necessary for sustainability to be possible.

They are erroneously billed as “decentralized communities,” but they are the exact opposite – They are utterly centralized, like a hamster cage where you are the pet.  The core philosophy behind them is dependency.  If you live in a place which is specifically constructed to eliminate your ability to provide for yourself, then you are a slave.  Though, to be sure, even slavery can be made to look noble if people are convinced that their chains are necessary for the good of the planet.

The dumb face of “smart” government, climate enjoy John Kerry. Essentially Greta Thunberg with a role in Federal government to influence public policy. I wonder if Kerry drives a gas-powered car and lives in a highly congested 15-minutes city? Nope. Kerry lives on Martha’s Vineyard (same island that President Obama lives on).

Here is John Kerry’s home on Martha’s Vineyard. This is after he sold his Nantucket mansion.

Here is John Kerry’s previous mansion on Nantucket. Perhaps moving to an island slightly closer to the Massachusetts shore. Maybe that is Kerry’s idea of a 15-minute city.

By the way, Morgan Stanley is forecasting a rise in the US unemployment rate to 4.3% in 2024. And a slowing of real GDP to 1.4%.

Bidenomics Breakfast! Orange Juice Prices UP 47% Under Biden (Even Though Food CPI Has Slowed To 3.69% YoY)

Even eating breakfast under Bidenomics is more expensive. Particularly if you like orange juice like I do. To save money, I am probably going to have to switch to nasty-tasting Tang.

Food CPI is up 3.69% year-over-year. The rate of growth in food prices is slowing. But do I trust BLS data on CPI? Of course not.

Orange juice prices are up 47% under Biden.

And we see that REAL GDP is growing at a slower rate than nominal GDP.

Tang is the taste I hate and I can get Vitamin C from a multi vitamin. But I just don’t like having government policies (or follycies) dictate my food consumption. Or auto choice (I refused to buy an electric car or pickup truck).

Speaking of Bidenomics, here is an interesting Zero Hedge story on “The Biden-Du Pont Nexus: From A Prestigious Golf Club To A Controversial Child Rape Plea Deal.” What is it with Delaware elites having sex with their children?? And why is NY AG Letitia James prosecuting Donald Trump when there has been no crime while she let’s Epstein’s clients who flew to have sex with minors (used to be illegal) off the hook?

But I feel good! After my breakfast of … Scotch Broth. OJ is just too expensive.

Back In Red? Bank Credit Growth Negative For 15th Straight Week, Savings Growth (As % Of Gross National Income) Negative For Last Two Quarters As Bitcoin Soars (Biden Wants 4 More Years To “Finish The Job”!)

To paraphrase AC/DC, the US consumer is “back in red.”

On a amusing or sad note, Biden campaign communications director Michael Tyler’s message to Americans who are worse off economically under Biden: “That’s precisely why we need another four years to finish the job.” OMG! What does “finish the job” mean?? I am afraid to ask.

Where we currently sit is … bank credit growth is in the red (15th straight week of negative growth) and net savings as a percentage of gross national income has seen negative growth YoY for 2 consequtive quarters.

September marked the largest consumer credit drop since May 2020, signaling a significant recession warning. 

And with Bidenflation (or Yellenflation) and The Fed’s counterattack, we are seeing bank stocks losing relative to the tech sector.

Proshares Bitcoin (BITO)’s assets have nearly doubled in the past 30 days. 

Yes, the Three Stooges (Biden, Yellen, Powell) have put the US on a highway to hell!

Here is a video of Biden, Yellen and Powell trying to spend trillions and NOT cause sustainable inflation.

Well, hell’s bells. The US is starting to resemble Venezuela and Argentina.

Bidenomics Is No Good! 30Y Mortgage Rate Declines -36 Basis Points Since 10/19/23, But Still Up 169% Under Bidenomics (Home Prices UP 33% Under Biden, Making Homeownership MORE Expensive)

Under Bidenomics, the song “Silver Threads And Golden Needles” should be renamed “Counterfit Silver Threads And Fool’s Golden Needles.” Or simply, Bidenomics is no good.

Conforming mortgage rates have actually dropped -34 basis points since hitting a local high of 7.81% on October 19, 2023. Unfortunately, mortgage rates are still up 169% under Biden and his signature Bidenomics. Even worse, home prices are up 33% under Bidenomics making housing even more unaffordable.

While real weekly earnings growth finally turned positive in 2023, growth is already slowing again as The Fed’s balance sheet slowly declines.

But its so easy for the government to spend money they don’t have, we will likely see inflation not cooling down much.

Damn It, Janet (Yellen)! Moody’s Downgraded US Credit Outlook To Negative (Out Of Control Spending, Rising Debt And Deficits And A Deeply Divided Congress = Credit Downgrade)

Damn it, Janet (Yellen)! Moody’s just cut the US credit to NEGATIVE.

The primary reason for Moody’s downgrade of US credit? The absolutely insane ramp-up of Federal spending starting with the Covid outbreak in early 2020. And the subsequent economic shutdowns and the closure of public schools. But even as Covid faded to diminished status, Bidem demanded an increase in Federal spending. Well, Biden’s war (Ukraine) which looks like spending in perpetutity.

Of course, Biden/Congress love to spend money, but raising personal taxes to pay for it is political suicide. A private sector firm would cut spending to balance its budget, government simply doubles down on spending. Never let a crisis go to waste!

And The Federal deficit keeps on growing under Biden/Yellen’s economic reign of error.

After a disastrous 30Y bond auction this week, a collapse in Treasury market liquidity, and an accelerating rise in the market’s perception of the United States’ credit risk, Moody’s has just cut its outlook on US credit ratings to negative from stable.

Source: Bloomberg

The key driver of the outlook change to negative is Moody’s assessment that the downside risks to the US’ fiscal strength have increased and may no longer be fully offset by the sovereign’s unique credit strengths.

In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.

Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.

Moody’s does affirm the Aaa rating:

The affirmation of the Aaa ratings reflects Moody’s view that the US’ formidable credit strengths continue to preserve the sovereign’s credit profile.

  • First, Moody’s expects the US to retain its exceptional economic strength. Further positive growth surprises over the medium term could at least slow the deterioration in debt affordability.
  • Second, the US’ institutional and governance strength is also very high, supported in particular by monetary and macroeconomic policy effectiveness. While the adjustment of the US economy and financial sector to higher-for-longer interest rates is underway, policymakers have facilitated the transition through transparent and effective policy.
  • Finally, the unique and central roles of the US dollar and Treasury bond market in the global financial system provide extraordinary funding capacity and significantly reduce the risk of a sudden spiraling of funding costs, which is particularly relevant in the context of high debt levels and weakening debt affordability.

The US’ long-term local- and foreign-currency country ceilings remain unchanged at Aaa. The Aaa local-currency ceiling reflects a small government footprint in the economy, relatively predictable and reliable institutions, very low external imbalances and moderate political risks, all of which reduce the risks posed to non-government issuers by government actions or shocks that would commonly affect the government and the private sector. The foreign-currency ceiling at Aaa reflects the country’s strong policy effectiveness and open capital account which reduce transfer and convertibility risks to minimal levels.

The market – late on a Friday – pushed yields on the 2Y and 5Y Treasyr notes to fresh new highs for the day…

Full Rationale:

ABSENT POLICY ACTION, FISCAL STRENGTH WILL DECLINE

The sharp rise in US Treasury bond yields this year has increased pre-existing pressure on US debt affordability. In the absence of policy action, Moody’s expects the US’ debt affordability to decline further, steadily and significantly, to very weak levels compared to other highly-rated sovereigns, which may offset the sovereign’s credit strengths.

Past increases in interest rates by the Federal Reserve will continue to drive the US government’s interest bill higher over the next few years. Meanwhile, although the government’s revenue base will rise in line with the economy as a whole, in the absence of specific policy action, this will occur at a much slower pace than the rise in interest payments.
Moody’s expects federal interest payments relative to revenue and GDP to rise to around 26% and 4.5% by 2033, respectively, from 9.7% and 1.9% in 2022. These projections factor in Moody’s expectation of higher-for-longer interest rates, with the average annual 10-year Treasury yield peaking at around 4.5% in 2024 and ultimately settling at around 4% over the medium term. The debt affordability forecasts also take into account Moody’s expectations that, absent significant policy changes, the federal government will continue to run wide fiscal deficits of around 6% of GDP near term and to around 8% by 2033, the widening being driven by higher interest payments and aging-related entitlement spending.

By comparison, deficits averaged around 3.5% of GDP from 2015-2019. Such deficits will raise the US federal government’s debt burden to around 120% of GDP by 2033 from 96% in 2022. In turn, a higher debt burden will inflate the interest bill.

For a reserve currency country like the US, debt affordability – more than the debt burden – determines fiscal strength. As a result, in the absence of measures that limit the size of fiscal deficits, fiscal strength will increasingly weigh on the US’ credit profile.

FISCAL RISKS ARE EXACERBATED BY ENTRENCHED POLITICAL POLARIZATION UNDERSCORING RISING POLITICAL RISK

At a time of weakening fiscal strength, there is an increased risk that political divisions could further constrain the effectiveness of policymaking by preventing policy action that would slow the deterioration in debt affordability. These risks underscore rising political risk to the US’ fiscal position and overall sovereign credit profile.

Recently, multiple events have illustrated the depth of political divisions in the US: renewed debt limit brinkmanship, the first ouster of a House Speaker in US history, prolonged inability of Congress to select a new House Speaker, and increased threats of another partial government shutdown due to Congress’ inability to agree on budgetary appropriations. In Moody’s view, such political polarization is likely to continue. As a result, building political consensus around a comprehensive, credible multi-year plan to arrest and reverse widening fiscal deficits through measures that would increase government revenue or reform entitlement spending appears extremely difficult.

While the US’ Aaa rating takes into account relative weaknesses with regards to the quality of the country’s legislative and executive institutions and fiscal policy effectiveness compared to other Aaa-rated sovereigns, there is a risk that these weaknesses take greater credit relevance because the deteriorating debt affordability trend would call for a more significant and effective fiscal policy response.

In particular, the US’ lack of an institutional focus on medium-term fiscal planning, either through legislated fiscal rules aimed at improving the fiscal balance or general bipartisan consensus on the need for fiscal consolidation, is fundamentally different from what is seen in most other Aaa-rated peers such as in Government of Germany (Aaa stable) and Government of Canada (Aaa stable). Meanwhile, the more short-term focus of US fiscal policymaking, along with limited fiscal flexibility – because a very large portion of nondiscretionary budgetary spending is on mandatory entitlement programs and debt service (around 75% of total outlays), exacerbates already fractious bipartisan politics around a relatively disjointed and disruptive budget process. As annual debt service costs continue to rise, fiscal flexibility will diminish even further.

Remember, annual interest payments of the $33.8 TRILLION debt load is now over $1 TRILLION. Yes. rampant Federal spending begat inflation which begat Fed rate hikes.

Treasury secretary Janet Yellen will repeat Chauncey Gardiner’s “All is well in the garden” speech from Being There.

Livin’ On A Prayer … And Credit! US Consumer Debt Hits $17.3 TRILLION As Credit Card Delinquency Growth Highest Since Covid Lockdown (UMich Inflation Expectations SOAR To Highest Since 2011!)

Under Bidenomics, with its high inflation rate and crushing negative wage growth, consumers are draining their savings and living on a prayer …. and consumer credit to cope.

US consumer credit just rose to $17.3 trillion, up dramatically since Biden’s inaugaration as El Presidente of the United Banana Republics of America.

What is worriesome in the transition rates (like current to 90-days delinquent) Credit cards (blue) and auto loans (red).

A closer look at credit card delinquency rates on a year-over-year (YoY) basis, showing the fastest growth in delinquencies since the Covid economic lockdowns.

Then we have commercial real estate delinquencies are now the highest the have been since 2013.

Meanwhile, University of Michigan consumer sentiment about inflation spiked to 4.4%. That is the highest medium-term inflation expectation since 2011.

The US consumer is being shot through the heart and Biden and The Fed are to blame. Biden gives gov a bad name.

Biden’s $45 Billion Boondoggle For Office-To- Home Conversions Getting Harder (Biden Has To Find Housing For The 8 Million Illegal Immigrants That Have Crossed Under Biden/Mayorkas!) Why Isn’t The Private Sector Doing The Conversions??

Has anyone considered the impact of Biden/Mayorkas’s open southern border with Mexico? Other than the crime, stress on existing services like healthcare, schools and Social Security. But where will the 8 million illegal immigrants reside? Well. the Biden Administration has an answer: throw money at it! This time, $45 billion to convert empty office space to homes. Not just for illegals, but for anyone.

Conversion from office space to apartments is getting harder. Let’s discuss why, and also what the effort is really all about.

Only 3,575 apartment units were converted from office space last year. The already fraught process now faces even more challenges.

The Wall Street Journal explains why in its report Turning Empty Offices Into Apartments Is Getting Even Harder

Cities hoping to convert emptying office buildings into apartments are running into financing issues, stagnating rental markets and other challenges that are bottling up their efforts.

Developers last year created just 3,575 apartment units in the U.S. through office conversions, according to an analysis by rental listing site RentCafe. That amounts to less than 1% of all apartments built that year through new construction. 

Federal and local governments are also trying to give conversions a boost. The White House said last month that it was updating guidance for existing grants and spending programs to make billions in federal dollars available for these projects. It also said it would seek the conversion of more government-owned properties into housing.

Some cities, such as Washington, D.C., New York and San Francisco, are also taking steps to encourage more conversions. Tax incentives and faster approvals are “rocket fuel” for these projects, said Sheila Botting, a principal at commercial property brokerage Avison Young.

Even so, the process has always been fraught with difficulty and few office buildings are natural candidates. Conversions are easiest in older, lower-quality and mostly empty buildings with small floors. But less than 1% of office space in the biggest U.S. cities ticks those boxes, according to Avison Young.

In significant ways, the conversion process is getting even harder now. Slowing rent growth might make apartment conversions less attractive to investors, if the trend persists into next year. Asking rents for apartments have fallen 1.2% nationally over the past 12 months, according to rentals website Apartment List.

Projects Not Economical

Without massive subsidies these projects are not economically feasible. Many aren’t even with massive subsidies.

In downtown Dallas, developer Wolfe Investments seeks to convert an 18-story, 1950s office tower into residential apartments, but has recently been fighting off foreclosure from its lender, Thistle Creek Partners, court records show. 

Developers of One Camelback, a 200,000-square-foot office building in central Phoenix, are trying to convert it into what would be one of the city’s most expensive rental-apartment properties. A website advertises $8,000-a-month apartments, with floor-to-ceiling windows and crystal-clear views of nearby mountains.

But the developers, Sagamore Capital and partners defaulted on a loan of about $70 million. The project’s lender, Delphi Financial Group, has moved to foreclose. An auction of One Camelback is set for later this month, according to documents filed in Maricopa County, Ariz.

Biden Throws $45 Billion in Federal Funds to Convert Offices into Homes

On October 29, Mish (Mike Shedlock) commented Biden Throws $45 Billion in Federal Funds to Convert Offices into Homes

Questions abound. Assume you can convert offices into homes, who wants to live in them? Is a tear down cheaper?

The government has 1,500 office buildings nationally and leases on almost 200 million square feet of additional space that it does not need. Instead of canceling leases and selling the real estate, it’s going to convert them into clean energy spaces.

With enough subsidies, developers will try nearly anything. Then when the projects fail, the developers ask for more money.

How is this Being Paid For?

Taxpayers of course. But Biden is funneling $45 billion from clean energy incentives in the ridiculously named Inflation Reduction Act (IRA) into housing conversions.

You might also be wondering what this has to do with clean energy, and the answer is nothing. The questions keep piling up and I have answers.

What’s Really Going On Here?

Biden is hoping to spread the IRA dollars around to buy more votes.

But to do so, he is taking money away from his other pet projects to fund the idea of the moment. His idea of the moment is to do something about the price of rent.

According to RentCafe, Washington DC had two zip codes that led the nation in apartments completed in the last five years (up to 2022).

Why is the private sector doing so few conversions? THAT is the right question. The answer? Office-to-housing conversion is hard and the demand may not be there. But with 8 million illegal immigrants having crossed the border, Biden has to do something. So Biden steps in with $45 billion to convert empty office space to homes. And I have to ask: is this a shadow wealth transfer to large Democrat-controlled cities as an apology for the havoc caused by Biden/Mayorkas open border policy?? Just asking!

So if an idea is really bad and won’t work, like solar power in areas with limited/spotty sunlight or wind turbines in areas with little/sporadic wind, Federal and State governments are always on stand-by to do something really stupid. Like rent control, which creates even worse distortions.

Wreck Of The USS 30Y Treasury! Disastrous 30Y Auction Sees Rising Long-term Treasury Yields

Today was the Wreck of the USS 30Y Treasury. Disastrous Federal fiscal policies and Yellen’s slowness to refinance outstanding Treasury debt has created a mess. Biden’s nerves must be a wreck with Powell and Yellen managing the nation’s finances.

That’s the only way one can describe today’s 30Y auction, which many expected could be challenging after a mediocre 3Y and a subpar 10Y auction earlier this year, but nobody expected… this.

The bond priced at a high yield of 4.769%, which was below last month’s 4.837%, and just shy of the April 2010 high. But more importantly, it tailed the When Issued by a whopping 5.3bps, which was… well… terrible, because as shown in the chart below, this was the biggest tail on record (going back to 2016).

The bid to cover was just as bad: at 2.236 it was the lowest since Dec 2021.

The internals were even worse as foreign bidders (Indirects) tumbled from 65.1% to 60.1%, the lowest since Nov 2021, and with Directs taking down only 15.2%, banks (Dealers) were forced to step up and take the balance, or a whopping 24.7%, double the recent average of 12.7%, and the highest since Nov 2021.

This is a big warning flag because every time we have seen a surge in Dealer takedowns, some sort of Fed intervention – QE or otherwise – has usually followed and we doubt this time will be different.

So what happened? Well, maybe the bond market read our note from earlier this week in which we explained “How Treasury Averted A Bond Market “Earthquake” In The Last Second: What Everyone Missed In The TBAC’s Remarkable Refunding Presentation.” It may be difficult to fool the bond market for a second time.

The market reaction to the catastrophic 30Y auction was immediately, sparking a swift and painful response across markets with bonds and stocks hammered lower and the dollar spiking.

Treasury yields  – as you would expect – exploded higher, with 30Y Yields back up to pre-payrolls levels…

That is the biggest spike in 30Y yields since March 2020…

But the entire curve is higher in yields…

Stocks tanked…

Regional bank stocks tumbled…

The dollar ripped back up to pre-payrolls levels…

Finally, we note that this ugly auction comes as Treasury Liquidity is evaporating dramatically…

The Fed (and The Treasury) have a problem!! Particularly since the 30Y yield reversed course and is on the rise again.

And at the 10 year tenor, the rate rose to 4.638%.

All together now!!

The Edmund Fitzgerald, symbolic of the US under Biden and Janet Yellen.