The Thrill Is Gone? US Industrial Production Plunges In October As Auto-Maker Strikes Hit (But Also Federal Stimulypto Has Worn Out)

The thrill has gone from all the BIG spending bills from Biden.

After its surprising bounce last month (on a seasonally-adjusted basis, because it crashed NSA), US Industrial Production was expected to decline 0.3% MoM in October. It was worse – down 0.6% MoM from a downwardly revised September print (from +0.3% to +0.1%). October’s decline is the worst since Dec 2022 and the YoY drop of 0.8% is the worst since the COVID lockdowns. AND Federal stimulypto is wearing off (M2 Money growth surge peaked in February 2021, but has slowed into negative growth starting in August 2022.

Notably, once again, the non-seasonally-adjusted industrial production tumbled more than then seasonally-adjusted data…

Source: Bloomberg

On the manufacturing specific sector, consensus was for a 0.4% drop MoM but it was considerably worse, dropping 0.7% MoM (and September’s print was revised down from +0.4% to +0.2% MoM). That is the biggest MoM drop since March and biggest YoY drop since the COVID lockdowns.

That is also the 8th straight month of YoY declines for Manufacturing production.

Source: Bloomberg

Output was weighed down by a 10% plunge in motor-vehicle production as the annualized rate of car assemblies dropped to 9.22 million units, the least since February 2022. Excluding parts production, autos and trucks production fell 16.5% MoM – the biggest drop since the COVID lockdowns…

Source: Bloomberg

Starting in September, the United Auto Workers union authorized targeted strikes against the Big Three Detroit automakers, disrupting production at the companies and at their suppliers. The UAW reached tentative agreements with management in late October, laying the groundwork for a rebound in factory output in November.

So theorteically, we should see bounce back next month. Unless demand – as WMT hinted at – has fallen off a cliff.

Fiscal Inferno! US Debt Hits $33.7 Trillion With Unfunded Promises Hitting $211.7 TRILLION, $629k Per Citizen! (REAL Hourly Compensation Has DECLINED By -5.1% Under Bidenomics)

We are currently in a fiscal inferno under Biden/Yellen.

And US Treasury Secretary Janet Yellen is just a girl who can’t say no … to big government spending.

In fact, Congress and the Biden (mis) Administration are spending like the proverbial drunk sailors in port. US national debt is up to $33.7 TRILLION. That transates to $259,103 per taxpayer. With US debt to GDP of 138%!

Now, HERE IS THE REAL BAD NEWS! Unfunded promises that politicians made to Americans (Social Security, Medicare, Medicaid, etc.) now stands at $211.6 TRILLION. That equates to $629,000 per citizen. Maybe that should be the deal at the southern border: all immigrants must pay $629,000 for admission!

And the Federal budget deficit keeps on getting worse.

The budget deficits under Biden/Yellen have been the worst in history. So much for Biden whispering “Bidenomics is working!”

Rents in the US remain unaffordable to many.

And Yellen, our nation’s financial consigliari, hasn’t said much about the dire decline in income tax receipts.

But Biden’s favorite country China, a classic top-down command economy like Biden and Yellen love,

On Sunday, President Joe Biden tweeted, “Right now, real wages for the average American worker is higher than it was before the pandemic, with lower wage workers seeing the largest gains. That’s Bidenomics.” That’s right, Joe! Except real hourly compensation has DECLINED by -5.1% under Biden.

Smells Like Fed Spirit! Homebuilder Confidence Fall To 34 In November Due To High Interest Rates … But 2024 Should See A Decline In Mortgage Rates

Its beginning to smell like Fed spirit! As the 2024 Presidential election rapidly approaches, The Fed will be pressured into lower interest rates to haul Biden’s befuddled and corrupt ass across the finish line. Or his replacement, Greasy Gavin Newsom. (Leaving an oil slick in his wake).

Lowering the mortgage rate will benefit the real estate market, which is currently been “Biden’d.” Due to inflation and The Fed’s mission to crush inflation.

High mortgage rates that approached 8% earlier this month continue to hammer builder confidence, but recent economic data suggest housing conditions may improve in the coming months.

Builder confidence in the market for newly built single-family homes in November fell six points to 34 in November, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the fourth consecutive monthly drop in builder confidence, as sentiment levels have declined 22 points since July and are at their lowest level since December 2022. Also of note, nearly the entire HMI data for November was collected before the latest Consumer Price Index was released and showed that inflation is moderating.

Mortgage rates will likely decline in 2024 as The Fed reverses its inflation-crushing policy for Presidential election interference.

And Morgan Stanley forecasts the Fed Funds Rate to plunge to 2.375%.

Joe Biden is 80 and not exactly the most energetic President that can inspire confidence.

Maybe the economy needs Viagra.

I really wish Biden would stop babbling about “his” approach to economic growth, a Chinese Communist approach of top down economic management.

Under Biden, Americans have seen a 17.6% price hike and a 3% pay cut. Inflation has averaged 5.9% — more than double the level of inflation under any of the last four presidents.

Christmas Early Warning! Walmart Crashes On Disappointing Guidance, Warns That Consumer Spending Is Deteriorating (Jingle Hell?)

Its beginning to look a lot like a BAD Christmas!

We already knew that earnings calls were filled with concerns about a weak Christmas season.

After yesterday’s solid (inventory liquidation driven) earnings from Target, many were hoping for follow through today from the OG, the world’s largest retailer WMT which reported Q3 results at 7:00am ET. Alas, those same long-suffering consumer discretionary investors were in for more disappointment when the retailing giant reported earnings that generally beat on revenue and earnings, and even though it raised its previous guidance, the numbers came in shy of Wall Street estimates which in turn sent its stock tumbling.

Let’s take a closer look at what WMT reported, starting with Q3 historicals:

Adjusted EPS $1.53 vs. $1.50 y/y, just barely beating the (previously lowered) consensus estimate of $1.52
Revenue $160.80 billion, +5.2% y/y, beating the estimate of $159.13 billion (global eCommerce net sales hit $24
billion, reaching 15% of net sales; they were up 15% led by pickup and delivery)
Total US comparable sales ex-gas +4.7%, beating the consensus estimate +3.35%
- Walmart-only US stores comparable sales ex-gas +4.9%, beating consensus estimate +3.46%
- Sam’s Club US comparable sales ex-gas +3.8%, beating estimate +3.66%

The increase in Walmart’s comp store sales was notable because both Target and Home Depot reported declines in that metric this week, as consumers continued to pull back from discretionary purchases.

The key charts:

So far so good, and if that was the extent of it the stock would probably be soaring now. However, what the market threw up all over was the company’s disappointing guidance (which was raised but still failed to meet consensus estimates), as well as its cautious tone about the outlook for US shoppers after signs of weakness at the end of October.

Looking ahead, Walmart forecast that adjusted earnings for fiscal 2024 will be in the range $6.48-$6.48 a share, up from its previous outlook range of $6.36 – $6.46 a share. However, this was still viewed as weak compared to consensus: Wall Street had been estimating $6.48, which Walmart now admits may be a stretch.

Not helping was the company’s commentary on consumer strength, or rather, weakness trends: according to CFO John Rainey, there was a “sharper falloff” in sales during the last two weeks of October. Demand however picked up in November, spurred in part by seasonal offerings.

“The takeaway for us is that we’re seeing strength, we’re seeing share gains versus others, but there still is pressure on the consumer,” Rainey said. The punchline: “We are more cautious on the consumer than we were 90 days ago at this time.”

Separately, the company als warned that “general merchandise sales reflected softness in discretionary categories including apparel, home, and toys”, categories which some had expected would show a rebound.

In the aftermath of Target’s earnings, which were actually quite ugly but for some reason the huge short squeeze was enough to make markets forget that fundamentals are rapidly deteriorating, Walmart’s muted tone pointed to growing uncertainty around consumer spending even as the company grabs more sales from many rivals.

One thing is certain: the market did not like what Walmart had to say, and the shares tumbled as much as 8%. Walmart stock had climbed 20% this year through Wednesday, compared with the 17% increase in the S&P 500 Index. It is about to lose about half this gain in the premarket.

Here is a symbolic Walmart shopper.

More Biden news!

Bidenomics Strikes Again! Foreclosure Sale Notices For Commercial Property Loans Are Exploding, LA Apartment Sales Cratering (Newsom Creates New Potemkin Village For China Xi’s Visit)

Bidenomics strikes again!

After listening in horror to Joe Biden’s press conference after his summit with China’s Xi, I had to ask the following question: what does Joe Biden has in common with Georgia Tech? Answer? They are both rambling wrecks. Biden made a horrendous foreign policy blunder by calling Xi a “dictator” and almost blew it by nearly spillling the beans on our foreign policy negotiations with Israel. SecState Blinken had to intervene. We are represented by Winken (Harris), Blinken and Nod (Biden, who usually looks asleep or confused).

But back to the horrors of a slowing economy.

As the US economy slows down (like Biden himself), we are seeing further cracks in the real estate market. Foreclosure sale notices for commercial property loans are exploding.

And depending on the MSA, multifamily delinquencies are booming, like in Houston, Texas, New York City and Phoenix AZ.

Then we have this headline: “Not Just Office Towers – Commercial Real Estate Sales Crater Throughout Los Angeles.” It’s difficult to find big commercial real estate deals of any kind in Los Angeles. A new report from NAI Capital reveals how severe and universal the decline in activity is throughout the region this year amid collapsing values, higher interest rates, and a new tax on property sales above $5 million.

A related headline screams “LA Apartment Sales Plummet 50% as Investors Confront New Taxes, Higher Costs.” Every submarket saw an increase in vacant units and a decline in year-to-date sales volume in the second quarter. Construction, interest rates, eviction protections, also define 2023.

Yes, I know, California’s real estate woes are mostly the fault of their politicians like Governor Gavin (Gruesome) Newsom. The same guy who ordered San Francisco’s homeless population to be moved creating a new Potemkin Village. But rising interest rates are the fault of excessive spending by Congress and the Biden Administration.

Prepayments on Ginnie Mae MBS are extremely low.

But things are less than rosy in Communist China. China’s housing woes worsen as prices fall most in eight years.

But my favorite headline is from the Babylon Bee (a satire site): “After Five Minutes With Biden, Xi Gives Order To Invade Taiwan.”

Final Countdown? PPI Final Demand Declined To 1.3% In October As Gasoline PPI Plunges -13.5% YoY, Most Since Covid Economic Shutdowns (No Chance Now Of Further Fed Rate Hikes)

Is this the final countdown?

US Producer Price Index (PPI) Final Demand plunged the most since the COVID lockdowns. After four months of re-acceleration, US producer prices tumbled in October – down 0.5% MoM, the biggest drop since April 2020. This dragged Final Demand PPI YoY down to 1.3%. Primary drivers? Rapidly declining gasoline prices (-6.5% in October).

The other driver? M2 Money growth. Notice that PPI Final Demand is slowing as M2 Money growth goes negative.

Gasoline PPI plunged -13.5% YoY in October. No it wasn’t Biden opening up America to energy indepence. More like the impact of M2 Money growth being negative.

But never fear! The Federal Reserve is expected to stop raising rates and, in fact, start cutting rates in 2024 as the economy is sagging fast.

Don’t worry. Sleepy, stumbling Joe Biden is meeting with China’s Xi.

Treas Sec Janet “Magic Mushroom” Yellen meeting with China’s Xi and Biden’s likely replacement Oily Gavin “Gruesome” Newsom.

Biden’s Mortgage Market! Mortgage Purchase Demand Falls 0.3% Since Last Week And -12% Since Last Year, Stocks, Bitcoin Booming, Gold Enters Contango (Mortgage Rates UP 172% Under Biden)

Biden says he wants 4 more years to finish the job. Like killing off the mortgage market completely, Joe?

Mortgage applications increased 2.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 10, 2023.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.4 percent compared with the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index decreased 0.3 percent compared with the previous week and was 12 percent lower than the same week one year ago.

The Refinance Index increased 2 percent from the previous week and was 7 percent higher than the same week one year ago.

Of course, mortgage rates have been declining slightly over the past few weeks, but remain up 172% under Biden.

At least the stock market is booming after the inflation report signalled that The Fed is likely done with rate hikes.

On the gold front, we are seeing evidence of contango.

Bitcoin? Down a wee bit after a staggering rise in price over the past year.

Here is China’s Xi meeting with Biden’s likely replacement, “Greasy Gavin” Newsom and Newsom’s likely Treasury Secretary, Janet “Too Low For Too Long” Yellen. Newsom, Yellen and Xi all want havoc in America.

We WILL Get Fooled Again! Purchasing Power Of US Dollar DOWN -15% Under China Joe Biden (Top 1% Doing Great Under Bidenomics, Not The Middle Class)

Republicans elected Mike Johnson from Louisiana as House Speaker, then were surprised when Johnson agreed with big spending Senators McConnell and Schumer on Biden’s mega spendathon. Also, several Republicans voted with Democrats NOT to impeach Cuba Pete (Mayorkas) for allowing 8 million illegals to cross the southern border. Bottom line: the Biden Administration and Congress are closely held subsidiaries of the elite 1% and US large corporations. The middle class be damned! But we will get fooled again in every election.

Since Biden’s inaugration in January 2021, the purchasing power of the US dollar is down a staggering -15%.

Yes, under control of large corporations and the 1%, the economy is an economic wasteland. But the 1% are doing great under Bidenomics! With The Fed’s help of course.

Here is a chart of core inflation relative to M2 Money printing. Easy way to cool inflation … stop printing money!

Here is China’s Xi and America’s “China Joe” Biden.

Seriously, Biden has always been known as being stupid and corrupt. Now he has dementia. A PERFECT President for the 1% in their war against the middle class. Biden is the penultimate “useful idiot” with an emphasis on idiot.

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.