Like the spaghetti western “The Good, The Bad And The Ugly,” Bidenomics has had similar effects on financing. Some good, some bad and a lot of uglies.
The good! For investors like pension funds the own US Treasuries, inflation has led The Federal Reserve to raise interest rates. This is good for investors holding short-term debt. The Bianco Fixed Income Total Return Index is soaring!!
The Bad: Well, the flip-side of the same coin is that debt refinancing costs have soared.
The Ugly. There are many contenders for losers under Bidenomics and current Fed (garbled) policies. But I choose … mortgage demand collapse with rising home prices and rising mortgage rates. Mortgage rates are up 165% under Biden.
And mortgage demand (applications) have been crushed.
Also on the ugly side, global aggregate corporate yields have collapsed.
So, there have been winners with Bidenomics (the top 1%), and lots of losers.
The drop takes the measure from ‘expansion’ at 7-month-highs to ‘contraction’ at 4-month-lows…
Source: Bloomberg
The new orders fell six points to -11.3, pointing to a decline in orders for a third consecutive month, and the shipments index fell sixteen points to -6.4, indicating that shipments fell.
The unfilled orders index held steady at -24.0, a sign that unfilled orders continued to fall significantly.
After rising into positive territory last month, the inventories index retreated fourteen points to -5.2, suggesting that inventories moved lower.
The delivery times index dropped ten points to -15.6, its lowest reading in several years, a sign that delivery times shortened.
The index for number of employees fell four points to -8.4, its lowest level in several months, pointing to a modest decline in employment levels.
On the bright side, the prices paid index moved down six points to 16.7, suggesting an ongoing moderation in input price increases, while the prices received index held steady at 11.5, a sign that selling price increases remained modest.
Is this the start of ‘soft’ data’s reversion to ‘hard’ reality?
The Fed – with its six rate-cuts – better hope so.
… it was the dot plot, where the median 2024 dot plot now forecasts 3 rate cuts up from 2, that shocked traders: in a very rare admission by the Fed, the central bank confirmed that the pre-meeting market pricing of multiple cuts in 2024 were correct in interpreting the Fed’s intentions. It also confirmed – yet again – that the market was right and every single FOMC member was wrong. In retrospect, none of this should have been a shock.
Commenting on the dot plot, TS Lombard’s Steven Blitz said that “for a group that prizes the pricing of its policy intentions in the forward markets as being more important to shifting market conditions than the spot rate, they h d to know that moving the median forecast for Fed funds at the end of 2024 back to June levels would be a bullish signal.“
Or maybe concerns about the market’s reaction were of secondary importance to a Fed which had gotten the tap on the shoulder by the Biden admin and its Democratic cronies on the Hill, terrified about their re-election chances now that the snake of Identity Politics is finally eating its poisonous tail. Indeed, almost as if having seen the collapse in the recent approval polls, Biden’s handlers made some very persuasive phone calls to the Fed. After all, only something as ridiculous – and serious – as steady political pressure can explain the unprecedented U-Turn by the Fed chair, one which even shocked Powell’s own mouthpiece, Nikileaks, who commented on the “Powell pivot” saying “what a difference two weeks can make.”
But markets are behaving as if The Fed will begin cutting rates. Look at the US 2-year Treasury yield on Wednesday AFTER the Fed minutes were released.
Bear in mind that mortgage rates are up 149% under Biden. And mortgage payments up 88%. Yikes!
President Gerald For (R-MI) might be best known for his silly attempt at “whip inflation NOW” by having “Music Man” Meredith Wilson write a song: “Whip Inflation Now!” But the second line has been forgotten: “Eat crow instead of cow.” That second line is appropriate for Bidenomics which has left America’s middle class eating crow in the housing market.
The Wall Street Journal had an interesting piece showing the rise of 30-year fixed rate mortgage payments under Biden where the average monthly new mortgage payment is now $3,222, up from $1,787, up 86%!
The 86% rise in mortgage payments is two fold. First, home prices are up 33.2% under Biden and the 30-year mortgage rate is up 181%.
Yes, Americans are eating crow under the utter failure known as Bidenomics: top down government mandates for massive green energy and other nonsense.
We are on a Highway To Hell! Massive Federal Budget deficits and staggering payments to Treasury from The Fed (losses on balance sheet) and $212 TRILLION in unfunded promises to the non-elites.
Under Modern Monetary Theory (or print money without consequences), we are seeing trillion dollars budget deficits with no end in sight. Nothing has been the same since the financial crisis of 2008 with The Fed’s massive intervention.
Then we have The Fed paying an ever growing amount to US Treasury for losses on their huge balance sheet.
The song “Running on Empty” by Jackson Browne comes to mind when analyzing the state of American banking, especially regional banks.
Yesterday we found out that inflows to money-market funds continue to be huge ($290BN in six weeks), and more importantly, regional banks’ usage of The Fed’s BTFP bailout facility surged to a new record high (even as regional banks surged…
Source: Bloomberg
And so, with that shitshow in mind, we await the glorious manipulation of The Fed’s bank deposits data to reinforce that equity confidence.
On a seasonally-adjusted basis, banks saw a $53.7BN deposit outflow…
Source: Bloomberg
However, on a non-seasonally-adjusted basis, deposits rose by $27BN…
Source: Bloomberg
And even with the outflows (SA), the divergence between soaring money-market funds and bank deposits continues to widen…
Source: Bloomberg
Excluding foreign bank deposits, domestic banks saw the third week of the last four of deposit outflows (-$40.6BN SA) with Large banks -$35BN (SA) and Small banks losing $5.7BN (SA). On an NSA basis, domestic banks saw inflows of $36.5BN last week with Large banks adding $32BN and Small banks adding $4BN…
Source: Bloomberg
That adds up to $88BN (SA) of deposit outflows in the last four weeks (bank to its lowest total since May…
Source: Bloomberg
And on the other side of the ledger, despite deposits declining SA, loan volumes increased (SA) for the third week in a row with Small banks adding $2.1BN and Large banks adding $3.8BN…
Source: Bloomberg
Finally, the key warning sign continues to trend ominously lower (Small Banks’ reserve constraint), supported above the critical level by The Fed’s emergency funds (for now)…
Source: Bloomberg
As the red line shows, without The Fed’s help, the crisis is back (and large bank cash needs a home – green line – like picking up a small bank from the FDIC).
Mortgage rates, despite coming down recently, are still up 151% under Biden. And home prices are up 33.2%. So much for affordable housing for those renting.
So, “Running on Empty” applies to middle class and their ability to afford housing.
Why are buying conditions for houses so low? Well, mortgage rates, despite coming down recently, are still up 151% under Clueless Joe. And home prices are up 33.2% under Biden. So much for affordable housing for those renting.
Like the great Shoeles Joe Jackson on ChiSox and Cleveland Indian fame, Clueless Joe Biden cheated too. Except that Shoeless Joe was accused of accepting $5,000 to throw the World Series in 1919. Clueless Joe Biden and family are accused of accepting over $24 million from China, Ukraine, etc.
Several talking heads are salivating about the strong or solid jobs report in October. As if The Federal Reserve can’t read the jobs report. I call the report “Government gone wild!” since 51k government jobs were added in October.
Job gains occurred in health care, government, and social assistance. Employment declined in manufacturing due to strike actvity.
Total nonfarm payroll employment increased by 150,000 in October, below the average monthly gain of 258,000 over the prior 12 months. In October, job gains occurred in health care, government, and social assistance. Employment in manufacturing declined due to strike activity. (See table B-1.) Health care added 58,000 jobs in October, in line with the average monthly gain of 53,000 over the prior 12 months. Over the month, employment continued to trend up in ambulatory health care services (+32,000), hospitals (+18,000), and nursing and residential care facilities (+8,000). Employment in government increased by 51,000 in October and has returned to its pre-pandemic February 2020 level. Monthly job growth in government had averaged 50,000 in the prior 12 months. In October, employment continued to trend up in local government (+38,000). Social assistance added 19,000 jobs in October, compared with the average monthly gain of 23,000 over the prior 12 months. Over the month, employment continued to trend up in individual and family services (+14,000). In October, construction employment continued to trend up (+23,000), about in line with the average monthly gain of 18,000 over the prior 12 months. Employment continued to trend up over the month in specialty trade contractors (+14,000) and construction of buildings (+6,000). Employment in manufacturing decreased by 35,000 in October, reflecting a decline of 33,000 in motor vehicles and parts that was largely due to strike activity. In October, employment in leisure and hospitality changed little (+19,000). The industry had added an average of 52,000 jobs per month over the prior 12 months. Employment in professional and business services was little changed in October (+15,000) and has shown little net change since May.
Speaking of Govzilla, my favorite quote showing the stupidity of BIG government is … Biden’s climate envoy John Kerry. “We’ve got to cut down on farming due to ‘Climate Change’…or people are going to starve…”
While the exciting headline is “Mortgage Purchase Demand rises 35%!” bear in mind that the level of mortgage purchase demand is still relatively low. This is volatility in mortgage applications.
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 December 1, 2023. Last week’s results include an adjustment for the observance of the Thanksgiving holiday.
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 43 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 0.3 percent from one week earlier. The unadjusted Purchase Index increased 35 percent compared with the previous week and was 17 percent lower than the same week one year ago.
The Refinance Index increased 14 percent from the previous week and was 10 percent higher than the same week one year ago. Mortgage rates declined last week, with the 30-year fixed-rate mortgage falling to 7.17 percent – the lowest level since August 2023.
And with 5 rate cuts priced in, we should see mortgage demand increasing in 2024.
On the hotness front, here are the 10 smokin’ housing markets. Strange that the hotness score is highest for generally depressed economic cities like Manchester NH, Rochester NY and Rockford IL. Hey, at least Columbus Ohio made the top 10 on the hotness list!
Confounded Interest - Anthony B. Sanders 
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