Consumer Sentiment For Housing Remains In The Doldrums As Fed Tightens To Combat Bidenflation (Atlanta Fed GDPNow Tanks To Only 0.5%)

As inflation rages thanks to Biden’s energy policies and insane Federal spending, The Federal Reserve is trying to cool inflation (or Bidenflation).

As The Fed tightens, the 30-year mortgage rate has risen to 14 year highs. And home prices are still hot, hot, hot (though slowing). But consumer sentiment for housing remains in the doldrums (UMich Buying Conditions For Houses).

The good news? Atlanta Fed’s GDPNow real-time GDP tracker shows the US economy at positive growth of 0.521%. Ok, that is kind of lousy given the massive Fed stimulus and Federal spending since Covid.

M2 money velocity demonstrates the lousy return of Fed/Federal government “investment”.Near the lowest level in US history.

So, The Fed will have to destroy the US economy to save us from Bidenflation (bad energy policies and out-of-control Federal spending).

And more good news! The NASDAQ composite index is down only -1% today!

NASAQ Index Plunges 4% On Fed’s Inability To Cool Inflation (Gimme Some Quantitative Tightening!)

That’s the way The Fed likes it!

On today’s inflation report for August, it is clear that The Fed has failed to cool off US inflation, meaning that MOAR QT is on the way.

The NASDAQ composite index plunged -3.85% after The Fed’s failure was released.

The Dow was down “just” -2.70% today. But things are red all over in Europe where they too are failing to tame inflation.

The Fed is probably singing “Give me some quantitative tightening!”

The likelihood of further rate increases just rose to over 4% for the December FOMC meeting.

Jay and The Statists At The Fed!

Pain is coming!

Sundown? Freddie Mac 30Y Mortgage Rate Highest Since Financial Crisis And Advent Of Fed Quantitative Easing (CORE US Inflation For August Expected To Rise To 6.1% YoY)

Is it sundown for housing and mortgage markets with Fed quantitative tightening (QT)?

Freddie Mac’s 30-year mortgage commitment rate just rose to its highest level since … The Fed initiated Quantitative Easing (aka, fanatical money printing) during the financial crisis.

The good news? The US inflation report is likely to show a slowing of the inflation rate to around 8% YoY and -0.1% MoM. Why? Gasoline prices are cooling thanks to the global economic slowdown.

While gasoline and food prices are falling, CORE US inflation, the inflation rate excluding food and energy, is expected to rise to around 6.1% YoY and +0.30% for August.

But watch out as winter approaches!

The Oakland Stroke? Oakland CA Leads Nation In Home Price DECLINE At -15.1% Over 3 Months (San Francisco DOWN -11.2% Over 3 Months As Fed Removes Punch Bowl)

Is the Oakland housing market having a stroke?

The US housing market is facing stress thanks to The Federal Reserve’s “war on inflation.” As The Fed starts trimming its excess ballast and M2 Money growth YoY slows to the lowest since Pre-Covid, we are seeing housing markets like San Francisco beginning to experience declines in home prices.

According to Redfin, Oakland California is leading the nation in terms of declining sales prices at -15.1% over a 3 month period. Followed by Silicon Valley and San Jose at -12.7%. San Francisco is in third place at -11.2% (I will ignore Lake Havasu AZ since it is teeny but does have one of the London Bridges) and Austin TX is in 5th place at -9.7%.

Powell and The Fed are doing “The Oakland Stroke.”

What M2 Money Growth Says About US Employment Numbers (Job Creation Will Likely Slow As Fed Removes Monetary Stimulus, REAL Hourly Earnings YoY Are Declining)

Joe Biden is the king of malaprops. But his press secretary is just as bad as her boss. Recently, she said that under Biden, there were 10,000 million jobs created. Better known as 10 BILLION jobs created. Not bad, considering that the total population of the US is 333 million. THAT is a hot labor market! /sarc

But seriously, the US U-3 unemployment rate is 3.7% in August, the lowest since Donald Trump was President and BEFORE the Covid outbreak. The Covid economic shutdown saw a surge in the unemployment rate to 14.7% in April 2020 that begat a huge spike in M2 Money growth (22% YoY in May 2022 (green line). Only now is M2 Money growth returning to Trump-era growth rates.

But as The Federal Reserve removes its hefty monetary stimulus, it is unlikely that the unemployment rate will remain low.

In defense of Biden’s press secretary, the US economy saw 10.247 million jobs added under Biden (although while technically correct, even MSNBC wouldn’t give Biden credit for job creation in his first several months as President. Check that. They probably would.

April 2020 saw a decline in US jobs of -20.493 million jobs thanks to the Covid economic shutdowns. BUT with the M2 Money surge, we saw +12.1 million jobs added between May and November 2020 under Trump. Then the US elected China Joe (or Beijing Biden) as President.

The economic shutdowns due to Covid were an economic disaster for millions. But the surge in M2 Money (supporting the various Federal spending programs and inflation) explains the surge in jobs added, not economic wizardry of Biden.

For some reason, Biden and his press secretary failed to mention that inflation is so bad that REAL average hourly earnings YoY are declining at a 3% pace.

And not surprisingly, job growth has accrued to big corporations and not small businesses.

No Escape From Biggest Bond Loss in Decades as Fed Keeps Hiking (Agency MBS Facing Big Losses As Well As Mortgage Rates Keep Rising)

US pension funds seem to have no where to run, and no where to hide. They just need to keep on running as The Federal Reserve tightens.

(Bloomberg) Investors who might be looking for the world’s biggest bond market to rally back soon from its worst losses in decades appear doomed to disappointment.

The US employment report on Friday illustrated the momentum of the economy in face of the Federal Reserve’s escalating effort to cool it down, with businesses rapidly adding jobs, pay rising and more Americans entering the workforce. While Treasury yields slipped as the figures showed a slight easing of wage pressures and an uptick in the jobless rate, the overall picture reinforced speculation the Fed is poised to keep raising interest rates — and hold them there — until the inflation surge recedes.

Swaps traders are pricing in a slightly better-than-even chance that the central bank will continue lifting its benchmark rate by three-quarters of a percentage point on Sept. 21 and tighten policy until it hits about 3.8%. That suggests more downside potential for bond prices because the 10-year Treasury yield has topped out at or above the Fed’s peak rate during previous monetary-policy tightening cycles. That yield is at about 3.19% now.

Then we have Bankrate’s 30-year mortgage rate soaring on Fed intervention expectations.

Inflation? US inflation is near its highest in 40 years and the USDollar Plain Vanilla Swap was at 0.50 when Biden first took office as President and is now 3.371 (quite an increase!).

Here is an interesting chart of FNCL 2% Agency MBS.

US Jobs Data Have Potential to Push Fed Toward Third Jumbo Hike (Remember That ADP Jobs Added In August Was Only 132k)

When we look at tomorrow’s US jobs report, it is important to acknowledge that 1) The Federal Reserve has not yet removed the Covid stimulus (green line) and 2) the ADP payroll jobs added was only 132k in August while non-farm payrolls jobs added in July was 528k. That is quite a spread!

(Bloomberg) The hotly anticipated US jobs report has the potential to tip the scales toward a third jumbo-sized hike in interest rates later this month after a wave of data that point to a resilient consumer and high labor demand.

Friday’s report is one of the last marquee releases Fed officials will have in hand before the mid-September policy meeting to help them decipher a complex economic and inflationary puzzle.

Forecasts call for a healthy, yet more moderate 298,000 gain in August payrolls and for the unemployment rate to hold steady at 3.5%, matching the lowest in five decades. Solid wage growth is also expected amid a persistent mismatch between labor demand and supply.

Such figures, in conjunction with a blowout July employment print, improving consumer sentiment figures and a surprise pickup in job openings, could be enough to push the Fed to raise borrowing costs by 75 basis points, extending the steepest interest-rate hikes in a generation to curb an inflation surge.

As of this morning, Fed Funds futures data is still pointing to The Fed Funds Target rate rising from 2.50% to around 4% by the March FOMC meeting. That is still a large jump of another 150 basis points anticipated.

US Treasury Yields And Mortgage Rates Rise As Fed Vows To Extinguish Inflation Fire (Caused By Themselves And BAD Federal Policies) Check Out The Eurozone

As inflation burns the US middle class and low wage workers, The Federal Reserve reaffirmed at Jackson Hole that they are the NEW Smoky The Bear (only The Fed can fight inflation fire!) But of course, Federal spending and energy policies can drive up prices too.

Having said that, the 2-year Treasury yield and 30yr mortgage rate are rising rapidly.

The Fed is trying to cool demand by raising rates after lax monetary policy since late 2008.

While the US 2-year Treasury yield is up only slightly today, the Eurozone is seeing their 2-year sovereign yields spiking by 11-15+%.

Fed’s Temporary Repo Facility Looks More Permanent As Inflation Rages (All Is NOT Well In The Economy)

The Federal Reserve’s overnight repo facility where banks park their money is seemingly becoming permanent.

As inflation has soared near the highest in 40 years, banks are increasingly parking their money at The Federal Reserve.

To quote Joe Biden, “All is well in the garden.” But apparently, not is all well in the banking industry or with the mortgage industry.

The Housing Blues! US Pending Home Sales Tank -22.5% YoY In July As Fed Tightens And M2 Money Growth Slows

Me and the (housing) blues.

At The Fed continues to tighten to fight inflation, pending home sales in July crashed and burned. That is, pending home sales fell -22.5% in July as M2 Money growth slowed

If I was still teaching at Ohio State or Chicago, I would ask the students if they see the relation between M2 Money growth and pending home sales.