Commodities Versus S&P 500 And The New World Order (Crashing Currencies And Flight To Commodities) The End Of US Dollar Hegemony?

Here is Dvorak’s New World Symphony, an appropriate piece the global turmoil that has taken place after Russia’s invasion of Ukraine.

Here is the ratio of the S&P 500 index against the Bloomberg Commodity Price Index. This ratio is plotted against The Federal Reserve’s balance sheet of assets. Notice the decline in the Commodity Ratio in 2022, even ahead of the Russian invasion of Ukraine.

Global currencies, on the other hand, have been really crushed since the Russian invasion of Ukraine. The Japanese Yen, China’s Renminbi and Europe’s Euro relative to the US Dollar are falling due to a variety of reasons. Covid lockdown in China, Japan’s insistence on monetary easing while other Central Banks are tightening and the Euro with Russia threatening nuclear war.

WTI Crude is back to $100 a barrel. Critical metals are down today related to a slowing global economy and wheat is up 2.75%.

Could it be that US Dollar hegemony is nearly over and commodity-backed currencies are the way of the future?

Slippin’ Into Darkness! Dallas Fed Manufacturing Index Plunges To 1.1 As M2 Money “Slows” To 11% YoY (Will The Fed Reinstate Its “Low Rider” Interest Rate Policies?)

Slippin’ into darkness!

M2 Money stock YoY skyrocketed during the Covid mini-recession, peaking at 21% during February of 2021. The Dallas Fed manufacturing outlook grew to 38.1 in March 2021.

However, as M2 Money growth has slowed 11%, the Dallas Fed manufacturing outlook has plunged to near zero.

So, with the economy faltering (and REAL wage growth in negative territory), will The Fed reinstate its “Low Rider” interest rate policies?

The US Treasury 10Y yield is down -12.5 basis points (never a good sign as investors buy Treasuries in a flight to safety).

Crude oil is down below $100 again and is down -5.61% today on … problems everywhere. ALL metals are down.

Cryptos are getting clobbered today as well.

Between Biden’s “Going green!” policies and The Fed’s allegedly trying to fight inflation, markets are getting trashed.

Fauci’d! Office Occupancy Remains Low At 42.8% While Office Prices Soar +16.2% With Fed Stimulus (Average Time To Foreclosure In Hawaii Is Over 7 Years??)

Do you want to see a magic trick? Like how governments shut down the US economy resulting in collapsing office occupancy rates while the price of office buildings rose dramatically (+16.3% since Q2 2020)?

Kastle’s “Back to work barometer” is showing that the 10 city average occupancy rate in the US is now only 42.8% as remote working has caught on. And the fear of yet another Covid mutation is keeping office occupancy below 50%.

Even Washington DC, home of Dr. Anthony Fauci, has only a 37.5% occupancy rate. Of the top 10 cities, Austin TX has the highest office occupancy rate at 62.4%.

So, the magic trick is not why America is so slow to return to the office, but why commercial office prices are rising so fast. Ah, Federal government STIMULYTPO! Aka, The Federal Reserve has been overstimulating the economy since 2008 and particularly since 2020 and Covid.

Speaking of a magic trick, here is how government’s make the average time to foreclosure up to over 7 years in Hawaii and 4.4 years in New York. In simple terms, you can buy a home in New York, never make a mortgage payment and live rent free for an average of 4.4 years.

Of course, the states with the longest average times to foreclosures at JUDICIAL foreclosures states (seen here is gray). Hawaii is now a judicial foreclosure state. That is, you must line up for a judge to hear your case.

So, the government’s magic trick is to 1) shut down local economies in fear of Covid, 2) provide excessive fiscal and monetary stimulus to combat the shutdown, 3) watch office building prices soar with stimulus as office occupancy remains below 50%.

Do you want to see a magic trick? Watch The Fed try to tighten monetary easing and NOT crash the economy.

Update for 04/25/2022. 10Y Treasury yields DOWN 8.7 bps.

And commodities are tanking. WTI oil is down 5%, iron ore is down almost 7%.

And the Dow is diving with increased expectations of Fed monetary tightening, but the expectations (green line) have been declining this morning.

Fed Fireball! Mortgage Rates Climb To Highest Level Since 2009 As Fed Attacks Inflation And Markets Get Crushed (S&P 500 Index Down 7% In April, Bitcoin Down 11%)

Its Saturday and I am dreading markets opening on Monday. But here is where we sit today.

The 30-year mortgage rate has soared to 5.29%, the highest level since 2009 at the beginning of Obama’s Presidency. Since 2009, we have seen the purchasing power of the US Dollar decline further (orange line) while inflation (blue line) has soared. M1 (yellow) and M2 (green) has been growing since the financial crisis, but really took-off with the Covid outbreak in 2020 and The Fed’s massive overreaction coupled with Federal government stimulus.

Since the creation of The Federal Reserve System under President Woodrow Wilson, the purchasing power of the US Dollar has collapsed so much that $10 in 1913 in worth 34.8 cents today. But notice that since 1949, the CPI YoY has rarely been negative meaning that prices are pretty much only going up.

Instead of April showers bring May flowers, it is April expected Fed rate hikes (now 10.408 rate hikes by February 2023) bringing declining assets prices. In April so far, the S&P 500 index is DOWN 7%, the 10-year Treasury Note price is DOWN 5%, Bitcoin is DOWN 11%, the 3.5 coupon agency MBS price is down 3.2%.

We are seeing increased volatility in both the equity and bond markets.

Well, Powell and The Fed are hurling fireballs at mortgage rates and asset prices in April.

Equity Markets Get “Powell’d” After Fed Chair Backs Front-Loading Rate Hikes, Says Half-Point on Table (Dow Down Over 600 Points On “Foul Powell” Utterance)

And what an unappetizing table it is!

Federal Reserve Chair Jerome Powell said he saw merit in the argument for front-loading interest-rate increases, including a half percentage-point hike next month.“

I would say that 50 basis points will be on the table for the May meeting,” Powell told an IMF-hosted panel on Thursday in Washington that he shared with European Central Bank

President Christine Lagarde and other officials. “We really are committed to using our tools to get 2% inflation back,” he said, referring to the Fed’s target for annual price increases.

Central bankers are grappling with some of the highest inflation rates since the 1980s that are being further pressured as Russia’s invasion of Ukraine boosts food and energy prices and China’s coronavirus lockdowns tangles supply chains anew.

Equity markets in the USA and Europe are getting “Powell’d” and “Lagarde’d” today. As of noon today, the Dow is down 628 points (or -1.81%). Euro Stoxx 50 is down -2.24%.

I remember appearing on Fox Business’ Stuart Varney and Company where he asked me what will happen when The Fed starts to raise rates in a serious fashion. I made a ka-boom gesture at which he laughed. Stuart, I wasn’t joking!

Foul Powell on the Prowl, driving up mortgage rates, and driving down equities and bonds.

Slipping Into Darkness! Bidenflation And Fed’s Reaction Causing Social Security And Pension Funds To Get Clobbered (Mortgage Rates Keep Climbing)

US President Biden went green and signed executive orders on his first day to limit oil and natural gas exploration of Federal lands and offshore (also, killed the Keystone Pipeline), helping to drive up energy prices and food prices. These orders begat inflation (also caused by the massive Covid relief by the Federal government). The highest inflation in 40 years begat The Federal Reserve signalling a tightening of Fed monetary policy … to fight the problem caused by The Fed in the first place … too much monetary stimulus for too long. Fiscal and monetary fanaticism and ignorance is forever busy and needs feeding

There was an interesting article on MarketWatch entitled “Bond rout exposes Social Security’s insanity.” The headline was “Every dollar of yours that’s invested in the Social Security trust fund is invested in low-yielding government bonds.”

Yes, another disastrous consequence of The Fed’s lax monetary policy since 2008, helping to push Treasury yields extremely low. And REAL Treasury yields into negative territory.

But here we sit today with The Fed threatening to trim their balance sheet and raise rates … to combat the inflation they helped create in the first place. Now we have the 10-year Treasury Note price falling like a paralyzed falcon with expected hate hikes going above rate hikes by February 2023 (based on Fed Funds Futures prices).

Most pension funds also invest heaving in US Treasuries, along with agency Mortgage-backed Securities (AgencyMBS).

Plus we have the Treasury curve slipping into darkness.

Speaking of “Slipping Into Darkness,” mortgage rates are soaring.

Meanwhile, Biden, Fed economists and Congress are merrily partying at some DC nightclub.

What is hip? NOT Biden, Pelosi, Schumer or Powell.

How Biden And Congress Helped Crush Netflix Stock Price (Declining REAL Earnings Led To Crash In Neflix Subscriptions)

Netflix, the movie and TV show subscription service, suffered an extraordinary decline in its stock price. But like the film “Margin Call” that pretends the Lehman Brothers bankruptcy in 2008 was a surprise, it really is no surprise that Netflix is getting crushed. Why? Thanks to Bidenflation, millions of American households are suffering (REAL average hourly earnings are declining under Biden) and many of those were Netflix subscribers.

Netflix’ earnings per share soared when Biden was first installed as President, likely due to effects of Biden’s/Pelosi’s/Schumer’s Covid stimulus. But alas, fiscal stimulus is short-lived but the negative effects of inflation are long-lasting.

Inflation Joe, the bully of the middle class and low-wage workers. But at least millionaires will get more electric cars charging stations! /sarc

T-R-O-U-B-L-E! Mortgage Purchase Applications DOWN 14% From Same Week Last Year, Refi Applications DOWN 68% (Yet Fed STILL Has Its Huge Foot On Monetary Gas Pedal) This One’s Gonna Hurt You For A Long, Long Time

There is one song that sums up the mortgage banking industry with proposed tightening of Fed monetary stimulypto: T-R-O-U-B-L-E.

Mortgage applications decreased 5.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 15, 2022.

The Refinance Index decreased 8 percent from the previous week and was 68 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 14 percent lower than the same week one year ago.

All together now, mortgage rates are up 76% under Biden.

And yes, The Federal Reserve STILL has its enormous foot on the monetary gas pedal (with hints that they will remove it “soon.”

The number of ARMs increased 14.9% from the previous week.

Between Bidenflation and Powell and the Gang tightening monetary policy, This One’s Gonna Hurt You (For A Long, Long Time).

US 1-Unit Housing Starts Drop -1.72% YoY As Mortgage Rates Soar While Apartment Starts Rise 7.5% MoM (Bullard Says Fed Could Raise Rates By 75 BPS At May Meeting, Japanese Yen To US Dollar Crashes)

We have Federal Reserve of St Louis President James “Bully” Bullard saying that The Fed could raise rates by 75 basis points in May, the Japanese Yen to Dollar is crashing as mortgage rates continue to soar.

Here is a nice summary of The Fed’s massive balance sheet expansion in reaction to Covid (orange line) and the resulting soaring of home prices. Then The Fed signals that they will remove the “punchbowl” and mortgage rates have boomed. And not in a good day.

Today we have the US housing starts report. In a nutshell, 1-unit housing starts (single-family detached) declined -4.4% YoY as mortgage rates skyrocket.

5+ unit (aka, apartment stats rose 7.49% MoM in March while 1-unit starts declined by -1.72% MoM. 1-unit permits fell by -4.81% MoM while 5+ units starts rose by 10.89% MoM.

Soaring home prices coupled with soaring mortgage rates equals … apartment living.

Bear in mind that The Fed STILL have massive monetary stimulypto outstanding!!

Now you to can lease an apartment next to Patrick Bateman from “American Psycho.” And listen to Huey Lewis and The News through the paper-thin walls.

US Mortgage Rates Rise To 5.25%, Up From 2.88% Under Biden (Fed May Boost Rate 50 BPS At Next Meeting)

Fortunately, I refinanced my home mortgage while Trump was still President. When Biden was installed as President, the 30-year mortgage rate was 2.88% (according to Bankrate). It has now risen to 5.25%.

The Federal Reserve is now expected to raise their target rate as much as 50 basis points at the next meeting on May 4, 2022. This chart shows the anticipated rate hikes coming our way, peaking in summer 2023.

Fed Funds Futures are pricing in a 50 bps rise at the May meeting.

The good news is that the US Treasury actives curve is upward sloping, but is showing fatigue in the forward rates between 7Y and 10Y.

On the hard asset front, precious metals are up over 1% with silver and platinum leading the way.