Manufacturer’s Durable Goods New Orders growth peaked in April 2021, thanks in part to M2 Money Growth peaking in February 2021. And its been all downhill since then.
This is the 8th downward revision of durable goods orders in the last year…
Source: Bloomberg
Under the hood, defense and non-defense capital goods orders rose with non-defense aircraft orders surging over 30% MoM…
Source: Bloomberg
But… it looks like the AI bubble just burst as Computer & related Products orders plunged 3.9% MoM – the biggest drop since COVID lockdowns…
Source: Bloomberg
Finally, and more problematically, core capital goods shipments – a figure that is used to help calculate equipment investment in the government’s gross domestic product report – saw only a small 0.2% MoM rise, which left core shipments down 1.2% YoY – the biggest YoY drop since the COVID lockdowns…
Source: Bloomberg
Now that Biden is considering a NATIONAL CLIMATE EMERGENCY granting him 130 War-like powers, I shudder to think for much green spending he will initiate.
Biden: “How many times does Trump have to prove we can’t be trusted?”
The latest report from real estate data provider ATTOM shows CRE foreclosures topped 625 in March, up 6% from February and 117% from the same period last year.
ATTOM has been tracking commercial foreclosures since 2014. The number of foreclosures is approaching the peak of 889 in October 2014.
“California began experiencing a notable rise in commercial foreclosures in November 2023, surpassing 100 cases and continuing to escalate thereafter,” the report said.
New York, Florida, Texas, and New Jersey also showed increases in CRE foreclosures last month.
Regional banks provide a bulk of the financing for the space. The ongoing mess in the lending space due to tighter conditions adds pressure to the CRE downturn. Banks are expected to set aside more money to cover potential CRE losses.
Last month, Federal Reserve Chair Jerome Powell testified on Capitol Hill, “We have identified the banks that have high commercial real estate concentrations, particularly office and retail and other ones that have been affected a lot,” adding, “This is a problem that we’ll be working on for years more, I’m sure. There will be bank failures, but not the big banks.”
Data from a recent Treasury Department’s Financial Stability Oversight Council (FSOC) warned office vacancy rates have climbed sharply in recent years, reaching a record of 13.1% at the end of 2023.
CoStar analyst Phil Mobley recently noted the “reset in office demand has rocked US markets.”
Morgan Stanley warned earlier this year that office prices could plunge 30% due to sliding demand.
For those wondering why the excess supply of office towers can’t be converted into affordable housing, Goldman also noted that prices must drop 50% for housing conversions to make sense.
Powell has a rolling crisis on his hands. And the goal is to save the fireworks for after the election.
Housing is becoming an exclusively upper-class privilege in a growing number of cities.
According to a new study by Creditnews Research, in 2024, middle-class households could afford to buy an average home in just 52 of the country’s 100 largest metros.
Just five years earlier, they could afford a home in 91 of the top 100 metros.
The situation is far worse for lower middle-class households, as they can only afford a home in seven of the largest 100 metros.
In total, 41 out of the 100 metros require a gross annual income of $100,000 or more to qualify for an average home. In 13 metros, an average income of more than $155,000 is needed.
In those cities, even the upper-middle class doesn’t qualify for an average home.
The study determined affordability by looking at how much income households need to earn to afford a down payment, mortgage payment, and related fees for an average home.
A home is considered affordable if monthly housing and mortgage costs don’t exceed 28% of a household’s gross income.
“There’s no two ways about it: Housing affordability has worsened significantly since Covid,” the report said. Since the pandemic, 39 of the most populous metros have fallen below the affordability threshold.
As expected, the most affordable areas for the middle class are located in the Midwest, Rust Belt, and parts of Texas, while the West Coast, Tri-State Area, and Hawaii are largely out of reach.
Affording a home is no longer a guarantee for the middle class
Being considered “middle class” doesn’t carry the same significance as it did just a few years ago.
“In the past, if you were middle class, it was almost assumed you would become a homeowner,” said Ali Wolf, chief economist of Zonda, a housing market research firm.
“Today, the aspiration is still there, but it is a lot more difficult. You have to be wealthy or lucky.”
That’s all thanks to a “perfect storm” of elevated mortgage rates, sky-high home prices, and a lack of inventory, making housing more unaffordable.
The result is that middle-income buyers, or those with an annual income of up to $75,000, could only afford about one-quarter of listings on the market last year.
According to Nadia Evangelou, the director of real estate research at the National Association of Realtors, “Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership.”
Mortgage rates (blue line) creep closer to 7%. Mortgage rates are UP 168% under Vacation Joe and home prices are up 32.5%.
After falling between November and January, mortgage rates are creeping back up.
According to Freddie Mac, 30-year fixed-rate mortgages reached 6.88% in the week of April 11 and at some point climbed well above 7%.
The reversal seems to be driven by a surprise spike in inflation, which has come out higher than expected for four consecutive months
“For homebuyers, the latest CPI report means mortgage rates will stay higher for longer because it makes the Fed unlikely to cut interest rates in the next few months,” said Chen Zaho, Redfin’s economic research lead.
“Housing costs are likely to continue going up for the near future, but persistently high mortgage rates and rising supply could cool home-price growth by the end of the year, taking some pressure off costs.”
President Obama selected Slow Joe Biden as his Vice President because 1) he was white and 2) an alleged foreign policy wizard in The Senate. Between Afghanistan, Ukraine, Israel, Taiwan and every other foreign policy disaster under his leadership, I am beginning to doubt Biden’s foreign policy acumen. For example …
While we are acutely aware of the fact that ‘correlation is not causation’, one would find it hard to argue that the practically perfect concomitance of China’s Treasury holdings and the yield of the US 10Y Treasury note over the past three years makes us wonder (in our out-loud voices), if – away from The QT, The FedSpeak, the macro-economy, the geopolitical crises, the AI-hype, the growth scares – if it’s not just all a well-managed (slow and steady) liquidation of China’s (still massive) US Treasury holdings…
Source: Bloomberg
It’s hard to argue they don’t have an incentive to a) de-dollarize, and b) not liquidate it all at once, shooting themselves in the face.
While the de-dollarizing has been steady in Treasury-land (enabled by a vast sea of liquid other players), things have been a little more ‘obvious’ in the alternative currency space – i.e gold.
And in case you wondered, it’s not just China and Russia, world reserve Treasury holdings are ‘relatively’ flat (based on Fed’s custody data) while according to The IMF, the world’s sovereign nations have been buying gold with both hands and feet…
Source: Bloomberg
…happy to take whatever retail-ETF-sellers are offering into their physical vaults…
Source: Bloomberg
Finally, as we note in the chart, this all started to ‘escalate quickly’ when Washington really started to weaponize the dollar.
Assuming that all the US gold is still in Fort Knox (and assuming that China and Russia are honest about their holdings), the world’s ‘other superpowers’ are rapidly catching up to the US’ holdings…
Source: Bloomberg
Who could have seen that coming? With mortgage rates hitting 7.5%, the home price to median household income ratio just hit an all-time high.
The 10Y Treasury yield just hit 4.519%.
And we have The Federal Reserve posting record losses.
Did we REALLY elect this fool Biden as President??
Biden lies constantly. This time about how HE reduced the Federal deficit. Odd since his student debt relief (buying votes) is going to raise the deficit by up to $750 BILLION.
The Biden Administration recently announced a new plan to cancel student debt for up to 30 million borrowers and released a preliminary rule this morning detailing parts of this plan. The proposal, which is being introduced through the rule making process, would replace the Administration’s initial proposal to cancel between $10,000 and $20,000 per person of debt, which was struck down by the Supreme Court.
Elements of the plan in today’s proposed rule would cost nearly $150 billion, according to the Department of Education. However, this excludes a proposal to allow the Secretary of Education to cancel debt for those facing hardship or likely to default. Including this provision, we estimate the plan could cost $250 billion to $750 billion, depending on how the additional cancellation is designed.
The plan itself has five major components. It would:
Cancel accumulated interest for borrowers with balances higher than what they initially borrowed, capped at $20,000 for those in standard repayment and uncapped but restricted to individuals making less than $120,000 annually or couples making under $240,000 enrolled in an income-driven repayment (IDR) plan.
Automatically cancel loans for borrowers in standard repayment who would be eligible for cancellation had they applied for programs such as Public Service Loan Forgiveness (PSLF) or the new IDR program, Saving on a Valuable Education (SAVE).
Automatically cancel loans for borrowers who have been repaying undergraduate loans for over 20 years or graduate loans for over 25 years.
Cancel debt of those who attended low-financial-value programs, including those that failed accountability measures or were deemed ineligible for federal student aid programs.
Forgive debt of borrowers who are “facing hardships” or are likely to default on their loan payments.
The Department of Education has estimated the first four components of the plan would cost $147 billion over a decade, with half the cost stemming from the cancellation of accumulated interest. This is in line with estimates we are currently producing, though well above estimates of $77 billion from the Penn Wharton Budget Model (PWBM). A huge source of uncertainty is how these provisions would interact with existing IDR programs and how much of the debt would otherwise be cancelled under current policy.
Importantly, today’s rule does not include the Administration’s hardship cancellation plan, which would “authorize the automatic forgiveness of loans for borrowers at a high risk of future default as well as those who show hardship due to other indicators.”
This is by far the most unclear and potentially the most costly part of their proposal, since cancellation could be both wide-ranging and ongoing. We estimate this proposal could cost between $100 billion and $600 billion over a decade. However, there’s a tremendous amount of uncertainty, with design choices possibly resulting in much lower costs than our range – for example, PWBM estimates this provision would only cost $7 billion.
It is unclear how the Administration will define hardship, but they discuss 16 possible criteria such as other consumer debt, age, and health care or housing expenses and also declare hardship could be defined based on “any other indicators of hardship identified by the Secretary.” In assessing default risk, the rule allows cancellation for cancellation for those with an 80 percent likelihood of default, as determined by the Secretary. Importantly, over $150 billion of debt is currently in default (and loans in default generally have around a 70 percent recovery rate). We also estimate that a further 6 million borrowers are over 90 days delinquent on their loans, which is another predictor of a high likelihood of default and would further push up the number. The historically high rates of delinquency appear to be related to challenges around restarting student loan repayments last year.
While the default provision would be limited to the next two years under the most recent draft of the proposal, the hardship component has no time limit and thus opens a new venue for a future administration to cancel large amounts of student loan debt. An analysis by FREOPP argues that it could cover over 70 percent of college students.
In total, our $250 billion to $750 billion estimate for the total cost of the plan would be in line with the cost of the Administration’s $400 billion blanket debt cancellation, which was ruled illegal by the Supreme Court. It would be on top of more than $600 billion of debt cancellation already enacted through unilateral executive action. As we have shown before, these policies would put upward pressure on inflation and interest rates by supporting stronger demand, and much of the benefits would accrue to high-incomeandhighly-educated Americans. In the coming weeks, we will produce further analysis of the Administration’s latest proposal and continue to refine our cost estimates as more data is made available.
Mortgage applications increased 3.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 12, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 3.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 4 percent compared with the previous week. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 10 percent lower than the same week one year ago.
The Refinance Index increased 0.5 percent from the previous week and was 11 percent higher than the same week one year ago.
Bidenomics, a massive subsidy to the political donor class, but heartless towards the middle class.
Come feel the noise! After steady growth in 1-unit housing starts under Trump, housing starts have been eratic under Biden despite the foreign invasion force of millions … of low wage workers.
For context, this is the largest MoM drop in housing starts since the COVID lockdowns…
Source: Bloomberg
It was a bloodbath across the board with Rental Unit Starts plummeting 20.8% MoM…
Source: Bloomberg
That pushed total multi-family starts SAAR down to its lowest since COVID lockdowns…
The plunge in permits was less dramatic and driven completely by single-family permits down 5.7% to 973K SAAR, from 1.032MM, this is the lowest since October. Multi-family permits flat at 433K
Intriguingly, while starts and completions plunged in March, the BLS believes that construction jobs surged to a new record high…
Source: Bloomberg
Finally, just what will homebuilders do now that expectations for 2024 rate-cuts have collapsed?
Source: Bloomberg
One thing is for sure – do not trust what homebuilders ‘say’ (as NAHB confidence jumped to its highest since May 2022 at the same time as housing starts crashed)…
US CPI on trend for 4-5% at US election in November.
Source: BofA
Above 5%…?
Strong CPI raises market probability of YE25 rates above 5%.
Source: Goldman
Cyclical inflation remains too elevated
“Our measure of cyclical inflation–which should capture the impact of excess demand on prices–appears to be stuck at around 5%, which is too elevated”
Source: Safra
US alone
The US is the only economy in the G10 where the latest inflation print surprised to the upside.
Source: Goldman
200% of GDP
Under current policies, government debt outstanding will grow from 100% to 200% of GDP.
Source: Apollo
Close to $9 trillion in maturities
That’s a significant amount of government debt maturing within the next year.
Source: Apollo
Every year a deficit
OMB forecasts 5% budget deficit every year for the next 10 years.
Source: Apollo
A billion per day….is long gone
US government interest payments per day have doubled from $1bn per day before the pandemic to almost $2bn per day in 2023.
Source: Apollo
Biggest Story of 2020s…Ugly End of 40-year Bond Bull
Chart shows long-term US government bond (15+ year) rolling 10-year annualized returns, %.
Source: Flow Show
Highest yields in 15 years
The intermediate part of the yield curve still offers the highest yields in over fifteen years.
Source: Piper Sandler
Finally, electricity costs keeps rising, ESPECIALLY with the misnamed Inflation Reduction Act (IRA). The real name of the IRA should have been the Large Green Donor Increase Act (LGDIA).
Joe Biden, his Administration, and The Federal Reserve are really “The Alligator People.” Despite what they tell you, they have small brains (particularly Biden) and are hyperfocused on spending.
A good example comes from “Wall Street On Parade” where they show that The Federal Reserve is still paying BILLIONS to US Treasury in the form of remittances (losses). While at the same time, paying the mega banks on Wall Street high interest loans.
As of April 3 of this year, the Federal Reserve (Fed) has racked up $161 billion in accumulated losses. We’re not talking about unrealized losses on the underwater debt securities the Fed holds on its balance sheet, which it does not mark to market. We’re talking about real cash losses it is experiencing from earning approximately 2 percent interest on the $6.97 trillion of debt securities it holds on its balance sheet from its Quantitative Easing (QE) operations while it continues to pay out 5.4 percent interest to the mega banks on Wall Street (and other Fed member banks) for the reserves they hold with the Fed; 5.3 percent interest it pays on reverse repo operations with the Fed; and a whopping 6 percent dividend to member shareholder banks with assets of $10 billion or less and the lesser of 6 percent or the yield on the 10-year Treasury note at the most recent auction prior to the dividend payment to banks with assets larger than $10 billion. (This morning the 10-year Treasury is yielding 4.41 percent.)
Operating losses of this magnitude are unprecedented at the of Fed, which was created in 1913. In a press release dated March 26, the Fed stated this: “The Reserve Banks’ 2023 sum total of expenses exceeded earnings by $114.3 billion.”
As the chart above indicates, the Fed’s ongoing weekly losses have ranged from a high of $3.3 billion for the week ending Wednesday, January 31, 2024, to $1.86 billion for the most recent week ending Wednesday, April 3, 2024.
American taxpayers have good reason to sit up and pay attention to the Fed’s giant and ongoing losses. That’s because when the Fed is operating in the green, as it was on an annual basis for 106 years from 1916 through 2022, the Fed, by law, turns over excess earnings to the U.S. Treasury – thus reducing the amount the U.S. government has to borrow by issuing Treasury debt securities. According to Fed data, between 2011 and 2021, the Fed’s excess earnings paid to the U.S. Treasury totaled more than $920 billion.
WHO pays for the student loan forgiveness? It just doesn’t vanish, it is transferred to taxpayers. Alligators like Alexandria Ocasio Cortez going on talk shows to argue the benefits of being free from financial obligations that student voluntarily agreed to. Say, can AOC get my mortgage forgiven?? Just kidding. Now those same students can borrow additional money to get MBA degrees with the expectation that the student loan is “free money.”
Yes, Biden is acting recklessly (no surprise). Here is a picture of King Gator, Joe Biden.
The Biden Administration and The Federal Reserve ARE the alligator people. Except these gators are hungry for your money and votes constantly.
Despite Biden’s rambling that inflation is improving, bear in mind that the inflation rate is at it highest in 50 years. Yes, it has improved from 18% in 2022 to above 10% today.
A recent research paper by four noted economists, including Larry Summers, the former Treasury Secretary under Barack Obama and former Harvard President, discovered that the real inflation rate during the Biden years, using pre-1983 calculations reached 18% in 2022.
The number is the highest inflation rate the country has seen in over 50 years.
Confounded Interest - Anthony B. Sanders 
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