Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
The Fed’s theme song: Keep on printing!
Look at this chart of the S&P 500 index against M2 Money stock.
And this chart of Case-Shiller home prices against M2 Money.
Bottom line? The Fed has to keep on printing money. Otherwise, the US economy will collapse like a cheap building.
Here is Fed Chair Jerome Powell creating assets bubbles.
The wheels are coming off Bidenomics. Code for corporate welfare and massive government spending. Coupled with misguided and burdensome regulations, we got gut wrenching inflation.
The result? A disastrous stock market showing yesterday.
What has Biden/Harris’ economic agenda wrought? Record high personal debt and record low savings rates.
Like the Go-Go’s song Manic Monday, it is a manic Monday for stocks. The awful jobs report from last Friday is reverberating through markets. The VIX (fear index) soared to 52.2 this morning.
MY fear is that Congress will go wild and start (mis)spending trillions of dollars again on hare-brained projects like green energy (and electric cars) when our electric grid can’t support the increase in electric cars.
US 2s/10s yield spread is now flat for the 1st time since 2022 on aggressive repricing of Fed rate cuts. US 2y yields have plunged by 70bps to 3.69% since last Wed while US 10y yields only dropped by 40bps in the same time.
Voters are head-over–heels for Kamala Harris, a dim-witted Marxist authoritarian.
Remember the TV show “The Biggest :Loser”? That show was about weight loss.
Now The Federal Reserve has posted a record loss of $114 BILLION IN 2023.
The cause of the loss? Massive expansion of The Fed’s balance sheet coupled with rising interest rates. The two year track record of The Fed is truly appaling. With a bloated balance sheet, rising interest rates have caused staggering losses.
The Fed is the biggest loser!
And the biggest losers!
Bidenomics (actually Biden/Harrisnomics) is all about huge payoffs to large, powerful donors. A good example is The Chips Act, intended to bring chip manufacturing back to the US from Taiwan, China, etc. Biden/Harris doled out $8.5 BILLION to Intel … which just laid off 15% of it’s labor force or 15k workers.
Intel has suspended dividends and its stock price has crashed from above $45 in March now down to $21.48, a 53% loss in 4 months.
Bear in mind that a Harris Presidency would be more of the same wasteful, Communist-style centralized economic (mis)management. Perhaps even worse.
And on that dreadful jobs report on Friday, the VIX fear index soared (white line) to its highest level since March 2023.
Qhat a terrible jobs report! The number of unemployed rose by 352k and only 114k jobs added.
It was a 3 sigma miss to the median estimate of 175K.
May revised down by 2,000, from +218,000 to +216,000, and the change for June was revised down by 27,000, from +206,000 to +179,000. With these revisions, employment in May and June combined is 29,000 lower than previously reported. It gets better because as shown in the next chart shows, 5 of the past 6 months have now been revised lower.
And the US yield curve is screaming recession ahead!
Over the last year, native-born Americans have LOST 1.2 million jobs while foreign-born employment has increased 1.3 million; we’re just swapping out American workers at this point.
The US commercial real estate sector is dying, like an episode of The Twillight Zone.
Example? This is 135 W 50th St in NYC. In 2006, this building sold for $332 million. Yesterday it sold for $8.5 million at auction. A 97% discount!
It is mostly smaller banks with large CRE exposure.
Mortgage applications decreased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending July 26, 2024.
The Market Composite Index, a measure of mortgage loan application volume, decreased 3.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent lower than the same week one year ago.
Note the decline in mortgage purchase demand after Biden/Harris were sworn into office in Janaury 2021.
The Refinance Index decreased 7 percent from the previous week and was 32 percent higher than the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) remained unchanged at 6.82 percent, with points increasing to 0.62 from 0.59 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
Because of rising rates under Biden/Harris economic policies, mortgage refinancing demand has gotten crushed.
We are in the latter half of the year, so seasonalility will kill off purchase mortgage demand compared to the Spring and early Summer.
Sigh. We got jolted!
And yet, the same data rigging observed last month took place once again, because a quick look at the breakdown shows that while private jobs saw another broad drop in openings across private sectors…
… this was almost fully offset by the relentless surge in government job openings.
Yes, while May was indeed revised lower, June saw another bizarre jump in government job openings, surging to a near record 1.094 million, driven by a 118K spike in State and Local job openings.
Putting it all together, while private sector job openings plunged to a level seen back in late 2018, government job openings are just shy of a record high!
Ignoring the data manipulation, in the context of the broader jobs report, in June the number of job openings was 1.373 million more than the number of unemployed workers (which the BLS reported was 6.811 million), down from last month’s 1.581 million and the lowest since the summer of 2021.
Said otherwise, in April the number of job openings to unemployed dropped to just 1.24, a sharp slide from the March print of 1.30, the lowest level since June 2021 and now officially back to pre-covid levels.
But wait there’s more: confirming that if one ignores the clearly manipulated jump in government job openings (“quick, let’s hire a ton more TSA agents and deep state apparatchiks to make it seems that Kamalanomics is working”), a quick look at the number of quits – an indicator closely associated with labor market strength as it shows workers are confident they can find a better wage elsewhere – showed a plunge in June, dropping by 121K, the most since July 2023, to just 3.282 million, the lowest since August 2020!
Finally, the piece de resistance was the number of actual hires, which in June also tumbled to just 5341, down a massive 314K in one month, the biggest monthly drop since February 2023…
… dragging the total to just 5.3 million, the lowest level since the depts of the covid lockdowns.
Finally, no matter what the “data” shows, let’s not forget that it is all just estimated, and it is safe to say that the real number of job openings remains still far lower since half of it – or some 70% to be specific – is guesswork. As the BLS itself admits, while the response rate to most of its various labor (and other) surveys has collapsed in recent years, nothing is as bad as the JOLTS report where the actual response rate remains near a record low 33%
In other words, more than two thirds, or 70% of the final number of job openings, is estimated!
And at a time when it is critical for Biden, pardon Kamala, to still maintain the illusion that at least the labor market remains strong when everything else in the economy is crashing and burning, we’ll let readers decide if the near record number of government job openings at a time when hiring and quitting are both crashing, is an accurate reflection of a strong labor market, or is merely a reflection of a debt-funded deep state gone full tilt. We’ll know the answer on Friday.
Up until 2022, the US Treasury yield curve behaved normally. In fact, as late as May 6th, 2022, the US Treasury 10Y-3M yield curve was at +227 basis points. Denote by the orange line in the following chart. That date corresponded with peak Fed balance sheet.
Then the massive spending by Biden/Harris/Congress hit the fan and inflation soared. The Fed counter attacked by raising rates and began scaling back their balance sheet. The 10Y-3M yield curve has been negative ever since.
Confounded Interest - Anthony B. Sanders 
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