US Services Gauge Jumps To 4-Month High In June As China Encourages Stock Market Investment

A gauge of U.S. service industries jumped to a four-month high in June and showed the resumption of growth as the economy reopened more broadly from pandemic-induced lockdowns.

The Institute for Supply Management on Monday said its non-manufacturing index soared a record 11.7 points to 57.1 last month, exceeding the 50.2 median forecast in a Bloomberg survey of economists. While the rebound follows a similar jump in the group’s manufacturing gauge and indicates that the economy is recovering from its pandemic-related recession, recent spikes in Covid-19 cases threaten to restrain the pace of improvement in services.

A front-page editorial in China’s Securities Times on Monday said that fostering a “healthy” bull market after the pandemic is now more important to the economy than ever. Chinese social media exploded with searches for the term “open a stock account,” with bullish sentiment also lifting the yuan. The Shanghai Composite Index closed up 5.7%, the biggest advance since 2015.

And a good economic report out of China produced this result for The Dow.

Tiny (Asset) Bubbles? Or HUGE Asset Bubbles? Is Charlie Kelly The REAL Fed Chair?

The Federal Reserve has been pumping liquidity (aka, air) since late 2008. And the stock market and commercial real estate prices have soared.

These are not tiny bubbles, but HUGE bubbles.

Is Charlie Kelly’s uncle Jack the real Fed Reserve Chair?

My Fed! FOMC Minutes Suggest Fed Will Keep Buying Bonds “For Many Years” As Fed Officials Unconvinced on Need for Yield-Curve Control

There is nothing in the world that can change The Fed.

Federal Reserve officials had “many questions” about the benefits of yield-curve control when they discussed its pros and cons during their meeting in early June.

“Many participants remarked that, as long as the committee’s forward guidance remained credible on its own, it was not clear that there would be a need for the committee to reinforce its forward guidance with the adoption of a YCT policy,” minutes published Wednesday of the June 9-10 Federal Open Market Committee meeting showed. YCT refers to yield caps or targets.

Here is today’s Treasury yield curve versus the yield curve on December 1, 2005. Looks more like wholesale panic to me.

Furthermore, Powell and The Fed have signaled in the minutes that more long-term debt will have be issued … and purchased by The Fed.

The Fed dots plot from the recent meeting shows low interest rates until after 2022.

To infiniti … and beyond!!

US Home Prices Soar 4.73% YoY In April As Average Hourly Rise 7.76% YoY (No Where To Run, No Where To Hide)

When US Treasury yields below 1% for maturities less than 20 years,

households are incentivized to invest in the stock market and real estate. As such, it is no surprise that the Case-Shiller national home price index rose 4.73% YoY in April.

At the same time, average hourly earnings for US workers rose 7.76% YoY in April and 6.75% in May.

Phoenix led in YoY price growth at 8.8% with Chicago at the bottom with 1.4% growth.

It doesn’t look like The Fed will pull the plug on its prodigious asset buying anytime soon.

“I swear that I will not meaningfully reduce The Fed’s footprint in the economy.”

Fed’s Muriburiland: Fed Keeps Pumping Air Into Asset Prices (S&P 500, Commercial Real Estate)

“In the field of monetary and credit policy, precautionary action to prevent inflationary excesses is bound to have some onerous effects— if it did not, it would be ineffective and futile. Those who have the task of making such policy don’t expect you to applaud. The Federal Reserve, as one writer put it after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”

William McChesney Martin, Speech to Investment Bankers Association of New York, October 1955

Perhaps The Fed removes the punch bowl in Muriburi Land, but The Fed certainly didn’t remove the punch bowl in the USA. The S&P 500 index and commercial real estate have both exploded with the perpetual punch bowl.

“We’re not even thinking about thinking about the consequences of our actions.”

Jerome Powell, Chairman, Federal Reserve

Apparently, Chairman Powell lives in financial Muriburiland.

Thanks to Jesse at Jesse’s Cafe Americain for the quotes!

4.68 Million Homeowners In Forbearance Plans (8.8% of Active Mortgages)

Black Knight has some grim housing news today. The latest data from the McDash Flash Forbearance Tracker shows that the number of homeowners in active forbearance rose this week after three consecutive weeks of declines.

As of June 23, As of June 23, 4.68 million homeowners are in forbearance plans, representing 8.8% of all active mortgages, up from 8.7% last week. Together, they represent just over $1 trillion in unpaid principal ($1,025B)., up from 8.7% last week. Together, they represent just over $1 trillion in unpaid principal ($1,025B).

Fannie Mae and Freddie Mac lead in terms of loans in forbearance.

What is forbearance you ask? Forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later.

The Forgotten Man II: Federal Reserve Holds 48.3% Of Treasury Debt Outstanding As Q2 GDP Plunges To -46.6%

It is stunning that The Federal Reserve now holds almost 50% of the US Treasury debt outstanding. At the same time, Japan and China are reducing their holdings.

Meanwhile, the government-shutdown of the economy has caused a recession. The Atlanta Fed GDPNow forecast of Q2 GDP is a whopping -46.631%.

Yes, “the shutdown governors” of NY (Cuomo), NJ (Murphy) and VA (Northam) have forgotten about the middle class as FDR forgot about them in the Great Depression.

Dow Tanks 700 Points As Covid-19 Picks Up Steam (No Where To Run For Treasuries)

The latest on the Covid-19 epidemic indicates that opening local economies will result in more Covid-19 cases. Which will lead to more governors and mayors shutting down economies.

On this bleak news, the Dow fell over 700 points.

As Martha and the Vandellas warbled, “No where to run, no where to hide” for Treasuries. Since the US Treasury yields at 3 years and less maturity are at only 21 basis points and lower.

There is no where to run to hide from local government shutdowns of the economy. But life finds a way .. unless government interferes.

The US Dollar And Alternatives Cryptocurrencies, Gold, Silver (Dollar Has Lost 57% In Purchasing Power Since 1980)

It has been a wild ride for the US Dollar since the 1980s.

Since 1980, the US Dollar has declined 57% in terms of purchasing power (going from 0.404 in 1980 to 0.130 for today).

The decline in purchasing power of the US Dollar looks like the ski jump at Lillehammer Norway.

There is little doubt that the purchasing power of the US Dollar will continue to deteriorate. But there are alternatives for value preservation. Such as Bitcoin, Gold and Silver.

Note that gold and silver moved together until the Great Bitcoin Bubble of late 2017/early 2018. Since the burst of the Bitcoin bubble, gold has skyrocket and silver has risen a little. Bitcoin also has risen, but nowhere near its bubble highs.

Of course, Bitcoin is hardly the only crypto game in town: Dash, Ethereum, Litecoin, Monero, etc. Even Singer Akon is launching his own Crypto along with Venezuelan strongman Nicolas Maduro who has launched his own crytpo!

The US Dollar is legally manipulated by The Federal Reserve, but gold, silver and cryptos can be easily manipulated by foreign agents. So be careful!

“Did someone say Lillyhammer?”

Why Residential Mortgage Rates Won’t Rise Over The Next Two Years (Ultra Bond Futures Trading At An Ultra Premium)

Mortgage lenders should rejoice at the continuing low level of 30-year mortgage rates and the 10-year Treasury yield.

The Covid-crisis can be seen in the following chart, starting in January 2020. It has been all downhill since January 1st in terms of rates and yields. With the exception of the blip in the Freddie Mac US Mortgage Market Survey 30 Year Homeowner Commitment rate around March 19, 30-year mortgage rates are barely above 3%.

The US Ultra Bonds futures price continues to trade at an ultra-premium.

The ultra premiums in ultra bond futures indicates that the Covid shutdowns are likely to return. Or continue to ravage the economy. And endless interference in markets by The Federal Reserve.