The flexible cut of the CPI—a weighted basket of items that change price relatively frequently—increased 19.76 percent (annualized) in February.
If we added the U-3 unemployment rate, we get a MISERY Index under Biden of 23.56%, the highest in modern history. Worse than Carter-era inflation and malaise.
Bear in mind that the traditional use of the misery index is CPI YoY + U-3 unemployment rate, we see that Biden’s misery index is similar to the early years of Obama (following the financial crisis) but lower than the Ford/Carter years.
US rent inflation (owner’s equivalent rent of residence YoY) surged to 4.30%. However, Zillow’s rent index last month was 15.93% YoY.
But if we look at US Monthly Rent YoY, we see that rents are climbing at a 17.6% rate.
Energy costs soared in February YoY. Gasoline was up 38%. Fuel Oil was up 43.6%. Food was up 7.9%.
Volatility (AVAT) rages in the energy sector.
There are still 7 rate hikes in the cards from The Federal Reserve.
Gold has been climbing as Russia invades Ukraine. Cryptos Bitcoin and Ethereum are steady, even as the Biden Administration issues an executive order to “study” cryptocurrencies.
The mayhem caused by the Russian invasion of Ukraine is helping drive down interest rates … for the time being … and this is helping push down mortgage rates and increase mortgage applications.
Mortgage applications increased 8.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 4, 2022.
The seasonally adjusted Purchase Index increased 9 percent from one week earlier. The unadjusted Purchase Index increased 11 percent compared with the previous week and was 7 percent lower than the same week one year ago.
The Refinance Index increased 9 percent from the previous week and was 50 percent lower than the same week one year ago. Diane Olick at CNBC has the hilarious headline “Brief drop in mortgage rates sparks mini refinance boom.” The slight rise in refi applications from the previous week is more of a firecracker going off than a boom given that refi apps are still down 50% from the same week last year.
Bear in mind that the US Treasury 10-year yield is up since the MBA’s reporting week ended on March 4, 2022. So, look for Olick’s mini-refi boom to end as quickly as it started.
Here is the rest of the MBA story.
The MBA Mortgage Purchase applications index typically peaks in mid-to-late April, so we still have another month (seasonality) until purchase applications begin declining again.
The US Treasury 10Y-2Y curve continues to flatten and is the worst curve recovery in modern history.
The general rise in US mortgage rates is more closely tied to expectations of Fed rate increases than Fed Agency MBS holdings.
Russia is still engaged in its invasion of Ukraine. And the US continues to import crude oil from Russia. In fact, US crude oil imports from Russia soared under Biden only to decline again in December 2021.
On the sovereign bond and currency front, the 5.25% coupon Russian international sovereign bond has crashed to 22.494. And the Ruble/USD cross has crashed as well.
Sberbank Bank 5 1/8% corporate bond has crashed to 25.
The Russian blue-chip stock market (OTOB Russian Traded Index CRTX) has crashed by over 50% since the invasion of Ukraine.
Fortunately, I like Cheerios for breakfast made from oats, since wheat futures are soaring.
Russia’s Credit Default Swap (CDS) 5Y has dropped to a still-elevated 554.
The US really needs to ban Russian crude oil imports, since Biden’s failed in game theory by cutting US energy exploration on Federal lands and offshore drilling.
War is hell, as Vlad “The Ukrainian Impaler” Putin has demonstrated.
This has been a brutal week for consumers. With the Russia/Ukraine conflict raging and Congress seems determined to not allow for additional oil and gas production, and Biden’s anti-fossil fuel edicts still in place, we are seeing dramatic price increases in wheat (UP 89.5% since January 1, 2021), WTI Crude (UP 143% since January 1, 2021), and food stuffs (UP 55% since January 1, 2021).
Bankrate’s 30-year mortgage rate has actually been falling the last several days, which is good for prospective home buyers as the 10-year US Treasury Note yield has been declining.
The USD/Russian Ruble cross is skyrocketing and the USD/Euro is doing likewise. Russians visiting the US will find that their trip is suddenly unaffordable (as do many American citizens will its rampant inflation). As Bruce Willis said in “Die Hard,” “Welcome to the party, pal.”
On Friday, the US Treasury 10-year yield declined 11 bps.
And energy prices continue to soar, particularly UK Natural Gas Futures that rose 19.85% overnight.
The US inflation data will be released on March 10th and the consensus is that February CPI inflation will rise to 7.9% YoY.
But even the latest unemployment rate report (3.8%) is signalling that The Fed should be raising interest rates since it is lower than the Natural Rate of Unemployment or NAIRU (4.44%).
And we have the next Fed policy error on March 16th. The Fed dots plot looks like the glide slope for an aircraft, but the message is that rates will be going up at future meetings.
And just for amusement, I present to you the infamous Hindenburg Omen chart that forecast the 2008/2009 stock market correction. Since that correction, the Hindenburg Omen has been flashing “danger” but the only correction was the COVID-linked correction of early 2020. While the Hindenburg Omen is flashing red right now, The Federal Reserve’s balance sheet (green line) has protected against market corrections. Let’s see what happens if and when The Fed decides to remove the epic monetary stimulus.
Its anyone’s guess as to whether The Fed will actually tighten monetary policy.
Despite crude oil, natural gas and gasoline price skyrocketing, House Speaker Nancy Pelosi proclaimed that
“The president has already talked about releasing oil from the — the st– as he already has done from the (slurred, inarticulate). And (slurred, inarticulate) I’m not for drilling on public lands.”
Well, if President Biden rescinded his executive order on drilling, pipelines, etc., we would see a reduction in energy prices AND inflation. But between Biden’s anti-fossil fuel orders and the Russia-Ukraine conflict, we can see that the WTI Cushing crude oil spot price has risen from $47 per barrel in early January 2021 to $112.05 today. That is over a doubling of crude oil prices.
Energy prices are up across the board, particularly gasoil, heating oil and coal.
If we use the core Flexible Price Index as a measure of inflation, we can see that Americans are the most miserable in modern history (Core Flexibe CPI + U-3 Employment rate).
UPDATE! House Republicans introduced the “American Independence from Russian Energy Act” on Feb. 28, a measure meant to authorize the Keystone XL pipeline, boost domestic oil and gas production, and prevent President Joe Biden’s executive branch agencies from halting energy leasing on federal land and water, among other provisions. Yet on March 1, the legislation was shot down by Democrats in a 221–202 vote, almost entirely along partisan lines.
The US still has a steeply upward-sloping yield curve, but Russia has the exact opposite: a steeply downward-sloping or inverted yield curve.
Here is a comparison of the US Treasury Actives curve (steeply-upward sloping) compared to Russia’s sovereign curve (steeply-downward sloping).
Russia’s technical default on international bonds has led to its 5.25% coupon international bond (denominated in Euros) to plunge from 131.6 in September 2022 to only 21.75 this morning.
Commodity prices? Commodity prices saw the biggest one-day gain in 13 years on Tuesday.
Between Biden’s anti-fossil fuel executive orders and the Russian invasion of Ukraine, gasoline futures are up 126% since the start of January 2021.
While Corelogic’s January home price index was hot, hot, hot (UP 19.1% YoY), today’s mortgage applications index for the week ending February 25, 2022 was not, not, not.
Mortgage applications decreased 0.71 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 25, 2022.
The seasonally adjusted Purchase Index decreased 1.76 percent from one week earlier. The unadjusted Purchase Index increased 1.16 percent compared with the previous week and was 9 percent lower than the same week one year ago.
The Refinance Index increased 1 percent from the previous week and was 56 percent lower than the same week one year ago.
Yes, the mortgage industry is going through some difficult times. But not as difficult as trying to understand Biden’s State of the Union address: “Putin may circle Kyiv with tanks, but he’ll never gain the hearts and souls of the Iranian people.” Huh?
And then Biden’s closing remark was “Go get ’em!” What? Go get whom? The Russians? Inflation? Trump supporters?? I feel like Biden thought the SOTU was the annual Army-Navy football game.
President Biden is giving his first State of the Union address tonight with rebuttals from Iowa Governor Kim Reynolds and The Squad’s Rashida Talib (yes, a Republican is giving the rebuttal to Biden’s SOTU speech, and a Democrat is rebutting a Democrat President??)
Let’s look at a short list of Biden’s economic triumphs. I will ignore Biden’s catastrophic Afghanistan withdrawal and his weak response to the Russian invasion of Ukraine.
If you want higher oil and gasoline prices, Biden is a tremendous success.
If you like rampant government spending, then Biden is your man. Home price growth is up to 18.84%, making housing unaffordable for millions of American families.
Wages? They are up, but declining after 7.5% YoY inflation. And GDP is almost zero.
Biden can only point to rising average hourly wages, but not REAL average hourly wages.
Inflation? Highest in 40 years, due to excessive Federal spending, The Fed’s crazy printing and Biden’s energy mandates.
I am scratching my head to think of accomplishments for Biden to mention in the SOTU. But I am sure that he will say something positive. Otherwise, Biden’s SOTU speech should be the Billy Preston song “Nothing from Nothing.“
As someone who needs to move to Ohio, I would really appreciate it if mortgage rates would more closely follow the 10-year Treasury yield. But alas, Bankrate’s 30-year mortgage rate just rose to 4.30% as the US Treasury 10-year yield dropped -8.2 basis points.
Europe. Middle East and Africa (EMEA) sovereign yields are all down over 10 basis points averaging around -15 bps.
Ukraine’s 10-year yield has plummeted by -48.3 bps this morning.
The anticipated meeting between Russia and Ukraine on Belarus soil was a failure. Likely due to Belarus showing-off their modern air force capabilities.
Confounded Interest - Anthony B. Sanders 
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