Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
No problemo, says James “Bully” Bullard, President of the St Louis Federal Reserve. Bullard said that US recession fears are overblown with consumers “healthy.”
Really Jim?
Inflation is so bad they REAL average hourly earnings growth keeps falling and is now -3.34% YoY.
Apparently, real GDP growth of ZERO doesn’t bother Bullard either.
Apparently, we are still Under The Thumb of The Federal Reserve.
The kids running Washington DC are not as sharp as pistols (which they want to take away) when they do the DC stomp.
Thanks to massive Fed monetary stimulus still stalking the housing market, US new home sales rose +10.7% MoM (from April to May), but were down -5.9% YoY (from May 2021 to May 2022) as mortgage rates rose.
Median price of new home sales rose 42% since May 2021, thanks to Fed stimulypto. And Federal government stimulus spending.
Yes, like the predators from the movies, The Fed’s balance sheet is still stalking markets.
Fed Chair Jerome Powell.
The talk of a gasoline tax “holiday” out of Washington DC is pure Kabuki theater. It is purely a sign of the times with Biden still trying to blame Putin for rising gasoline prices and inflation and ignoring his anti-fossil fuel policies that helped drive energy prices AND inflation through the roof.
Daily regular gasoline prices have dipped below $5.00 to $4.94 while diesel fuel, the lifeline of the shipping industry, rose slightly to $5.80. I guess the folks shipping food and other goods don’t get a holiday.
Note that the implied Fed target rate has fallen a bit as the probability of a recession increases.
And why are banks stashing so much money at The Fed in the form of reverse repos? Fear of recession, perhaps?
The Biden Administration is settling all kinds of records, and none are good.
Despite what Biden and his muppets say, there is a good chance that the US will slip into recession over the next 24 months. And with that, we are seeing a slight drop in US mortgage rates.
Inflation is surging, and The Fed seems intent on “inflation fighting” but may have to pause that fight the impending recession. This is called a “U-turn” although Powell didn’t mention that is his testimony yesterday.
According to Mortgage News Daily, the 30-year fixed dropped below 6% to 5.88%.
Europe is signaling their u-turn to recession fighting as 10-year sovereign yield have dropped over 10 basis points this morning. Australia and New Zealand are dropping hard as well.
Here is the Federal Reserve’s open market committee deciding on the direction of interest rates … inflation fighting or recession fighting?
Although mortgage rates have been rising quite fast, The Fed’s balance sheet is only being reduced quite slowly, leading to a continuation of the hot, hot, hot housing market.
But the expectation of Fed rate hikes is causing mortgage rates to soar and borrowers are trying to get buy housing before The Fed chokes off rates.
Mortgage applications increased 4.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 17, 2022.
The seasonally adjusted Purchase Index increased 8 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 decreased 3 percent from the previous week and was 77 percent lower than the same week one year ago.
So, the housing market remains hot, hot, hot but not mortgage refi applications. But Powell and Company will likely choke-off purchase applications as well.
Rising energy prices, rising home prices, rising mortgage rates, declining hope.
But as The Federal Reserve begins to withdraw it Covid stimulus, existing home sales declined -3.39% in May from April.
But like Covid itself, The Fed’s outrageous monetary stimulus is still in place, helping caused median home prices to rise 14.8% YoY. And inventory for sale is rising, but still remains low.
Jointly, Treasury Secretary Yellen and Fed Chair Powell are “Mr Freeze.”
We’ve got a line on The Federal Reserve. They don’t seem to care about housing and the mortgage market.
Monthly mortgage payments are soaring as home prices soar AND mortgage rates soar.
Mortgage rates have soared with Fed noose tightening.
Something has to give. Otherwise, winter is coming.
The theme song of The Federal Reserve thinking that rising prices can be tamed by raising rates is “Dear Mr Fantasy.”
I couldn’t sleep at all last night … after The Fed cranked up their target rate 75 basis points.
The odds of a recession grew to 71.7% as The Fed hikes rates.
Over the next 24 months, the probability of a US recession is 98.5%.
The NASDAQ index tanked -4% today on the fallout from yesterday’s Fed actions.
Do I detect a trend in The Fed’s latest Dot Plot??
So, will The Fed continue to go head-over-heels on monetary tightening?
Like in the movie The Poseidon Adventure, we can all sing “The Morning After.”
On the heels of The Fed’s 75 basis point surge in the target rate, the US Treasury yield jumped +11.5 BPS as of 8:30 AM EST. The S&P 500 E-mini futures contract is down -1.8%.
As investors brace for a recession, mortgage rates dropped to 6.03%.
Gasoline prices remain near $5 per gallon, diesel prices are near $6 per gallon and The Fed’s massive balance sheet is still in force.
On the housing front, US housing starts plunged -14.4% MoM in May, the biggest decline under Biden.
While housing starts were down -14.4% MoM in May, single-family detached home were down only -9.16%. It was 5+ unit (multifamily) starts that were down -26.83% MoM.
Good morning peeps! Reality is dawning after the market surge yesterday after investors celebrated that The Fed could have raised rates even more.
Sometimes I wonder if The Federal Reserve Board of Governors pays attention to economic news. For example, the Atlanta Fed’s GDPNow forecast for Q2 was released today at -0.002%. So what does The Fed do? They raised their target rate by 75 basis points to 1.75%.
Apparently, The Fed has chosen to fight inflation rather than help the economy.
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