Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
2024 hasn’t been a good year for Bidenomics. The Economic Surprise Index is falling to its lowest point in years.
The economic confidence index has been terrible since Covid and Biden’s Reign of Ecoomic Error.
We need to give Biden the hook!’
And I don’t want The Lizard Queen either.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 1.8 percent on June 3, down from 2.7 percent on May 31. After recent releases from the US Census Bureau and the Institute for Supply Management, the nowcasts for annualized second-quarter real personal consumption expenditures growth and real private fixed investment growth declined from 2.6 percent and 3.1 percent, respectively, to 1.8 percent and 1.5 percent.
fff
Since I used The Animal’s version of the John Lee Hooker great tune “Boom Boom,” I will use another Animals tune for Joe Biden’s penchant for sniffing little girls. “Baby Let Me Take You Home.”
The Animals band. Not to be confused with the animals in the Biden Administration and Congress.
Job openings in April 2024 dipped to 8,059. Notice the trend (orange line) is below the trend set prior to Covid (red line).
Call it Washington DC soullessness.
Back in 2023, Socialist Paul Krugman declared that “the war on inflation is over!!! “We” won, at very little cost.” I love when elitists claim “We won!” since clearly 99% of Americans lost since food, housing and car prices up are double digits under Biden.
The problem is that food, energy, shelter, and used cars/trucks are a huge part of Americans consumption basket.
Under Biden, food CPI is up 23%. Home prices are up 34% and used cars/truck prices are up 17.7%.
A note to Paul Krugman, YOU may have won, but the rest of Americans lost. Consumer purchasing power of the US Dollar is DOWN 16.5% Under Biden.
Here is where we stand under Bidenomics.
Ask Joe if he cares.
After unexpectedly slumping last month to 37.9, the Chicago PMI index cratered even more unexpectedly in May, when it defied hopes of a rebound to 41.5, and instead tumbled even more, sliding to a cycle low of 35.4 which was not only below the lowest estimate, but was staggeringly low. To get a sense of just how low, the last two times it printed here was during the peak of the covid and global financial crises…
… which seems to suggest that at least according to Chicago-based purchasing managers, the economy is in a depression.
This is how the final number looked relative to expectations.
Looking at the report we find the following:
Did nothing rise? One thing did:
So we have not just a depression, but a stagflationary depression in which everything else is going to hell, except prices: they keep on rising.
And while it is unclear what has prompted this unprecedented bearishness (the surely negative contribution from Boeing is likely to blame for a substantial portion of the apocalyptic outlook), one thing is certain: Goldman will have to come up with even more goalseeked surveys that explain away reality and tell us how purchasing managers really should feel…
On the good news front, REAL Gross Domester Income rose to 1.5%.
As copper prices keep on rising. Which is bad news for Biden’s shift to EVs! (Once again, Biden is driven around in gas guzzling Chevy Tahoes/Suburbans and owns a Chevy Corvette). There isn’t enough copper production to build the EVs that Biden wants.
Biden drove his Chevy to the STRATEGIC PETROLEUM RESERVE and the reserve was dry. And them good old Democrats were drinkin’ whiskey and rye after a New York Jury found Trump guilty of 34 felony counts, despite there not being any laws broken.
I have testified and sat through many trials in New York city and have never seen a court case quite like the one the Trump lost with the Judge effectively telling the jury to find Trump guilty.
With the terrible mortgage applications index from Wednedsay, we are seeing US pending home sales crashiing. As Joe Biden handles the economy his way.
After an unexpected jump in March, pending home sales were expected to drop 1.0% MoM in April as mortgage rates pushed back above 7.00% and stayed there.
Well, the analysts had the direction right but magnitude was way off as pending home sales plunged 7.7% MoM – the biggest drop since Feb 2021 (and below the lowest estimate), leaving sales down 0.7% YoY…
This is the 29th straight month of YoY declines for non-seasonally-adjusted pending home sales.
This MoM decline pushed the Pending Home Sales Index back to record lows…
The Midwest saw the biggest drop in pending sales, down 9.5% in April, followed by declines of 8.5% and 7.6% in the West and South, respectively. Contract signings in the Northeast fell 3.5%.
“The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” NAR Chief Economist Lawrence Yun said in a statement.
“But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.”
All driven by affordability crisis as mortgage rates surged back above 7.00%…
“The prospect of measurable home price declines appears minimal,” Yun said.
“The few markets experiencing price declines will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs.”
As a reminder, the pending-sales report tends to be a leading indicator of sales of previously owned homes, because houses typically go under contract a month or two before they’re sold.
What I like about Biden’s economy … nothing. Most of Biden’s economic growth came from Trump’s spending and Fed monetary policy from the Covid shutdown of 2020.
The sharp downward revision primarily reflected a downward revision to consumer spending, which rose 2.0% annualized, down from 2.5% in the first GDP report and below the 2.2% estimate.
Drilling down into the number, the 1.3% increase reflected increases in consumer spending (below previous forecasts) and housing investment that were partly offset by a decrease in inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
In terms of bottom-line contributions, we find the following:
The thrill is gone …from the US mortgage market.
The Market Composite Index, a measure of mortgage loan application volume, decreased 5.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6.3 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 10 percent lower than the same week one year ago. And -40% under Biden.
The Refinance Index decreased 14 percent from the previous week and was 12 percent higher than the same week one year ago.
It is still an unfavorable time to buy a home!
From the film “Ronin” that sums up actor Robert DeNiro in one sentence.
Spence (Sean Bean): “You know, you think too hard.”
Sam (Robert DeNiro): “Nobody ever told me that before.”
How would DeNiro consider the 40% drop in mortgage purchase demand under Biden?
Housing in the US is simply unaffordable. Home prices in Biden’s America are up 34.5% even though mortgage rates are up 157%.
This pushed the price up 7.38% YoY – the fastest rise since October 2022…
“We’ve witnessed records repeatedly break in both stock and housing markets over the past year. Our National Index has reached new highs in six of the last 12 months.” says Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices.
Overall, US home prices reached a new record high in March (as median new home prices began to fall)…
San Diego continued to report the highest year-over-year gain among the 20 cities this month with an 11.1% increase in March, followed by New York and Cleveland, with increases of 9.2% and 8.8%, respectively.
Portland, which still holds the lowest rank after reporting three consecutive months of the smallest year-over-year growth, posted the same 2.2% annual increase in March as the previous month.
Luke suggested this implies “a strong demand for urban markets.”
No city has seen a MoM decline in price in 2024.
Home prices continue to track Fed Reserves closely, but a turning point may come soon…
Given the smoothing and heavy lag in the Case-Shiller data, it’s hard to find a causal relationship between prices and mortgage rates…
…but with rates remaining above 7%, it seems hard to believe prices can continue their advance.
Who the heck is HUD Secretary? It was Cleveland’s Marcia Fudge (a typical Biden political appointment). Now it is Adrianne Todman, from the US Virgin Islands and former executive director of the District of Columbia Housing Authority. Not exactly a high-powered resume for a cabinet post, Joe!
I saw former President Obama criticizing former President Trump for not passing “transformative” changes. That is, Trump didn’t sign any Obama-like transformative changes (like Obamacare). Truimp did try to slow down the damage done by Obama and his transformative agenda (e.g., open borders, wealth redistritution, green energy) that Biden has attempted to continue.
As we approach the party conventions and Presidential election of 2024, we saw the Economic Surprise Index (ESI) in May decline to -0.126.
Coupled with Biden’s negative buying conditions for housing (higher mortgage rates and soaring house prices), Obama’s Jacobian transformative economic fantasty is on thin ice.
Speaking of higher interest rates, US debt servicing costs currently make up 12% of government spending. Jacobin revolution = Cloward-Piven.
Let’s hope the Obama/Biden Jacobin revolution doesn’t get to this point!
The various talking heads from The Federal Reserve keep jawboning about whether to raise rates or not. One of the major drivers of inflation is … money. M2 Money growth YoY is growing again (blue line)! And with it, inflation has been rekindled.
Mortgage rates? There is a lag between M2 Money printing and conforming mortgage rate growth.
Fear the talking Fed.
Confounded Interest - Anthony B. Sanders 
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