Whip It! US Misery Index Highest In Modern History As Energy, Food And Building Material Prices SOAR (Flexible CPI Overwhelms Declining Unemployment Rate)

It is truly a miserable time for many Americans as demonstrated by the Misery Index (inflation rate + unemployment rate). But rather than using the CPI YoY measure at 7.5%, I am using the FLEXIBLE CPI YoY to compute the misery index. And is it ever miserable!

In January, the CORE flexible CPI YoY + U-3 unemployment rate hit a modern high at 22.99%. Or at least since 1967.

Like the movie “50 Shades of Gray,” we have 50 shades of inflation. Examples?

How about hardwood? Producer Price Index for hardwood is up 30.8% YoY.

How about diesel fuel prices? They are UP 40% since January 1, 2021.

How about housing? UP 20% YoY according to Zillow’s home value index.

Global food prices? UP 20% YoY.

I could go on and on, but you get the picture. Rising energy, food and construction materials are soaring making many Americans miserable.

But Powell and The Fed have promised to whip inflation. Whip it good … with interest rate increases.

UMich House Buying Conditions Falls To 71 As Fed Monetary Stimulypto Continues! (10Y-2Y Treasury Curve Slipping Into Darkness)

The University of Michigan consumer survey is out for February. And an ugly survey is it! Buying conditions for housing fell to 71 as The Federal Reserve continues it monetary stimulypto!

Despite 7.5% inflation, The Fed continues its “Stimulytpo” monetary policy.

As the US Treasury 10Y-2Y yield curve is slipping into darkness.

US consumer confidence is the lowest in 10 years as the yield curve crashes.

Here is the POMO schedule just released by The Fed.

I am reminded of my roommate at University of Wyoming who played James Brown over and over and over again. Much like The Fed doing nothing to curb inflation. Until they finally do something with a crashing yield curve.

Can’t wait for Powell to turn The Fed loose.

Bidenflation? WTI Crude UP 91% Under Biden, Foodstuffs UP 47%, 30Y Mortgage Rates UP 39% (6-7 Rate Increases, What’s It Going To Be?)

Well, it has been a cringe-worthy year+ under President Biden. West Texas Intermediate Crude futures price is up 91% and the Commodity Research Bureau Foodstuffs index is up 47%. Talk about Biden’s energy folicies being passed through to American households in the form of higher food costs and energy prices!

And then we have mortgage rates. Bankrate’s 30Y mortgage rate is up to almost 4%, up 39% since the beginning of 2021.

Other central banks are raising rates like banshees on the moor, while The Federal Reserve continues to send conflicting signals about possible March rate hikes.

Goldman Sachs sees 7 rate hikes in 2022, culminating in an eventual 2% rate in December.

Fed Funds Futures are signalling 7 rates increases by the February 1, 2023 meeting.

6 or 7 rate hikes, what’s it going to be?

It’s just like Biden to blame COVID for reckless Federal monetary and fiscal policies that overloaded the system.

Reversal Of Fortune: Yield Curve Drooping As 2022 Forecast To Be Slower Market For Housing

No, not the Klaus von Bulow type of “reversal of fortune” (when he killed his wife). I am talking about a reversal in fortune for America.

Let’s look at the 10Y-2Y Treasury curve. It typically falls below 0 basis points before every recession. Except the mini-COVID recession of 2020. But notice that the Treasury curve did not recover from the COVID recession as it typically did. More along the lines of 1984-1985.

Speaking of Reversal of Fortune, everything changed once Fed Chair Powell started to speak after Tuesday’s FOMC meeting.

Hmm. Midterm elections, possible Russian invasion of The Ukraine, further problems in China, etc. While The Fed Funds Future data implies that The Fed may raise their target rate 5 times over the coming year, we’ll see.

I happen to agree with Fannie Mae’s Doug Duncan who says that he is less bullish about the housing market in 2022.

If 2021 was a great year for the US housing market, 2022 faces “a new normal” marked by a slowing down of home price rises, job layoffs in the mortgage industry, and concerns over rising inflation and interest rate hikes, according to Douglas Duncan (pictured), Fannie Mae’s senior vice president and chief economist.

Duncan said “a shift” was underway in the market and the wider economy, which would result in far more moderate home price appreciation, expected to be between 7% and 7.5% this year due to the ending of fiscal and monetary stimulus.

“One of the elements of the shift is that you’re going to see house prices up, but not nearly as far as they were in the last two years because that was driven hugely by the fiscal and monetary stimulus (now) being removed,” he told MPA.

Ominously, he added that low interest rates “may never be seen again”. Or at least until Biden appoints more doves to The Federal Reserve Board of Governors.

The doves at The FOMC.

Too Much Money! U.S. Consumer Spending Drops, Price Index Up Most Since 1982 (REAL Personal Spending Fell 1% In December)

This is a case of “Too much money” in the economy, courtesy of The Federal Reserve.

(Bloomberg) — U.S. inflation-adjusted consumer spending fell last month by the most since February, suggesting that Americans tempered their outlays amid the latest Covid-19 wave and the fastest inflation in nearly 40 years.

Purchases of goods and services, adjusted for changes in prices, decreased 1% from November, the Commerce Department said Friday.

The personal consumption expenditures price gauge, which the Federal Reserve uses for its inflation target, rose 0.4% from a month earlier and 5.8% from December 2020, the most since 1982. Unadjusted for inflation, spending fell 0.6%, while incomes rose 0.3%.

Yes, the PCE Deflator YoY rose to 5.8% as M2 Money Stock is growing at a 13.1% YoY clip.

REAL personal spending declined 1% in December as prices rose in part thanks to the 13.1% growth in M2 Money stock YoY.

Too much money! Time to slow down, Jay Powell! Stop sucking the life out people with inflation.

US Q4 GDP Price Soars To 6.9% QoQ As Commodity Prices Skyrocket (10Y-2Y Treasury Curve Tanks)

Yes, The Federal Reserve could have raised their target rate at their January meeting, but chose not to raise rates. Instead, Chairman Powell said that rate increases are a comin’!

I hope Powell wasn’t hoping for a slowdown in inflation, because today’s Q4 GDP report showed a surge in GDP to 6.9% QoQ. But with that GDP surge we also got a surge in prices paid by consumers to 6.9% as well. Thanks to the continuing massive Federal stimulus being poured into markets.

Despite the positive news on Q4 GDP, we are still seeing 7% inflation and a diving 10Y-2Y yield curve.

Along with that surprising GDP report, we are seeing the Bloomberg Commodity Index rising like a bat out of hell (RIP, Meatloaf).

Powell apparently found paradise by the dashboard light. So, why rock the boat? Oh yes. INFLATION.

Should Powell be renamed Meatloaf?

US New Home Sales Crash -14% YoY In December As Median Price Slows To +3.4% YoY (Mortgage Applications Decline As Mortgage Rates Increase)

US new home sales spiked in December by 11.9% from November, but were down 14% year-over-year.

But the median price of new home sales (YoY) declined to 3.4%.

The Midwest saw a surge in new home sales (+56%).

The MBA’s mortgage applications index shows declining purchase applications (-1.83%) and declining refinancing applications (-12.60%) as mortgage rates increased from 3.64% to 3.72% for the week of 01/21.

Now, mortgage purchase applications rose for the week of 01/21 if we used non-seasonally adjusted data.

Bubble Burst? NASDAQ, WTI Crude Futures And Bitcoin All DOWN On Opening (Europe Stoxx Down 4%)

Is this the bubble burst many were expecting once The Federal Reserve starting raising rates?

Well, if today’s market opening is an indication, the answer is yes. The NASDAQ Composite Index is down 1.36% and West Texas Intermediate Crude Oil futures prices are down 2%.

The S&P 500 index is down over 10% since January 3rd.

Drawdown is taking place.

But if you think the US equities are deflating, look at European equities. The Euro Stoxx 50 index is down 4.04%.

Is this a Don Ho “Tiny Bubble” burst? Or a slow deflation of asset prices as The Fed removes its stimulus?

Simply Unaffordable! Fannie Mae Multifamily Financing Grew 23% … While Home Prices Grew 19.1% And Real Hourly Earnings Fell -2.36% (Rising Mortgage Rates Make The Affordability Problem WORSE)

Mortgage Orb has the tantalizing headline: “Fannie Mae’s Financing for Multifamily Affordable Housing Grew Over 23%.” At first, this sounds amazing … until you realize how simply unaffordable housing is much of urban/suburban America.

If you look at the following chart, you can see multifamily (5+ unit) starts remain elevated (pink box) which is not surprising given that home prices at growing at 19.1% YoY nationally (orange circle) and REAL hourly earnings have declined (yellow triangle) thanks to reemergence of inflation after 40 years.

Then we have the humming dragon, rising mortgage rates, that will reduce housing affordability even further.

Home ownership has become simply unaffordable much like steaks. Doctor, doctor (Yellen), we got a bad case of unaffordable home ownership.

UMich Housing Sentiment “Rises” To 83 As Inflation Hurting Retail Sales (Industrial Production Declines -0.3%)

That Bidenflation is really hurting Americans.

Start with the UMich Buying Conditions for Houses. It “rose” to 83. Unfortunately, 100 is the baseline and any number below 100 is bad. The reason? The massive increase in US home prices since 2020.

But retail sales are hurting thanks to higher prices. Retail sales less food services and auto are DOWN 3.1% MoM.

Meanwhile, US industrial production fell to -0.3%.