Good News! Flexible Price Inflation Cools To … 20%, Export Prices Cool To 18% YoY As Jerome “Slowhand” Powell Reappointed As Fed Chairman (Taylor Rule Suggests Fed Rate Of 13.89%)

The US Senate yesterday confirmed the reappointment of Jerome “Slowhand” Powell as Federal Reserve Chairman.

The good news? Atlanta Fed’s Flexible CPI YoY cooled to 20% in April. The bad news? Flexible prices are still growing at 20% while wages are growing at 5.5% YoY.

On the export front, export prices are cooling and were at 18% YoY in April, down slightly from March. Import prices cooled to 12% YoY as The Federal Reserve has slowed asset purchases.

I would have preferred President Biden appoint a serious Federal Reserve Chairman liked Stanford University’s John Taylor (of Taylor Rule fame). In his honor, here is the Mankin version of the Taylor Rule which calls for a Fed Funds Target Rate of 13.89% while the current Fed Funds Target Rate under Powell and the Gang is … 1%.

Call it the Powell Boogie. At a very slow speed.

Powell is indeed “Slowhand.”

April Inflation “Cools” To 8.3% YoY, But Food Up 9.4%, Gasoline Up 43.6%, Shelter Up Only 5.1%? (Real Avg Weekly Earnings At -3.4% YoY)

April’s inflation numbers are out and, at first glance, inflation seems to be cooling from 8.5% YoY in March to 8.3% YoY.

But the headline inflation numbers do not accurately reflect the pain and suffering of American households. Food is up 9.4% YoY and gasoline is up 43.6% YoY.

The strange way the BLS measure “shelter” shows that housing only grew at 5.1% YoY. That’s odd since home price growth is almost 20% YoY and rent growth is near 20%.

Runaway home prices and rents are especially painful given that inflation is destroying the purchasing power of the dollar for consumers. Real average weekly earnings YoY are at -3.4% YoY.

Hence, the purchasing power of the US Dollar keeps eroding.

Good luck out there with inflation still roaring, and food/housing/energy prices soaring.

Here is a photo of American children trying to create energy from flying a kite made from progressively devalued US currency.

Beat The Heat! Mortgage Purchase Applications RISE 5% From Previous Week As Homebuyers Scramble To Beat The Fed’s Monetary Tightening

Yes, homebuyers are jumping into a generally slowing housing market to “beat the heat.” That is, beat The Fed’s monetary tightening.

Mortgage applications increased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 6, 2022.

The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 8 percent lower than the same week one year ago.

The Refinance Index decreased 2 percent from the previous week and was 72 percent lower than the same week one year ago.

Beat the Heat!! Or Beat The Fed!!

As least inflation came in slightly cooler in April at 8.3% YoY. While housing (own or rent) is rising at over 2x CPI.

Morning Update! S&P 500 Futures UP, Mortgage Rates UP To 5.57%, Apartment Rents UP 20% YoY, WTI Crude Down -1.76%

At least S&P 500 futures are up this morning, an opportunity to buy the dip.

But on the housing front, we see that mortgage rates have pieced the 5.50% barrier and is now at 5.57%.

On the rent side, apartment rents are growing at 19.3% YoY for both Class A and Class B units.

Commodities are down this AM. WTI Crude is down -1.71%, iron ore is down -4.06% and nickel is down -6.29%.

Whoops! After a positive futures reading before opening, the Dow is down near a full percentage point, but the NASDAQ is almost breakeven for the day.

And the 10-year Treasury yield is down 8.6 bps.

As The Boss sang, “We’re going down.”

Cooler Kings! As Biden Keeps Going Green And Fed Raises Rates, Everything Is Cooling (Mortgage Rates UP, Venture Capital Down 53%, Stocks Crushed, Etc)

The Biden Administration and The Federal Reserve together should be called “The Cooler Kings” in that their policies are putting a Big Chill on the mortgage market and equities.

Mortgage rates are skyrocketing thanks to the Federal Reserve.

The 30-year fixed-rate mortgage averaged 5.27% for the week ending May 5, according to data released by Freddie Mac FMCC, -1.62% on Thursday. That’s up 17 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%.

House price growth to wage growth is below the all-time high, but remains above housing bubble levels of 2005-2007.

The Refinitiv Venture Capital Index is down 53% since November ’21 as The Fed cranks up interest rates.

Well, at least commodities are soaring under “The Cooler Kings.” Pretty much everything else is sucking wind.

Home prices are actually falling in some cities, like Toledo Ohio, Detroit Michigan, Rochester NY, and Pittsburgh PA. Even La-La Land (Los Angeles CA) is seeing a drop in median listing price since 2021 of -5.0%.

The question, of course, is whether The Federal Reserve will back off its plans to aggressively raise interest rates in lieu of crashing stock market, venture capital, and possibly home prices.

This is Scorcher VI: Global Meltdown.

Does Biden and The Fed Feel Like We Do?

Powell-Yellenburg Omen? Dow Drops 1,000+ Points, NASAQ Down 5%, Commodities Rally After Lunch As Fed Fear Strikes

It has been a miserable day for markets as The Federal Reserve struggles to get inflation under control.

The Dow fell over 1,000 points today and NASDAQ was down a cool 5%.

Is the Hinderburg Omen back in fashion? Better yet, the Powell-Yellenburg Omen?

While equity markets have gotten clobbered by Powell and the Gang, commodities at least rallied in the afternoon.

Fear The Talking Fed! Fed Jacks Target Rate Up By 50 BPS, 9 More Rate Hikes A Comin’ (Yield Curve Rises)

Well, the Fed’s talking heads have been saying a 50 basis point hike was coming in May … and it appeared!

And it looks like 9 rate hikes are a comin’ by February 2023.

The Fed’s Dot Plots shows a cooling of Fed rate hikes by 2024 and beyond.

Here is the path of Balance Sheet peel-off.

The US Treasury actives curve is up by 14 bps at the 10-year tenor and up 17 bps at the 2-year tenor.

The plan will see $30 billion of Treasuries and $17.5 billion on mortgage-backed securities roll off. After three months, the cap for Treasuries will increase to $60 billion and $35 billion for mortgages.

I could read the Fed’s speech on their decision, but since The Fed has been so highly politicized, I don’t really care what they say. Only what they do.

Medusa Touch II: REAL Wage Earning Growth Remains Negative, Reverse Repos Continue To Grow, Lithium Prices And Mortgage Rates SOAR

President Biden (or whoever is pulling his strings) is inflicting a “Medusa Touch” on the US. That is, everything his administration touches turns to stone.

Yesterday, I walked through the rise in energy and food prices under Biden, and it is horrific. The only “disinformation” was generated by the Biden Administration itself claiming that soaring inflation is due to Russia’s invasion of Ukraine. I demonstrated that inflation began with Biden’s anti-fossil fuel executive orders and the Russia invasion only made things worse.

Let’s look at average hourly earnings. Thanks to “progressive” energy policies from Biden, REAL average hourly earnings growth has crashed and burned.

But here is the chart that the Biden Administration touts showing average hourly earnings growth at 5.6% YoY (although I doubt if Jen Psaki would leave out the massive distortion caused by The Federal Reserve’s “Let’s go crazy!” monetary policy.

Another Medusa Touch moment is the reverse repo market. When I wrote about reverse repos before, several people wrote me saying “You don’t understand. This is a temporary problem and will vanish shortly.” However, The Fed’s reverse repo facility has now climbed to an all-time high.

Then we have the disruptive effects of The Federal Reserve deciding for us that mortgage rates are too low and should be higher.

Now look at lithium prices, a key element for electric car batteries. Making the switch from Internal combustion engines to electric motors far more costly.

The list goes on and on.

Suffice it to say, everything the Biden Administration touches turns to stone.

But I wager that the Biden Administration wishes that Hunter Biden’s laptop would turn to stone.

Only an elitist DC bureaucrat like Joe Biden would laugh at inflation that is ruining the lives of millions of Americans.

Q1 US Employment Costs Skyrocket Most In History Helping To Increase Already Soaring Inflation (PCE YoY Rises To 40-year High of 6.60% YoY)

Not only has The Federal Reserve driven M2 Money Velocity to near historic lows, but now we find out that the Employment Cost Index just rose to a historic high.

Of course, a variety of minimum wage laws have helped drive up employments costs. Don’t tell lawmakers that minimum wage laws lead to higher inflation since they typically deny responsibility for anything. But I can almost picture the 4 Horsemen of the Inflation Apocalypse (Powell, Biden, Pelosi, Schumer) sitting around asking “What we can do to make inflation worse?”

We did see the PCE Deflator YoY rise to 6.6%, the highest since 1982, the highest in 40 years.

Personal spending increased to 1.1% in March, probably panicking buying over further inflation.

A PCE Deflator of 6.60% leads to a Taylor Rule estimate of 9.05% for The Fed Funds Target Rate.

The Federal government and Federal Reserve trying to solve inflation reminds me of Parks and Recreation’s Jerry Gergich trying to celebrate his retirement.

Bidenflation Roars To 25% YoY In March As Real GDP Growth Goes Negative (Clueless Joe)

While headline inflation is growing at 8.6% YoY in March, flexible price inflation grew at a terrifying 25% YoY rate.

Even with headline inflation of “only” 8.56% YoY, today’s Q1 real GDP growth checked in at -1.4% QoQ. Clearly, Bidenflation isn’t help the economy or anyone else.

Diesel prices have skyrocketed under Biden.

Instead of Shoeless Joe, we have Clueless Joe as President.