Stimulypto! How The Federal Reserve Helped Drive Property Taxes Above $10,000 In New York City (NYC Home Prices UP 26.3% Since February 2020, Chicago UP 21.7%, LA UP 32.5%)

As we are all aware, The Federal Reserve launched its monetary “stimulypto” in March 2020 to combat the Covid virus. Coupled with the surge in Federal stimulus, we have seen home prices rise over 20% since February 2020.

Specifically, New York City home prices are up 26.3% since February 2020, Chicago home prices are up 21.7%, and Los Angeles home prices are up 32.5%. Fed monetary stimulypto is up 113% since February 2020.

Of course, this has resulted in soaring PROPERTY TAXES as well. According to Attom Data Services, “Among 1,481 U.S. counties with at least 10,000 single-family homes in 2021, 16 had an average single-family-home tax of more than $10,000, including 12 in the New York City metro area. The top five were Kings County (Brooklyn), NY ($13,734); Marin County, CA (outside San Francisco) ($13,719); Westchester County, NY ($13,674); Essex County, NJ ($13,116) and Nassau County, NY ($13,095).”

Of course, not all metro areas raised their property taxes. Major markets with the largest decreases in average property taxes included Pittsburgh, PA (down 35.1 percent); New Orleans, LA (down 20.2 percent); Houston, TX (down 18.7 percent); Dallas, TX (down 12.2 percent) and Austin, TX (down 7.7 percent).

States with the highest effective property tax rates in 2021 were Illinois (1.86 percent), New Jersey (1.73 percent), Connecticut (1.67 percent), Vermont (1.55 percent) and Pennsylvania (1.37 percent).

Even if The Federal Reserve removes its massive monetary stimulypto (MMS), property taxes will remain elevated unless cities reduces their property tax rates. But Democrat-controlled cities tend to be addicted to spending much like The Federal government.

You might as well face it, they’re addicted to gov.

T-Dazzle! Inflation Crushing Households Under $60k, Russian CDS Indicating 99% Probability Of Russia Debt Default Over Next Year (WTI Crude UP 2%+, Wheat UP 3%+)

As we are painfully aware, The Fed’s exaggerated monetary flood combined with Federal stimulus spending has led to horrible inflation.

Yes, despite what government talking heads say, Federal stimulus increases demand for goods, the supply is generally slow to respond resulting in rising prices. Then government policies driving up energy prices also leads to highers prices. Throw in Federal Reserve monetary stimulypto and we have this chart from hell from Penn-Wharton. The chart shows that households earning less that $60,000 experience higher expenses due to rising prices than their gain in earnings.

Speaking of the government push to “go green” I saw an ad for a Mercedes Benz EQ sedan that I admit looked really cool, but no price given. I went to Car and Driver’s website and it said “Starting at $103,360.” I’ll take a hard pass, but you can see why households making over $150,000 per year have rising additional expenses due to price increases. To paraphrase April Ludgate, “Thanks for nothing President Biden and Fed Chair Powell.”

Another chart from hell is the Russian USD Credit Default Swap (CDS) curve. It is spiking at over 20,000.

The one-year Russian CDS is currently at a whopping 20,336 indicating that there is about a 99% of a Russian default over the coming year. As someone who lived through the 1998 Russian credit default scare on Wall Street, this will send a shock wave through credit and Treasury markets.

On the US Treasury front, this chart shows how steeply sloped the US Treasury actives curve has become. Steep until 3 years, then flat. I call this chart “T-Dazzle!” T-Dazzle because I can’t believe how badly the Biden Administration and The Federal Reserve are screwing up the country.

Crude oil? WTI Crude is back to almost $100 per barrel while Brent Crude is at $102.78 per barrel. Wheat is up 3.22% thanks largely to problems related to Russia invading Ukraine (Europe’s bread basket) and a dismal Chinese wheat harvest.

Cryptocurrencies, the alternatives to the US fiat dollar, are rising (in particular, Bitcoin and Ethereum).

Of course, I have to finish up with the soaring 30-year mortgage rate.

Here are Treasury Secretary Janet Yellen and Transportation Secretary Pete Buttigieg trying to convince people that Treasuries are fantastic and to avoid alternatives to fiat currency like Bitcoin, Ethereum, Stablecoin or anything else.

Stablecoin? US Senator Toomey Announces Legislation to Create Responsible Regulatory Framework for Stablecoins (Bad Day For Cryptos)

Stablecoin refers to a new class of cryptocurrencies which offer price stability and/or are backed by reserve asset. In recent times, stablecoins have gained enough traction as they attempt to offer the best of both world’s – the instant processing and security of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies.

US Senator Pat Toomey, ranking member of the Banking, Housing and Urban Affairs Committee, announced today legislation to create a responsible regulatory framework for STABLECOINS.

Toomey Announces Legislation to Create Responsible Regulatory Framework for Stablecoins
Releases Discussion Draft of the Stablecoin TRUST Act

Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) today released a discussion draft of legislation establishing a new regulatory framework for payment stablecoins.

“While today stablecoins facilitate trading with cryptocurrencies, tomorrow stablecoins could be widely used in the physical economy. They have the potential, among other things, to speed up payments and automate transactions,” said Ranking Member Toomey. “The proposed regulatory framework I’m releasing today will allow this crypto-innovation to continue flourishing while protecting consumers and minimizing potential risks from stablecoins to the financial system. I look forward to receiving feedback on this legislation from my colleagues and stakeholders as Congress continues its work on stablecoin regulation.”

Key Components

· Authorizes three different options to issue payment stablecoins:

o Establishes a new federal license designed specifically for stablecoin issuers;

o Preserves the state-registered money transmitter status for most existing stablecoin issuers; and

o Clarifies that insured depository institutions are permitted to issue stablecoins.

· Protects consumers by subjecting all payment stablecoin issuers—regardless of whether they are a state money transmitter or receiving a new federal license—to standardized requirements, including:

o Disclosures regarding the reserve assets backing the stablecoin;

o Clear redemption policies; and

o Subjecting them to routine audits by registered public accounting firms.

· Provides much-needed clarity that, at a minimum, stablecoins that do not offer interest are not securities.

o Provides a clear regulatory framework for payment stablecoins and rejects the Securities and Exchange Commission’s approach of regulating through enforcement actions.

· Applies privacy protections to transactions involving stablecoins and other virtual currencies.

Background

· In August 2021, Ranking Member Toomey announced he was soliciting legislative proposals to ensure federal law supports the development of digital assets and its underlying technologies while protecting investors.

· In December 2021, Ranking Member Toomey released a set of principles to lay the framework for forthcoming stablecoin legislation.

Crytpos in general are having a bad day, with Bitcoin down 4.78% today and Ethereum Classic down 12%.

Toomey’s proposal is a great step forward in the regulation of stablecoin.

Alarm! Treasury 10Y Term Premium Remains Deeply Negative As Fed Plans Its Attack On Mortgage Rates And Treasury Yields (3M TBill/OIS Spread Crashes As 30Y Mortgage Rate Is -3%) Venezuela 2Y Yield At … 436.77%

Alarm!

The 10-year Treasury term premium, the amount by which the yield on a long-term bond is greater than the yield on shorter-term bonds, remains steeply negative (white line) as The Federal Reserve steps up its attack (aka, monetary tightening). Meanwhile, the 10Y-2Y curve actually rose into positive territory.

Historically, the 10-year Treasury Term Premium declines before a recession.

Meanwhile, 3 month Treasury bill to Overnight Indexed Swaps spread is crashing to the lowest level since 2017.

But with inflation raging at the fastest pace in 40 years, the REAL 10-year Treasury yield remains negative at -5.236% while the REAL 30-year mortgage rate is -3.01%. Both were in positive territory when Biden was installed as President.

Speaking of interest rates, the infamous PIGS (Portugal, Italy, Greece, Spain) are all seeing surges in their 10-year sovereign yields. Sweden, while not a PIG has the largest spike today at 13.8 BPS.

Actually, the biggest spike in sovereign yields occurred in Ukraine where their 2-year yield popped +205.8 BPS. But Lebanon has the highest 2-year yield at 162.29%. Turkey is in third place in the sovereign demolition derby at 23.52%. Sadly, Poland’s 2-year yield is up 16 bps today.

But the winner of the sovereign debt demolition derby is …. drumroll … VENEZUELA! At 436.77%.

I am really surprised that Biden hasn’t adopted Maduro’s fashion sense.

Inversion Therapy? Yield Curve Continues Inversion As Fed Slows Down Treasury Purchases (Mortgage Rates Climb To 4.91%) Biden Orders Autos Have 49 MPG By 2026

Its official! I submitted my resignation from George Mason University effective June 1, 2022. I will miss teaching the students, past and present.

But back to the US Treasury yield curve. It remains in reversion (meaning shorter-term Treasuries have higher yields than longer-term Treasuries, usually a sign of impending recession. The Fed has actually started quantitative tightening (QT) and the growth rate of Treasury note and bond purchases has slowed to a crawl.

Meanwhile, Bankrate’s 30-year mortgage rate rose slightly to 4.91%.

Meanwhile, President Joe “The Big Guy” Biden has ordered carmakers to increase their average fuel economy to about 49 miles (78.8 kilometers) per gallon by 2026. Of course, this is intended to kill-off gasoline-powered autos and make all cars electric or hybrid like the Toyota Prius.

According to Kelley Blue Book, the average transaction price for an electric vehicle in April 2021 was $51,532. That’s more than $11,000 higher than what you’d pay at the dealership for a full-size gas-powered car, and nearly $30,000 more than the average compact car sale.

This can be the Democrat’s midterm election slogan: “Making living in the USA unaffordable!”

The middle-class unaffordable Ford F-150 Lightning at nearly $100,000. Thanks Joe!

Alternatively, you can buy a Buick Envision (made only in Shanghai China) with up to 24 city / 31 highway MPG. Well, kiss that baby goodbye under Biden’s new MPG mandate.

The Great Reset … In Asset Returns (Commodities Soaring, Treasuries Tanking, Home Price Growth Still 4x Soaring Mortgage Rates)

Numerous elites like Klaus Schwab of The World Economic Forum (and Davos fame) are calling for a “Great Reset” in global economies. But perhaps “The Great Reset” in taking place in asset markets … and not in a good way.

Consider what has happened since President Biden was elected. The S&P 500 total return index (green index) has risen thanks to The Federal Reserve’s balance sheet expansion (orange line) with COVID. Until 2022 when the expectation of Fed rate hikes surged from 3 in late December 2021 to 9.4 expected rate hikes over the next 12 months (yellow line).

The US Treasury total return index (white line) has gotten crushed with The Fed’s signals of rate hikes and quantitative tightening (QT). Call it “White Line Fever.” The commodity total return index (blue line) has surged as The Fed’s expected rate hikes have risen from 3 to 9.4 in 2022.

Is The Fed causing a Great Reset in housing? In 2022, we see the surge in Fed rate hike expectations leading the 30-year mortgage rate to be nearly 5%. The last Case-Shiller home price index was for January and it was still raging at 19.17% YoY growth. Let’s see if The Fed’s QT will slow down home price growth. But home prices are growing at 4x 30-year mortgage rates.

I hope that Klaus Schwab and the global elites pick us up on our way down. But probably not.

So let’s see if The Fed still is going to withdraw its “Snake Juice” from the market.

Zoltan! US Dollar Purchasing Power For Consumers Sinking Faster Than The Titanic As Zoltan Pozsar Suggests Bretton Woods III With Money Backed By Commodities

Zoltan!

(Forbes) – Credit Suisse’s Zoltan Pozsar argues Bretton Woods II crumbled when the G7 countries seized Russia’s foreign exchange reserves. Keeping money inside financial institutions like the IMF was considered risk free. That is clearly no longer the case. Similarly, Bretton Woods I collapsed when Nixon took the US of the gold standard back in 1971 when dollars were convertible to gold at a fixed exchange rate of $35 an ounce. This led to Bretton Woods II, backed by “inside money” or the dollar, which itself is not linked to gold or any other commodity.

Now the basis of this system, which has operated for the past 50 years, is being called into question. The sanctions on Russia, which showed that reserves accumulated by central banks can simply be taken away, raised the question of “what is money?”

That question may explain why Pozsar believes a huge shift in the way the world organizes money and reserves is now underway, “creating a “Bretton Woods III backed by outside money,” (gold and other commodities). Including crude oil and bitcoin.

At least crude oil has fallen below $100 as Biden merrily drains the Strategic Petroleum Reserve (SPR). Gasoline prices have fallen slightly as this is being done before the midterm elections with political, not economic, intent. Once the midterms pass, will Biden continue draining the SPR until there is little left forcing the US to convert to “green energy”?

The purchasing power of the consumer dollar took a plunge under Biden as other commodities such as Bitcoin and crude oil soared.

An alternative asset, gold, have generally risen under Biden’s Reign of Error, but particularly after the Russian invasion of Ukraine.

Politicians love to spend money, often recklessly. And with The Fed monetizing Federal government expenditures, the purchasing power of the US dollar for consumers is sinking faster than The Titanic.

Goin’ Green! Lithium Prices UP 761% Since Biden Elected, Making Electric Cars Even MORE Unaffordable (Defense Production Act For Critical Materials)

You can always count on government to make things more expensive when they claim they want to help make things more affordable.

For example, President Biden and his green commandos are helping drive critical electric battery component LITHIUM through the roof!

Lithium hydroxide futures prices are through the roof making already expensive electric cars even MORE expensive. So much for making electric cars affordable!

Of course, The Federal government will now have to subsidize GM and Ford and increase Federal tax credits to encourage consumers to purchase outrageously expensive electric cars.

Thanks Joe for issuing your enactment of the Defense Production Act, helping to drive prices insane.

In fairness to Biden and his green commandos like AOC and Bernie Sanders (no relation to me), other nations are going electric car crazy, bidding for a scare resource like lithium. Particularly when there is an abundance of oil in the ground.

I wonder how about members of Congress and the Biden Administration bought lithium ahead of Biden declaring the Defense Production Act to encourage electric car battery production?

Bidenflation Leads To 23% Rise In Fixed-rate Mortgage Payments As Home Price Growth Hits 19% (Fertilizer Prices UP 166% Under Biden, Gasoline Prices UP 77%)

Inflation under President Biden (aka, Bidenflation) has hit 7.9%, the highest in 40 years. And no Joe, the inflation surge was well underway before Russia invaded Ukraine on February 24, 2022.

As The Federal Reserve is allegedly going to try to fight inflation by raising their target rate, the 30-year mortgage rate has risen from 2.88% on Biden’s inauguration to 4.56% today.

The surge in mortgage rates from 2.88% to 4.56% represents a 58.3% increase in mortgage rates under Biden. That translates to an increase in the 30-year fixed-rate mortgage (FRM) payment of 23%. Apparently Biden-Powell (not to be confused with Baden-Powell, the founder of the Boy Scouts) are not interested in keeping homes affordable for most Americans.

I summarize the predicament facing Americans in the following chart. Home prices were growing at a 19% YoY pace in December (Case-Shiller updates will be available tomorrow for January). Inflation is growing at 7.9% and M2 Money continues to grow.

US fertilizer prices are up 166% under Biden while regular gasoline prices are up 77% under Biden. But to be fair, fertilizer and gasoline prices jumped with Russia’s invasion of Ukraine. Fertilizer prices were up 66% under Biden BEFORE Russia invaded Ukraine and regular gasoline prices were up 50%.

Meanwhile, back at the fixed-income ranch, the US Treasury 10Y-2Y curve has flattened to 14.5 BPS as Fed Funds Futures signal 9 rate hikes over the coming year.

And the US Treasury 10Y-5Y curve continues to invert.

In short, Biden and Congress are anti-fossil fuel, pro-renewable energy helping to drive up energy prices and inflation PRIOR to Russia invading Ukraine. Powell and The Federal Reserve are trying to fight what Biden and Congress did with creating energy-related inflation.

Breakeven 10Y Rate Above 3%, Highest In History!

The U.S. breakeven 10 year (USGGBE10 Index) went above 3% for the first time EVER.

Breakeven inflation is the difference between the nominal yield on a fixed-rate investment and the real yield (fixed spread) on an inflation-linked investment of similar maturity and credit quality.

But look at 30-year mortgage rates!

Way to go, Joe!