Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
The Freddie Mac 30-year mortgage rate is rising faster than a SpaceX moonshot!
I’m telling your now that The Fed is killing the dreams of millions of Americans by pricing them out of the housing market. Home price growth is lethal as is the increase in mortgage rates.
Call this “Nobody’s Everything.” Crytpocurrencies are getting clobbered. But then again, the S&P 500 is not doing so well. But crypto stalwarts Bitcoin and Ethereum have down even worse.
At the dollar strengthens, Bitcoin has gotten pummeled.
But at least Bitcoin rose this morning along with Bitcoin Cash. And XRP. But the others are getting clobbered.
Microstrategy bonds are getting crushed.
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.
Joe Biden likes to sell himself as “Middle Class” Joe. But Middle Class Joe declared war on the middle class with executive orders on fossil fuel drilling and killing the Keystone pipeline. Hence, his press conference on reducing inflation left off one thing: he could rescind the aforementioned executive orders. But he didn’t. So its Band-Aids on Band-Aids.
Since Biden was elected President, WTI Crude Oil futures are up 102%. Regular gasoline is up 83% and the lifeline of the shipping industry, diesel, is up 111%. Of course, inflation measures don’t measure the harm to the middle class at 8.5% YoY.
Here is Biden’s speech, blaming everyone but himself for inflation. And then walks away (as usual) when asked a tough question. But he lied. He COULD cancel his executive orders on oil and natural gas exploration, but didn’t. Instead, he blamed Trump and MAGA voters.
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.”
As the US is engulfed in inflation while The Federal Reserve is engaged in trying to fight inflation (well, sort of), we are seeing markets taking a shellacking, particularly commodities.
One indicator of a slowdown is declining commodity prices. Crude oil futures are down around -2.5%. Iron Ore is down -5% and steel rebar is down -3.21%.
Inflation numbers are due out Wednesday and are forecast to be 8.1% YoY (based on headline CPI). But combined with a slowing global economy, we get the dreaded “STAGFLATION.”
Meanwhile, the S&P 500 index futures are down around 1.726% for Monday open. Asian markets already got clobbered with the Hang Seng down almost -4%.
On the bond side, the 10Y Treasury Note yield rose to 3.20% early in the morning, but has retreated to 3.1447% as of 8:40am EST.
Both stock and bond market volatility measures are increasing.
So, is it a Blue Monday effect? Or global stagflation?
Time for supplemental income under the Biden Administration.
As crooner Dean Martin once said, “Let ’em have it!” Ain’t this a kick in the … head.
Perhaps Joe Biden and Fed Chair Jay Powell are channeling Dean Martin by letting us have it.
Since Obama’s 3rd term as President (aka, Biden’s installation as President on January 20, 2021), mortgage rates have risen 87%, regular gasoline prices have risen 80%, CRB foodstuffs are up 59% and Commodities are up 63%.
And don’t forget about America’s energy life force, WTI Crude Oil. It is UP 123% under Biden.
Rents? Rising at a 16.8% rate.
Rents rising, food costs rising, energy costs rising, Biden and The Fed are taking us higher. In terms of prices and cost of living.
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.
Trevor Noah was correct. EVERYTHING is more expensive under Biden. And REAL average hourly earnings YoY keeps declining.
REAL average hourly earnings YoY fell further to -3%.
Meanwhile, fertilizer prices, a key ingredient to food costs, is up 262% under Biden.
Today’s jobs report was better than expected, at 428k jobs added (versus 380k expected). Its just too bad Bidenflation is clubbing American workers to economic death.
US labor force participation actually declined in April and struggles to get back to levels pre-Covid and Trump.
Here is the jobs market data for April 2022.
Leisure and hospitality sector still has a way to go after the ill-advised government shutdowns surrounding Covid.
Oddly, there are two job openings for every unemployed person.
Here is the new version of American Gothic.
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.
Confounded Interest - Anthony B. Sanders 
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