US Real GDP Growth Forecast To Be Dismal 0.50% In 2023, Personal Savings Rate -67.9% YoY In October, US Mortgage Rates Headed Down (Economic Lights On But Nobody’s Home)

Albert Collins said it best about the US economy under Joe Biden: “Lights Are On But Nobody’s Home”.

The Federal Reserve forecast for the US economy is a dismal 0.50% YoY. Do I detect a trend?

The FOMC forecast for 2023 and 2024. Core PCE YoY (inflation) is forecast to drop to 3.50%, still considerably higher than The Fed’s target rate of inflation of 2%. And unemployment is forecast to be 4.60%.

To cope with Bidenflation, US personal savings rate as of October is -67.9% YoY. The “good” news is that rents YoY are crashing. But food prices under Inflation Joe remain very high. But most everything is slowing down, not due to Biden’s policies, but a global and US economic slowdown.

With a big slowdown coming our way, you can understand why The Fed’s December Dot Plot is showing declining Fed Funds Target rate starts declining in 2024.

Even US mortgage rates are headed down.

Speaking of going down, cryptos are down across the board with Cardano leading the decline at -6.91%.

All aboard the SS Biden!

California Screamin’! 2022 Home Prices Crashed Mostly In California As Fed Withdraws Monetary Stimulus (Austin TX And Seattle WA Also Crashed Hard)

California Screamin’!

6 of the top 8 metro areas with the largest home price crash in 2022 were in California, according to Redfin.

Sadly, I lived in three of these metro areas (Austin TX, San Jose CA and Phoenix AZ), although I wouldn’t confuse correlation with causation.

The trend for home price growth (blue line) is definitely on the downturn as The Fed removes its ample stimulus (green line).

Here is California governor Gavin (Nancy Pelosi’s nephew) Newsome screaming about crashing California home prices.

US Debt Rose 250% From 2007 To Today Under Pelosi, Boehner, Ryan, Pelosi (Pelosi Is Greatest Spender Of All Time But Ignored Crippling Unfunded Liabilities Problem … 452% Of Massive Federal Debt)

Nancy Pelosi is passing her gavel to someone else (most likely McCarthy R-CA), but her legacy like that of fellow spendaholic John Boeher (RINO-Ohio) and Paul Rino (RINO-WI) is reckless spending and debt load.

Since 2007 when Pelosi took the gavel as Speaker of the US House, Federal debt has risen from $5.8 trillion in Q4 2006 to $31.4 trillion today, an increase of over 250%. Pelosi’s spending spree was continued by RINOs Boehner and Ryan before SanFranNac retook the gavel and continued Congress’ spend-a-holic ways.

Nothing has been the same since the financial crisis and Pelosi became Speaker in 2007. Notable is the wild spending with the gap between spending and tax revenue soaring.

Since 2007 and SanFranNan, Medicare spending has exploded along with Medicaid.

Under peace-loving Pelosi, defense spending has exploded.

And then we have unfunded liabilites from the Federal government at a staggering $173.3 trillion, which is 452% of Federal debt. What did Pelosi (or Boehner/Ryan) do to fix this problem? Nothing. She kept spending like crazy.

It would be nice if Biden told every illegal immigrant that on becoming a citizen, you owe $519,286 in terms of unfunded liabilities and a $94,240 for their share of Federal debt. But, of course, that will never happen.

The S&P 500 index is down -2.44% today as M2 Money growth crashes.

Then we have Nancy Pelosi sneaking Obamacare into law by not giving Republicans time to read the massive Obamacare bill.

Again, RINOs Boehner and Ryan followed Pelosi’s massive spending spree with even more spending and debt.

Here is a painting of spendaholic Nancy Pelosi with fellow spendaholic John Boehner.

The Empire Strikes Out! NY Manufacturing Outlook Shrivels To -11.2% And Its NOT Always Sunny In Philadelphia Fed Outlook At -13.8% (S&P 500 Index Drops -1.87%, EuroStox Drops -3.42%)

The numbers coming out today are not good. November numbers were 1) US Industrial Production was down -0.2% MoM, 2) manufacturing production is down -0.6%, 3) retail sales advanced down -0.6% (most in 11 months) and …

The Empire State Manufacturing outlook was down -11.2% and the Philadelphia Fed (or Phed) business outlook was down -13.8% in November.

And with all this bad news, global equity markets are dropping like a paralyzed falcon.

But at least Biden traded a dangerous international arms dealer for WBNA star Brittney Griner. Possilby the worst trade in history after the Chicago Cubs traded future Hall of Famer Lou Brock for sore-arm pitcher Ernie Broglio. Griner is Ernie Broglio.

Fed Surprises No One With 50 Basis Point Rate Hike, Highest Since November 2007 (New Fed Dots Plot Looks Like Lillehammer Ski Jump)

As expected, The Federal Reserve raised their target rate by 50 basis points to 4.50%, the highest Fed target rate since November 2007.

The only thing interesting that happened was Powell’s hawkish statements about The Fed wanting to keep tightening to fight inflation caused under “Inflation Joe” Biden.

But the NEW Fed Dots plot looks like an Olympic Ski jump with expectations of DECLINING Fed target rates.

My take on the steeply downward sloping Dot Plot is a tacit acknowledgement that a recession is headed our way in 2023.

Here is the Lillehammer Olympic ski jump that resembles today’s Fed Dots Plot.

Gone In 60 Seconds? Treasuries And Stock Futures Trading Spike 60 Seconds BEFORE CPI Data Release (Who Tipped The Wink?)

Apparently, despite the denials from the Biden Administration, someone at Bureau of Labor Statistics or someone in Congress or the Federal Reserve or the Biden Admininstration itself likely tipped the wink on the soft CPI report on Tuesday.

Treasuries were well on the front-foot in the lead up to the below-estimate November CPO print, as a surge of buying took place seconds before the official 8:30 am New York release time. Over a 60 second period before the data, 13,518 March 10-year futures traded as the contract moved from 114-04+ up to 114-22. Gains were then extended up to 115-11 session highs once the data was released.

On the equity side, stock futures suddenly spiked more than 1%. Trading in Treasury futures surged, pushing benchmark yields lower by about 4 basis points. Those are major moves in such a short period of time — bigger than full-session swings on some days. And they should get scrutinized by regulators, long-time market observers say, even if a leak is only one of several possible explanations for why traders suddenly started buying right before the report was published.

Remember that current Treasury Secretary Janet Yellen was accused of leaking information to a NY hedge fund ahead of the Fed Open Market Committee meeting? And then we have the Wolf of Wall Street.

I wonder if the REAL Wolf of Wall Street did this?

MBA Mortgage Applications Rise 3.2% From Previous Week, But Purchase Applications Down 38% From Same Week Last Year As Fed Tightens

Mortgage applications increased 3.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 9, 2022.

The Refinance Index increased 3 percent from the previous week and was 85 percent lower than the same week one year ago. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 38 percent lower than the same week one year ago.

You can see the impact of seasonalilty on mortgage purchase applications (white line). They peaked in the week of May 6, 2022 and have been generally declining since. While refi applications (orange line) increased over the past week, they have been pummelled by The Fed tightening.

It is quiet today as investors wait for The Fed to announce a 50 basis point rate increase. Fed Funds Futures point to almost another 100 basis point hike by May 5, 2023, then a slow decline in The Fed Funds target rate (upper bound).

And here is Sam Bankman-Fried and his high-powered legal defense.

The Fed Needs To Take A Look At Itself: WSJ Editorial By Levy And Plosser (Taylor Rule Implied Target Rate Of 12.07%, Current Rate At 4%)

Paul Revere and the Raiders said it best about The Federal Reserve. Take a look at yourself.

Mickey Levy of Berenberg Capital and Charles Plosser wrote a great op-ed in the Wall Street Journal entitled “The Federal Reserve Needs a Hard Look in the Mirror.” Here is a Fed Reserve St Louis paper by Levy and Plosser entitled “The Murky Future of Monetary Policy.”

Abstract

In August 2020, the Federal Reserve unveiled its new strategic framework. One major objective of the Fed was to address its concerns over the potential consequences for the conduct of monetary policy when the policy rate was constrained by its effective lower bound. This article concludes that there are significant flaws in the new strategy and that it encourages a more discretionary approach to monetary policy and increases the risks of policy errors. The new framework is an overly complex and asymmetric flexible average inflation targeting scheme that introduces a significant inflationary bias into policy and expands the scope for discretion by broadening the Fed’s employment mandate to “maximum inclusive employment.” In a postscript, the article describes how quickly the flaws have been revealed and urges a reset toward a more systematic and coherent strategy that is transparent and broadly understood by the public.

I attended a speech by macoeconomist Gershon Mandelker at the National Association of Realtors where he called on the Federal Reserve to follow some observable rule rather than the complex (or seat of the pants) approach to monetary policy.

With today’s inflation report (core inflation YoY of 6%) results in a Taylor Rule estimate of The Fed Funds Target Rate of 12.07%. We are struggling to reach 5% as a “terminal” Fed target rate (currently at 4% and likely to rise 50 basis points at tomorrow’s Fed meeting).

The matrix of CPI and unemployment under the Taylor Rule shows that The Fed’s target rate isn’t at even 5% for any relevant combination of core CPI (inflation) and unemployment rate.

Note that since the financial crisis the Fed’s target rate (white line) has been consistely below the Taylor Rule implied rate (blue dashed line).

Here is Treasury Secretary and former Fed Chair Janet Yellen laughing at those who want some kind of observable Fed rule.

Behind Closed Doors? Sam Bankman-Fried Arrested In Bahamas Prior To House Hearing On FTX Collapse (Will He Testify Via Zoom?)

First, Sam Bankman-Fried agreed to testify in the House Financial Services Committee meeting on December 13, 2021. Then Bankman-Fried said he would testify remotely. Then ,,, he was arrested by the Bahama’s police. How convenient!

Does this mean that SBF will testify from behind closed doors?

According to Reuters, FTX’s Bankman-Fried says he will testify remotely at congressional hearing.

WASHINGTON, Dec 12 (Reuters) – Sam Bankman-Fried, the founder and former CEO of now-bankrupt crypto exchange FTX, on Monday said he would testify remotely at Tuesday’s U.S. House Financial Services Committee hearing to examine the collapse of the company.

FTX filed for U.S. bankruptcy protection last month and Bankman-Fried resigned as chief executive, triggering a wave of public demands for greater regulation of the cryptocurrency industry.

That might be kind of difficult, since Sam Bankman-Fried has been arrested in the Bahamas.

Perhaps, The SEC Gary Genslar will testify as to why he met with SBF and gave him the green light for his trading? And why did Genslar erase Hillary Clinton from his schedule after meeting with her? And why was Genslar meeting with Hillary in the first place since she is now just an American cititzen??

Will SBF be extricated by tomorrow morning hearing time?

Pre-Fed Status: 100% Probability Of US Recession In 2023, Mortgage Rate Steady (US Yield Curve Now Inverted For 116 Straight Days, Implied Rate Hike Of +50 BPS To 4.50%)

Fun week ahead. US inflation numbers are out on Tuesday (forecast? CPI YoY = 7.3%, Core CPI YoY = 6.1%) and The Federal Reserve’s Open Market Committee (FOMC) rate decision is on Wendesday.

So, where are we sitting on Monday?

First, the US Treasury 10Y-2Y yield curve has been inverted (a precursor to recession) for 116 straight days). Second, the likelihood of recession in 2023 is 100%. Third, with the forecast of core inflation at a still numbing 6.1%, The Fed seems dead set on raising their target rate by 50 basis points to 4.50% on Wednesday.

dddd

So, as The Fed debates recession versus fighting inflation (partly caused by The Fed), we have Kevin Malone from The Office debating Angela versus double-fudge brownies:

“I hear Angela’s party will have double fudge brownies. But it will also have Angela. Double fudge.. Angela.. double fudge….. Angela. Hmm..” I am betting on risking a recession by raising the Fed’s target rate by 50 basis points.