Zoltan! On Why the Fed Needs to Spark a Market Crash (As US Housing Starts Decline With Rising Mortgage Rates)

Credit Suisse’s Zoltan Pozsar thinks The Federal Reserve needs to spark a market crash. Really Zoltan??

If The Fed does its expected “shock and awe” (or shock and awful), it will be more than the stock markets will crash. The housing market could crash too.

Take the current US housing situation with its limited inventory of listings combined with massive Fed stimulypto.

US 1-unit housing starts are down -4.1% in January. But heck, it is January! But on a year-over-year basis, 1-unit housing starts are down -2.4%. But what will happen if The Fed ACTUALLY withdraws its gargantuan monetary stimulus (green line)?

Existing home sales inventory continues to decline as Bankrate’s 30-year mortgage rate starts to climb with expectations of Fed “Shock and Awful.”

Say hello to The Federal Reserve Board of Governors!

Jay The Revelator! Minutes Show Fed Ready To Raise Rates, Shrink Balance Sheet “Soon” (Mortgage Rates SOAR To 4.23%)

Jay “The Revelator” Powell has told us in The Fed minutes that The Fed is ready to raise rates and shrink the balance “soon.” Sort of like saying “Shock and Awe” is coming.

The minutes of the recent Fed Open Market Committee (FOMC) have been released. Yet they only mention “soon.” Just like when my wife asks me to take out the trash and I reply “soon.” At which point she realizes that I have no intention of doing it.

The REAL 10-year Treasury yield is now -5.44%.

And the 30-year mortgage rate has risen to 4.23% while the REAL 30-year mortgage rate has fallen to -3.7%.

Jay The Revelator sings “Soon!”

Mortgage Purchase Applications Increased 5% From Previous Week, But DOWN 7% From Same Week Last Year (Refi Apps Down 54% Since Last Year During Same Week)

The good news is that borrowers are continuing to apply for a mortgage. The bad news is that they are applying at a 7% slower rate than the same time last year.

Mortgage applications decreased 5.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 11, 2022.

The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 7 percent lower than the same week one year ago.

The Refinance Index decreased 9 percent from the previous week and was 54 percent lower than the same week one year ago.

Double Whammy, Staglflation Style! US Rents Soaring (12%) As Real-time Q1 GDP Slows To 0.7%

Call this a double whammy! Red-hot rents combined with a slowing economy.

According to CoreLogic, single-family annual rent growth finished 2021 at a new record: 11.7% YoY for high tier rental properties and 10.4% YoY for low tier rental properties.

Of course, southern and southwest rental properties are seeing the fastest rent growth. Particularly Miami at 36% YoY. Phoenix is no slouch at 19% growth in rents.

Inflation is really ripping the insides out of America’s working class. Especially with real-time GDP slowing to 0.7%.

Double whammy, indeed!

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Think 7.5% Inflation Was Bad? How About FLEXIBLE Core Inflation At 19%! (2-year Treasury Yield Skyrocketing Along With Mortgage Rates)

I thought the last inflation report of 7.5% inflation was bad. But then the Atlanta Fed updated their inflation measure for flexible prices. Flexible inflation, less food and energy, is roaring at 19% YoY!

Flexible prices are those prices that adjust rapidly. Along with commodity prices.

Speaking of rapid rises, take a look at the 2-year US Treasury yield since COVID struck in early 2020.

We did see 2-year Treasury yields generally correlated with The Fed Funds Target Rate … at least until COVID struck. Since mid-2020, The Fed Funds Target Rate remains at 0.25% while the 2-year Treasury yield is roaring back with fuzzy expectations from The Fed’s leadership.

The 10-year Treasury yield is not rising as rapidly as the 2-year Treasury yield, but it is hovering around 2%.

But Bankrate’s 30-year mortgage rate is rising like a comet, similar to the 2-year Treasury yield.

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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.

US Inflation Surges To 7.5% YoY, REAL Weekly Wage Growth Falls To -3.1% YoY (Taylor Rule Now Suggests Fed Funds Target Rate Of …18.90%)

As expected, US inflation surged from 7.0% in December to 7.5% in January.

REAL average weekly earnings growth YoY fell to -3.1%.

Energy prices YoY lead the wage (fuel oil UP 46.5% YoY). Used cars and trucks UP 40.5%. At least food is up “only” 7%.

At 7.5% CPI, the Taylor Rule suggests that The Federal Reserve should have their target rate be 18.90%.

At least CORE inflation is “only” 6% YoY.

How about rent CPI? The owner’s equivalent rent of residences rose to 4.09% YoY. Seems a little misleading since home prices nationally are growing at 18.81% YoY.

Fed Funds Futures data points to 6-7 rate HIKES over the coming year. BRACE FOR IMPACT!!

Yes, this is Powell’s famous chili recipe if The Fed actually starts to raise rates and pare back the balance sheet stimulus.

Slowing! Mortgage Purchase Applications DOWN 12% YoY (Mortgage REFI Applications DOWN 50% YoY)

The Mortgage Bankers Association (MBA) released their weekly mortgage application survey this morning. Mortgage applications decreased 8.1 percent from one week earlier, for the week ending February 4, 2022.

The Refinance Index decreased 7 percent from the previous week and was 52 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 10 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 12 percent lower than the same week one year ago.

And mortgage refinancing applications are down 50% since the same week last week.

Here are the stats. Pretty much down across the board.

Given a slowing mortgage market, I designate The Office’s Kevin Malone as the face of the market with rising interest rates.

30 Tons! Mortgage Rates Rising As Fed Navigates Rising Rate With $30 Trillion In Federal Debt (Good Time To Buy Home Hits All-time Low)

30 Trillion in debt and what do you get? Another day older and deeper in debt. What else do we get? Rising inflation and rising interest rates.

Mortgage rates are rising rapidly as The Federal Reserve contemplates 5-7 rate increases over the next year and removing their balance sheet stimulus.

And according to Fannie Mae, the share of Americans to say it’s a good time to buy a home hits an all-time low.

Yes, I want to see how The Federal Reserve will navigate the rising rate scenario in the face of $30 trillion … and growing … Federal debt load.

Instead of Tennessee Ernie Ford, I want to hear Delaware Joe Biden explain this to us.

PIGS Facing The Fire (Again)! Portugal, Italy, Greece, Spain Seeing Surge In Sovereign Debt Yields

European PIGS must face the fire … again.

Once upon a time, European PIGS (Portugal, Italy, Greece and Spain) saw incredible spikes in their sovereign yields related to Greek credit default contagion. But the European Central Bank (ECB), World Bank (WB), International Money Fund (IMF) rose to the rescue.

But here we go again! Thanks to rising inflation, the ECB is threatening to remove the massive monetary stimulus. Sound familiar??

Here are the Eurozone 10-year sovereign yields as of this morning. Greece is up a whopping 27.4 basis points, Italy is up 11.7 BPS, Portugal is up 9.3 BPS and Spain is up 9.2 BPS. The core of the Eurozone, France and Germany, are up 4.3 and 3.0 BPS, respectively.