Boss Biden’s Economy! Core Inflation Prints At 4.7% In July, Food UP 4.9% YoY, Shelter UP 7.7% YoY (Although Fed Is Unlikely To Raise Rates Again)

Welcome to Boss Biden’s America! It reminds of woefully corrupt Boss Tweed and Tammany Hall in New York City. Today’s inflation report revealed that core CPI YoY was 4.7%. Ugh!

While energy prices are down since last year, Food prices are still up 4.9% YoY and shelter (housing) CPI is up 7.7% YoY.

Expectations for this morning’s must-watch CPI print were for a MoM and YoY rise in the headline, and modest slowing of the core YoY. However, The Fed will be watching its new favorite signal – Core Services CPI Ex-Shelter – which reaccelerated in July (+0.2% MoM, and from +3.9% to +4.0% YoY).

The headline CPI rose 0.2% MoM in July (as expected), the same as in June, pushing the YoY up to 3.2% (from 3.0% in June) but below the 3.3% expected…

Source: Bloomberg

Today’s increase in CPI YoY broke the record-equaling streak of 12 straight months of declines.

Core CPI rose 0.16% MoM, with the YoY growth in prices slowing to 4.7%.

Source: Bloomberg

Both Goods and Services inflation (YoY) slowed in July – but Services remain extremely high at +6.1%…

Source: Bloomberg

On an annual basis, the index for all items less food and energy rose 4.7% over the past 12 months with the shelter index rising 7.7% over the last year, accounting for over two-thirds of the total increase in all items less food and energy.

Other indexes with notable increases over the last year include motor vehicle insurance (+17.8 percent), recreation (+4.1 percent), new vehicles (+3.5 percent), and household furnishings and operations (+2.9 percent).

Source: Bloomberg

Taking a closer look at the all important shelter index, while it is still growing both sequentially and annually, the slowdown in growth is increasing more visible:

Shelter inflation up 7.69% YoY in July vs 7.83% in June, lowest since Dec 22; also up 0.43% MoM, lowest monthly increase since Jan 22
Rent inflation up 8.03% in July vs 8.33% in June, lowest since Nov 22; also up 0.41% MoM, lowest since March 22

The silver lining here, as noted by former Fed staffer Julia Coronado, is that “we are seeing core inflation slow before the expected big step down in rent/oer” which is great news as “lots of price sensitivity in travel and core goods that was slow to take hold but is now fully coming through.” In other words, if and when rent/shelter inflation actually post a decline (with the usual 12-18 month BLS lag), the Fed will be scrambling to fight inflation.

Turning to the wage aspect, for the second month in a row, ‘real’ wages rose YoY in July (but barely, +0.2%), and it appears that we are about to dip back into real contraction next month.

Source: Bloomberg

So the question becomes – is this an inflection point in inflation? (or is M2 still leading the way?)

Source: Bloomberg

Yet, Fed Funds Futures are pointing to no further Fed rate hikes.

With House Republicans releasing bank records showing over $20 million in payments to Biden family, associates, and Democrats denying any wrongdoing, I think we are seeing the Biden Administration as a rebirth of New York City’s Tammany Hall corrupt political machine led by Boss Tweed. Since Biden’s malfeasance/influence peddling occurred when he was Vice President under Barack Obama (aka, Barry Soetoro), Obama is the new Bathhouse John Coughlin the woefully corrupt Chicago Alderman and Hunter Biden is the new Hinky Dink (Michael Kenna, also a woefully corrupt Chicago Alderman).

Bathhouse Barry Soetoro, Boss Biden and Hinky Hunter at a basketball game.

KJP: “Bidenomics Is Indeed Working!” … If The Goal Is NEGATIVE Real Weekly Earnings Growth Of -3.57% YoY, Then Bidenomics Is Working! (Even Worse For Blacks At -6.23% YoY)

“Bidenomics is indeed working!” claims Karine Jean-Pierre. “Cost is going down … wages going up, that is Bidenomics.”

Excuse me Karine. REAL weekly earnings growth remains negative as inflation outpaces weekly earnings growth. As of Q2 2023, REAL median weekly earnings growth is a dismal -3.57% YoY.

And if you are black, Bidenomics has failed you even worse! Q2 Real weekly earnings growth for black households was -6.23% YoY.

I wonder if the harpies on The View will discuss this?

Biden’s Mortgage Market! Mortgage Demand Falls -3.1% Since Last Week, Purchase Demand Falls -3% And Down -27% Since Last Year

The US mortgage market is livin’ la vida Biden! And for the US mortgage market, la vida Biden in ugly.

Mortgage applications decreased 3.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 4, 2023.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week and was 37 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 27 percent lower than the same week one year ago.

Here is a chart of mortgage purchase applications with Biden’s record in the orange box.

Prepayment rates with rising mortgage rates (to try to cool Bidenflation) are now low by historic standards.

Here is a photo of Joe Biden (or is that Boss Tweed of NYC’s Tammany Hall)? Doesn’t matter because they are both the same corrupt person.

Banks And CRE Turmoil Worsens As Office Delinquencies Accelerate (Delinquency Rate Rose To 4.41% Last Month, Office Rose To 4.96%)

Its not a wonderful world for regional and small banks given the deterioration of office markets.

The latest data from Trepp, which tracks commercial mortgage-backed securities (CMBS) securities market data, shows the delinquency rate of commercial property loans packaged up by Wall Street jumped again in July, with four of the five major property segments posting increases.

“While the rest of the US economy has seen relief in terms of higher equity prices, better-than-expected corporate earnings, and falling inflation numbers, the commercial real estate (CRE) market continues to be left behind,” Trepp wrote in the report.

Trepp data found the delinquency rate rose 51 basis points to 4.41% last month — the highest level since December 2021. Office delinquencies increased by 46 basis points to 4.96% — up more than 350 basis points since the end of 2022. The deterioration in the office segment is intensifying at an alarmingly rapid pace.

A broad overview of the US CMBS market shows the delinquency rate increased to 4.41%, a 51bps rise compared to the previous month, but still significantly lower than the 10.34% rate recorded in July 2012. The rate peaked at 10.32% in June 2020 during the government-forced Covid lockdowns.

Here are more highlights from the report:

Year over year, the overall US CMBS delinquency rate is up 135 basis points.
Year to date, the rate is up 137 basis points.
The percentage of loans that are seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) is now 3.92%, up 20 basis points for the month.
If defeased loans were taken out of the equation, the overall headline delinquency rate would be 4.64%, up 51 basis points from June.
One year ago, the US CMBS delinquency rate was 3.06%.
Six months ago, the US CMBS delinquency rate was 2.94%.

To better understand what might come next for the CRE market, Kiran Raichura, Capital Economics’ deputy chief property economist, recently warned in a note to clients that the office segment might experience a 35% plunge in values by the second half 2025 and “is unlikely to be recovered even by 2040.”

According to swipe data from Kastle Systems, the US office occupancy rate is less than 50%. The figure has plateaued since September, indicating a new reality of remote work.

One major hurdle for CRE space is that “more than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points,” Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management, wrote in a note to clients.

Shalett expects a “peak-to-trough CRE price decline of as much as 40%, worse than in the Great Financial Crisis.”

Bank of America analysts expect challenges in the CRE space but noted, “They are manageable and do not represent a systemic risk to the US economy.”

Meanwhile, analysts at UBS warned:

“About $1.3 billion of office mortgage loans are currently slated to mature over the next three years.

“It’s possible that some of these loans will need to be restructured, but the scope of the issue pales in comparison to the more than $2 trillion of bank equity capital. Office exposure for banks represents less than 5% of total loans and just 1.9% on average for large banks.”

We’ve already seen major building owners returning their office towers and malls to lenders in California (here & here) and elsewhere (here). This will result in an uptick in CMBS delinquencies moving forward.

… and remember what we wrote during the regional bank crisis earlier this year — the note was titled “Nowhere To Hide In CMBS”: CRE Nuke Goes Off With Small Banks Accounting For 70% Of Commercial Real Estate Loans.

Meanwhile, The Federal Reserve is printing the night away.

Sam Cooke sang Joe Biden’s favorite song: “Only Sixteen.”

“So why did I give my heart so fast
It never will happen again
But I was a mere man of 80
I’ve aged a year since then.”

Economic Rollerball! US Regional/Small Bank Shares Drop After Moody’s Cuts Ratings, Warns on Risks (Bidenomics Favors Large Firms, Not Small Firms)

Rating company downgrades 10 lenders, citing dimmer outlook
U.S. Bancorp, BNY Mellon among six firms facing potential cuts

Not surprising given that Bidenomics is nothing more than giving big bucks to big corporations, including banks. Regional/small banks? Not so much.

US bank stocks declined after Moody’s Investors Service lowered its ratings for 10 small and midsize lenders and said it may downgrade major firms including U.S. Bancorp, Bank of New York Mellon Corp., State Street Corp., and Truist Financial Corp.

Higher funding costs, potential regulatory capital weaknesses and rising risks tied to commercial real estate are among strains prompting the review, Moody’s said late Monday.

“Collectively, these three developments have lowered the credit profile of a number of US banks, though not all banks equally,” the rating company said.

Moody’s Sees Problems Ahead for US Banks

Rating company issues raft of downgrades, outlook

Source: Moody’s

Shares declined for firms that had their ratings cut, including M&T Bank Corp., down 3.2%, and Webster Financial Corp., which lost 1.3%. Moody’s also adopted a “negative” outlook for 11 lenders, including PNC Financial Services Group, Capital One Financial Corp. and Citizens Financial Group Inc. Among those, PNC was down 2.2% and Capital One lost 2.4%.

Investors, rattled by the collapse of regional banks in California and New York this year, have been watching closely for signs of stress in the industry as rising interest rates force firms to pay more for deposits and bump up the cost of funding from alternative sources. At the same time, those higher rates are eroding the value of banks’ assets and making it harder for commercial real estate borrowers to refinance their debts, potentially weakening lenders’ balance sheets.

“Rising funding costs and declining income metrics will erode profitability, the first buffer against losses,” Moody’s wrote in a separate note explaining the moves. “Asset risk is rising, in particular for small and midsize banks with large CRE exposures.”

Some banks have curbed loan growth, which preserves capital but also slows the shift in their loan mix toward higher-yielding assets, Moody’s said.

Banks that depend on more concentrated or higher levels of uninsured deposits are more exposed to these pressures, especially banks with high levels of fixed-rate securities and loans.

Deposits are declining as The Fed hikes rates.

So, Bidenomics reminds me of the film “Rollerball” where big corporations run the government and run a game akin to Rome’s gladiator fights.

“Pain Trade” Points To A Steeper US Yield Curve As Fed Remittances To US Treasury Soar (The Cost Of Bidenomics’s BIG Policies)

Yes, Bidenomics is an FDR-type massive expansion of government into the private sectors requiring massive Federal spending … and inflation. Except that it beenfits anything BIG and powerful to the detriment of the small and weak.

(Bloomberg) Friday’s jobs data sparked a relief rally in bonds and a flatter yield curve, but the pain trade is still for higher yields and a steeper curve – the lesser-spotted bear steepener – with this week’s CPI a potential catalyst.

Last week was a turbulent one for bonds, but the continued softening in payrolls data served to remind the market that supply and fiscal-profligacy fears have to be counter-balanced with an economy that’s in its late-cycle stages.

After the data, 10-year yields took the elevator back down to sub-4.05% after briefly going above 4.20%. They have since clambered back to 4.12%, but their next cue is likely to come from Thursday’s CPI report. Headline is expected to nudge back up to 3.3% (from 3% last month), mainly due to base effects, and core is expected to hold steady at 4.8%.

Still, stronger-than-expected data probably means higher yields in a market more acutely alert to inflation (and therefore supply) risks. As with last week, term premium would likely drive the move, meaning a curve steepening. After relentlessly flattening for the last two years, the pain trade is for a steeper curve. Implicit positioning of speculators from the COT report shows there is a heavy skew to a flatter curve.

The negative carry for most flatteners remains punitive (for 2s10s USTs it’s ~83bps over a year), but the large upside potential from supply/inflation worries and the covering of positions begins to make that look less insurmountable.

Finally, the Bundesbank’s decision to stop paying interest on domestic government deposits – which initially pushed short-term German bonds higher this morning – highlights the broader issue of central banks paying interest on reserves when they are superabundant.

In the days of QE and 0% interest rates, the ECB and Fed at al. remitted money to their treasuries from the income on their bond portfolios.

But now that is reversed as bond income is dwarfed by the cost of paying interest on trillions of bank reserves. Take the Fed, whose debt to the Treasury is now accruing at over $2 billion each week.

This is something that will become more politically contentious, especially as economies continue to slow and cost-of-living pressures bite further.

Bidenomics. The takeover of the US economy by BIG corporations, BIG labor unions, BIG tech, BIG pharma, BIG defense, BIG healthcare, BIG media, BIG banks, BIG tech, BIG … Well, anyting that is BIG and powerful that can buy influence in Congress and the Administration. Except BIG energy which lost out to BIG Progressive DC thinktanks.

Leading to BIG inflation!

But I feel good! Even though inflation expectations are soaring again as gasoline soars again.

Bidenomics Falsehood: Biden “Created” 400k Jobs Per Month While Trump Lost Jobs (Actually Trump Averaged 1.56 Million Jobs Added Post-Covid While Biden Averaged 400k)

“One of the most cowardly things ordinarily people do, Is to shut their eyes to facts.” – C.S. Lewis

Okay, we know Biden lies constantly and misrepresents facts (hey, he is a politician like Adam Schiff (D-CA). But this graphic praising Bidenomics with Biden having created the most jobs (average per month) since Carter (notice they left out Democrat darling Jimmy Carter!!!). In this absurd graphic, Biden wins by “creating” over 400k jobs per month while Trump lost jobs per month. Riveting … except that it is completely misleading.

Actually, the US economy added 12.53 million jobs after April 2020 (Trump) while Bidenomics created took 2 1/2 years to add 12.56 million jobs. So, Biden took over twice as long to create jobs after Covid than it did under Trump. Simply opening the economy and schools produced that magical claim by Biden. And the National Teacher’s Union and Randi Weingarten worked with Fauci to orchestrate shutting down schools. Blaming Trump for local governments shutting down the economy is pure bunk.

12.53 millions jobs added / 8 months = 1.56 million jobs average per month. Biden? 12.56 million jobs added / 30 months = .43 million jobs average per month. So, Trump averaged more than 3x the job growth post-Covid than Biden.

Here is the “glories of Bidenomics” from the White House. As Biden likes to say, pure malarkey!

I wonder if the Democrat Party is a rebirth of New York City’s Tammany Hall corrupt political movement of the 1800s? Is Biden Boss Tweed? Or is Obama Boss Tweed with Biden as his nasty, dimwitted henchman?

In 1871, Thomas Nast denounces Tammany as a ferocious tiger killing democracy. The image of a tiger was often used to represent the Tammany Hall political movement. Sounds an awful lot like today’s Democrat Party.

Perhaps a fez for Democrats?

Bidenomics! Ford Will Lose $4.5 Billion On EVs This Year, Up From $2.1 Billion Last Year (Ford DOWN -48% Since January 2022, GM DOWN -40% As Fed Withdraws Stimulus)

Bidenomics, the term for “Government Gone Wild! in terms of spending and EPA regulations, is a disaster for the US middle class and low wage workers. Even the 1% are now hurting if bought into Biden’s green lunacy. Ford is now down -48% since January 14, 2022 as The Fed started raising rates to fight inflation. GM is down “only” -40%.

Ford is slated to lose $4.5 billion from its EV segment this year, a $1.5 billion larger loss than the company had expected.

So far this year, the division has lost $1.8 billion and this year’s $4.5 billion loss figure blows away last year’s $2.1 billion loss. Ford also announced that its electric F-150 pickup trucks will undergo a price cut, according to Fox.

Ford beat earnings on Thursday and reported adjusted EPS of $0.72, beating expectations of $0.54. It posted revenue of $45 billion and adjusted EBITDA of $3.8 billion, above estimates of $3.15 billion.

The company also raised its guidance, forecasting adjusted EBIT of $11 billion to $12 billion from $9 billion to $11 billion. The company is now guiding for free cash flow of $6.5 billion to $7 billion, from $6 billion.

But reality has sunk in about the company’s comments regarding its EV production schedule and spending plans. Price cuts in the industry, led by Elon Musk and Tesla, have thrown Ford’s production targets into a tailspin and Morgan Stanley noted on Friday morning that “major changes to the EV strategy” could be necessary, according to a wrap up by Bloomberg.

Ford now says it is “throttling back” on plans to ramp up EV production, the wrap up said. It blamed the price war for EVs as part of the cause and told shareholders it would need another year to meet its target of 600,000 EVs produced annually.

Ford CEO Jim Farley said late last week: “The shift to powerful digital experiences and breakthrough EVs is underway and going to be volatile, so being able to guide customers through and adapt to the pace of adoption are big advantages for us. Ford+ is making us more resilient, efficient and profitable, which you can see in Ford Pro’s breakout second-quarter revenue improvement (22%) and EBIT margin (15%).”

CFO John Lawler said yesterday that the company “has ample resources to simultaneously fund disciplined investment in growth and return capital to shareholders – for the latter, targeting 40% to 50% of adjusted free cash flow,” Bloomberg added. He now says Ford is “not providing a date” for producing 2 million EVs per year, which was previously the company’s target for 2026.

Ford’s inability to compete with Tesla was noted earlier this year in a piece titled Tesla ‘Weaponizes’ Price-Cuts To Crush EV Competition.

Is the company pulling an Intel and “kitchen sinking” its guide for the year, or has Elon Musk’s price cuts over at Tesla really put the legacy automaker on the ropes? Ford reports again on October 26, where we’ll get our next glimpse into its continuing operations this year.

Tesla is down -26% since January 14, 2022. And showing a nice turnaround!

Today, the 10-year Treasury yield is up 11 basis points.

Government Gone Wild!

Bidenomics! Mortgage Demand Decreases 3.0% From One Week Earlier, But Purchase Demand Down 26% From Last Year, Down -45% Under Biden While Mortgage Rates Are UP 134% (US Interest Expenses Surged By 50% In Past Year To Nearly $1 Trillion On Annualized Basis)

Inflation under Biden has been very painful for the US middle class and low wage workers. That inflation has resulted to surging mortgage rates thanks to The Fed’s counterattack.

The result? Mortgage rates are up 134% under Bidenomics, while mortgage purchase demand is down -45% since Biden was selected. And mortgage refinancing demand is down a staggering -90%!

Mortgage applications decreased 3.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 28, 2023.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 32 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 26 percent lower than the same week one year ago.

US interest expenses have surged by about 50% in the past year, to nearly $1 trillion on an annualized basis.

Look at the share of net worth by the top 1% as Treasury borrows more money.

Oddly, Biden is not talking about about putting US government policies up for sale to the highest bidders. But don’t worry. Biden is the King of Corruption in the District of Corruption (Washington DC).

Bidenomics (Or Yellenomics)! Real Weekly Earnings For Men LOWER Under Biden Than Jimmy Carter! (Men’s Real Weekly Earnings DOWN -9% Since Q2 2021 While M2 Money UP 31%)

President Jimmy Carter is usually the bar for terrible Presidents. Under Carter, the US experienced economic stagnation and soaring inflation. At least it led to the election of Ronald Regan!

So, Biden’s much mentioned Bidenomics have produced REAL MEDIAN WEEKLY EARNINGS FOR MEN that is currently below 1979 levels under Jimmy Carter.

Even worse for Bidenomics, REAL MEDIAN WEEKLY EARNINGS GROWTH FOR MEN was -4.45% In April 2023, while the last reading prior to Covid under Trump was 6.674% YoY in February 2020. So, Bidenomics isn’t even back to Trump levels for men.

I like this chart which I call “Yellenomics” because it illustrates The Fed’s Folly of money printing and its impact on real earnings. After the Trump wage growth boom, real median weekly earnings for men has been steadily declining.

Women, on the other hand, did show a gain since Carter, but still lower than the last month before Covid struck. Women’s real median weekly earnings growth YoY since Q2 2021 are down -5%. So, Bidenomics has been less sucky for women than men.

Reminds me of The Yardbird’s classic “I’m A Man.” Worse off under Biden than under Jimmy Carter. Although The Yardbird’s “Over Under Sideways DOWN” is more emblematic of Bidenomics.

Bidenomics should be renamed Corruptionomics given Biden’s habit of selling government influence to anyone willing to waive a few million.