US Treasury Yield Curve Inverts To -82 Basis Points, Worst Since 1981 As Fed Tightens Policy (112 Straight Days Of Inversion)

The US Treasury 10y-2y yield curve descended further into inversion at -82 basis point, the worst since 1981.

This is not a good sign, since the 10Y-2Y curve typically inverts just prior to a recession.

The current US Treasury curve is currently humped at 1 year, then declining rapidly. The swaps curve is peaking at 9 months, then declining rapidly.

The Fed Funds Futures market is pointing to a peak Fed Funds rate of 5% at the May 3rd FOMC meeting.

Yes, a recession is headed our way.

Fed Dead Redemption! Blackstone’s $69 Billion Real Estate Fund Hits Redemption Limit (Equity REITs DOWN -23.6% In 2022, Mortgage REITs DOWN -28.6%)

As The Federal Reserve continues its assault on inflation by raising their target rate, Blackstone Inc.’s $69 billion real estate fund for wealthy individuals said it will limit redemption requests, one of the most dramatic signs of a pullback at a top profit driver for the firm and a chilling indicator for the property industry.

Blackstone Real Estate Income Trust Inc. has been facing withdrawal requests exceeding its quarterly limit, a major test for the one of the private equity firm’s most ambitious efforts to reach individual investors. The news, in a letter Thursday, sent Blackstone stock falling as much as 10%, the biggest drop since March.

You can see the problem facing commercial real estate. Since December 31, 2021, NAREIT’s all-equity REIT index has fallen -23.6% while NAREIT’s mortgage REIT index has fallen -28.6%. It looks like Blackstone’s Real Estate Income Trust has a decline coming.

If I look at NCREIF’s commercial property index, we can see that The Fed helped boost CRE values. But what will happen if and when The Fed actually shrinks its balance sheet.

I call The Fed’s attempts at cooling inflation “Fed Dead Redemption” since it resulted in redemptions from real estate funds.

Good November Jobs Report Points To Higher Mortgage Rates, Likely More Rate Hikes Coming From The Fed (REAL Wage Growth At -2.2% YoY, US Yield Curve Inverted For 109 Straight Days)

Unlike yesterday’s ADP jobs report (only 127k jobs added), the official Federal government report shows 263k jobs added. I like the ADP report, but The Fed pays attention to the BLS numbers. So, …

U.S. employers added 263,000 jobs in November, and the nation’s unemployment rate stayed the same at 3.7 percent, according to data released Friday by the Labor Department. Meanwhile, average hourly pay for workers rose 5.1 percent from a year earlier, to $32.82 from $31.23. But the US headline inflation rate at the last reading was 7.7% YoY that equates to -2.2% REAL Average Hourly Earnings YoY.

Mortgage rates fell to 6.51 yesterday, but expectations of Fed rate hikes (WIRP) and the 10-year Treasury yield are up today. In fact, the 10-year US Treasury yield is up 10 basis points this morning. This will likely translate to higher mortgage rate today.

Inflation is still the humming dragon crushhing the US middle class and at last report stood at 7.7% YoY. Average hourly earnings YoY rose to 5.1% in November, which is good. But inflation takes a huge bite out that number, resulting in -2.2% YoY REAL average hourly earnings.

And the US 10Y-2Y Treasury yield curve has been inverted for 109 straight days.

Here is the rest of the jobs report.

The biggest gainer? Motion picture and sound recording industries followed by logging (with rising energy prices, people have to heat their homes somehow).

Recession Alert! ISM Prices Paid Crashes To Covid Shutdown Levels As Fed Tightens

Warning! Evidence of a US recession is appearing. And with a recession, prices will likely fall due to lack of demand.

Why might inflation be falling? Take a gander at ISM Prices Paid. They just fell to the lowest level since the infamous Covid economic shutdowns of 2020.

M2 Money growth YoY is the lowest in years, but The Fed’s balance sheet remains elevated. But apparently the Covid-related sugar rush has ended.

US Adds 127k Jobs In November, Lowest Since August ’21 As Fed Tightens (On The Fed’s Good Ship Follypop!)

ADP’s jobs added in November shows a continued downward trend in private jobs added as The Fed merrily tightens its monetary follicy.

On the good ship Follypop!

104 Days Later! US 10Y-2Y Yield Curve Remains Inverted For 104 Staight Days, Mortgage Rate Falls As Fed Tightens (Ethereum Rises > 4%)

Yes, The US Treasury 10Y-2Y yield curve remains inverted, for the 104th straight day. And Bankrate’s 30-year mortgage rate has dropped -57 basis points since November 3, 2022.

This comes after a gruesome Pending Home Sales and mortgage applications reports today.

At least Ethereum is up over 4% today!

US Pending Home Sales Fall -36.7% YoY In October, MBA Purchase Applications Fall -31.22% YoY As Fed Tightens

The Federal Reserve continues to remove the monetary punch bowl despite the global yield curve inverting and The Fed fighting Bidenflation.

On the mortgage front, mortgage applications decreased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 25, 2022. This week’s results include an adjustment for the observance of the Thanksgiving holiday.

The Refinance Index decreased 13 percent from the previous week and was 86 percent lower than the same week one year ago. The unadjusted Purchase Index decreased 31 percent compared with the previous week and was 41 percent lower than the same week one year ago.

On the housing front, US pending home sales fell for a fifth month in October as demand continued to sag under the weight of high mortgage rates.

The National Association of Realtors index of contract signings to purchase previously owned homes decreased 4.6% last month, according to data released Wednesday. And fell -36.7% YoY.

All together now. Look at pending home sales YoY and mortgage purchase applications SA compared with M2 Money YoY.

Is this part of The Great Reset??

US Home Price Growth Slows To 10.65% YoY In September As Fed Tightens

The Covid outbreak of early 2020 begat a massive surge in monetary stimulus which has dissipated. Notice that home price growth is dissipating as well.

Also causing problems for housing is NEGATIVE REAL WAGE GROWTH. While the US is suffering from inflation and decling real wage growth, trading partner Germany has even a worse REAL WAGE GROWTH problem.

Where? Florida is doing great!!

Do I detect a trend?

As The Fed Tightens To Fight Inflation, The US Banking System Growth Grinds To A Halt, Bank Deposits Decline -0.6% YoY (SBF’s Lemonade Stand Isn’t Helping)

The US has an inflation problem. Both headline and core inflation YoY remain high compared to the previous 40 years. And The Federal Reserve is resolute in trying to curb inflation to 2%.

But as The Fed counterattacks inflation by raising their target rate, we are seeing a problem forming at the nation’s commercial banks. The growth in deposits YoY is now -0.6%. Commercial bank holdings of Treasuries and Agency MBS are declining as well. Agency MBS holdings are down -4.6% YoY and Treasuries and Agency holdings are down 0.0%.

How about M2 Money growth and M2 velocity? M2 Money growth has fallen to 1.3% YoY while M2 velocity has not been the same since the Covid sugar splash by The Fed and Federal government.

While inflation is creating havor for commercial bank deposit growth, it is interesting to follow the adventures of a spoiled child from MIT and his multi-billion dollar lemonade stand with all the controls of a child.

Once again, how did regulators get this SOOOOO wrong? And why didn’t investment advisors look at the balance sheet of FTX and Alameda Research. Yes, the media loves to report on FTX orgies, but the FTX fiasco points to something far more sinister. Were Sam Bankman-Fried and his paramore Caroline Ellison fronting this operation on behalf of some other parties?

Here is the FTX bankruptcy declaration in the State of Delaware. It appears like a massive case of fraud to me. And perhaps worse. Here is a nice summary from Zerohedge.com.

I recall one of Woody Allen’s best lines. When asked what an investment manager does, the response was “they manage your money until nothing is left.” Sounds like SBF has a great future on Wall Street! And Caroline Ellison should have known better than to post things like “Here are what I think about some things: controlling most major world governments.”

Going Down! November’s UMich Buying Conditions For Houses Plunges To Lowest Reading In History (The Fed Giveth And The Fed Taketh Away)

We’re going down!

November’s consumer sentiment survey from University of Michigan is one for the books. It printed at 33.0, the lowest in the history of the survey that goes back to 1977.

This chart shows how The Fed and Federal government threw trillions at the Covid economic shutdowns and the aftermath (green line).

BTW, the great blues tune “Going Down” was written by Don Nix of Alabama State Troupers fame.