Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Bidenomics just got jolted! US job openings in July collapsed by -22.4% to 8.82 million job openings. As M2 Money growth remains negative.
You can see the same collapse in growth of job openings in this chart.
Apparently, Powell and The Gang at The Federal Reserve have to keep on printing!
Here is alleged Civil Righter advocate Joe Biden saying the N- word in Congress. I can’t believe this stupid, demente fool is our President.
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The US housing market is truly bizarro world! San Francisco and Seattle are down near 10% year-over-year (YoY) while Chicago and Cleveland lead in price gains.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported 0.0% annual change in June, up from a loss of -0.4% in the previous month. The 10-City Composite showed a decrease of -0.5%, which is an improvement on the -1.1% decrease in theprevious month. The 20-City Composite posted a year-over-year loss of -1.2%, up from -1.7% in the previous month.
Notice that The Fed’s balance sheet is slowly unwinding (green line) and real weeky “usual” earnings are finally positive after two long years of decline (red line). No growth or loss in home prices at the national level.
How about at the metro level? Chicago, Cleveland, and New York again led the way reporting the highest year-over-year gains among the 20 cities in June. Chicago remained in the top spot with a 4.2% year-over-year price increase, with Cleveland in at number two with a 4.1% increase, and New York held down the third spot with a 3.4% increase. There again was an even split of 10 cities reporting lower prices and those reporting higher prices in the year ending June 2023 versus the year ending May 2023; 13 cities showed price acceleration relative to the previous month.
But The West is where home prices fell and fell hard. The biggest losers were San Francisco (-9.7% YoY) and Seattle (-8.8% YoY). Bubble cities of Phoenix (-7..5% YoY) and Las Vegas (-8.2% YoY) round out the four biggest losers in the nation.
The really interesting chart show the surge in home prices following The Great Recession of 2008 and ensuing financial crisis and post Covid. Of course, the commonality in the surge is the massive expansion of money supply thanks to a hyperactive Federal Reserve.
The puppetmaster of bizarro world? The Federal Reserve!
We are livin’ la vida Bidenomics!
The 30-year conforming mortgage rate is currently 7.23%, up 161% under Biden and Bidenomics (code for massive Federal spending on green initiatives that go to large Democrat donors and Ukrainian oligarchs). Meanwhile, M2 Money supply is up 9.4% under Biden.
At the same time. home prices are UP 26% under Biden while Real Median Weekly Earnings are DOWN -5%.
On a sad note, it looks like The Federal government is starting to rattle its Covid saber just in time for the 2024 Presidential election. Odds are the US will ramp up online voting, early voting, etc. Think of John Fetterman (aka, Walter White’s twin brother) and the Pennsylvania voting experience.
Team Biden!
As Robert Palmer nearly sang, US housing is simply unaffordable.
If we look at the Case-Shiller National home price index against real weekly wage growth, you can see the problem clearly. Since Covid and The Fed’s overreaction by providing staggering monetary stimulus, home prices shot up while real median weekly earnings collapsed.
Buying a house requires a much bigger slice of people’s income now — making this the most unaffordable housing market since 1984, by one measure.
And that crushing lack of affordability isn’t expected to improve much in the near future.
In just the last few weeks, US home prices rose for the first time in months and the 30-year fixed mortgage rate hit a 22-year high of 7.23%.
That has made what was already a dismal affordability picture even worse.
At today’s rates, buying a median-priced home would require a monthly principal and interest payment of $2,440 for those making a 20% down payment, according to Black Knight, a mortgage technology and data provider.
The rising cost of shelter represented 90% of last month’s inflation.
That’s $1,172 a month more in mortgage payments from just two years ago, before the Federal Reserve raised its benchmark lending rate 11 times in 18 months, Black Knight found. It’s a 92% increase — and is taking a growing chunk out of household budgets already facing inflation on many fronts.
Currently, 38.6% of the median household income is required to make the monthly payment on the average home purchase, making housing the least affordable it’s been since 1984, according to Black Knight.
“To put today’s affordability levels in perspective, it would take some combination of up to a 28% decline in home prices, a more than 4% reduction in 30-year mortgage rates, or up to a 60% growth in median household incomes to bring home affordability back to its 25-year average,” said Andy Walden, vice president of enterprise research and strategy at Black Knight.
Must as well face it, we’re addicted to gov. Or at least Fed monetary stimulus.
Just look at Personal Interest payments under Bidenomics.
The themesong for Bidenomics should be “Let’s Go Crazy” with spending … on green donors!
Biden and Powell probably sing “Hurt so good!”
It’s NOT always sunny in Philadelphia. Particularly when the Philly Fed non-manufacturing survey screams stagflation (a nauseating combination of economic slowdown and inflation).
After a positive surprise in July, Philly Fed’s non-manufacturing survey slumped back into contraction in August (from +1.4 to -13.1). Additionally, while respondents continue to expect a growth over the next 6 months, that optimism is fading rapidly…
Source: Bloomberg
On a non-seasonally-adjusted basis, the Philly Fed Services survey plunged to -20.0 – practically its lowest level since the COVID lockdowns…
Source: Bloomberg
Under the hood it’s even uglier with stagflationary impulses rearing their ugly heads.
Price indicator readings suggest continued increases in prices for inputs and the firms’ own goods and services.
The prices paid index increased 7 points to 46.2 this month. More than 50 percent of the firms reported increases in input prices. Regarding prices for the firms’ own goods and services, the prices received index rose from 7.8 to 14.6.
At the same time the indexes for sales/revenues and new orders both recorded negative readings this month
Source: Bloomberg
Is the ‘Services’ side of the economy finally catching down to the reality of the ‘Manufacturing’ side as savings run dry?
Now that The Fed and Fed Chair Powell are meeting at Jackson Hole WYO for the annual symposium, here is a video of Powell (Green Man) dancing with symposium attendees.
Hellzapoppin under Bidenomics! And it isn’t a musical, but a tragedy.
Between The Federal Reserve’s outrageous overreaction to Covid (printing like there was no tomorrow), and Biden’s massive spending spree (lots of moldy (green) spending, we have see horrid inflation.
And The Fed trying (sort of) to combat inflation, we see that 30-year CONFORMING mortgage rate for 80% LTV or lower credit borrowers is up 163.5% under Bidenomics.
Under Bidenomics, public debt (owed by the US Treasury) is up 19% or greater than $5 triillion. Now wonder Biden throws are billions like it is water.
I seriously want the Biden Administration (and almost every member of Congress) why we are sending billions of dollars to Ukraine while barely giving Maui fire victims barely anything. The US is already $33 trillion in debt with >$193 trillion in unfunded liabilites. I want to ask Biden and Congress HOW the US is going to afford $193 trillion in unfunded liabilites?
Of course, NO ONE wants to face the reality of the disastrous fiscal poliicies of Washington DC politicians. Not McConnell, not McCarthy, not Schumer and especially not Billions Biden. Remember 10% for The Big Guy where Democrats argue that is meaningless. Or mini-me, Robert Reich (Clinton’s labor secretary) who claimed that the US economy is the best he has ever seen! Yes, Reich, for the top 1%. Of couse, no one will ask fools like Reich how we will pay for $33 trillion in debt and the $193 trillion in unfunded liabilies … and fund a war in Ukreiane in seeming perpetuity.
My good friend Jesse has an excellent write-up on the upcoming KC Federal Reserve annual retreat at Jackson Hole, WYO. This retreat is just the US banking version of The World Economic Forum and Klaus Schwab. Know-it-all unelected elitists controlling our lives.
This is very strange. Global Treasury Yields just rose to a 15-year high (2008). This is primarily due to Central Bank moneta
And REAL 10-year Treasury yields also the highest since 2009.
At the same time, US industrial production is at the same level as pre-financial crisis (2007). Despite Federal Reserve monetary stimulypto (remember, The Fed’s balance sheet remains abouve $8 trillion.
This is Obama/Biden/Yellenomics. Trillions of dollars of fiscal (green) stimulus and monetary stimulus only to have industrial production be at the same level BEFORE The Great Recession and financial crisis.
“Ice Cream Joe” Biden is at Lake Tahoe for a week, probably to avoid being asked questions about his tin-ear respoonse to the tragic Maui fires that have killed 106 people so far. Instead, Joe is inappropriately chuckling (showing he doesn’t care!) and taking photo ops of him eating ice cream. The Biden administration angered a lot of people when it was announced that households that have been affected by the fires would only be getting a one time emergency aid payment of $700 while he gives billions for Ukraine.
At least housing starts were up 6% year-over-year (YoY).
However, the picture was more mixed with starts rising 3.9% MoM (vs +1.1% exp), but that was impacted by a notable downward revision in June (from -8.0% to -11.7%). Building Permits rose just 0.1% MoM (well below the 1.5% MoM expected).
On a SAAR basis, Permits disappointed (1.442mm vs 1.463mm exp) while Starts were in line at 1.452mm (up from a significantly downwardly-revised 1.398mm in June).
Source: Bloomberg
On the Permits side, single-family rose as multi-family fell:
July Housing Starts data followed the same trajectory with rental units growth underperforming single-family:
Additionally, we note that while Housing Starts and Completions remain well off their 2022 highs, Construction Jobs remain very close to those highs…
Source: Bloomberg
Finally, we note that Mortgage Bankers Association data released earlier this morning showed applications for home purchases dropped again last week (back near 1996 lows) as the contract rate on a 30-year fixed mortgage surged above 7% (highest since Dec 2001).
Source: Bloomberg
This won’t end well.
Speaking of not ending well, 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 August 11, 2023.
The Market Composite Index, a measure of mortgage loan application volume, decreased 0.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The Refinance Index decreased 2 percent from the previous week and was 35 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 0 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 26 percent lower than the same week one year ago.
Inflation is a killer to the middle class and low-wage worker. Yet there are always apologists for terrible Federal spending and Federal Reserve monetary policies. Like Alex Bereson with his “How we stopped inflation without a recession (hint: by not stopping inflation).”
Before I look at Berenson’s plea for more inflation, let’s see where Federal spending and Fed Monetary policies have left us. As of this morning, the REAL US Treasury 10-year yield (nominal yield less inflation), is now the highest since two crises ago, meaning The Great Recesssion and the first major overreaction of The Federal Reserve in late 2008.
Here is Berenson’s chart showing changes in inflation (CPI YoY) from 1966-1982 compared with recent inflation (orange) from 9/30/2013 – 06/30/2023. A charist might get confused and assume that inflation is will start rising again. But it is far more complicated than a simple projection.
One of the complications to the narrative is the change in the US economy after the Carter recession of 1980 and the inherited recession inherited by Reagan from Carter from 1981-2.
Since 1982 and the Carter recessions, we have seen incredible growth in Federal spending and when the proved insufficient, a massive increase in Fed monetary stimulus in late 2008 and then again in 2020 due to Covid. Remember Winston Churchill’s quote regarding water, “Never let a good crisis go to waste.” That has morphed into a battle cry for more government spending and regulation, not to mention Federal Reserve monetary policies.
Notice that core inflation under Carter (green line) was gut wrenching (yet Berenson just shrugs it off). Core inflation is still at a horrible 4.7% YoY. But you can see the spikes in Federal spending (blue line) and Fed Monetary stimulus (red line) associated with the financial crisis of 2008-2009 and Covid 2020-2021.
Then we have the Federal budget deficit, still over $1 trillion (despite perpetually confused President Biden claiming he got rid of the deficit). Meanwhile, The Federal Reserve still has over $8 TRILLION in monetary stimulus sloshing around the financial system.
Inflation is a horrifying by-product of Federal spending and Fed monetary policy (especially under Fed Chair Janet Yellen). Unfortunately, Yellen is now the US Treasury Secretary. For example, REAL average hourly earnings are declining thanks to inflation.
Berenson closes his piece with this sobering statement: “Ultimately, this pattern is why inflation is so problematic. It is addictive, and breaking the addiction means damaging the economy.”
Its Federal spending that addictive, and eventually Congress has to cut its insane spending levels. Even if it lowers GDP and increases unemployment. Take a look at China, a command economy, that is really suffering despite massive government spending.
Berenson is saying “all the Biden defenders are saying we’ve won the battle with inflation. But how can that be so with how much we’ve spent?” I agree, but will Washington DC ever learn? I doubt it.
Under Obama/Biden, the US economy is transitioning from a demand economy to a Soviet/Chinese-style command economy where central government directs economic traffic. We need to bite the bullet and return to a deamnd economy.
As The Buckinghams crooned, the mortgage market is a kind of a drag.
Rates on 30-year mortgages in the US are now the highest since 2000, at 7.53%. Mortgage rates are now up 153% under Bidenomics. Rates have gone from sub 3% to above 7.50% under Inflation Joe.
US Treasury yields are playing catch-up from Yellen’s “Too low for too long” monetary policies.
Yes, in part we are playing catch-up from Yellen’s Reign of Error as Fed Chair (keeping rates too low for too long). Only in Washington DC, does gross incompetance warrant a promtion to US Treasury Secretary. Career half-wit Mean Joe Biden is El Presidente and acting like a third world dictator.
Confounded Interest - Anthony B. Sanders 
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