Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Cryptocurrencies are a runaway train. In particular, Ethereum has gone from $129 on April 1, 2020 to $4,358 today.
Yes. March 2020 is when Covid struck and The Federal Reserve counterattacked.
Has volatility increased for the cryptos? Of course. The skew to the upside is steep on Bitcoin.
The last time we saw US labor productivity out per hour this low was in 1981 when President Reagan inherited stagflation from President Jimmy Carter.
As unit labor costs soar +8.3%.
Any wonder that the 1% have been doing so well relative to the bottom 50% in terms of wealth since entrance of The Fed in 2008 with zero-interest rate policies (ZIRP) and assets purchases (QE). And also after Covid struck.
“That will be $10,000 for your Big Mac, fries and a soda, please!”
The Federal Reserve Open Market Committee (FOMC) did what was expected today. They left their target rate unchanged at 25 basis points and enacted a slooooowwww tapering of their balance sheet.
The Fed will … Undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent.
Complete the increase in System Open Market Account (SOMA) holdings of Treasury securities by $80 billion and of agency mortgage-backed securities (MBS) by $40 billion, as indicated in the monthly purchase plans released in mid-October.
o Increase the SOMA holdings of Treasury securities by $70 billion and of agency MBS by $35 billion, during the monthly purchase period beginning in mid-November.
o Increase the SOMA holdings of Treasury securities by $60 billion and of agency MBS by $30 billion, during the monthly purchase period beginning in mid-December.
o Conduct overnight repurchase agreement operations with a minimum bid rate of 0.25 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair.
o Conduct overnight reverse repurchase agreement operations at an offering rate of 0.05 percent and with a per-counterparty limit of $160 billion per day; the per-counterparty limit can be temporarilyincreased at the discretion of the Chair.
Yes, a slowdown in the trajectory of Fed asset purchases.
The maturity structure of System Open Market Holdings by The Fed?
The reaction in the stock market and bond markets? How about the Dow?
The 10-year Treasury Note yield?
The US Dollar?
I want Fed Chair Jerome Powell to sing about the tapering like Wilson Pickett.
Nothing has been the same since Covid struck in early 2020.
CMBX BBB-, the reference basket for CMBS 6, was climbing to around $95 prior to the Covid outbreak and resulting recession. The CMBX reference basket is now at $72.25.
CMBX 6 is largely composed of retail and office, both hit hard by Covid and the ensuing lockdowns and fearmongering by the Federal government and main street media.
Yes, home prices are still growing at a super-hot pace of 18%, according to Corelogic.
But the forecast for home price growth is for 1.9% YoY in 2022.
As home price growth crashes back to earth as wages don’t keep pace with home prices.
Home prices have been growing in most states out west where The Fed’s money pump has resulted in a boom in second homes and people escaping high tax California and Oregon for Nevada, Idaho, Arizona (again), Utah and Montana. The east coast is seeing the Carolinas booming along with Florida and Indiana. Escape from New York?
Escape from LA … to Arizona, Nevada, Idaho and Utah?
Somewhere over the Alps, T-Sec Janet Yellen is fearmongering over a possible US debt default if Republicans don’t kowtow to Democrat’s desires to raise the debt ceiling.
(Washington ComPost) — SOMEWHERE OVER THE ALPS — Treasury Secretary Janet Yellen on Sunday said Democrats should be willing to approve a fix to the nation’s debt ceiling without GOP support if necessary, an approach senior Democrats ruled out during a recent standoff over the issue.
In an interview aboard a government airplane between Rome and Dublin, Yellen castigated Republicans for refusing to help raise the debt limit but acknowledged Democrats may be able to address the issue without GOP support through the Senate budget procedure known as reconciliation.
Senior Democratic leaders were adamant that the debt ceiling be resolved on a bipartisan basis last month. Senate Republicans have uniformly insisted that Democrats should alone be responsible for raising the nation’s debt limit. Congress probably will face a deadline of Dec. 3 to act, though the exact date is uncertain.
Well, Janet, the market (Credit Default Swaps for US) doesn’t seem to be worried about raising the debt ceiling.
Likewise, the CDX 5Y IG for the US investment grade corporate bonds is near historic lows. Even Yellen can’t make that rise.
The yield curve is flattening as The Fed gets ready to taper.
Only a career academic and politico Bambina like Janet Yellen would try to drum up agita about a US debt default when Democrats can cram down most anything through “budget reconciliation.”
Just relax Janet, put on some headphones, and listen to Redd Volkaert instead of your habit of fearmongering.
Instead of Bonjovi singing “Keeping the faith,” they should sing “Losing the faith” with regard to central banks and inflation.
Ethererum, the cryptocurrency, is now at $4,298. It under $200 as the Covid crisis took shape in March 2020. Since Covid, The Federal Reserve went loco and massively increased their money supply and asset purchases. With that response (and economic bottlenecks), inflation has increased to 5.4% YoY.
The Fed’s new moto should be “Policy errors ARE our business!”
No, we don’t look to President Beavis to do much of anything positive about inflation.
Its the same all over the world … insane central bank policies and resulting inflation.
I have discussed the US Federal Reserve in depth, but its time to focus on Europe’s European Central Bank (ECB) and their President Christine Lagarde.
With central banks around the world signalling tighter policy amid rising prices, Lagarde said the ECB had done much “soul-searching” over its stance but concluded that inflation was still temporary, so a policy response would be premature.
Soul-searching? The ECB is just doing what Powell and the Fed (aka, Jerome Jett and the Blackhearts) are doing. Keeping the foot on the monetary gas pedal in the face of inflation.
Let’s start Eurozone inflation. It is now sitting a 4.10% YoY. And core inflation is sitting at 2.10% YoY. Inflation is now the highest since 2009 while core inflation is at the highest since 2001.
Like the Federal Reserve, the ECB still has its foot on the monetary accelerator pedal despite booming inflation.
So, Christine, 19 nations in “Europe” having negative 2-year sovereign yields isn’t low enough for you?
The ECB’s platform in Frankfurt reminds me of a bad TV quiz show where participants try to guess prices next year. Call it “The Price Is Wrong.”
Unless, of course, the ECB sees a massive depression ahead.
(Bloomberg) — The largest owner of U.S. rental houses isn’t seeing any let-up in demand, or in its ability to increase rents.
Invitation Homes Inc., which owns more than 80,000 single-family rentals, raised prices by nearly 11% in the third quarter, according to a statement. The company boosted rents by 8% on renewals and 18% when leasing homes to new tenants. Rates are rising fastest in the Southwest, where rents increased 30% on new leases in Las Vegas, and 29% in Phoenix.
“It’s a little bit crazy,” Chief Executive Officer Dallas Tanner said on a conference call with investors Thursday. “There just isn’t enough quality housing available right now.”
Rising rents have been a staple of the economy since early Covid lockdowns lifted in the middle of last year. Surging purchase prices have pushed homeownership out of reach for first-time buyers.
Invitation’s properties, which tend be more centrally located than those owned by other institutional landlords, have been especially popular. And tenants tended to stay put: The company had a record-low turnover rate in the quarter, which reduced the expenses associated with preparing a house for leasing.
Invitation’s shares rose slightly to $40.77 at 12:49 p.m. New York time after the company raised its expectations for full- year revenue and net operating income. The stock is up 37% for the year.
As Milton Friedman once said, “If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.” In this case, The Federal government and Federal Reserve were put in charge of the Covid epidemic and we have shortages of almost everything. Including housing.
I don’t have Invitations rent growth chart, but here is Zillow’s YoY rent chart against The Fed’s balance sheet.
The good news? The 11% increase is almost half of the 20% YoY Case-Shiller National home price index.
Here is Treasury Secretary Janet Yellen making housing supply disappear.
U.S. employment costs rose at the fastest pace on record in the third quarter as companies across a variety of sectors raised wages against a backdrop of labor shortages.
The employment cost index, a broad gauge of wages and benefits, rose 1.3% from the prior quarter, according to Labor Department data released Friday. The gauge increased 3.7% from a year earlier.
Although there was a record jump in wages and salaries, personal income was reported to have dropped -1.04% in September. On a YoY basis, personal income fell to a 4.15% growth rate. Even more disturbing, the Case-Shiller national home price index is still rising at a near 20% pace.
Confounded Interest - Anthony B. Sanders 
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