February Jobs Report Comes In Hot, Hot, Hot (Avg Hourly Earnings UP 4.6% YoY, Too Bad Inflation Is At 6.4% YoY)

According to the US Bureau of Labor Statistics (BLS)https://www.bls.gov/news.release/empsit.nr0.htm, the February jobs report came in hot, hot, hot.

One indicator that the Biden Administration will herald is that average hourly earnings rose to 4.6% Year-over-year (YoY). Too bad headline inflation is still at a whopping 6.4% YoY.

More jobs were added to the US economy than forecast (311k actual versus 225k forecast). The U-3 unemployment rate rose to 3.6% from 3.4% in January.

The biggest gainer in jobs? Food services and drinking places, of course, at 69.9 k jobs added.

The aftermath of the jobs report? 2-year Treasury yields are down a whopping -15.8 basis points. But Europe is seeing double digit declines in sovereign yields as well.

At the 10-year tenor, we see the US Treasury yield drop -12.8 basis points. Much in line with European sovereign yield declines.

Big 4 Banks And SVB: Canaries In The Economic Coal Mine? (SVB Racing To Prevent a Bank Run As Funds Advise Pulling Cash)

While waiting on the February jobs report from the US Bureau of Labor Statistics (BLS), I noticed that the big 4 banks (Bank of America, JPMorgan Chase, Citi and Wells Fargo) are drowning in net realized losses as The Federal Reserve combats 1) too many years of loose monetary policy under former Fed Chair Janet Yellen and 2) too much spending under Pelosi, Schumer and … McConnell.

At a micro level, we have Silicon Valley Bank (SVB) SVB Is racing to prevent a bank run as funds advise pulling cash.

Panic is spreading across the financial world as concerns about the financial stability of Silicon Valley Bank prompt prominent venture capitalists including Peter Thiel’s Founders Fund to advise startups to withdraw their money.

The turmoil followed a surprise announcement from Santa Clara, California-based SVB that it was issuing $2.25 billion of shares to bolster its capital position after a significant loss on its investment portfolio. The stock plunged 44% in premarket trading before exchanges opened in New York on Friday, set to extend its 60% decline on Thursday. Bonds had posted record declines, igniting a broad selloff in US bank shares that also spread to Asia and Europe.
In the US, the KBW Bank Index on Thursday had its worst day since June 2020, as its members shed more than $90 billion of value. In Europe, the biggest banks lost more than $40 billion from their market caps on Friday.

Management’s solution appears to have been to seek out yield through a lot of long-duration bonds. The bank started to lose deposits as VCs pulled cash/burnt through operating capital.

Are banks the canary in the economic coal mine?

The Walking Dead … Housing Edition! New York City Leads Nation In Zombie Foreclosures In Q1 (Followed By Miami, Chicago, Cleveland And Philadelphia)

According to Attom Data, New York City leads the nation in zombie forceclosures.

A zombie foreclosure refers to a situation where a homeowner vacates their property after receiving a notice of default, expecting they will lose the home in the pending foreclosure. The foreclosure may get canceled for any number of reasons and never completed.

New York City and its surrounding areas lead the nation in zombie foreclosures. Followed by Miami. Chicago and Cleveland. Then Philadelphia.

Mortgage Purchase Applications Increased 6.9% In Weekly Survey (But Purchase Apps Down 42% YoY, Refi Apps Down 76% YoY As Fed Tightens Monetary Noose)

Mortgage applications increased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 3, 2023.

The Market Composite Index, a measure of mortgage loan application volume, increased 6.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 9 percent compared with the previous week. The Refinance Index increased 9 percent from the previous week and was 76 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 7 percent from one week earlier. The unadjusted Purchase Index increased 9 percent compared with the previous week and was 42 percent lower than the same week one year ago.

Today, we saw mortgage rates climb further to 7.11% as the US Treasury yield curve (10Y-2Y) descends into Mortgage Mordor as The Fed continues to tighten.

Slippin’ Into Darkness! US Treasury Yield Curve Descends To -108 BPS (169 Days Of Inversion) As US Mortgage Rate Hits 7.11% (Fed No Longer Low Riding Interest Rates)

Slippin’ into darkness! The US Treasury 10Y-2Y yield curve, that is.

At the same time that the 10Y-2Y yield curve inverts to -108 basis points, Bankrate’s 30-year mortgage rate has risen to 7.11%.

Now that The Federal Reserve is no longer low riding interest rates, I expect to see a cooling of the US economy.

Hang ‘Em High! US Treasury 10Y-2Y Yield Curve Inverts To Near Lowest Since 1981, Credit/Equity Spread Turns Positive As Fed Tightens Monetary Noose

Hang ’em high!

As inflation remains persist (thanks to endless Fed stimulus and endless Federal spending splurges), we are seeing The Federal Reserve finally withdrawing the monetary stimulus (tightening the monetary noose). And with it, the US Treasury yield curve (10Y-2Y) goes down with it.

Another sign of distress is the spread between credit and equities which has turned positive as it does in times of crisis.

UPDATE! Recession predictor the US Treasury yield curve just went “red alert”, inverting to -100 basis points.

Price Of Insuring Against US Debt Default Highest Since Last Debt Ceiling Crisis In 2013 (Debt Up 88% Since The Last Crisis, $182 In Unfunded US Liabilites)

The last US debt crisis occured in 2013 when Congress finally raised the debt ceiling … and kept on borrowing and spending, But if you thought that a debt crisis would scare Congress (and the Administration) into balancing the Federal budget, you would be wrong. In fact, since the 2013 debt crisis, Federal debt is up 88% (+$14.7 TRILLION over the last 10 years).

And with the massive growth in Federal debt under Obama, Trump and Biden has resulted in an explosion in interest payments on the Federal debt.

And with $182 TRILLION in UNFUNDED liabilities, the debt issuance won’t stop.

Let’s see what is in Treasury Secretary Janet Yellen’s bag of tricks.

LIBOR cracked 5% for first time since 2007.

And the US Treasury 10Y-2Y yield curve is the most inverted since 1981.

Is Janet Yellen the “evil woman” from Crow’s song?

Sink The Economy! S&P 500 Down -6% Since Fed Started Raising Rates On May 4, 2022, Equity REITs Down -16% (Pension Pain From Interest Rate Increases)

Interest rates are an important driver of the economy and financial markets. And what has happened to the S&P 500 index since The Federal Reserve started raising their target rate on May 4, 2023 to fight surging inflation?

Since that fatal day, the S&P 500 index has fallen -6% and equity REITs (commercial real estate) has fallen -16%.

What about returns on US Treasuries and Mortgage-backed Securities (MBS)? Same thing. PAIN!

Although The Fed has pledged to keep raising rates to fight inflation (and further decimate retirement accounts), investors are pointing to a peak (terminal) Fed rate of 5.44% at the September 2023 FOMC meeting. Then rate cuts following the September 2023 meeting.

Of course, much of the blame belongs to former Fed Chair Ben (QE) Bernanke and current Treasury Secretary Janet “Too Low For Too Long” Yellen who never met a Fed rate hike that she liked. But Yellen LOVES giving away US taxpayer dollars … to Ukraine.

Give The Fed 3 Steps! The Fed’s Overreaction To Covid Shutdown (Over Twice The Reaction To The Crippling Financial Crisis Of 2008/2009)

There is a fascinating film about the 2008/2009 financial crisis called “The Big Short.” Actually, Iiked a similar film a little more called “Margin Call” where the infamous fire sale of securities (primarily subprime asset-backed securities).

But despite how bad the financial crisis of 2008/2009 was, the growth of Fed assets on it balance sheet (orange oval) paled in comparison to The Fed’s overreaction to the Covid outbreak of 2020. And the government shutdowns and mask mandates.

The good news? The rate of growth YoY of both The Fed’s balance sheet and M2 Money is negative. But it is still startling to see the comparison of Fed reactions to crises.

Give The Fed three steps to catch up to the mayhem they created. Particularly in inflation home prices.

They call Janet Yellen, former Fed Chair and current Treasury Secretary “The Breeze” because idiotic monetary policies just blow over her head.

After all, The Fed is way behind the curve on raising rates.

All this is happening as the interest paid on our rapidly expanding Federal debt is getting Titanic-like.

US Mortgage Rates Rise To Over 7% As Fed Tightens Monetary Noose (Is Powell Chanelling Volcker?)

Yesterday’s inflation report (in the form on skyrocketing labor costs) helped lead Bankrate’s 30-year mortgage rate to over 7% … again.

Here is yesterday’s horrible unit labor costs YoY chart showing the fastest growth in labor costs since 1982 and Fed Chair Paul Volcker. Jerome Powell, the current Fed Chair is trying to reduce the Bernanke/Yellen/Powell monetary stimulypto (with an extra dose of “sugar” from the Covid outbreak).

The good news is that the 10-year Treasury yield is down -7.3 basis points this morning.

Here is The Fed’s Open Market Committee (FOMC) trying to summon Paul Volcker to help them figure out how they got inflation so wrong.