We are on a Highway To Hell! Massive Federal Budget deficits and staggering payments to Treasury from The Fed (losses on balance sheet) and $212 TRILLION in unfunded promises to the non-elites.
Under Modern Monetary Theory (or print money without consequences), we are seeing trillion dollars budget deficits with no end in sight. Nothing has been the same since the financial crisis of 2008 with The Fed’s massive intervention.
Then we have The Fed paying an ever growing amount to US Treasury for losses on their huge balance sheet.
According to Trepp, the volume of CMBS delinquency increased 49.4% during 10 months through October.
Looking for more? This piece has been taken from Trepp and Commercial Real Estate Direct’s Q3 2023 Quarterly Data Review. Access the magazine here.
The volume of CMBS loans that are classified as delinquent increased by 49.4% during the 10 months through October to $27.91 billion. That volume amounts to 5.07% of the $601.98 billion universe tracked by Trepp. In contrast, delinquencies at the end of last year amounted to 3.03% of the $616.15 billion universe then extant.
Office Sector Drives Increase in Delinquency Volumes
The driver of the increase was the office sector, which had a 261% increase in delinquency volumes over the 10-month period through October. A total of 199 loans with a balance of $9.59 billion, or 5.91% of all CMBS office loans were at least 30 days late with their payments, as of the end of October. At the end of last year, 115 loans with a balance of $2.65 billion, or 1.63% of office loans, were delinquent.
The sector’s prospects are unlikely to improve as office occupancy rates have declined in most of the country’s major markets. That’s been driven by a substantial pullback in demand from office-using tenants.
Hit especially hard have been loans with floating coupons that are maturing and need interest-rate cap agreements in place before they qualify for term extensions. Those rate caps have skyrocketed in price in lockstep with interest rates.
On the residential side, The Fed is helping drive mortgage payments through the roof!
Biden’s terrible economic policies and horrid fiscal managment has put stress on The Federal Reserve. The Federal Reserve paid an estimated $76 billion to the Treasury in 2022 while banks’ willingness to lend has plummeted.
One of the key ways central banks absorb liquidity back out of the market is through reverse repo. These are short-term transactions where the Fed sells securities to banks and agrees to buy back at a higher price the next day.
This means banks are being paid to park cash with the Fed instead of injecting it into the economy through loans and fanning the fires of inflation.
That alone is costing the Fed $200M every single day.
In addition, the Fed is spending another $500M in daily interest payments on its reserve policy, i.e. balances that banks are holding in their reserve accounts at the Fed.
Banks’ willingness to lend has plummeted making credit availability increasingly tighter. Current levels have typically ended in recessions.This time is NOT different.
And on the energy side of the market, Biden Invokes ‘Wartime Powers’ to Attack Gas-Powered Furnaces. Of all the stupid things Biden has done, invoking wartime powers to make households use inefficent electric heat pumps instead of gas furnaces in stupid of two levels. First, invoking wartime powers for things unrelated to national defense is reckless and capricious. Second, electric heat pumps in the colder areas of the country is stupid as well. Electric heat pumps are inefficient, unless the goal of Biden and his Idiocracy is to “cull the herd” or kill off people during winter months (I had an electric heat pump in a condo I owned and it was terrible in winter months).
Yes, the Biden Administration and The Fed are economic mutilators!
After listening in horror to Joe Biden’s press conference after his summit with China’s Xi, I had to ask the following question: what does Joe Biden has in common with Georgia Tech? Answer? They are both rambling wrecks. Biden made a horrendous foreign policy blunder by calling Xi a “dictator” and almost blew it by nearly spillling the beans on our foreign policy negotiations with Israel. SecState Blinken had to intervene. We are represented by Winken (Harris), Blinken and Nod (Biden, who usually looks asleep or confused).
But back to the horrors of a slowing economy.
As the US economy slows down (like Biden himself), we are seeing further cracks in the real estate market. Foreclosure sale notices for commercial property loans are exploding.
And depending on the MSA, multifamily delinquencies are booming, like in Houston, Texas, New York City and Phoenix AZ.
Then we have this headline: “Not Just Office Towers – Commercial Real Estate Sales Crater Throughout Los Angeles.” It’s difficult to find big commercial real estate deals of any kind in Los Angeles. A new report from NAI Capital reveals how severe and universal the decline in activity is throughout the region this year amid collapsing values, higher interest rates, and a new tax on property sales above $5 million.
Yes, I know, California’s real estate woes are mostly the fault of their politicians like Governor Gavin (Gruesome) Newsom. The same guy who ordered San Francisco’s homeless population to be moved creating a new Potemkin Village. But rising interest rates are the fault of excessive spending by Congress and the Biden Administration.
$1.027 trillion in interest is calculated by multiplying the average interest rate on marketable US Treasury debt (which according to the Treasury is 3.096% as of Oct 31) by the $26.003 trillion in marketable US debt (as of Oct 31) which nets off to $805 billion, and adding to this non-marketable debt interest (which as of Oct 31 was 2.884% multiplied by the amount of non-marketable debt which is $7.696 trillion) and which in turn is an additional $222 billion in interest. Add across and you get $1.027 trillion.
Naturally, this calculation of estimated real-time interest costs – which is entirely based on Treasury data – is different than what the Treasury actually paid. Interest costs in the fiscal year that ended Sept. 30 ultimately totaled $879.3 billion, up from $717.6 billion the previous year and about 14% of total outlays, however that number is merely lagging what the pro forma print currently is, and will inevitably catch up to it, and then lag on the other side even as pro forma interest payment start dropping (once interest rates plunge after the next QE/YCC is launched).
Fans of exponential functions, we got you covered: the unprecedented surge in both interest rates and interest expense in the past two years means that total US interest has doubled since April 2022 and that’s with the inherent lag in interest catch up – as a reminder, the vast majority of 5, 7, 10 and 30 year debt is still locked in at much lower interest rates, and as such, rates will continue to rise as all of the existing debt rolls into much higher rates over the coming years.
Looking ahead, the staggering surge in both yields and total long-term Treasuries in recent months confirms the government will continue to face an escalating interest bill. As a reminder, we were the first to point out that it took just one month after US federal debt first rose above $33 trillion for the first time, to spike by another $600 billion.
On the personal finance side, annual Interest payments on a 30-year, fixed-rate mortgage before Biden was $8,500, but after Biden it almost tripled to $24,300! That means that annual mortgage interest rose 186% under Biden.
Bidenomics is a windfall for the donor class (high rate of return on campaign contributions) while the middle class gets beaten to a pulp. Waiting for Biden to lean over and creepily whisper “It’s working!” Even though it is clearly not working, at least for the middle class.
Evidence that Bidenomics is not working and destructive? Try the surging income needed to buy a house under Biden. Home prices are rising faster than median household income. As in $111,000 income needed to buy a house, while median household income is only $78,000. So, housing is simply unaffordable under Bidenomics. The Biden era is outlined in pink.
Mortgage purchase applications have collapsed to 1994 levels.
Meanwhile, stressed households are seeing credit card delinquencies at the highest level since 1991.
And thanks to Uncle Spam (given how Uncle Sam is destroying the middle class it is now Uncle Spam), 2023 interest payments are the same as the total debt from 1980! Spam, which the Federal government has devolved into, is very high in fat, calories and sodium and low in important nutrients, such as protein, vitamins and minerals.
2022 was a bad year for investments under Bidenomics. 2023 year to date is showing huge gains for Bitcoin, the NASDAQ and gold. Bringing up the rear are long duration Treasuries and REITs (real estate investment trusts), both earning negative returns thus far of less than -10%.
Bidenomics strikes … again. No, not his inane ramblings about Hamas being “the other team” or that Hamas has to learn to shoot straight. But his policies freezing effects on the economy. Like housing.
Existing-home sales faded in September, according to the National Association of REALTORS®. Among the four major U.S. regions, sales rose in the Northeast but receded in the Midwest, South and West. All four regions registered year-over-year sales declines.
Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – waned 2.0% from August to a seasonally adjusted annual rate of 3.96 million in September. Year-over-year, sales dropped 15.4% (down from 4.68 million in September 2022). … Total housing inventory registered at the end of September was 1.13 million units, up 2.7% from August but down 8.1% from one year ago (1.23 million). Unsold inventory sits at a 3.4-month supply at the current sales pace, up from 3.3 months in August and 3.2 months in September 2022.
The total existing home sales SAAR dropped back below 4mm for the first time since October 2010 (during the foreclosure crisis)…
Source: Bloomberg
Sales fell in all regions except the Northeast in September… and in every price range…
Single-family home sales fell to an annualized 3.53 million pace, the lowest since 2010. Condominium and co-op sales also declined.
“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” said Lawrence Yun, NAR’s chief economist.
“The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”
First-time buyers made up a historically low 27% of purchases, down from the prior month.
Cash sales represented 29% of total sales, matching the highest level in over a decade. Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 18% of the market.
“It would be very unusual to have higher cash compared to first time buyers,” Yun said on a call with reporters.
And, if mortgage rates (and thus affordability) are anything to go by, things are about to get real…
Source: Bloomberg
The median selling price rose 2.8% from a year earlier to $394,300, the highest September reading on record, pushing affordability even lower. But existing home prices are falling relative to new home prices (with the ratio near record lows)…
It looks like The House may elect a RINO as Speaker (Patrick McHenry, RINO-NC) to replace McCarthy. One RINO replacing another RINO … all so The House can continue its insane, inflation inducing spending.
Hey Bartender! The leading employment gain under Bidenomics was … low paying leisure and hospitality jobs at 96k jobs added.
The US added a whopping 336K jobs, the highest monthly increase since January. This is surprising given that the ADP report was so weak.
And the BLS decided to UPWARD revised past numbers. The BLS revised not only August but also July higher: the change in total nonfarm payroll employment for July was revised up by 79,000, from +157,000 to +236,000, and the change for August was revised up by 40,000, from +187,000 to +227,000. With these revisions, employment in July and August combined is 119,000 higher than previously reported.
Meanwhile wage growth continued to cool, and in September average hourly earnings increased 0.2%, below the 0.3% expected, and resulted in a 4.2% increase YoY, down from 4.3% in August…
… as a result of a big bump in lower paying jobs.
But perhaps the most remarkable divergence in the report is that with headline payrolls surging 336K (establishment survey), the Household Survey indicated that the pain continues, as the number of people employed not only rose by less than 100K (86K to be precise), but it was all part-time workers, which increased by 151K. Full-time workers? Why, they dropped by 22K, and the lowest since February.
Leisure and hospitality added 96,000 jobs in September, above the average monthly gain of 61,000 over the prior 12 months.
But the jobs report highlights Bidenomics. Lots of government jobs and the private sector getting crushed. +1 million government jobs, -400K non-government.
Hmm. How will The Federal Reserve view this report? Focus on the red-hot headline gain of 336k job added or the fact that it is mostly part-time jobs added? Odds of a rate HIKE rise to 44% after September jobs report and Fed PAUSE expectations have been extended.
After the jobs report, the US Treasury 10Y yield soared.
The 10-year Treasury yield has risen dramatically under Biden’s Reign of (Economic) Error.
Actually, I have to Spain numerous times and love visiting Barcelona. But the US debt fiasco under Biden and Congressional spending sprees has led to … US credit default swap being priced worse than Spain’s CDS.
With Biden/Congress orgy of spending (and a declining economy in many important respects), the US is seeing Federal debt near $33 TRILLION and even worse, unfunded Federal liabilities (promises, promises) are at $193 TRILLION, almost 6 times the current Federal debt load.
If you are into archaelogy and fossils, Nancy Pelosi (83) has announced that she is running for re-election to The House. Hasn’t San Francisco suffered enough under Feinstein, Newsom and Mayor Breed?
What a mess Biden and his Progressive backers have made. And we are forced to suffer the consequeinces of his policies. Or follies!
Money-market funds saw inflows for the 7th week of the last 8 with a $42BN jump (the most in 2 months) to a new record high of $5.625TN…
Source: Bloomberg
The inflow was dominated by a $24BN increase in Institutional fund assets while Retail also saw a sizable $17.7BN increase…
Source: Bloomberg
And the divergence between money-market fund assets and bank deposits continues to grow…
Source: Bloomberg
And while we actually saw huge deposit outflows (on a non-seasonally-adjusted basis) – despite The Fed’s seasonally-adjusted deposits increase – The Fed balance sheet shrank by another $20BN last week to its smallest since June 2021…
Source: Bloomberg
The Fed’s QT program continues apace with$18.4BN sold last week to its smallest since June 2021…
Source: Bloomberg
Usage of The Fed’s emergency bank funding facility jumped by $328 Million last week to a new high of $108BN…
Source: Bloomberg
Fed BS weekly change:
Fed balance sheet QT (Notes and bonds decline): $4.255 trillion, down $18,2BN
Discount Window $2.1BN, down $800M from $.29BN
BTFP new record $107.9BN, up $400MM
Other Credit Extensions (FDIC Loans): $133.8BN, down $0.6BN from $134.4BN
Finally, US equity markets and bank reserves at The Fed have converged a little recently, but the gap remains wide (thanks to the plunge in reverse repo balances)…
Source: Bloomberg
Tick, tock, banks!
Source: Bloomberg
You have six months to figure out how to clean up the $108 Billion hole in your balance sheet that you’re currently paying The Fed’s exorbitant rates to fill.
Bank deposit growth remains negative as The Fed tightens its overly accomodative monetary policy.
And then we have this chart showing plinging M2 Money (white line fever).
And the horrific unrealized losses on bank’s books.
Bidenomics is failing America. Primarily because Biden was one of the stupidest members of the US Senate. Not to mention nasty. Great President, America! /sarc
Confounded Interest - Anthony B. Sanders 
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