Rioting In The Streets! ‘This Will Not End With A Soft-Landing Whimper’ – Rubino Warns “Only A Matter Of Time Before Everyone Realizes There’s No Fix”

Martha and the Vandellas said it best: “No where to run, no where to hide.” We are already seeing rioting in the streets.

Analyst and financial writer John Rubino has a new warning about being fooled into thinking the economy is improving because inflation and interest rates have fallen some recently.

Rubino says, “If the U.S. government is running crisis level deficits, which it is right now, borrowing money and paying interest on it means we are in a financial death spiral…”

“The debt goes up, the interest on the debt goes up and that raises the debt even further, and you just spiral out of control.

We are there right now. The official U.S. debt is $33.5 trillion. It’s growing by $1.7 trillion a year, and $1 trillion of that is interest costs.

Interest costs are rising as the overall debt goes up. Then throw in this incredibly reckless military spending in the guise of foreign aid, and you get a society that has completely lost control.

That’s where we are now.

We are in the blowoff stage of a 70-year credit super-cycle.

Those things do not end with a whimper, and they certainly do not end with a soft landing. They end with a bang, and the bang is going to be centered on the currency.

People are going to look at this and say, ‘Do I really want to hold the currency or bonds of a country that is destroying its finances at this trajectory and this scale?’ The answer will be ‘No.’

At that point, it is game over for a deeply indebted economy. We are headed that way fast, and these wars are taking us that way even faster.”

If the Fed keeps raising interest rates, the economy tanks, but you protect the dollar. If you cut interest rates, you spike inflation even more, and the U.S. dollar tanks.

Rubino says in the end, we get a “massive reset,” and the everything bubble explodes.

Rubino says the dollar is going to decline and, at some point, it starts to go into freefall in terms of buying power. Rubino explains,

“If a currency starts to decline in a disorderly way, then you have a massive financial crisis on your hands.

That is definitely where Japan is right now. The U.S. is headed that way fast.

So, once we reach that point, there is no fix.

Then it is only a matter of time that everybody realizes that there is no fix, and they just bail on the whole experiment, and that’s where we are headed.”

Rubino talks about plunging home prices, more trouble coming in the commercial real estate market and why you need gold and silver as core assets during a currency reset.

Riots, already happening in American cities (not to mention looting in New York City, Chicago, San Francisco and Los Angeles), will accelerate if Congress attempts to curtail entitlements (now at $211.65 TRILLION).

Meanwhile, Biden keeps giving away money (student loan forgiveness, electric heat pump mandates, etc.).

Hey, at least Argentina elected AC/DC’s Angus Young as President!

The Thrill Is Gone? US Industrial Production Plunges In October As Auto-Maker Strikes Hit (But Also Federal Stimulypto Has Worn Out)

The thrill has gone from all the BIG spending bills from Biden.

After its surprising bounce last month (on a seasonally-adjusted basis, because it crashed NSA), US Industrial Production was expected to decline 0.3% MoM in October. It was worse – down 0.6% MoM from a downwardly revised September print (from +0.3% to +0.1%). October’s decline is the worst since Dec 2022 and the YoY drop of 0.8% is the worst since the COVID lockdowns. AND Federal stimulypto is wearing off (M2 Money growth surge peaked in February 2021, but has slowed into negative growth starting in August 2022.

Notably, once again, the non-seasonally-adjusted industrial production tumbled more than then seasonally-adjusted data…

Source: Bloomberg

On the manufacturing specific sector, consensus was for a 0.4% drop MoM but it was considerably worse, dropping 0.7% MoM (and September’s print was revised down from +0.4% to +0.2% MoM). That is the biggest MoM drop since March and biggest YoY drop since the COVID lockdowns.

That is also the 8th straight month of YoY declines for Manufacturing production.

Source: Bloomberg

Output was weighed down by a 10% plunge in motor-vehicle production as the annualized rate of car assemblies dropped to 9.22 million units, the least since February 2022. Excluding parts production, autos and trucks production fell 16.5% MoM – the biggest drop since the COVID lockdowns…

Source: Bloomberg

Starting in September, the United Auto Workers union authorized targeted strikes against the Big Three Detroit automakers, disrupting production at the companies and at their suppliers. The UAW reached tentative agreements with management in late October, laying the groundwork for a rebound in factory output in November.

So theorteically, we should see bounce back next month. Unless demand – as WMT hinted at – has fallen off a cliff.

We WILL Get Fooled Again! Purchasing Power Of US Dollar DOWN -15% Under China Joe Biden (Top 1% Doing Great Under Bidenomics, Not The Middle Class)

Republicans elected Mike Johnson from Louisiana as House Speaker, then were surprised when Johnson agreed with big spending Senators McConnell and Schumer on Biden’s mega spendathon. Also, several Republicans voted with Democrats NOT to impeach Cuba Pete (Mayorkas) for allowing 8 million illegals to cross the southern border. Bottom line: the Biden Administration and Congress are closely held subsidiaries of the elite 1% and US large corporations. The middle class be damned! But we will get fooled again in every election.

Since Biden’s inaugration in January 2021, the purchasing power of the US dollar is down a staggering -15%.

Yes, under control of large corporations and the 1%, the economy is an economic wasteland. But the 1% are doing great under Bidenomics! With The Fed’s help of course.

Here is a chart of core inflation relative to M2 Money printing. Easy way to cool inflation … stop printing money!

Here is China’s Xi and America’s “China Joe” Biden.

Seriously, Biden has always been known as being stupid and corrupt. Now he has dementia. A PERFECT President for the 1% in their war against the middle class. Biden is the penultimate “useful idiot” with an emphasis on idiot.

Fear The Talking Fed! Morgan Stanley Forecasts 315 Basis Point Cut In Fed Funds Target Rate In 2024 (Mortgage Rates Could Fall To 5.50% In 2024)

The Talking Heads at The Federal Reserve keep yammering about persistant inflation (which Yellen kept saying was transitory) and whether or not Fed rate hikes will be necessary to get infation to 2%.

Instead of muddling lectures (like by Atlanta Fed President Rafael Bostic) on Fed tightening to fight inflation, let’s address the elephant in the room (no, not Chris Christie or Hillary Clinton), but Morgan Stanley’s soft landing forecast of a Fed Funds rate cut from 5.50% today to 2.375% in 2024. This is a whopping 215 basis point cut!

Currently, the spread between the 30-year conforming mortgage rate and The Fed Funds Target rate is 1.981% of 198.1 basis points. While the better spread is the mortgage rate compared to the 10-year Treasury yield, I am going to use Morgan Stanley’s Fed Funds target rate forecast for 2024. Assuming the spread is constant, this results in a mortgage rate in 2024 of … drumroll … 5.50%.

In one sense, a 200 basis point decline in the 30-year mortgage rate would be welcome news to home buyers. On the other hand, Morgan Stanley is forecasting a soft landing and a rise in the unemployment rate to 4.3%, hardly good economic news.

So, fear the talking Fed. They are talking about fighting stubborn inflation while ignoring the slowdown forecast for 2024.

Interest On US Debt Skyrockets Above $1 Trillion For The First Time Ever (Annual Interest Payments On 30-year Mortgage In 2020 Was $8,500, But Has Almost Tripled To $24,300!)

Another day, another dose of bad fiscal/monetary news. Not surprising with the US Treasury being run by Janet Yellen, who doesn’t seem to know much economics. In fact, with Biden/Congress spending like drunken sailors in port, inflation and The Fed’s counterattack, we see that interest of US debt just hit $1 TRILLION!

$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.

Biden’s Mortgage Market! Mortgage Demand (Applications) Increase By 2.5% From Previous Week As Mortgage Purchase Demand Down -20% From Last Year (Refi Demand Down -7% From Last Year While Mortgage Rate Is UP 169% Under Biden)

US inflation is lower than it was a year ago (cheers from The View CNN and MSNBC cheerleaders), but inflation remains stubborning above The Fed’s 2% target rate and will likely remain above 2% for the nexf few years. So mortgage demand is much like inflation … mortgage demand increased in the latest week but generally is very low compared to last year.

Mortgage applications increased 2.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 3, 2023.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week and was 7 percent lower than the same week one year ago.

The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 20 percent lower than the same week one year ago.

The 30-year fixed mortgage rate dropped by 25 basis points to 7.61 percent, the largest single week decline since July 2022. But, mortgage rates are up 169% under Biden and Bidenomics.

Bideomics is over, under, sideways, down. Mostly down.

Alarm! Bidenomics And The Tilt Effect (Mortgage Rates Up 174% Under Biden, 10Y Treasury Yield Up 402%, Real Disposable Income Declining, TLT Calls Explode!)

Alarm!

No, this isn’t the tilt effect in the mortgage market where inflation is front-loaded in mortgage rates making mortgage payments quite unaffordable. Although inflation is causing mortgage rates to be up 174% under Biden (while Biden continues to brag about how Bidenomics is helping). Meanwhile, the 10Y Treasury yield is up 402% under Biden (making refinancing the US staggering debt load more difficult to refinance. Higher mortgage rates tilt the present value of mortgage payments to the front, making housing even more unaffordable. Thanks Joe!

But the Tilt effect I am talking about is the TLT effect. TLT (iShares US Treasuries 20y+ ETF) calls. Friday was the largest TLT call volume ever.

Meanwhile, US real disposable income is declining.

I’ll feel a whole lot better when Biden is gone.

Meanwhile, inflation under Biden is still eight miles high.

“Rich Men North Of Richmond” Economy! US Debt Up 45% Since Q1 2020, But Consumer Debt Is Up 19% Under Biden (Personal Savings Down To 3.4% Compared To 7.7% In Last Month Before Covid Outbreak (Earnings Calls Reveal Concern About Continued Demand)

Call it “The Rich Men North Of Richmond” economy. Where the coastal elites drive the US economy off the cliff with insane spending and borrowing with much of the benefits flowing to big political donors, not the middle class. Think of Span Bankfraud Parboiled as an example.

President Biden loves to spend billions and go on endless vacations (he is in Rehobeth Beach Delaware yet again). He (illegally) forgave student debt, keeps spending billions on Ukraine and keeps spending on failed green energy nightmares.

Biden and his allies will tout the latest GDP numbers as an example of how marvelous Bidenomics is. BUT that GDP report was driven largely by consumer spending.

Since the Covid outbreak in 2020, Federal (public) debt is up 45%! Wow. And consumer debt is up 19% under Biden to cope with inflation (caused primarily by massive Federal spending).

To fuel consumer spending, the personal savings rate has fallen to 3.4%. For point of reference, the personal savings rate in Februray 2020 was 7.7%, so the consumer is running out of gas thanks to inflation and spending.

And with a debt-stressed consumer, earnings call revealed concern about continued demand.

Note the trend in jobs added as The Fed tightened to fight inflation.

Jobs Come Crumbling Down! October Jobs Added Only 150k, 50% Drop From September (Unproductive Government Jobs Increased By 51k While Productive Construction Jobs Grew By Only 23k) Bidenomics Hurts So Good??

Yes, the jobs come crumbling down!

Total nonfarm payroll employment increased by 150,000 in October, below the average monthly gain of 258,000 over the prior 12 months. This represents a drop of more than 50% from the original Sept print, and the second lowest since 2022!

In October, job gains occurred in health care, government, and social assistance. Employment in manufacturing declined due to strike activity. (See table B-1.) Health care added 58,000 jobs in October, in line with the average monthly gain of 53,000 over the prior 12 months. Over the month, employment continued to trend up in ambulatory health care services (+32,000), hospitals (+18,000), and nursing and residential care facilities (+8,000). Employment in government increased by 51,000 in October and has returned to its pre-pandemic February 2020 level. Monthly job growth in government had averaged 50,000 in the prior 12 months. In October, employment continued to trend up in local government (+38,000).

In October, construction employment continued to trend up (+23,000).

So, unproductive government jobs increased by 51k while productive construction employment grew by only 23k.

Average weeky; earnings growth YoY slowed to 3.2%. Too bad core inflation last printed at 4.13% YoY in September.

But the household survey shows employment collapsed by 348K, the biggest drop since the Covid shutdown.

As usual, historical data was revised massively lower, with the jobs change for August revised down by 62,000, from +227,000 to +165,000, and the change for September was revised down by 39,000, from +336,000 to +297,000. With these revisions, employment in August and September combined is 101,000 lower than previously reported. In total, 8 of the past 8 months have been revised sharply lower in what only idiots can not see is clearly mandated political propaganda designed to make the economy look stronger at first glance then quietly revise the growth away.

Bidenomics hurts so good? At least that is what Biden and KJP will say.

Soft Jobs Report Weakens Impetus for Fed Rate Hike in December. Translation? Weak jobs report = no more Fed rate hikes = falling interest and mortgage rates.

10-year US Treasury yield now down a whopping 40 basis points in the last three trading sessions.

And its beginnig to look a lot like a BAD Christmas!

How do you recession? B-I-D-E-N-O-M-I-C-S.

Thunderstruck! ADP Report Shows 113,000 Jobs Added In October, But Wage Growth Slowing Rapidly

The economy is thunderstruck under Bidenomics.

ADP reported today that the US economy added 113,000 jobs in October.

Analysts’ expectations were for a rise to +150k job additions in October, but for the 3rd straight month, ADP disappointed with a +113k print (+150k exp).

But, October saw the 13th straight month of declines in wage growth – to the weakest growth levels since Q3 2021. Job stayers saw a 5.9 percent year-over-year pay increase in September, marking the 12th straight month of slowing growth. Pay gains also shrank for job changers, to 9 percent, down from 9.7 percent in August.