Biden’s Fastest Economic Recovery In History? Or Recession? Flexible Inflation Rate Hits 20% And Q1 GDP Stalled At <1% (Real Average Hourly Earnings Dive To -2.72% YoY) As Fed Drive Rates Up

Government response to COVID in the form of business shutdowns resulted in massive job losses, then as governments opened the economy up again, job gains were incredible. The Hill had an article discussing the whipsaw in jobs entitled “Biden is delivering the fastest economic recovery in history. Why hasn’t anyone noticed?”

Well, the US have gone from “fastest economic recovery in history” to real GDP growth of less than 1% (Atlanta Fed GDPNow for Q1). In addition, the flexible price CPI less food and energy is a whopping 20%.

You can see “The Biden Miracle!” in the following chart. Hires (red line) dropped with Covid shutdowns, then spiked when governments opened economies again. Throw in the trillions of Federal government Covid stimulus and trillions in Fed monetary support, the Biden Miracle sees less like a miracle and more like an extremely expensive way to add jobs. But the interesting problem facing the Administration is the massive spike in job openings relative to hires (again, governments opening-up plus Federal Stimulypto).

Now for a real downer of a chart. Inflation is so toxic that REAL average hourly earnings YoY is down -2.72%. Hardly the best economic growth in history.

Now we have Jerome Powell and The Blackhearts threatening quantitative tightening starting in May. Here is The Fed’s theme song “We love printing money.”

But The Fed is already slowing the growth of monetary base, although this Fed Stimulypto is still growing much faster than pre-Covid.

At least the 10Y-2Y Treasury curve is back above 0 bps as the Atlanta Fed’s GDPNow Q1 forecast falls to under 1%.

Remember, The Fed is planning on shrinking the balance sheet by $95 billion. The Fed’s balance sheet is just shy of $9 trillion. Which is around 1% per month.

With rising expectations of Fed quantitative tightening (QT), residential mortgage rates keep climbing.

Despite a slowing economy teetering on recession and a war raging in Europe, The Fed is tightening monetary policy. Allegedly to fight red-hot inflation.

Alarm! Treasury 10Y Term Premium Remains Deeply Negative As Fed Plans Its Attack On Mortgage Rates And Treasury Yields (3M TBill/OIS Spread Crashes As 30Y Mortgage Rate Is -3%) Venezuela 2Y Yield At … 436.77%

Alarm!

The 10-year Treasury term premium, the amount by which the yield on a long-term bond is greater than the yield on shorter-term bonds, remains steeply negative (white line) as The Federal Reserve steps up its attack (aka, monetary tightening). Meanwhile, the 10Y-2Y curve actually rose into positive territory.

Historically, the 10-year Treasury Term Premium declines before a recession.

Meanwhile, 3 month Treasury bill to Overnight Indexed Swaps spread is crashing to the lowest level since 2017.

But with inflation raging at the fastest pace in 40 years, the REAL 10-year Treasury yield remains negative at -5.236% while the REAL 30-year mortgage rate is -3.01%. Both were in positive territory when Biden was installed as President.

Speaking of interest rates, the infamous PIGS (Portugal, Italy, Greece, Spain) are all seeing surges in their 10-year sovereign yields. Sweden, while not a PIG has the largest spike today at 13.8 BPS.

Actually, the biggest spike in sovereign yields occurred in Ukraine where their 2-year yield popped +205.8 BPS. But Lebanon has the highest 2-year yield at 162.29%. Turkey is in third place in the sovereign demolition derby at 23.52%. Sadly, Poland’s 2-year yield is up 16 bps today.

But the winner of the sovereign debt demolition derby is …. drumroll … VENEZUELA! At 436.77%.

I am really surprised that Biden hasn’t adopted Maduro’s fashion sense.

Going Down! Mortgage Rates Keep Rising, UP 68.75% Under Biden While Mortgage Payments UP 27.25% As Mortgage Applications Decline 6.3% From One Week Earlier

Mortgage applications are going down as expectations of monetary tightening send mortgage rates soaring.

Mortgage applications decreased 6.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 1, 2022.

The Refinance Index decreased 10 percent from the previous week and was 62 percent lower than the same week one year ago.

The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 9 percent lower than the same week one year ago.

Bankrate’s 30-year mortgage rate rose only slightly today to 4.86%, but the 30-year mortgage rate has risen 68.75% and a fixed-rate mortgage payment has risen 27.25% under Biden.

The rest of the story? The adjustable rate mortgages (ARMs) remain at only 6.8% of loan origination volume despite being almost 150 basis points lower in rate (4.90 FRM versus 3.38% 5/1 ARM).

Meanwhile, US Treasury yields rose again with the 10-year yield rising almost 10 basis points … again.

And President Obama spoke at The White House defending his healthcare initiative, The Affordable Care Act. It seems that Nancy Pelosi, Amy Klobuchar, Jame Clyburn and the others were thrilled to see Obama back in The White House. So much so that Biden was abandoned on stage and left to wander aimlessly around.

Brutal.pic.twitter.com/fhXGcgcutu
— Michael Knowles (@michaeljknowles) April 5, 2022

When Fed Gov Brainard Talks, Markets Listen! Brainard Says Fed Will Shrink The Balance Sheet At A Rapid Rate (10Y Treasury Yield Rises 16 BPS As Nasdaq Falls 300 PTS) Mortgage Rates Will SOAR!!

When Federal Reserve Governor Lael Brainard speaks, markets listen

Federal Reserve Governor Lael Brainard said the U.S. central bank will continue to tighten policy methodically and shrink its balance sheet at a rapid pace as soon as May.

Brainard’s hawkish remarks sent bond prices crashing and 10Y bond yields up over 16 bps.

While Bankrate’s 30Y mortgage rate is down slightly today, the surge in the 10Y and 2Y Treasury yields could push mortgage rates above 5% by tomorrow,

Even Europe is feeling Brainard’s wrath. Italian 10Y sovereign yields are up almost 20 bps.

The NASDAQ index is down 300 points on Brainard’s utterance.

Gee thanks Lael from all us wanting to finance the purchase of a house.

Brainless and Brainard.

Euphoria! CoreLogic February Home Price Index UP 20% While Real Hourly Wages Decline (Wine Prices UP 25.1%, Foodstuffs UP 52.7 Under Biden)

Euphoria!

CoreLogic’s Home Price Insights revealed that home prices rose 20% YoY in February despite REAL average hourly earnings declining -2.678% YoY. THAT is euphoria! Or Stimulypto, as I like to call it.

No, The Federal Reserve still hasn’t removed its staggering monetary stimulus. Notice that M2 Money Stock is still growing at a torrid 11% pace.

20% YoY home price growth in February? CoreLogic has increased their forecast of home price growth to 5%, likely because The Federal Reserve is imitating a sloth in removing its monetary Stimulypto.

Of course, there are other assets growing at lightning speeds. US Regular gasoline prices are UP 75.4% under Biden. Foodstuffs are UP 57.2% since Biden was installed as President. At least ground beef is only up 16.8% while the fine wine index is up 25.1%.

Speaking of wine, Hitching Post II in Buellton, CA must be suffering from rising food and grape costs too (I highly recommend eating there and using their HP Magic Stuff at home). Not to mention their spectacular wines. Roast artichokes anyone??

The Great Reset … In Asset Returns (Commodities Soaring, Treasuries Tanking, Home Price Growth Still 4x Soaring Mortgage Rates)

Numerous elites like Klaus Schwab of The World Economic Forum (and Davos fame) are calling for a “Great Reset” in global economies. But perhaps “The Great Reset” in taking place in asset markets … and not in a good way.

Consider what has happened since President Biden was elected. The S&P 500 total return index (green index) has risen thanks to The Federal Reserve’s balance sheet expansion (orange line) with COVID. Until 2022 when the expectation of Fed rate hikes surged from 3 in late December 2021 to 9.4 expected rate hikes over the next 12 months (yellow line).

The US Treasury total return index (white line) has gotten crushed with The Fed’s signals of rate hikes and quantitative tightening (QT). Call it “White Line Fever.” The commodity total return index (blue line) has surged as The Fed’s expected rate hikes have risen from 3 to 9.4 in 2022.

Is The Fed causing a Great Reset in housing? In 2022, we see the surge in Fed rate hike expectations leading the 30-year mortgage rate to be nearly 5%. The last Case-Shiller home price index was for January and it was still raging at 19.17% YoY growth. Let’s see if The Fed’s QT will slow down home price growth. But home prices are growing at 4x 30-year mortgage rates.

I hope that Klaus Schwab and the global elites pick us up on our way down. But probably not.

So let’s see if The Fed still is going to withdraw its “Snake Juice” from the market.

Now A Warning? Dallas Fed Warns That A Housing Bubble Is Brewing (Too Late, Its Already Here!)

This clip from the Bruce Willis and Meryl Streep film “Death Becomes Her” perfectly represents the predicament surrounding The Federal Reserve’s loose monetary policies and housing prices: “Now a warning” after Meryl Streep ingests The Fed’s magic monetary elixir.

The Dallas Federal Reserve issued a warning recently that a housing bubble is brewing … after the economy drank its magic monetary elixir. We can see the housing bubble clearly (defined as the spread between REAL home price growth and REAL average hourly earnings). Notice that the current housing bubble looks similar to the infamous 2005 housing bubble. And the US is seeing several months of the spread between REAL home price growth and REAL hourly earnings be even higher than the peak of the 2005 bubble.

The Federal Reserve is starting to slow down its asset purchases, so we should see a cooling of the housing bubble. Unless, of course, The Fed changes its tune from quantitative tightening (QT) back to quantitative easing (QE) … again.

The Dallas Fed has a measure of housing “exuberance” which shows a bubble forming, but not there yet. I like the spread between real house price growth and real hourly earnings better.

The Dallas Fed also has a price-to-rent chart also showing growing exuberance.

But if we look at the Case-Shiller National HPI YoY to US CPI Urban Consumers Owners Equivalent Rent of Residences YoY we see that the US is currently experiencing a price-to-rent ratio higher than the peak of the 2005 house price bubble. What is the culprit? The vast expansion of monetary and fiscal Stimuylpto surrounding the Covid outbreak in early 2020.

So, the Dallas Fed thinks that is a house price bubble is brewing, but it has actually been in the works since QE3 in 2013 (bubble 2), but really took off with The Fed’s stimulypto and Federal COVID spending surrounding the COVID outbreak in early 2020.

Here is a rare video of Fed Chair Jerome Powell at the recent Fed Open Market Committee meeting deciding on removing the toxic monetary elixir from the system.

Here is a video of Jordan Spieth at the Valero Open engaging in putting errors like The Fed’s policy errors.

The Powellenburg Omen! Will Powell Pop The Asset Bubble Created By The Fed’s Repeated Policy Errors? (Blackrock Rises, NVR Homes Gets Crushed)

As of today, Jerome “Nero” Powell and The Gang at The Federal Reserve have not trimmed the Fed’s balance sheet and have only raised their target rate once under President Biden.

Here is the Hindenburg Omen, named for the catastrophic explosion on May 6, 1937 at Lakehurst Naval Air Station in New Jersey. The Hindenburg Omen was flashing red before the stock market correction of late 2007-2009. But, the Hindenburg Omen has flashed red repeatedly since the financial crisis, yet the S&P 500 index has kept rising. The reason? Repeated policy errors by The Fed leaving monetary stimulus in place for too long leading to a bubble forming in the stock market.

The Shiller CAPE (Cyclically-adjust price-earnings) ratio is at the second highest level since the 1800s. The highest point was the infamous Dot.com bubble and bust in 2000/2001.

Since The Fed continues to say “We have a plan!” to slow/shrink The Fed’s balance sheet and raise their target rate … it has not done anything yet (other than a 25 basis point bump at the March meeting).

I am not advocating technical analysis for stocks, but the Bollinger Band analysis for the S&P500 index is showing the S&P 500 index near the top band indicating that a decline in likely.

Today, the US equity market in essentially flat given the massive uncertainty about the Russia/Ukraine situation and whether the US economy is slipping into darkness. But this morning, Federal government blessed companies (healthcare, solar energy and Blackrock) are doing quite well, while homebuider NVR is taking it on the chin thanks to hints that The Fed will raising rates.

Now, NVR (Northern Virginia Homes, Ryan Homes) had explosive earnings growth in their February 1, 2022 report.

But the market is pricing in the crushing Fed rate hikes that are expected.

So, will Foul Powell pull a Volcker and raise rates and crush the economy (and stocks)? Or will Foul Powell And The Fed gang let inflation burn out of control, but preserve the massive asset bubbles?

Bidenflation Leads To 23% Rise In Fixed-rate Mortgage Payments As Home Price Growth Hits 19% (Fertilizer Prices UP 166% Under Biden, Gasoline Prices UP 77%)

Inflation under President Biden (aka, Bidenflation) has hit 7.9%, the highest in 40 years. And no Joe, the inflation surge was well underway before Russia invaded Ukraine on February 24, 2022.

As The Federal Reserve is allegedly going to try to fight inflation by raising their target rate, the 30-year mortgage rate has risen from 2.88% on Biden’s inauguration to 4.56% today.

The surge in mortgage rates from 2.88% to 4.56% represents a 58.3% increase in mortgage rates under Biden. That translates to an increase in the 30-year fixed-rate mortgage (FRM) payment of 23%. Apparently Biden-Powell (not to be confused with Baden-Powell, the founder of the Boy Scouts) are not interested in keeping homes affordable for most Americans.

I summarize the predicament facing Americans in the following chart. Home prices were growing at a 19% YoY pace in December (Case-Shiller updates will be available tomorrow for January). Inflation is growing at 7.9% and M2 Money continues to grow.

US fertilizer prices are up 166% under Biden while regular gasoline prices are up 77% under Biden. But to be fair, fertilizer and gasoline prices jumped with Russia’s invasion of Ukraine. Fertilizer prices were up 66% under Biden BEFORE Russia invaded Ukraine and regular gasoline prices were up 50%.

Meanwhile, back at the fixed-income ranch, the US Treasury 10Y-2Y curve has flattened to 14.5 BPS as Fed Funds Futures signal 9 rate hikes over the coming year.

And the US Treasury 10Y-5Y curve continues to invert.

In short, Biden and Congress are anti-fossil fuel, pro-renewable energy helping to drive up energy prices and inflation PRIOR to Russia invading Ukraine. Powell and The Federal Reserve are trying to fight what Biden and Congress did with creating energy-related inflation.

Headaches On Headaches! 10Y Treasury Rates Rises 8.6 BPS, But REAL 10Y Is -5.50% Thanks To 40-Year High Inflation

Headaches on headaches.

Overnight, the US Treasury yield rose to 2.38% as the number of forecast Fed rate hikes rose to 8.211. So, enjoy “low” rates while you can.

If we back out the highest inflation rate in 40 years, the REAL 10Y Treasury yield is -5.50%.

And the REAL 30Y mortgage rate is -3.57%.

Of course, the meteoric rise in inflation is due largely to Biden’s attack on the fossil fuel industry (until Russia’s invasion of Ukraine distracted from Biden’s inflation fiasco). Remember, Russia didn’t invade Ukraine until February 2022.

But rather than relax Biden’s anti-fossil fuel executive orders, Congress is now considering the “Gasoline Rebate Act” to give people gasoline stimulus checks to offset the alarming rise in gasoline prices. California governor Gavin “Nancy Pelosi’s nephew” Newsome is proposing a similar measure to give auto owners a $400 rebate to cover rising gasoline prices. Of course, Newsome is up for reelection and there are the midterm elections approaching, so I rule out true concern for citizens as a motive.

Wait. I thought the purpose of Biden’s executive orders was to reduce dependence on fossil fuels by driving up gasoline and natural gas prices producing a shift to “green energy.” Won’t these “gas rebates” simply continue the consumption of gasoline and natural gas? And increase inflation??

As Winston Churchill once said, “Never let a crisis go to waste.”