US Core Inflation Clocks In At … 1.7% YoY And Real Avg Weekly Earnings At 4.1% YoY, Rent Inflation Falls To 2.5% YoY (Taylor Rule Suggests Fed Funds Target Rate Of -0.51%)

Well, the Consumer Price Index less food and energy remain near the same level, 1.7133% YoY and is leading the Core PCE growth of 1.5934% YoY.

US Real Average Weekly Earnings YoY checked it at 4.1% YoY.

US CPI Urban Consumers Owners Equivalent Rent of Residences YoY fell to 2.5% YoY despite massive Fed intervention.

The Rudebusch variation of the Taylor Rule suggests that the Fed Funds Target rate should be at -0.51%.

On a side note, the US Dollar rose and gold got clubbed downwards.

Revival! Gold Is Rallying In Part To Never-ending Fed Stimulus (Rate Increases On Hold Until After 2023)

Gold’s rally is showing signs of a revival.

The spot metal has posted two straight weekly gains, and at least one technical signal is pointing to further increases. Bullion’s moving average convergence-divergence indicator, a gauge of price momentum, crossed above the so-called signal line last week for the first time since early August in a bullish sign for traders who follow price patterns.

Of course, never ending juice from The Federal Reserve is helping.

And the juice isn’t going away until after 2023 (according to the Fed Dots plot).

Its a shame for the people of Venezuela that they can’t pump gold instead of oil given that their 9.25% sovereign bond has fallen from over $100 in 2013 to $9.28 today.

Where Has All The Credit Gone? Credit Cards And Mortgage Availability Have Crashed

Where has all the credit gone?

Credit cards and other revolving debt has crashed during the Covid-shutdown recession, despite another expansion of The Fed’s balance sheet.

Yes, banks are tightening standards on consumer loans and credit cards.

Mortgage credit availability has crashed as well despite The Fed’s balance sheet expansion.

Over 50% of lenders are tightening credit standards for mortgage lending, even for GSE-eligilble mortgages.

Apparently The Fed’s spoonful of asset purchases hasn’t done anything to prevent the decline in credit availability to households.

Hispanic Homeownership In USA Highest EVER As Hispanic Wage Growth Soars (Also Highest Ever)

There is a lot to celebrate in the housing market, particularly for Hispanic households.

Hispanic (Latino) homeowership has soared to its highest level in history, surpassing even the peak of the housing bubble in 2005-2007. The primary driver of the record Hispanic homeownership rates is soaring Hispanic wage growth YoY.

Black homeownership rates have also soared in 2020.

It is indeed a better world when minorities can share in the American Dream of homeownership and rising earnings.

Where Will Mortgage Rates Be In Three Years? Hint: Right Where They Are Now Because The Fed Isn’t Going Anywhere Until 2023

One question that is often asked if “Where Will Mortgage Rates Be In Three Years?”

Take a look at Freddie Mac’s 30Y mortgage survey rate (white line) and M2 Money Velocity (green line). And then overlay The Federal Reserve Balance Sheet, pushing down the benchmark 10Y Treasury Note yield. It is clear that mortgage rates aren’t going up anytime soon.

Look at home price growth and The Fed’s balance sheet. As the Fed began shrinking its balance sheet in 2018 and then the Case-Shiller home price index growth rate started falling … then recovered as The Fed threw more gas on the fire.

Gold? There is also a positive relation to The Fed’s balance sheet.

The Fed isn’t going until at least 2023. So, The Fed is here to stay, distorting markets and prices.

Rock and roll, hoochie koo.

The Great Inflation Fantasy! Unfortunately, No Inflation In Sight … Until 2023

Policy makers agreed at the meeting to hold rates near zero until the labor market reached maximum employment, and inflation reached 2% — and was on track to moderately exceed that goal for some time. Forecasts also released on Sept. 16 showed officials didn’t expect the economy to reach those targets until 2023 or 2024, as it gradually recovers from the steep recession inflicted by the coronavirus pandemic.

The problem is the Treasury Inflation Protected Securities (TIPS) are pricing in little inflation. A negative TIPS yield means your return will be less than the change in consumer prices.

The US Treasury Inflation Indexed curve is negative across the entire curve.

According to The Fed’s minutes posted today, inflation (as measured by Core PCE growth) is not expected to hit 2% until 2023.

Where is the inflation that The Fed is trying to achieve? No where in sight .. until 2023.

MBA Mortgage Refi Applications UP 8.23% WoW While Purchase Apps DOWN -1.42% (Mortgage Credit Availability Sinks)

I was watching Stuart Varney on Fox Business and he excitedly announced that MBA applications were up 4.56% WoW in the latest MBA report.

True, but applications for a purchase mortgage were down -1.42% WoW.

But refinancing application were up 8.23% WoW as mortgage rates continue to fall since the Covid outbreak.

Mortgage credit availability plunged as mortgage rates hit all-time low.

Alt-Econ Index Shows Better Economic Recovery Than Economic Indices Show (Dow Up 350 Points, Yield Curve Returns To Same Level As Two Days Ago)

After a period of economic weakness in August and September, the pace of recovery in most advanced economies gained traction in the past two weeks, though activity is still far below pre-Covid levels, according to Bloomberg Economics gauges that integrate high-frequency data such as credit-card use, travel and location information. Germany and Japan remain at the forefront of the recovery and activity has also increased in France, Italy, and Spain. After months of stagnation, the U.S. is now seeing its recovery pace accelerate, while Canada and the U.K. are now the worst-performing advanced economies BE is tracking.

The activity indexes are estimated using a dynamic factor model. This methodology extracts an unobservable latent common factor of the underlying high-frequency data in the spirit of Stock and Watson. The model is estimated with daily figures from Jan. 1, 2020 to Oct. 6, 2020.

The high-frequency data we’re using have some obvious advantages — providing a more timely read than traditional data series.

But while the ALT index is showing recovery, also with the Atlanta Fed GDPNow Q3 Forecast of 35.2%, Neel Kashkari argues for MORE stimulus.

(Bloomberg) — Federal Reserve Bank of Minneapolis President Neel Kashkari said more fiscal support was urgently needed to support the U.S. economic recovery, following President Donald Trump’s unilateral decision to halt talks for another round of aid.

“Whatever Congress can do with the executive branch — come together aggressively to put money in the hands of people who have lost their jobs and to support small businesses so that we don’t have this continuing wave of bankruptcies across the economy — it’s just vital that they move quickly, whatever they do,” Kashkari said in an interview Wednesday on CNBC.

Trump’s decision Tuesday to walk away from talks with Democrats amid differences over the size of another fiscal relief package — even though hours later he appeared to reverse course — likely ended the chances of a deal before the Nov. 3 election. The president’s announcement followed a speech by Fed Chair Jerome Powell earlier in the day in which he made one of his strongest appeals to date on the need for lawmakers to do more. (NOT ONLY ABOUT THE SIZE OF THE PACKAGE, BUT THE WAY FUNDS ARE DISTRIBUTED AND NEW VOTING RULES ENCOURAGING MORE EARLY VOTING AND MAIL-IN VOTING). AND BAILOUTS FOR STATE WORKER PENSION FUNDS.

The Dow Jones Industrial Average rose this morning after yesterday’s beating in the afternoon.

The Treasury actives and dollar swaps curves are back to normal.

Apparently Pelosi and Mnuchin met this AM about a stand alone bill.

Mortgage 30 Day Delinquencies Tick Up Again As Key States Remain On Covid Lockdown (GDP Forecast Is Now 34.602%)

Just when we thought the US mortgage market had recovered from the financial crisis, then along came Covid and The Federal Reserve helping to push mortgage rates to near all-time lows.

According to Black Knight, the share of borrowers with only one missed payment was already below pre-pandemic levels in July and in August that number fell again. The number of loans in the 30- to 60-days past due bucket dropped by other 9.0 percent. At the same time, serious delinquencies, loans 90 or more days past due, increased by 5 percent and have risen in each of the past five months.

The transition from 30 days delinquent to 60 days late was falling as expected but showed a disturbing uptick in August.

Compared to natural disasters such as hurricanes, this time it is different PRIMARILY BECAUSE OF GOVERNMENT ECONOMIC SHUTDOWNS.

Most mortgages in forbearance remain in active forebearence and had the term extended DUE TO GOVERNMENT LOCKDOWNS OF SEVERAL KEY ECONOMIES.

But with US GDP growth expected to recover at a rate of 34.602%, look for forbearances and 30 day delinquencies to fade.

Unless Speaker Nancy Pelosi’s nephew California Governor Gavin Newsome insists on keeping California on eternal lockdown in order to prevent the spread of Covid.

Why does Gavin Newsome remind me of Beloche performing the ceremony opening the ark of the covenants in Raiders of the Lost Ark?

German, Italian Banks Versus US Banks And Their Central Banks Balance Sheets (Deutsche Bank’s 6% CoCo Bond Now Yielding 14%)

The German banks Deutshe Bank and Commerzbank along with the Italian bank Banca Monte dei Paschi di Siena crashed after the global financial crisis in 2008 despite an enormous spike in European Central Bank asset purchases.

On the other hand, US banks benefited from The Federal Reserve’s massive balance sheet expansion, at least until Covid hit in 2020.

Deutsche Bank’s 6% CoCo (Contingent Convertible) bond was issued in 2014. Contingent convertibles work in a fashion similar to traditional convertible bonds. They have a specific strike price that once breached, can convert the bond into equity or stock. The primary investors for CoCos are individual investors in Europe and Asia and private banks.

The yield on DB’s 6% CoCo bond is now 14%.

Deutsche Bank’s price is sinking like the battleship Bismarck along with its earnings per share.

Then there is the gold spoofing scandal at DB.

A photo of Deutsche Bank’s headquarters from 2005 before the financial crisis and after the financial crisis in 2008.