My Kuroda! Japan Conducted Its Second Currency Intervention This Week (The Peril Of Bad Fiscal And Monetary Policies)

In the time (dis)honored tradition of Haruhiko Kuroda, the former governor of the Bank of Japan, Japan likely conducted its second currency intervention this week, current account figures from the central bank suggest, in another sign of the government’s intensified battle to prop up the yen.

Tokyo’s latest entry into the market was likely around ¥3.5 trillion ($22.5 billion), based on a comparison of Bank of Japan accounts and money broker forecasts.

The BOJ reported Thursday that its current account will probably fall ¥4.36 trillion due to fiscal factors on the next business day of Tuesday. That compares with the ¥833 billion average forecast by money brokers of what the number would be without intervention.

The figures, released less than a day after the yen jumped sharply during US trading hours, indicate that Japanese authorities made the unusual move of stepping into the market shortly after a Federal Reserve meeting when investors were still digesting the announcement. That would signal the finance ministry is taking an increasingly aggressive stance in what could become a prolonged fight to support the yen.

“With Japanese holidays and US jobs data coming up, it was a very good time for the authorities to tackle speculators,” said Yuya Kikkawa, an economist at Meiji Yasuda Research Institute. “This will have a great impact on the market. I sense a strong determination by the authorities to defend the 160-yen-per-dollar line.”

The latest swing in the yen follows a similarly sudden jump on Monday. Central bank accounts suggested Monday’s move was likely an intervention by Tokyo worth around ¥5.5 trillion, close to the daily record of ¥5.6 trillion set in October 2022.

Ahead of the move late Wednesday in New York and early Thursday in Tokyo, Central Tanshi Co. and Totan Research Co. had forecast a ¥700 billion decline in the BOJ’s current account balance due to fiscal factors including government bond issuance and tax payments. Ueda Yagi Tanshi projected the balance to drop by ¥1.1 trillion.

The calculations based on a comparison of those estimates and the central bank accounts offer only ballpark figures rather than specific amounts. Similar analysis proved accurate in showing that a jump in the yen in jittery markets in October 2023 was not the result of Japan stepping in to buy the currency.

The calculations also estimated the size of intervention on Oct. 21, 2022 at around ¥5.5 trillion, closely matching the actual amount.

An official monthly figure for the size of intervention will come out on May 31. Traders will need to wait until August or later to see daily operation data.

Japan’s top currency official Masato Kanda declined Thursday to comment on whether the finance ministry had intervened two hours earlier in Tokyo, when the yen strengthened sharply against the dollar. Japan’s currency briefly touched 153.04 from around the 157.50 mark.

Kanda oversaw the previous cycle of interventions in 2022. The ministry bought the yen around 30 minutes after the BOJ’s governor press conference ended in September that year. Another round of moves came a month later with back-to-back business day interventions.

The pattern of Japanese officials declining to comment is aimed at keeping market participants in the dark. A lack of immediate clarity may help keep traders more on edge and less willing to bet against the yen even if the ministry hasn’t actually taken action.

“By acting right after the Fed decision and outside of Japan hours, they dished out a warning that they are in a position to intervene 24 hours a day,” said Hirofumi Suzuki, chief FX strategist at Sumitomo Mitsui Banking Corp.

“We are still waiting for US employment figures during the Golden Week holidays and depending on the outcome of that data, there is a risk of further intervention,” he said.

The US is having its own currency problems under Biden with its own bad fiscal and monetary polcies. The Purchasing Power of the US Dollars has fallen 17% under Biden.

Fed Will Likely Pause For 6th Straight Meeting (Mortgage Rates Are Already Up 161% Under Biden, MBS Returns Terrible!)

The Fed will likely pause rate cuts/increases when The Fed reveals their plans today.

Breaking: Federal Reserve officials are likely to hold interest rates steady at 5.25-5.5%—a 20-year peak—for a 6th consecutive meeting.

With inflation still high, rate cuts seem off the table for now.

Rate decision at 2pm Washington time.

The Street seems aligned.

Conforming rates are already up 161% under Biden.

According to Fed Funds Futures, no rate changes until after the Presidential election.

MBS returns have been abysmal under Biden/Powell.

Simply Unaffordable! Mortgage Demand (Purchase Applications) Fall 14% Compared To One Year Ago While HUD Energy Rules Will Add Up To $31,000 To New Home Prices (Payback Time Is 90 Years)

Housing in the US is simply unaffordable, particularly after HUD levied new regulation rising the cost of new housing up to $31,000. Wait for this to kick into the data for mortgage demand!

Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 26, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.4 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent lower than the same week one year ago.

The Refinance Index decreased 3 percent from the previous week and was 1 percent lower than the same week one year ago.

MBS returns are weak and volatile.

How is the Biden Regime making homeownership more affordable? They aren’t. The are using regulations, to drive the cost of new housing way up. New HUD energy rules will raise the cost of home construction by imposing stricter building codes. The National Association of Home Builders says the energy rules can add as much as $31,000 to the price of a new home. Payback time is 90 years (how long it will take the recoup the initial investment).

Under Biden’s “leadership” we are all addicted to gov. But at least Ukraine and Zelenskyy will be getting a guaranteed 10 years of financial support from the US … while E Palestine Ohio and Maui remain destroyed.

Keep On Printing! Home Prices Continue To Soar, Case-Shiller National Index UP 6.4% YoY In February

Janet Yellen, world class propagandist (US version of Baghdad Bob) and US Treasury Secretary under Biden, was so wrong about inflation. Instead of being “transitory”, turns out to be seemingly permanent.

Today’s Case-Shiller home price report was released for February. The National Home Price index was up 6.4% year-over-year. But look at the explosion of M2 Money and home prices. Hmm.

If we look at home prices and M2 Money on a year-over-year (YoY) basis, we can see the surge in money printing with COVID and the corresponding surge in home prices. As M2 Money growth slowed, the Case-Shiller National HPI slowed as well … until The Fed slowed the declined in M2 Money growth resulting in rising home price growth again.

So, The Fed will likely have to keep on printing. You can see Janet Yellen dancing to the thought of printing more money.

Tumbling Markets! Q1 Employment Cost Index Saw Biggest QoQ Jump Most In A Year (Stocks Decline, Treasury Yields Rise)

The Biden regime highlights the problem of politicians running the economy. Call it “Tumbling Markets.”

Highlighting just how sensitive the market is to any ‘inflation/deflation’ narrative questions, the Q1 Employment Cost Index (ECI) – a data point that is typically of secondary import – printed hotter than expected this morning and sent markets reeling.

The ECI rose from +0.9% QoQ in Q4 to +1.2% QoQ in Q1 (well above the +1.0% QoQ expected). That is the biggest QoQ jump in a year…

That was higher than the highest forecast…

Which leaves the civilian worker ECI up 4.2% YoY, stalling the disinflationary path it had been on…

In other words, persistent wage pressures are keeping inflation elevated.

This sent stocks tumbling lower…

…and Treasury yields higher…

Just add this data point to the ‘the disinflation narrative is dead’ side of the ledger.

Dallas After Midnight! Dallas Fed Manufacturing Contracts, Every Month Since May 2022 (Stagflation Warning!!!)

Dallas … and the US economy … after midnight.

The Dallas Fed Manufacturing Outlook survey has now been in contraction (below zero) every month since May 2022, falling modestly to -14.5 in April (worse than the -11.2 expected).

New Orders also remain negative (but did improve) and prices continue to rise (though at a slower pace). Labor market measures suggested flat employment and slightly shorter workweeks (hours worked index remained negative for a seventh month in a row) this month.

However, wit that said, wage pressure picked up dramatically this week to a seven-month high…

Source: Bloomberg

However, as always, we glean the most informative perspective from the respondents completed surveys where the pessimism shines through…

The business and political environment is terrible.
Business has not been this slow since COVID, and I’m worried.
Consumer confidence for consumer goods has noticeably worsened.
Customer orders have dropped. The indication is the economy is hurting spending in our area specifically. Customer uncertainty is worsening.
I keep thinking we’ll hit bottom and either level out or turn up, but we keep pushing those hopes out a month, and another month, and another.
There has been a decrease in new orders for three weeks now. Currently, we think this will come around, but we get more concerned as time goes on.
Industrial manufacturing is showing signs of positivity due to the possibility of an interest rate decrease. Please do it. Manufacturing is really hurting.

High prices remain problem for many businesses:

Inflationary pressures on raw materials and construction costs are driving up the cost of public projects. This is causing states to delay or scramble for funding for projects that have long lead times.
Business is generally good, but we’re starting to see more customer resistance to prices. Our costs have increased dramatically over the last two years, and we have customers asking to hold prices to last year’s level, which we just can’t do. We continue to make capital investments to improve productivity and reduce unit labor cost.

And finally, many are fearful of another four years of Bidenomics:

Political instability and politicization have hampered growth. We are entering stagflation.
Fewer governmental regulations would lower our cost of doing business. An example is the 332 report, which we must fill out for the U.S. government; it has no value for us, just expense.
Business is extremely slow, and we see no signs of improvement. We think it will stay slow until after the presidential election, after which, we will either have four more years of slow business or an improving economy.

US Treasury Bond Issue Set To Increase To $1.9 Trillion In 2024 As Personal Saving Rate Crashes To Near Low Since 2010 (Goverment Displacing Households)

Joe Biden could barely eat his dinner at the White House Correspondents’ Dinner. And we think he is calling the shots in The White House?? Oh well. Perhaps it is Treasury Secretary Janet Yellen or Klaus Schwab of the World Economic Forum.

In any case, Treasury bond issuance in 2024 is expected to hit $1.9 TRILLION. Surpassing levels seen even during the 2008 financial crisis.

And with inflation, the US personal saving rate is near the lowest level since Obama (2010).

And with the core inflation rate still higher than anytime since 2010, households are paying more for … everything depleting their savings.

With Biden and Congress spending like drunken sailors on shore leave, and no end in sight, this will eventually explode. Ukraine, foreign aid, no border security, virtually no money for Maui fire, E. Palestine Ohio is still a wreck, etc. They always have money for someone else. And if Trump is elected in November, watch CNN and MSNBC and Biden/Congress blame Trump.

Commodities are a way to protect yourself against the government and their insane spending and debt.

My point? Gold keeps rising!

The leading foreign holder of US debt is Japan, which is following the insane path as the US and resembles a banana republic.

Former Fed chair under Obama and current Treasury Secretary Janet Yellen under Biden is Doctor Wonderful. NOT!!

I don’t know what Biden thinks is so funny. Maybe it is because House “Majority” Leader Mike Johnson (RINO-LA) gave Biden and Schumer everything they wanted (Ukraine, Israel funding but nada for security our borders). Life is good when you are stupid and mean-spiritied like Joe Biden!

Biden is so vain: capped teeth, hair plugs, constant tan, face lifts, etc.

Bidenomics Warning! Fed’s Favorite Inflation Indicator Prints Hotter-Than-Expected As Savings Rate Plunges (Govt Wages Rose To 8.5% YoY, Private Sector Wages Up 5.5% YoY)

Today’s economic news highlights “Government Power.” Unproductive government jobs saw wages rise 8.5% YoY while productive private sector jobs saw wages rise by only 5.5% YoY. This is Bidenomics!!!

With inflation data surprising to the upside recently…

Source: Bloomberg

…the doves’ last chance for sooner than later rate-cuts is today’s Core PCE Deflator – often described as The Fed’s favorite inflation signal. Last month saw an uptick in the headline deflator and following yesterday’s core PCE rise for Q1, all eyes are on the March data released this morning.

However, both the headline and core PCE Deflator data printed hotter than expected (+2.7% vs +2.6% exp vs +2.5% prior and +2.8% vs +2.7% exp vs +2.8% prior respectively)…

Source: Bloomberg

The silver lining is that this hot PCE print is ‘dovish’ relative to the GDP-based data we saw yesterday, with whisper numbers of +0.4 to +0.5% MoM (vs the +0.3% print).

But still – it’s not good for the doves.

As WSJ Fed Whisperer Nick Timiraos notes, the 3-Month annualized core PCE jumped to 4.4%…

The Service sector led the MoM and YoY acceleration in headline PCE…

Source: Bloomberg

And for Core PCE, it was Services prices too that drove the acceleration…

Source: Bloomberg

The so-called SuperCore – Services inflation ex-Shelter – rose once again, and was revised higher…

Source: Bloomberg

Stripping it back even further, Transportation Services and ‘Other Services’ were the biggest gainers in SuperCore…

Source: Bloomberg

Income and Spending both rose again on a MoM basis with spending outpacing income (again). The 0.8% MoM rise in spending was the highest since Jan 2023…

Source: Bloomberg

Spending is accelerating fast relative to incomes (on a YoY basis) – and remember this is all nominal…

Source: Bloomberg

On the income side, government and private wage growth accelerated:

Govt wages rose to 8.5% YoY, from 8.3%, the highest Dec 22
Private wages rose to 5.5% YoY, from 5.4%, highest since Dec 22 as well

Source: Bloomberg

Which meant the personal savings rate plunged to 3.2% from 3.6% – its lowest since Nov 2022…

And the soaring credit card balance explains how people are getting by…

Source: Bloomberg

And all this amid the fourth straight month of government handouts…

Source: Bloomberg

Finally, while the markets are exuberant at the survey-based disinflation, we do note that it’s not all sunshine and unicorns. The vast majority of the reduction in inflation has been ‘cyclical’…

Source: Bloomberg

Acyclical Core PCE inflation remains extremely high, although it has fallen from its highs.

Is The (apolitical) Fed going to be able to cut at all this year like Joe Biden said they would?

The Green Slime! Ford Lost $132,000 On Every Electric Vehicle Sold In Q1 (Hertz Ups Sales Of EVs To 30,000 As China Dumps US Treasuries)

The Green Slime! The global movement towards Green Energy (or global Marxist movement) is really The Green Slime! Or maybe it should be renamed “The Red Slime.”

Ford lost $132,000 on every electric vehicles they sold in Q1. It was so bad that even CNN reported it!

And then we have Hertz dumping its inventory of EVs. A slew of used Teslas have hit the Hertz car sales website after the company announced Thursday it planned to sell off 10,000 more electric vehicles from its fleet than originally planned, bringing the fire sale’s total to 30,000. Perhaps one of the reasons you can get such a good deal on a Tesla at Hertz right now is that the outlook for EV value retention is pretty grim at the moment.

Given the incidents of electric cars catching fire, perhaps saying its a fire sales is a bad choice of words. But what it says is that DESPITE massive incentives to buy EVs, consumer demand stinks. Although Transportation Secretary Pete Buttigieg will claim the market is booming.

How bad is the trainwreck that is the Biden Regime? China is bailing on US Treasuries.

Then we have the harpies on The View claiming that the solar ecilpse is caused by … global warming. Also earthquakes. Sunny Hostin must have taken different courses that I did in college.

The Biden Regime is hereafter known as The Green Slime, given their horrible policies. Unfortunately, The Green Slime is here already … and Hertz knows customers don’t want them at least on a temporary basis.

Traders Now Pricing In One Rate Cut This Year, But Not Until The End Of 2024, After The Election (Home Prices UP 32.5% Under Biden, Mortgage Rates UP 160%)

The Federal Reserve is playing the song “Don’t rock the boat” ahead of the Presidential election. Despite the horrible economic news.

1) 4 months of hotter inflation (like today’s stagflationary GDP report)

2) Nearly 1.5 million full-time jobs decline with 1.9 part-time jobs created over a year

3) $2 trillion annual deficits

Leading traders to price in 1 rate cut in December 2024. AFTER THE PRESIDENTIAL ELECTION!

Under Biden, home prices are up 32.5% and conforming 30Y mortgage rates are UP 160%.

One of my colleagues at George Mason University in finance (an economics PhD) constantly quoted Lenin’s famous “You have to break a few eggs to make an omelet.” But why is it always OUR eggs that have to be cracked, never the wealthy elite.