One reason is diesel fuel prices are up 102% under Biden’s Reign of Error. While inventory of diesel fuel down -37%. Meanwhile core inflation is up from a measly 1.3% to a whopping 6.6% at the latest inflation report.
Introducing Biden’s Thanksgiving dinner … in a can to cope with rising prices.
Just kidding. This is too clever for the clueless Biden Administration. But Karine Jean-Pierre might get as confused as Joe Biden and repeat it as one of the ways that The Biden Administration is helping consumers.
As I told my Chicago, Ohio State and George Mason University finance and real estate students, repeatedly, “Watch out when The Fed begins to tighten monetary policy. It will be a bloodbath for taxpayers.”
Well, here we are. I argue that Biden’ green energy knucklehead policies are driving inflation, or it could be the insane level of Federal spending that Obama economist Larry Summers warned us about, or rising wages (in part due to Federal spending) is to thank for inflation. Or all of the above.
Regardless of the cause, the bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years.
Rate hikes also involve central banks paying out more interest on the reserves that commercial banks park with them. That’s tipped the Fed into operating losses, creating a hole that may ultimately require the Treasury Department to fill via debt sales. The UK Treasury is already preparing to make up a loss at the Bank of England.
The Reserve balance has crashed into negative territory.
And Fed losses are skyrocketing.
Agency MBS prices are up today, but are down since August 2022. But risk measures duration and convexity are zooming upwards.
Alarm! US home prices are decelerating as inflation rages and The Fed tightens.
Home price growth in the US slowed the most on record as a doubling of borrowing costs (thanks to the US Federal Reserve) has sapped demand.
A national measure of prices increased 13% in August from a year earlier, but is down from 20.79% in March, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.
The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated.
While 13% growth sounds good, it is not good for renters looking to buy a home.
According to S&P/CoreLogic/Case-Shiller, Southern (red) cities Atlanta, Charlotte, Dallas, Miami and Tampa all still grew at over 20% YoY. Other cities like blue cities Detroit, Minneapolis, Portland, San Francisco, Seattle and Washington DC are grew at UNDER 10% YoY.
On related news, I always said in my classes that +/- 10 basis point in the US Treasury yield is a big deal. This morning, the US Treasury 10-year yield is DOWN -16.1 bps. In fact, the 10-year yields are down across the board globally.
The Federal Reserve’s DOTS PLOT shows where each Fed official’s projection for the central bank’s key short-term interest rate is headed. As of the September 21, 2022 Fed Open Market Committee (FOMC) meeting, the prediction of future Fed target rates is decidedly DOWNWARD SLOPING.
The Fed hawks, those that want to tighten monetary policy, are Bowman, Waller, Kashkari, Mester and George. The Fed doves (or those who are neutral) are Biden recent appointees Barr, Cook, Jefferson, Logan, Collins. Note that Brainard and Bostic are the only technical doves.
I call the hawks at The Fed “The Blackhawks” since their mission of fighting inflation may lead to a recession. And Bowman, Mester and George are Lady Blackhawks.
25 days later. A real-life horror created by The Federal government.
Yes, according to the US Department of Energy, the US has only 25 days of diesel supply left.
The diesel crunch comes just weeks ahead of the midterm elections and has the potential to drive up prices for consumers who already view inflation and the economy as a top voting issue. Retail prices have been steadily climbing for more than two weeks. At $5.324 a gallon, they’re 50% higher than this time last year, according to AAA data.
Notably, National Economic Council Director Brian Deese recently commented on the emerging crisis. Deese said diesel inventories are “unacceptably low” and added that “all options are on the table.”
Yesh, diesel fuels prices are surging again as diesel inventory is shockingly low.
At least the US gets to live out a horror story created by The Federal government because failed Presidential candidate Al “The Snore” Gore and a teenage Swedish girl (Greta Thunberg) told Biden and Democrats to hate fossil fuels.
How dare you … drive inflation through the roof because of your green energy lunacy.
Things are getting interesting in DC, to say the least. The US is 100% likely to face a recession in the next 12 months while The Federal Reserve is on its crusade to fight inflation caused by … The Federal Reserve, Biden’s green energy shenanigans and massive, irresponsible Federal spending that even Former Obama economist Lawrence Summers warned would cause inflation. So what will The Fed do? Lower rates and expand their assets purchases to fight the impending recession OR keep tightening to fight Bidenflation? But where we are now is that the fixed-income market could be in big, big trouble.
For months, traders, academics, and other analysts have fretted that the $23.7 trillion Treasuries market might be the source of the next financial crisis. Then last week, U.S. Treasury Secretary Janet Yellen acknowledged concerns about a potential breakdown in the trading of government debt and expressed worry about “a loss of adequate liquidity in the market.” Now, strategists at BofA Securities have identified a list of reasons why U.S. government bonds are exposed to the risk of “large scale forced selling or an external surprise” at a time when the bond market is in need of a reliable group of big buyers.
“We believe the UST market is fragile and potentially one shock away from functioning challenges” arising from either “large scale forced selling or an external surprise,” said BofA strategists Mark Cabana, Ralph Axel and Adarsh Sinha. “A UST breakdown is not our base case, but it is a building tail risk.”
In a note released Thursday, they said “we are unsure where this forced selling might come from,” though they have some ideas. The analysts said they see risks that could arise from mutual-fund outflows, the unwinding of positions held by hedge funds, and the deleveraging of risk-parity strategies that were put in place to help investors diversify risk across assets.
In addition, the events which could surprise bond investors include acute year-end funding stresses; a Democratic sweep of the midterm elections, which is not currently a consensus expectation; and even a shift in the Bank of Japan’s yield curve control policy, according to the BofA strategists.
The BOJ’s yield curve control policy, aimed at keeping the 10-year yield on the country’s government bonds at around zero, is being pushed to a breaking point.
Well. Bidenflation certainly isn’t helping, but Statist Economist and Cheerleader Janet Yellen can’t bring herself to blame green energy policies, rampant Federal spending or irresponsible Federal Reserve policies for the crisis.
You will note the differences between today and the financial crisis of 2008-2009. The financial crisis gave us a massive surge in government securities liquidity thanks to then Fed Chair Ben Bernanke imitating Japan’s Central Bank and buying US government securities. Fast forward to today and the liquidity index hasn’t budged much since 2010 (except for a little blip around the Covid Fed intervention of early 2020), but we are now seeing near 40-year highs in inflation and a barely declining Fed balance sheet. And M2 Money YoY (mostly commercial bank deposits) are crashing.
I am guessing that The Fed will pivot given that stock futures are way up for Monday. The Dow Jones mini is up 770 points and the S&P 500 mini is up 88.75 points.
Bond market futures (specifically the US Ultra Bond) is down for Monday, meaning yields will be climbing.
I remember giving a speech at The Brookings Institute in Washington DC. Talk about stranger in a strange land. One person who I was debating got frustrated and said “You are such a … Republican!!!” As if that was the worst slur he could throw at me.
Like virtually everything in Biden’s economy, the price of turkey (often the main staple for Thanksgiving dinner) is way up in price. Turkey prices are UP 73% since last year. The price per pound of an 8- to 16-pound turkey has risen to $1.99, a 73% increase from $1.15 last year, according to USDA data.
Speaking of turkeys, in recent speeches, President Joe Biden has been misleadingly taking credit for cutting federal deficits by historic amounts, though most of the reduction in deficits is the result of expiring emergency pandemic spending. Deficits fell between fiscal year 2020 and 2021 far less than initially projected after Biden added to them with more emergency pandemic and infrastructure spending.
And apparently Biden (or Jill) haven’t looked at the data recently. While there was a momentary budget surplus in April 2022, the Federal budget deficit has increased dramatically in September 2022 to the worst deficit since March 2021 shortly after Biden took office.
The only thing that is strong under Biden is the labor market. But even the accomplishment is grossly misleading. Under Trump, the U-3 unemployment rate was 3.5% in February 2020 just before Covid-13 struck and the Fauci-ites shut down the economy causing unemployment to rise to 14.7% in April 2020. Most of the reduction in the unemployment rate was the result of the economy slowly opening back up under Trump. When Biden took over, the unemployment rate was 6.4% and it is finally back to Trump’s 3.5% in September 2022. At least Biden didn’t screw that up, as Obama has said. Perhaps that should be his new midterm campaign slogan!
But Biden DID screw up the labor market with Bidenflation. REAL average hourly earnings growth (yellow line) is NEGATIVE..
And yes, the US is rapidly approaching recession which will result in a spike in unemployment. So much for Biden’s “Strong as hell!” economy.
Wall Street saw another day of stunning reversals, with stocks rallying after a Treasury selloff sputtered. The yen jumped as Japan intervened again to prop up the currency.
After many twists and turns, the S&P 500 pushed solidly into the green and headed for its best week since June as 10-year yields fell from the highest since 2007.
Probably because The Fed is likely to pivot with impending recession. The Dow is up 774 points this Friday. And today was a huge option expiration day!!
And the 10-year Treasury yield fell -2.2 basis points.
Here is the result of Japan’s intervention.
But today’s numbers were largely monthly stock index option expiration.
Why did it fall upon Powell to be the wielder of the Fed tightening scimitar? Why didn’t Yellen? Because “Good Girls Don’t.” But Powell did.
Have a nice weekend. I will be rooting for Ohio State to annihilate the Iowa Hawkeyes at noon on Saturday.
Bloomberg’s recession probability over next 12 months is … 100%.
And how about the Conference Board’s Leading index of 10 economic indicators YoY? Third negative read ALWAYS followed by recession.
The Federal Reserve may be forced to pivot. This may be one reason why the Dow is up 565 points today (+1.86%) as recession and pain become ever more likely.
Look at commercial banks deposits. Wonder why liquidity is drying up?
Confounded Interest - Anthony B. Sanders 
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