Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Seriously, with soaring energy prices and soaring EVERYTHING prices (except for real wage growth), it is difficult to see how the US will avoid a recession.
Yes, everything is seemingly rising in price, yet REAL average hourly earnings growth keeps falling. Rising price + declining real earnings growth = eventual recession.
So, let’s get ready to stumble … into recession.
Goldman Sachs Senior Chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.”
I am not surprised. Take a look at The Fed’s Overnight Reverse Repo operations. As inflation surged in 2021 and 2022, banks are parking more funds at The Fed. Fear?
We are seeing the S&P 500 futures down today after a nice rally on Friday. The &P 500 forward 12-month P/E ratio is back to pre-Covid, pre Federal spending surge, pre Fed monetary Stimulypto of 2016.
Goldman Sachs see the 10-year Treasury yield rising to 3.3%. That bodes ill for 30-year mortgage rates, perhaps push mortgage rates up another 40 basis points to 5.80%.
And NASDAQ is having its worst year since 2008.
Its The Medusa Touch of Big Government.
Americans are suffering under Joe Biden. Call it Inflation Inferno!
Foodstuff are up 61.5% under Biden’s Reign of Error. Gasoline prices are up 85.8%, diesel prices are up 111%. Yet the government inflation index (aka, CPI) is up only 8.3% in April.
But while energy and food prices are soaring, the CRB Spot Metals Index has plummeted -15% since May 4 as Covid is ravaging the Chinese economy. Recession alter anyone?
And then we have soaring home prices and rents. But notice that Zillow’s Rent index is slowing down as mortgage rates soar.
We have a stalling Chinese market, down 28% since October. Is Biden President of China??
On the currency front, the Russian Ruble is soaring relative to the US Dollar while the Chinese Renminbi, the Japanese Yen and the Euro (or in this case, the Gyro) are sinking like a rock.
If I compare the Russian Ruble and Ukrainian Hryvnia, you can see Ukraine is losing the currency war with Russia.
Inflation Inferno thanks to Biden’s misguided energy executive orders and cancellation of Alaskan and Gulf of Mexico drilling leases.
Biden’s economic mismanagement team: American Gothics Treasury Secretary Janet Yellen and Fed Chair Jay Powell.
I feel like we are in an economic demolition derby under Joe Biden and The Federal Reserve (with freshly reappointed Fed Jerome Powell at the helm).
Under Biden, regular gasoline prices are UP 85%. The Biden Administration recently cancelled 0il-and-gas drilling leases in Gulf of Mexico and Alaska Coast, helping to drive up gasoline prices even higher.
In the two-pronged attack out of Washington DC, The Federal Reserve is tightening their monetary policy in an effort to combat 40-year highs in inflation (caused by excessive Federal spending and Biden’s ill-advised energy policies), causing residential mortgage rates to soar 93.4% under Biden’s Reign of Error.
It is almost like the Biden Administration and The Federal Reserve are engaged in an economic demolition derby to see who can cause the most destruction to America’s middle class and lower-wage workers.
We should call the current administration and The Federal Reserve “Demolition Men.”
And here is Biden’s Disinformation Chief giving out penalties for whatever Biden doesn’t like.
1984 anyone?
Call this “Nobody’s Everything.” Crytpocurrencies are getting clobbered. But then again, the S&P 500 is not doing so well. But crypto stalwarts Bitcoin and Ethereum have down even worse.
At the dollar strengthens, Bitcoin has gotten pummeled.
But at least Bitcoin rose this morning along with Bitcoin Cash. And XRP. But the others are getting clobbered.
Microstrategy bonds are getting crushed.
Yes, homebuyers are jumping into a generally slowing housing market to “beat the heat.” That is, beat The Fed’s monetary tightening.
Mortgage applications increased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 6, 2022.
The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 8 percent lower than the same week one year ago.
The Refinance Index decreased 2 percent from the previous week and was 72 percent lower than the same week one year ago.
Beat the Heat!! Or Beat The Fed!!
As least inflation came in slightly cooler in April at 8.3% YoY. While housing (own or rent) is rising at over 2x CPI.
Joe Biden likes to sell himself as “Middle Class” Joe. But Middle Class Joe declared war on the middle class with executive orders on fossil fuel drilling and killing the Keystone pipeline. Hence, his press conference on reducing inflation left off one thing: he could rescind the aforementioned executive orders. But he didn’t. So its Band-Aids on Band-Aids.
Since Biden was elected President, WTI Crude Oil futures are up 102%. Regular gasoline is up 83% and the lifeline of the shipping industry, diesel, is up 111%. Of course, inflation measures don’t measure the harm to the middle class at 8.5% YoY.
Here is Biden’s speech, blaming everyone but himself for inflation. And then walks away (as usual) when asked a tough question. But he lied. He COULD cancel his executive orders on oil and natural gas exploration, but didn’t. Instead, he blamed Trump and MAGA voters.
At least S&P 500 futures are up this morning, an opportunity to buy the dip.
But on the housing front, we see that mortgage rates have pieced the 5.50% barrier and is now at 5.57%.
On the rent side, apartment rents are growing at 19.3% YoY for both Class A and Class B units.
Commodities are down this AM. WTI Crude is down -1.71%, iron ore is down -4.06% and nickel is down -6.29%.
Whoops! After a positive futures reading before opening, the Dow is down near a full percentage point, but the NASDAQ is almost breakeven for the day.
And the 10-year Treasury yield is down 8.6 bps.
As The Boss sang, “We’re going down.”
As the US is engulfed in inflation while The Federal Reserve is engaged in trying to fight inflation (well, sort of), we are seeing markets taking a shellacking, particularly commodities.
One indicator of a slowdown is declining commodity prices. Crude oil futures are down around -2.5%. Iron Ore is down -5% and steel rebar is down -3.21%.
Inflation numbers are due out Wednesday and are forecast to be 8.1% YoY (based on headline CPI). But combined with a slowing global economy, we get the dreaded “STAGFLATION.”
Meanwhile, the S&P 500 index futures are down around 1.726% for Monday open. Asian markets already got clobbered with the Hang Seng down almost -4%.
On the bond side, the 10Y Treasury Note yield rose to 3.20% early in the morning, but has retreated to 3.1447% as of 8:40am EST.
Both stock and bond market volatility measures are increasing.
So, is it a Blue Monday effect? Or global stagflation?
Time for supplemental income under the Biden Administration.
As crooner Dean Martin once said, “Let ’em have it!” Ain’t this a kick in the … head.
Perhaps Joe Biden and Fed Chair Jay Powell are channeling Dean Martin by letting us have it.
Since Obama’s 3rd term as President (aka, Biden’s installation as President on January 20, 2021), mortgage rates have risen 87%, regular gasoline prices have risen 80%, CRB foodstuffs are up 59% and Commodities are up 63%.
And don’t forget about America’s energy life force, WTI Crude Oil. It is UP 123% under Biden.
Rents? Rising at a 16.8% rate.
Rents rising, food costs rising, energy costs rising, Biden and The Fed are taking us higher. In terms of prices and cost of living.
Confounded Interest - Anthony B. Sanders 
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