In addition to global equities taking a massive hit, cryptocurrencies Bitcoin and Ethereum have fallen -72% since November 2021 as The Fed (aka, The Sugar Shack) tightens interest rates.
$32 TRILLION of global stock value has been wiped out since December 2021.
Today’s core PCE deflator reading of 4.9% YoY shows that the inflation surge is not over. With a core PCE deflator of 4.9%, the Taylor Rule suggests that The Fed Funds Target Rate should be at 9.65%, far below its current level of 3.25%. So, IFF The Fed is following any sort of rule, rates should continue to soar.
And if we use headline inflation of 8.30% YoY, the Taylor Rule suggests hiking the target rate to 14.75%.
Fire! European stock valuations have dropped to lowest since 2012.
The US Dollar index is soaring (not helping Europe) as The Federal Reserve tightens monetary policy to combat the inflation fire.
Meanwhile, the Atlanta Fed’s GDPNow real-time forecast for Q3 is at least above zero (barely) at 0.271%.
Fed officials continued to hammer home the central bank’s hawkish outlook, with Atlanta President Raphael Bostic saying he backs raising rates by a further 1.25 percentage points by the end of this year. Meanwhile, the People’s Bank of China said it will accelerate usage of targeted loans.
Bond volatility is increasing.
The US Treasury 10-year yield was down -20 basis points yesterday and is up +10 basis points today. This is the Fed’s Rollercoaster effect.
The Dow is down another 400 points today as The Fed’s Sugar Rush is ending. Perhaps The Federal Reserve main building in Washington DC should be renamed “The Sugar Shack.”
In related news, apparently the Biden Administration is going to replace Treasury Secretary Janet Yellen with … anybody else??
Meanwhile I will have a bottle of wine to kill the pain of inflation and Fed tightening.
Banks get to park money at The Federal Reserve overnight in the form of repurchase agreements (or repos). But as inflation is raging in the US, banks have parked a record $2.366 TRILLION at The Federal Reserve.
The MOVE bond volatility index keeps rising as inflation roars and The Fed fights back,
The US bond volatility index is now almost as high as during the Covid Crisis and approaching financial crisis levels.
The scalding inflation rate crippling middle class Americans and low-wage workers is causing The Federal Reserve to take action by finally tightening their monetary policy.
As such we are seeing a rapid decline in the US housing market in terms of sales. For August, pending home sales declined -22.5% YoY as expectations of further Fed rate hikes (blue line) soars. Note that impact of The Fed’s and Federal government “sugar rush” after the Covid outbreak in early 2020 and its impact on pending home sales.
Speaking of a sugar crash, risk parity ETF is down 32% from high.
The culprit? The Federal Reserve’s Panzer onslaught! With its leader, Heinz Wilhelm Guderian Jerome Powell.
The Dow is up 500 points today on the expectation that The Fed will stop tightening in the face of global chaos.
As UK 10yr yields fall -50 BPS!! And US T-10 yield drop -20.8 basis points.
Here is a photo of The Federal Reserve attacking American consumers to reduce inflation caused by Biden’s green energy policies and insane spending by Biden/Pelosi/Schumer.
Will Janet Yellen and Jerome Powell be awarded Panzer assault medals for 1) leaving monetary stimulus too large for too long then 2) suddenly tightening stimulus?
It is going to be a bad day in markets. As I often mentioned in my classes, any 10 basis point shift in Treasury yields is a big deal.
On the bond side, the US Treasury 10-yr yield fell -12.2 basis points as investors run for cover. The UK 10 yr yield fell -46.6 basis points.
On the commodity side, we see WTI crude up 1.12%, heating oil up 1.92% and … UK Natural Gas Futures up 16.37%.
The natural gas leak in the Baltic Sea might have something to do with global jitters.
Here is a map of the gas leak.
I will have to turn on “The View” to find out who sabotaged the natural gas pipeline. /sarc
No, I don’t think Biden yelling at gasoline companies to lower prices has anything to do with market turmoil today. Its just another day under Joe Biden.
Mortgage applications have fallen to the lowest level in 25 years, in part due to The Federal Reserve’s tightening of monetary policy in an attempt to combat inflation.
Mortgage Net Daily is showing that 30-year fixed mortgage rates are 7.08%.
Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 23, 2022.
The Refinance Index decreased 11 percent from the previous week and was 84 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was29 percent lower than the same week one year ago.
Welcome to DeSantisville! Miami and Tampa Florida are the only metro areas in the nation (at least of the top 20 metro areas) growing at >30% growth in home prices.
My former home, Phoenix AZ, finally is no longer the fastest growing metro area in terms of home prices, relinquishing the crown to Miami and Tampa FL.
It almost seems that people are trying to escape the mess Gavin Newsome made in California and are escaping to Arizona, Nevada, Florida and Texas. But note that all 20 metro areas are positive in growth YoY, but 12 of the top 20 metro areas experienced NEGATIVE growth from June to July.
Any questions as to whether The Fed is killing the housing and mortgage markets??
On a different note, we see all hell breaking out in Great Britain. Like the US, Great Britain’s inflation is off the charts and the Bank of England is scared about the Pound getting pounded with BofE tightening.
Is FLA governor Ron DeSantis actually Snake Pliskin??
According to the BLS, US core inflation is 6.3% and headline inflation is 8.3% YoY. But everything I consume seems to be going up at a much faster rate?
Under Biden, regular gasoline price is UP 55%, CRB Foodstuffs UP 47%, rents UP 12.5% YoY and electricity is UP 957%.
And as The Fed continues to signal monetary tightening, the spread between 30Y FNCL Par Coupon and the 10-year Treasury yield keeps growing.
In case you watched the Buffalo Bills play the Miami Dolphins yesterday, you may remember this punt by the Dolphins. It almost perfectly represents what The Federal Reserve and Biden Administration are doing to the American middle class and low-wage workers.
Confounded Interest - Anthony B. Sanders 
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