Surprise! US Existing Home Sales RISE 6.7% In January As Inventory Available Shrinks To Lowest Level Since 1981 (Panic Over Fed Rate Increases??)

Surprise! US existing home sales in January rose to 6.50 million units SAAR versus the expected 6.10 million units. That is a 6.7% increase over December.

The disturbing news is the continued lack of available inventory that peaked in Q4 2007 and has continued its decline to today … the lowest level of available inventory since 1981. Despite the Fed’s massive stimulus that they allegedly will take away. Median price of existing home sales rose to 15.4% YoY. Making homes affordable should NOT be a slogan for The Federal Reserve, the Biden Administration or Congress.

The massive Federal stimulypto (fiscal and monetary) has helped push existing home sales to 6.50 million units SAAR in January. What will happen after The Fed withdraws it stimulus??

What is surprising is that with declining REAL wage growth, we saw a surge in home buying in January.

Remain calm, all is well!

The Shadow Knows! Wu-Xia Shadow Fed Rate Is -0.1974% As Inflation (7.5%) Dwarfs Wage Growth (5.1%) And Q1 GDPNow Falls To 1.285%

The Shadow Knows!

Wu-Xia employs an approximation that makes a nonlinear term structure model extremely tractable for analysis of an economy operating near the zero lower bound for interest rates. It can be used to summarize the macroeconomic effects of unconventional monetary policy (ZIRP + QE). The Shadow Rate is now -0.1974%.

The good news? The Atlanta Fed Wage Growth tracker is showing a 5.1% wage growth. The bad news? Inflation is ruining that growth at a whopping 7.5% rate leaving REAL wage growth at -2.4%.

And the Atlanta Fed’s GDPNow Q1 forecast is a measly 1.285%. Apparently, the fiscal and monetary stimulypto has worn out.

And liquidity in the equity market has seemingly vanished.

The Biden Administration and Congress need a distraction from the awful inflation news caused by Biden’s energy policies, sheer wasteful spending and Federal Reserve policy errors (too much monetary stimulus for too long).

Jay The Revelator! Minutes Show Fed Ready To Raise Rates, Shrink Balance Sheet “Soon” (Mortgage Rates SOAR To 4.23%)

Jay “The Revelator” Powell has told us in The Fed minutes that The Fed is ready to raise rates and shrink the balance “soon.” Sort of like saying “Shock and Awe” is coming.

The minutes of the recent Fed Open Market Committee (FOMC) have been released. Yet they only mention “soon.” Just like when my wife asks me to take out the trash and I reply “soon.” At which point she realizes that I have no intention of doing it.

The REAL 10-year Treasury yield is now -5.44%.

And the 30-year mortgage rate has risen to 4.23% while the REAL 30-year mortgage rate has fallen to -3.7%.

Jay The Revelator sings “Soon!”

New US Foreign Policy: Exporting Inflation Around The Globe As The Fed Keeps Printing (US Export Prices UP 15.1% YoY, Import Prices UP 10.8% YoY)

Another effect of The Federal Reserve’s reckless monetary policy coupled with Biden/Congress reckless spending is bad foreign policy. The US is exporting inflation around the globe.

US export price YoY is at 15.1%. The US is importing less inflation at 10.8% YoY.

Here is the export/import stack.

Things are not well in the US either. The misery index keeps rising under Biden’s Reign of Error.

The Federal Reserve keeps on printing!

Mortgage Purchase Applications Increased 5% From Previous Week, But DOWN 7% From Same Week Last Year (Refi Apps Down 54% Since Last Year During Same Week)

The good news is that borrowers are continuing to apply for a mortgage. The bad news is that they are applying at a 7% slower rate than the same time last year.

Mortgage applications decreased 5.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 11, 2022.

The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 7 percent lower than the same week one year ago.

The Refinance Index decreased 9 percent from the previous week and was 54 percent lower than the same week one year ago.

Double Whammy, Staglflation Style! US Rents Soaring (12%) As Real-time Q1 GDP Slows To 0.7%

Call this a double whammy! Red-hot rents combined with a slowing economy.

According to CoreLogic, single-family annual rent growth finished 2021 at a new record: 11.7% YoY for high tier rental properties and 10.4% YoY for low tier rental properties.

Of course, southern and southwest rental properties are seeing the fastest rent growth. Particularly Miami at 36% YoY. Phoenix is no slouch at 19% growth in rents.

Inflation is really ripping the insides out of America’s working class. Especially with real-time GDP slowing to 0.7%.

Double whammy, indeed!

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Never Ending Inflation? Final Demand PPI Index UP 9.7% YoY As The Fed Keeps Its Foot On The Monetary Gas Pedal

Biden and The Fed have a seemingly never ending problem for Americans: Inflation.

Today, the Final Demand Producer Price Index (PPI) printed at 9.7% YoY.

Biden claimed inflation was caused by COVID. How about 1) Biden’s anti-fossil fuel policies combined with 2) excessive fiscal (Biden and Congress) and excessive monetary stimulus (Fed)?

The Fed held its behind-closed-doors meeting on Monday, but nothing has been released about what they discussed. Suffice it to say, they have left the staggering monetary stimulus in play.

I wonder if The Fed is concerned about a soft landing with proposed rate increases.

Fed’s Bullard Backs Supersized Hike, Seeks Full Point by July 1 (10Y-2Y Yield Curve Crashing)

Call this “The running of the Bull(ard)s mouth.”

Federal Reserve Bank of St. Louis President James Bullard said he supports raising interest rates by a full percentage point by the start of July — including the first half-point hike since 2000 — in response to the hottest inflation in four decades.

“I’d like to see 100 basis points in the bag by July 1,” Bullard, a voter on monetary policy this year, said in an interview with Bloomberg News on Thursday. “I was already more hawkish but I have pulled up dramatically what I think the committee should do.”

Bullard’s plan involves spreading the increases over three meetings, shrinking the Fed’s balance sheet starting in the second quarter, and then deciding on the path of rates in the second half based on updated data. He said he was undecided on whether the March meeting should begin with 50 basis points, and would defer to Fed Chair Jerome Powell in leading the discussion. Powell, at a press conference in January, didn’t rule out the idea of such a move.

Bullard’s comments, along with the war drums along The Potomac about a Russian invasion of The Ukraine, are causing the 2-year Treasury yield to rise faster than the 10-year yield.

Resulting in a crashing 10Y-2Y curve.

The GINI measure of income inequality is at an all-time high as the purchasing power of the US Dollar is at an all-time low. Way to go, Federal Reserve and Congress!

What will The Fed decide at their emergency, closed-door meeting today? Nice transparency, Powell!

Behind Closed Doors: Monday’s Fed Meeting As 10Y-2Y Treasury Curve Crashes (WTI Crude Oil UP 96% Under Biden)

On Monday at 11:30 EST, The Federal Reserve Board of Governors will have a closed door session to determine if they should raise rates and/or change the speed of Fed asset purchases.

Between raging inflation and the potential wag-the-dog Russian/Ukraine tensions, The Fed has a lot to consider. Particularly if they are watching the 10Y-2Y Treasury yield curve plunging.

And we have the USD Inflation Swap Zero Coupon rate rising again.

While the Treasury and US Dollar Swaps curve are upward-sloping (not surprising since The Fed has aggressively pushed short-term rates to near zero), we are seeing Treasury Inflation Protected (TIPS) in negative territory until we get to 30 years.

The ICE BofA MOVE volatility index, a yield curve weighted index of the normalized implied volatility on 1-month Treasury options, has more than doubled under Biden.

And with Russian-Ukraine tensions growing, we see WTI crude oil up 96% since Biden took office.

Monday should be an interesting day. The market is now pricing in 6 rate hikes for 2022.

To paraphrase late, great Otis Redding, we can’t turn The Fed loose.

Think 7.5% Inflation Was Bad? How About FLEXIBLE Core Inflation At 19%! (2-year Treasury Yield Skyrocketing Along With Mortgage Rates)

I thought the last inflation report of 7.5% inflation was bad. But then the Atlanta Fed updated their inflation measure for flexible prices. Flexible inflation, less food and energy, is roaring at 19% YoY!

Flexible prices are those prices that adjust rapidly. Along with commodity prices.

Speaking of rapid rises, take a look at the 2-year US Treasury yield since COVID struck in early 2020.

We did see 2-year Treasury yields generally correlated with The Fed Funds Target Rate … at least until COVID struck. Since mid-2020, The Fed Funds Target Rate remains at 0.25% while the 2-year Treasury yield is roaring back with fuzzy expectations from The Fed’s leadership.

The 10-year Treasury yield is not rising as rapidly as the 2-year Treasury yield, but it is hovering around 2%.

But Bankrate’s 30-year mortgage rate is rising like a comet, similar to the 2-year Treasury yield.

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