Good News, Bad News! US New Home Sales Rise 2.3% In December, But DOWN -23% YoY (Median Price UP 7.8% YoY While M2 Money Growth Goes Negative)

The December new home sales report is good news and bad news.

The good news? US new home sales rose by 2.3% in December from November to 616k units sold SAAR. That is the good news.

The bad news? Since December of 2021, new home sales fell -23% year-over-year (YoY).

The median price of new home sales rose 7.8% YoY, but the trend as The Fed withdraws monetary stimulus (orange line) is not good.

Perhaps there is a communications breakdown between the Biden Administration and The Federal Reserve.

Magic? US Inflation Cools To -0.1% In December, 6.5% Year-over-Year YoY (REAL Weekly Earnings NEGATIVE For The 21st Straight Month At -3.1% YoY)

I don’t think this is a record that Biden can run on for re-election: 21 straight months of NEGATIVE REAL WAGE GRWOTH. Fortunately for Fed Chair Jay Powell, he is not an elected official.

The December inflation report still shows elevated inflation in the US, but only -0.1% since November (MoM), but still high compared to last year (6.5% YoY). That is still over 3x The Fed’s target inflation rate of 2%.

While headline inflation fell to 0.1% MoM, CORE inflation (removing food and energy) rose again 0.3% MoM and 5.7% YoY.

What exactly went up in price in December? Food and energy were all over 10% YoY growth.

At 6.50% YoY headline inflation, the Taylor Rule suggests a Fed Funds Target rate of … 13.13%. Well, I guess that Powell will say there is more rate hikes to be done.

As if The Fed follows any sensible rule. Instead, The Fed relies on magic tricks.

US Leading Economic Indicator Falls To -1% QoQ In November, -4.5% YoY As Fed Sugar Dissolves (Do I Detect A Trend?)

Do I detect a trend in the US Leading Economic Indicator data?

The Conference Board’s US Leading Economic Indicator was released this morning and it wasn’t pleasant. The US Leading Index was down -1% MoM in November.

On a year-over-year basis, it is down -4.5% YoY as The Fed withdraws its massive monetary stimulus.

The good news … for military contractors … is that Biden and Congress have given Ukraine’s Zelenskyy ANOTHER $47 BILLION.

Misery! US Real GDP Remains Below 2% YoY As Core PCE (Inflation) Rises And Remains Near 5% YoY (Misery Index Remains Elevated At 12%)

Its another slow growth economic report for the Biden Administration. So much stimulus, so little to show for it other than painful inflation.

On a year-over-year (YoY) basis, US real GDP rose to a measly 1.9%. US core PCE YoY fell slightly to 4.93%. M2 Money growth is at 2.6% YoY.

The Misery Index (U-3 inflation rate + inflation) remains elevated and above 10% (it currently clocks-in at 12%), far above the pre-Covid reading of around 5%.

Here is the rest of the story. On a quarter-over-quarter basis, real GDP rose to 3.2% QoQ. Personal consumption rose 2.3% QoQ. Core PCE (Personal Consumption Expenditures) rose to 4.7% QoQ. If we use core PCE as a measure of inflation, inflation is rising.

Here is a video of Fed Chair Jerome Powell (doubling as President Joe Biden) saying creating inflation and then raising interest rates to fight it “It’s for the best.”

US Real GDP Growth Forecast To Be Dismal 0.50% In 2023, Personal Savings Rate -67.9% YoY In October, US Mortgage Rates Headed Down (Economic Lights On But Nobody’s Home)

Albert Collins said it best about the US economy under Joe Biden: “Lights Are On But Nobody’s Home”.

The Federal Reserve forecast for the US economy is a dismal 0.50% YoY. Do I detect a trend?

The FOMC forecast for 2023 and 2024. Core PCE YoY (inflation) is forecast to drop to 3.50%, still considerably higher than The Fed’s target rate of inflation of 2%. And unemployment is forecast to be 4.60%.

To cope with Bidenflation, US personal savings rate as of October is -67.9% YoY. The “good” news is that rents YoY are crashing. But food prices under Inflation Joe remain very high. But most everything is slowing down, not due to Biden’s policies, but a global and US economic slowdown.

With a big slowdown coming our way, you can understand why The Fed’s December Dot Plot is showing declining Fed Funds Target rate starts declining in 2024.

Even US mortgage rates are headed down.

Speaking of going down, cryptos are down across the board with Cardano leading the decline at -6.91%.

All aboard the SS Biden!

The Empire Strikes Out! NY Manufacturing Outlook Shrivels To -11.2% And Its NOT Always Sunny In Philadelphia Fed Outlook At -13.8% (S&P 500 Index Drops -1.87%, EuroStox Drops -3.42%)

The numbers coming out today are not good. November numbers were 1) US Industrial Production was down -0.2% MoM, 2) manufacturing production is down -0.6%, 3) retail sales advanced down -0.6% (most in 11 months) and …

The Empire State Manufacturing outlook was down -11.2% and the Philadelphia Fed (or Phed) business outlook was down -13.8% in November.

And with all this bad news, global equity markets are dropping like a paralyzed falcon.

But at least Biden traded a dangerous international arms dealer for WBNA star Brittney Griner. Possilby the worst trade in history after the Chicago Cubs traded future Hall of Famer Lou Brock for sore-arm pitcher Ernie Broglio. Griner is Ernie Broglio.

Pre-Fed Status: 100% Probability Of US Recession In 2023, Mortgage Rate Steady (US Yield Curve Now Inverted For 116 Straight Days, Implied Rate Hike Of +50 BPS To 4.50%)

Fun week ahead. US inflation numbers are out on Tuesday (forecast? CPI YoY = 7.3%, Core CPI YoY = 6.1%) and The Federal Reserve’s Open Market Committee (FOMC) rate decision is on Wendesday.

So, where are we sitting on Monday?

First, the US Treasury 10Y-2Y yield curve has been inverted (a precursor to recession) for 116 straight days). Second, the likelihood of recession in 2023 is 100%. Third, with the forecast of core inflation at a still numbing 6.1%, The Fed seems dead set on raising their target rate by 50 basis points to 4.50% on Wednesday.

dddd

So, as The Fed debates recession versus fighting inflation (partly caused by The Fed), we have Kevin Malone from The Office debating Angela versus double-fudge brownies:

“I hear Angela’s party will have double fudge brownies. But it will also have Angela. Double fudge.. Angela.. double fudge….. Angela. Hmm..” I am betting on risking a recession by raising the Fed’s target rate by 50 basis points.

Inflation Gone In November? US Producer Prices Top Estimates At 7.4% YoY, Supporting Fed Hikes Into 2023

Is inflation gone in November? Nope.

US producer prices rose in November by more than forecast, driven by services and underscoring the stickiness of inflationary pressures that supports Federal Reserve interest-rate increases into 2023.

The producer price index for final demand climbed 0.3% for a third month and was up 7.4% from a year earlier, Labor Department data showed Friday. The monthly gains for October and September were revised higher.

At the same time, the annual increase was the smallest in 18 months, extending a months-long easing and suggesting the central bank still has scope to pause its rate hikes next year as expected. Cooler demand at home and abroad has taken some stress off supply chains.

The data come just days before the release of the closely watched consumer price index, which is forecast to show inflation, while much too high, continues to decelerate. 

While PPI is declining, it is still far above The Fed’s inflation rate of 2% (red line).

Watch out for energy prices when the sleeping giant (China) opens up again and demand for energy skyrockets. Meanwhile, Clueless Joe is merrily draining the US Strategic Petroleun Reserve.

Lastly, congratulations to former Cleveland Brown QB Baker Mayfield for winning with the LA Rams against the Las Vegas Raiders with a stunning 99 yard drive for a TD at the end of the game.

Trabucco Road? US Consumer Credit Outstanding SOARS As Inflation Soars And Personal Savings Collapses (Cryptos Rally As Jim Cramer And ARK’s Cathie Wood Buy The Dip!)

Wasting away again in Biden’s inflationville.

During the Covid crisis of 2020 (red box). consumer credit declined and households were saving. But following the end of US Covid economic shutdowns, we saw inflation soaring to 40-year highs as Biden declared war on fossil fuels and a Pelsoi-led Congress went on an epic spending spree. But with soaring inflation, came a decline in personal savings and soaring consumer credit outstanding in an attempt to cope with Bidenflation.

Meanwhile, in the crypto universe, CNBC’s Jim Cramer and ARK’s Cathie Wood are going big for cryptos. With Wood buying Bitcoin and Cramer touting Coinbase.

Hmmm.

But at least Litecoin and the others are up today. Likely because Cramer and Wood are touting cryptos with “buy the dip!” strategy.

And on the Sam Bankman-Fried fiasco front, I am watching the deflection of wrongdoing from SBF to his girlfriend and now the co-CEO of Alameda Research, Sam Trabucco.

Bloomberg: He has a degree from MIT and cut his teeth as a trader at Susquehanna International Group. Yet the former co-head of Alameda Research made it clear that poker and black-jack tables were where he honed the gambler’s instincts he applied to cryptocurrency trading. 

“I may or may not be banned from 3 casinos for this,” Sam Trabucco once tweeted about counting cards at black jack tables.

Trabucco Road?

The Fed’s BIG Green Bag (Of Money)! Goldman Sees Fed Rate Peaking In March At 5%, Core Inflation Rate UP > 400% Under Biden (US Yield Curve Inverted Prior To Nov 2nd FOMC Meeting)

The next Federal Reserve Open Market Committee (FOMC) meeting in on Wednesday, November 2nd. Let’s see what The Fed does with its BIG GREEN BAG … OF MONEY.

As I set here on Sunday morning waiting to see how the Cleveland Browns will lose to cross-state rival Cincinnati Bengals, I see that both the US Treasury 10yr-2yr and 10yr-3mo yield curves are inverted (below zero).

Core inflation (CPI less food and energy) YoY (blue line) was only 1.3% in February 2021 shortly after Biden was sworn-in as President and is now 6.6% in September 2022. That is over a 400% increase in core inflation!

We have this tantalizing headline on Bloomberg:

Goldman Sachs Now Sees Fed Rates Peaking at 5% in March By Simon Kennedy(Bloomberg) — 

Goldman Sachs Group Inc. economists said they now expect the US Federal Reserve to raise interest rates to 5%, higher than previously predicted.

The central bank will lift its benchmark rate to a range of 4.75% to 5% in March, 25 basis points more than earlier expected, economists led by Jan Hatzius wrote in an Oct. 29 research report.

The route to the new peak includes increases of 75 basis points this week, 50 basis points in December and 25 basis points in February and March, they said.

The economists cited three reasons for expecting the Fed to hike beyond February: “uncomfortably high” inflation, the need to cool the economy as fiscal tightening ends and price-adjusted incomes climb, and to avoid a premature easing of financial conditions.

Well, not exactly earth-shattering. Fed Funds Futures data point to a peak of near 5% (4.905%) for the May 2023 FOMC meeting, so Goldman Sachs is calling for an earliest peak at the March 2023 FOMC meeting,

Regardless of what Goldman Sachs thinks, Fed officials are expecting a peak in 2023 followed by a decline to 2.5%.

Brainard and Bostic are the only “doves.” Which is silly because Chicago’s Evans is a perma-dove. Let’s see how the Dots Plot changes at the November 2nd meeting.

America’s distressed debt pile is biggest since September 2020.