Nothing has been the same since Covid and The Federal Reserve’s massive overreaction to the government shutdowns of the economy.
Notice how the University of Michigan Consumer Sentiment Index (white line) has plunged since Covid and the ensuing rise in inflation. University of Michigan’s Buying Conditions for Houses has also plunged to new depths.
Rising inflation (highest in 40 years) and hottest home price bubble (even hotter than the infamous housing bubble of 2005-2007) AND rising mortgage rates have placed a damper on home buying sentiment.
The US Senate yesterday confirmed the reappointment of Jerome “Slowhand” Powell as Federal Reserve Chairman.
The good news? Atlanta Fed’s Flexible CPI YoY cooled to 20% in April. The bad news? Flexible prices are still growing at 20% while wages are growing at 5.5% YoY.
On the export front, export prices are cooling and were at 18% YoY in April, down slightly from March. Import prices cooled to 12% YoY as The Federal Reserve has slowed asset purchases.
I would have preferred President Biden appoint a serious Federal Reserve Chairman liked Stanford University’s John Taylor (of Taylor Rule fame). In his honor, here is the Mankin version of the Taylor Rule which calls for a Fed Funds Target Rate of 13.89% while the current Fed Funds Target Rate under Powell and the Gang is … 1%.
The Freddie Mac 30-year mortgage rate is rising faster than a SpaceX moonshot!
I’m telling your now that The Fed is killing the dreams of millions of Americans by pricing them out of the housing market. Home price growth is lethal as is the increase in mortgage rates.
April’s inflation numbers are out and, at first glance, inflation seems to be cooling from 8.5% YoY in March to 8.3% YoY.
But the headline inflation numbers do not accurately reflect the pain and suffering of American households. Food is up 9.4% YoY and gasoline is up 43.6% YoY.
The strange way the BLS measure “shelter” shows that housing only grew at 5.1% YoY. That’s odd since home price growth is almost 20% YoY and rent growth is near 20%.
Runaway home prices and rents are especially painful given that inflation is destroying the purchasing power of the dollar for consumers. Real average weekly earnings YoY are at -3.4% YoY.
Hence, the purchasing power of the US Dollar keeps eroding.
Good luck out there with inflation still roaring, and food/housing/energy prices soaring.
Here is a photo of American children trying to create energy from flying a kite made from progressively devalued US currency.
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.
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?
Today we saw the 10-year Treasury Note yield break through the 3% barrier, then retreat as is there was a reflecting barrier at 3%.
And in Europe, we saw a flash crash allegedly caused by Citi’s trading desk.
The selloff was triggered by a large erroneous transaction made by the U.S. bank’s London trading desk, according to people with knowledge of the matter who asked not to be identified discussing private information. A knee-jerk selloff in OMX Stockholm 30 Index in five minutes wreaked havoc in bourses stretching from Paris to Warsaw toppling the main European index by as much as 3% and wiping out 300 billion euros ($315 billion) at one point.
The US Dollar rose again as expectations of Fed monetary tightening due to inflation become a reality.
A measure of U.S. manufacturing activity unexpectedly dropped in April to the lowest level since 2020 as growth in orders, production and employment softened.
The Institute for Supply Management’s gauge of factory activity fell to 55.4 last month from 57.1, according to data released Monday. The Manufacturing Prices index remained elevated.
As the 10-year Treasury yield tries to breech the 3% barrier.
And as The Fed continues to threaten tightening of their monetary follicies, the S&P 500 index is down 14% since Dec 31, 2021.
And the NASDAQ had it worst monthly loss since 2008.
We all know (except for Biden apparently) that inflation is up 8.5% YoY as measured by the change in the Consumer Price Index (CPI). However, the CPI change doesn’t fully capture what is crushing Americans’ pocketbooks. Here is a brief update on where we stand prior to the upcoming Federal Reserve Open Market Committee meeting on May 4th.
Since Biden was installed as President on January 20, 2021, prices for key commodities have soared. Natural gas futures UP 192%, Regular Gasoline prices UP 73.6%, Commodity Research Bureau Foodstuffs UP 59%, Low sulfur Diesel futures UP 176%.
Since we now have the Biden’s Orwellian Ministry of Truth (actually The Department of Homeland Security’s “Disinformation Board”) which will start censoring free speech. And this post is what could fall under their reign of terror. Or in Biden’s case, reign of error.
Jen Psaki, the President’s talking head, has said that it is Russia and Putin’s fault. So, here are the same prices up to Russia’s invasion of Ukraine since Biden was installed as President: Natural gas futures UP 82.3%, Regular Gasoline prices UP 80.2%, Commodity Research Bureau Foodstuffs UP 50.1% ,Low sulfur Diesel futures UP 47.7%.
Yikes! So, even before Russia invaded Ukraine, the lethal combination of Biden’s green energy executive orders and The Fed’s continuing monetary stimulypto was deadly for American households.
On a sad note, The Biden Administration is considering cancelling student loan debt as a way to control inflation (?). Of course, cancelling student debt will lead to a surge in consumer spending and even MORE soaring inflation. Biden is suffering from The Medusa Touch. Everything he touches turns to stone.
While The Fed is expected to remove monetary stimulus, don’t expect inflation to return to pre-Biden levels. The anti-fossil fuels edicts from Biden are still in effect. Even if the bottlenecks clear up, Biden and Congress may unleash more Federal spending (although much of Federal spending benefits “Friends and Family” of Biden and Congress, not the American middle class or lower-wage workers).
Do you want to see a magic trick? Like how governments shut down the US economy resulting in collapsing office occupancy rates while the price of office buildings rose dramatically (+16.3% since Q2 2020)?
Kastle’s “Back to work barometer” is showing that the 10 city average occupancy rate in the US is now only 42.8% as remote working has caught on. And the fear of yet another Covid mutation is keeping office occupancy below 50%.
Even Washington DC, home of Dr. Anthony Fauci, has only a 37.5% occupancy rate. Of the top 10 cities, Austin TX has the highest office occupancy rate at 62.4%.
So, the magic trick is not why America is so slow to return to the office, but why commercial office prices are rising so fast. Ah, Federal government STIMULYTPO! Aka, The Federal Reserve has been overstimulating the economy since 2008 and particularly since 2020 and Covid.
Speaking of a magic trick, here is how government’s make the average time to foreclosure up to over 7 years in Hawaii and 4.4 years in New York. In simple terms, you can buy a home in New York, never make a mortgage payment and live rent free for an average of 4.4 years.
So, the government’s magic trick is to 1) shut down local economies in fear of Covid, 2) provide excessive fiscal and monetary stimulus to combat the shutdown, 3) watch office building prices soar with stimulus as office occupancy remains below 50%.
Do you want to see a magic trick? Watch The Fed try to tighten monetary easing and NOT crash the economy.
Update for 04/25/2022. 10Y Treasury yields DOWN 8.7 bps.
And commodities are tanking. WTI oil is down 5%, iron ore is down almost 7%.
And the Dow is diving with increased expectations of Fed monetary tightening, but the expectations (green line) have been declining this morning.
Confounded Interest - Anthony B. Sanders 
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