Strange Days! Fed Remittances Due To Treasury Skyrockets As Fed Tightens, Strategic Petroleum Reserve Crashing As M2 Money Growth Dies

We are truly living in Strange Days under Joe Biden. And with Elon Musk’s release of Twitter’s suppression of the Hunter Biden laptop scandal, they call Joe Biden the Sleaze.

As The Federal Reserve tries to crush Bidenflation, we are seeing Fed Remittances to the US Treasury soaring (white line). At the same time, we see the Biden Administration draining the Strategic Petroleum Reserve (orange dashed line). And as The Fed tightens, M2 Money growth crashes (green line).

And with tech layoffs, I predict that 2023 job growth will be pretty bad.

As I have discussed before, I am a fan of ADP’s job reports and not a fan of the BLS NFP reports. As M2 Money growth slows, we can see declining ADP jobs added (yellow line), but BLS’s NFP report shows huge spikes.

Lastly, we have Sam Bankman-Fried and FTX. SBF should be in custody for being involved in one of the biggest fraud cases in history, but like Hunter Biden, is roaming free and trying to raise MORE funds. Why are these lapses in justice occuring with “10% for The Big Guy” Biden?

Corruption in Washington DC?

World Yield Curve Inverts For First Time Since At Least 2000 (US Yield Curve Has Been Inverted For 107 Straight Days) Drums Along The Potomac??

Do I hear Drums Along The Potomac or East River??

The hawkish drumbeat from central bankers is raising fears of a downturn, with global bonds joining US peers in signaling a recession, as a gauge measuring the worldwide yield curve inverted for the first time in at least two decades. 

The US Treasury 10Y-2Y yield curve, on the other hand, has been inverted for 107 straight months.

And in Europe, 10-year sovereign yields are dropping like a paralyzed falcon.

The world and US yield curves are pointing to trouble. And drums along the Potomac (DC) and East River (NYC).

Buying Typical US Home Now Requires Income of Over $100,000, Up 46% YoY (19 Straight Months Of Negative REAL Wage Growth Isn’t Helping)

Redfin had an interesting post where they showed that the “typical” US home now requires income of over $100,000.

Of course, it is easy to blame the figure on rapidly rising mortgage rates and Federal Reserve tightening.

But the rest of the story (as Paul Harvey used to say) is that US REAL wage growth has been NEGATIVE for 19 straight months. This alone makes housing unaffordable for the middle class and low wage workers.

Good day!

Again, why are Biden and Trudeau wearing Mao jackets in Bali? And why is Biden looking like a robot?? Biden does look like he is saying “Take me to my leader, Pei.”

Is Sam Bankman-Fried Another Bernie Madoff? Buyer Beware Or Rely On Government For Protection? (FTX Held Less Than $1bn In Liquid Assets Against $9bn In Liabilities)

Like the disastrous Bernie Madoff debacle where investors lost millions of dollars, Sam Bankman-Fried has apparently cost investors like Steph Curry, Shaq and Tom Brady considerable sums as well.

What do Bernie Madoff and Sam Bankman-Fried have in common? Greedy investors who apparently didn’t bother to monitor what was going on.

Yes, had they monitored FTX, Bankman-Fried’s company, they would have noticed that FTX held less than $1bn in liquid assets against $9bn in liabilities.

Generally, with buyer beware, the onus falls on investors to monitor what is going on. But The Fed’s completely dropped the ball on Bernie Madoff where investors didn’t seem at all curious about earning supercharged returns. The same is the case for FTX.

FTX had partnered with Ukraine to process donations to their war efforts within days of Joe Biden pledging billions of American taxpayer dollars to the country. Ukraine invested into FTX as the Biden administration funneled funds to the invaded nation, and FTX then made massive donations to Democrats in the US.

The SEC’s Gary Gensler blew it again. After his agency failed to warn investors about Terra and Celsius—whose collapses this spring sparked a trillion-dollar investor wipeout—the Securities and Exchange Commission chair allowed an even bigger debacle to unfold right under his nose. I’m talking, of course, about the revelation this week that the $30 billion FTX empire was a house of cards and that its golden boy founder, Sam Bankman-Fried, is the crypto equivalent of Theranos’s Elizabeth Holmes (Stanford University is where Holmes was an MBA student and Stanford Law School is where both SBF’s parents are professor).

To be fair, Gensler was not the only one suckered by SBF. Nearly everyone else fell for the narrative that SBF, with his cute afro and aw-shucks demeanor, was exactly the savior crypto needed to shake off its dodgy reputation and emerge as part of the mainstream financial system. The problem is that cop-on-the-beat Gensler not only failed to spot the crime—he appeared set to go along with a legislative strategy that would have given SBF a regulatory moat and made him king of the U.S. crypto market.

While it is easy to blame Gensler, the onus still falls on investors (and their managers) to MONITOR. Buyer beware.

What will happen to Sam? Likely nothing. He is a golden child of Democrats and was the second biggest donor to Biden and the Democrats after America-hating George Soros. Just like Biden’s son Hunter will never pay for his many inappropriate antics, I doubt that Merrick “Double Standard” Garland will do much to Sam.

Steph Curry, Shaq and Tom Brady should fire their investment advisors and possibly sue then for failure to monitor. No one noticed $1bn in assets against $9bn in liabilities??

Gary Genslar is more like Inspector Clouseau than a serious regulator.

Here is the SEC’s Gary Genslar interviewing Sam Bankman-Fried about FTX.

Maybe Sam’s Stanford law school professor parents didn’t tell him that it is against the law.

The US Midterm Election In One Chart (Hint: Republicans Favored As Inflation Soars, Biden Unpopular On Kitchen Table Issues)

Here is the US midterm election in one chart.

According to Real Clear Politics, the generic Republican polling data FAVORABLE (red line) is at 47.9% while Democrat polling data favorable polling data (yellow line) is at 45.4%, advantage Republicans.

Biden has been a disaster as President (energy mandates, Afghanistan debacle, endless funding of Ukraine, highest inflation in 40 years, and every time he opens his mouth. But it is the “kitchen table” issues where Biden is getting clobbered: inflation, rising gas, food and diesel prices. One Democrat Congressman, Sean Patrick Maloney, said “Let them eat Chef Boyradee.” I can’t believe how tone deaf some politicians can be.

Biden’s UNFAVORABLE polling numbers (orange line) are directly related to the US headline inflation rate. Inflation was 1.4% YoY when Biden became President and it is now 8.2% YoY (blue line).

And I don’t think Biden’s hateful rhetoric toward “MAGA Republicans” is helping him. I thought his set looked like the movie “Doom” with Duane “The Rock” Johnson and Karl Urban.

How Biden And The Fed Defanged The FANG Index And Clobbered Growth And Real Estate ETFs (Cousin Eddie And Clark Griswold Strike Again!)

There is no doubt that Biden is the Cousin Eddie of politics with his gifts that keep on giving. Like rampant inflation, soaring food, gasoline and diesel prices, and Pelosi/Schumer’s helping hand in creating price controls that will kill potential cures for illnesses.

In addition to rampant 40-year highs in inflation, we have the Clark Griswold of the economy, Fed Chair Jerome Powell, slamming his foot on the economic breaks to combat inflation created by Biden’s energy mandates and reckless Federal spending (like the aforementioned, laughable “Inflation Reduction Act.”

So, Biden helps creates massive inflation and Powell and the Gang counterattacked by raising their target rate with more to come (at least until May 2023). And with the implied Fed Funds rate soaring (red line), we are seeing the FANG stocks (Facebook or Meta, Amazon, Netflix and Google) falling more rapidly (white line) than the S&P 500 index. Which is also falling like a rock (yellow line). All this is happening as M2 Money YoY crashes and burns.

How about growth versus value under Cousin Eddie and Clark Griswold? The Vanguard Growth ETF and Vanguard Real Estate ETF are plunging with Fed tightening (red line). Vanguard’s Value ETV (yellow line) is down too, but not by as much.

Yes, Washington DC elites. The gift that keeps on giving … bad things.

Thanks to my former GMU student Andrew Edwards for the Cousin Eddie suggestion!

Deceleration Nation! US Home Price Growth Slows Most On Record In August As Fed Hits Brakes, But Still Growing At 12.99% YoY (US Treasury 10-yr Yield DOWN -17 BPS Today)

Alarm! US home prices are decelerating as inflation rages and The Fed tightens.

Home price growth in the US slowed the most on record as a doubling of borrowing costs (thanks to the US Federal Reserve) has sapped demand.

A national measure of prices increased 13% in August from a year earlier, but is down from 20.79% in March, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.

The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated. 

While 13% growth sounds good, it is not good for renters looking to buy a home.

According to S&P/CoreLogic/Case-Shiller, Southern (red) cities Atlanta, Charlotte, Dallas, Miami and Tampa all still grew at over 20% YoY. Other cities like blue cities Detroit, Minneapolis, Portland, San Francisco, Seattle and Washington DC are grew at UNDER 10% YoY.

It looks like some people have taken three steps and left blue states for red states.

On related news, I always said in my classes that +/- 10 basis point in the US Treasury yield is a big deal. This morning, the US Treasury 10-year yield is DOWN -16.1 bps. In fact, the 10-year yields are down across the board globally.

Its that smell of impending recession.

Well, they certainly aren’t calling Biden “The Breeze.” Except for the recession that is going to clobber the US.

My Kuroda! Dow UP 774 Points And 10Y Treasury Yield Down -2.2 BPS As Japan’s Central Bank Intervenes To Prop Up Currency (Options Expiration Likely Explanation For Stock Surge)

My Kuroda!

Wall Street saw another day of stunning reversals, with stocks rallying after a Treasury selloff sputtered. The yen jumped as Japan intervened again to prop up the currency.

After many twists and turns, the S&P 500 pushed solidly into the green and headed for its best week since June as 10-year yields fell from the highest since 2007.

Probably because The Fed is likely to pivot with impending recession. The Dow is up 774 points this Friday. And today was a huge option expiration day!!

And the 10-year Treasury yield fell -2.2 basis points.

Here is the result of Japan’s intervention.

But today’s numbers were largely monthly stock index option expiration.

Why did it fall upon Powell to be the wielder of the Fed tightening scimitar? Why didn’t Yellen? Because “Good Girls Don’t.” But Powell did.

Have a nice weekend. I will be rooting for Ohio State to annihilate the Iowa Hawkeyes at noon on Saturday.

Bloomberg Recession Probability Is 100% Over Next 12 Months, Conference Board Registers Third Straight Negative Read (Here Comes The Night!)

To quote Van Morrison, “Here comes the night.”

Bloomberg’s recession probability over next 12 months is … 100%.

And how about the Conference Board’s Leading index of 10 economic indicators YoY? Third negative read ALWAYS followed by recession.

The Federal Reserve may be forced to pivot. This may be one reason why the Dow is up 565 points today (+1.86%) as recession and pain become ever more likely.

Look at commercial banks deposits. Wonder why liquidity is drying up?

And to paraphrase Van Morrison, Biden/Pelosi/Schumer please go.

And to paraphrase Van Morrison, Biden/Pelosi/Schumer please go. Powell too.

Need to hear Them’s “Gloria” for the weekend.

The B.I.D.E.N System! Biden Plans To Release Additional 10-15 Million Barrels Of Crude Oil From Strategic Petroleum Reserve (Regular Gasoline Prices UP 62% Under Biden And Diesel Fuel Prices UP 101.4%)

Joe Biden reminds me of Dennis Reynolds from “Its Always Sunny In Philadelphia.” And his D.E.N.N.I.S System. But Biden’s System is blatant politics. With the midterm elections in November and Democrats looking a bit behind, Biden is pulling out the political guns by 1) ramping up student loan forgiveness … again and 2) releasing 10-15 million MORE barrels from the Strategic Petroleum Reserve to lower gasoline prices. Particularly after his failed attempts to get the Saudis to pump more oil (too bad Biden put the kabash on US energy exploration and cancelled the Keystone pipeline).

Having said that, we can see that BEFORE the latest SPR order, the US Strategic Petroleum Reserve, meant to cope with national emergencies like … Russia dropping a nuke on the US, has declined -36% under Nuclear Joe.

At the same time, regular gasoline prices are UP 62% under Biden and the all-important diesel fuel prices are UP 101.4% under Biden.

Of course, expect The B.I.D.E.N System to do everything in its power to destroy the economy if Republicans win the midterms. Including no more SPR release.

The B.I.D.E.N. System.