Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
The mortgage market is really hurting under the stewardship of “Inflation Joe” Biden.
Bankrate’s 30yr mortgage rate hit 7.35% yesterday, up 155% under Biden.
Here is a photo of Inflation Joe taking aim at the mortgage industry and housing market.
President Biden just lost one of his midterm election talking points. “The U-3 unemployment rate the lowest since (garbled) at 3.5%!” Because it now has risen in October to 3.7%.
Private payrolls added 233k jobs in October, which is a -27% decline from September’s revised private payroll figures.
The good news? Average hourly earnings growth is still positive, but fell to 3.7% YoY. But with inflation raging at 8.2% YoY, workers are getting clobbered by inflation.
Here is the rest of the story.
The Fed is now green-lighted to raise rates even higher.
Biden’s campaign promise was to unite rather than divide. But Biden has morphed into Gustaf Holst’s, Mars – Bringer of War! Both domestically and in the Ukraine.
It has been a wild and mostly negative ride under Biden’s Reign of Error. 40-year highs in inflation (caused by Biden’s fossil fuel mandates and Federal spending) have left the US mortgage market FINALLY seeing positive REAL mortgage rates (now 0.32%), even though the REAL 10yr Treasury yield is still negative (-2.50%).
Even Joe Biden’s hate speech towards Republicans can’t mask the horrid inflation on his watch. As if Biden watches anything other than ice cream cones.
On a YoY basis, US Productivity is down for the 3rd straight quarter (and 4th quarter of the last 5).
On the mirror image of productivity, unit labor costs rose 3.5% QoQ (a notable slowing from the 8.9% QoQ growth in Q2). This was the 6th quarter in a row of rising unit labor costs (but was less than the +4.0% QoQ expected)…
However, on a YoY basis, that is the fastest growth since Q3 1982.
Yikes! The 2s10s Yield Curve Inversion Is the worst since the 1980s.
Markets are getting stranger than the Paul Pelosi hammer attack.
The S&P 500 index tanked -2.35% after Powell and The Fed failed to pivot.
Federal Reserve Chair Jerome Powell opened a new phase in his campaign to regain control of inflation, saying US interest rates will go higher than previously projected, but the path may soon involve smaller hikes.
Addressing reporters Wednesday after the Fed raised rates by 75 basis points for the fourth time in a row, Powell said “incoming data since our last meeting suggests that ultimate level of interest rates will be higher than previously expected.”
Powell said is it would be appropriate to slow the pace of increases “as soon as the next meeting or the one after that. No decision has been made,” he said, while stressing that “we still have some ways” before rates were tight enough.
“It is very premature to be thinking about pausing,” he said.
Fed Funds Futures data point now to a June peak in the target rate of 5.055%, then a decline.
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.
As the midterm elections get close, the news for Americans gets worse.
On the housing/mortgage front, Bankrate’s 30-year mortgage rate (yellow line) just hit 7.20%, the highest since 2000. Also, the US Treasury 10yr-3mo yield curve (white line) inverted, historically a precursor to recession, before barely climbing back above 0%.
Meanwhile, M2 Money growth has collapsed to the lowest level since 2010.
US GDP numbers are due out at 8:30AM EST for Q3. The numbers are expected to show slow growth (around 2.4%) with rapid inflation (5.3%). While the GDP numbers are better than Q2’s numbers, they are still pretty lousy.
As The Federal Reserve continues to withdraw its massive Covid-related monetary stimulus, US mortgage applications continue to fall to the lowest level since 1997.
Mortgage applications decreased 1.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 21, 2022.
The Refinance Index increased 0.1 percent from the previous week and was 86 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 42 percent lower than the same week one year ago.
Under Biden, we have seen (orange line) a significant decline in mortgage purchase applications (peak 2021 to this week). Mortgage rates are the highest since 2001 (wait for it!)
Here is Jerome Powell of The Federal Reserve Board of Governors trying to figure out what to do after so many policy errors with increasing likelihood of recession while trying to withdraw monetary stimulus.
Biden’s policies are making Halloween and Thanksgiving MUCH more expensive.
The latest inflation figures released by the federal government show that the price of candy and chewing gum rose by 13.1% last month — the biggest jump ever recorded. And turkey prices are up a whopping 73%!
One reason is diesel fuel prices are up 102% under Biden’s Reign of Error. While inventory of diesel fuel down -37%. Meanwhile core inflation is up from a measly 1.3% to a whopping 6.6% at the latest inflation report.
Introducing Biden’s Thanksgiving dinner … in a can to cope with rising prices.
Just kidding. This is too clever for the clueless Biden Administration. But Karine Jean-Pierre might get as confused as Joe Biden and repeat it as one of the ways that The Biden Administration is helping consumers.
Damn it, Janet (Yellen)! Get your story on inflation correct for once.
Biden’s Famous Chili!
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.
Confounded Interest - Anthony B. Sanders 
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