Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Sweet home Chicago … NOT!
The Biden/Harris economic “miracle” was simply massive Federal spending (and borrowing) combined with hiring Federal workers. This can be seen in the following chart of Chicago Fed manufacturing index compared with Federal spending. Great times in the first months of 2021, but as Federal spending slowed, so did the manufacturing index. Last seen at -10.71 in December 2024.
Joe Biden, sold his soul for family wealth at the crossroads in Delaware.
Inflation soared under Biden/Harris, primarily due to their outrageous wasteful government spending.
US government spening soared with Covid and politicians enjoyed the unbridled spending.
Let’s see if Trump and Republicans can do any better.
As expected, Powell and The Fed dropped their target rate by 50 basis points yesterday, deflating some of the air in the asset markets, More rate cuts will come, but at a slower rate.
Gold got clobbered but has somewhat rebounded.
Bitcoin did likewise: dropping like a rock then bouncing back somwhat.
But gold and bitcoin/ethereum are down again.
The CBOE VIX volatility index exploded upwards.
Powell is looking old, like most of Congress and Biden.
All aboard the Biden/Pelos/Schumer crazy spending train!
Wage and salary income as a percentage of GDP has fallen from over 50% back in 1970 to 43.1% in 2022. And look at the post Covid decline! And the increase in M2 Money.
Meanwhile the US budget balance as a % of GDP has been plunging downwards in recent years.
Despite the slowing economy, pre-tax profits post Covid have SOARED!
Primarily due to reckless/wasteful Federal spending and FEDERAL DEBT that soared.
There you have it! The Biden/Harris economic “miracle” was simply Federal government malspending that benefitted large corporations and few people.
Joe Biden and his woefully corrupt son Hunter of laptop fame.
Like a Great White Shark, Bitcoin has breached $100k!
Gold, a competitor to the US Dollar, is down a bit today, but has been rising with the prospect of Trump deregulating the hamstrung US economy. Gold rose under Biden/Harris (and McConnel/Schumer’s) gross fiscal mismanagemment.
Here is a picture of Bitcoin breaching the surface. And why it pays not to surf near seals or sea lions.
The last gasp of the Biden/Harris reign of (economic) error!
After existing home sales unexpectedly ticked up in October, analysts expected new home sales to slow after their recent resurgence (-1.8% MoM). They were right… BUT… the magnitude is mind-boggling!
New Home Sales collapsed 17.3% MoM in October. That is the largest MoM drop since July 2013.
That MoM plunge dragged sales down 9.4% YoY to 610k SAAR – the lowest since Nov 2022
Of course, all the revisions are lower…
Hurricanes Helene and Milton, which tore through parts of the Southeast, delayed sales in the nation’s biggest housing region and dragged down sales overall.
Sales in the South decreased 28% to 339,000, the slowest pace since April 2020. Sales also fell in the West, but rose in the Northeast and the Midwest.
Finally, we note that the median sale price of a new home increased to $437,300 in October, the highest in 14 months.
Does this mean November’s data will see a massive surge in new home sales? …even as rates have increased significantly?
Meet the new boss, same as the old boss. We did get fooled again!
The problem with the national debt can’t be fixed with Mitch McConnell still in the Senate and too many Obama-era political hacks still in Washington DC.
The Obama/Biden era began in 2009 and it still exists despite Trump winning the Presidency for 2025. The Obama/Biden regime along with Congressional assistance drove up US Federal Debt to around $36 TRILLION. That is an increase of a staggering 236% since Obama/Biden were sworn into office in January 2009. And Federal spending is up 121%.
Unfortunately, Trump cannot pull a Javier Milei (Argentina’s libertarian President) and obliterate the bloated carcas of Federal bureaucracy. Democrats and RINOs like Mitch McConnell will work overtime thwarting Trump’s efforts to control the bloat.
And don’t forget the $221 TRILLION in unfunded liabilities (promises) that Congress had made to get elected. That will eventually become Federal debt.
Its a slow down in the housing market.
Existing Home Sales were expected to rebound modestly in October (+2.9% MoM) after dropping for 6 of the last 7 months to the lowest levels since 2010, and they did. Sales rose 3.4% MoM (a beat) but thanks to a downward revision for September from -1.0% to -1.3% MoM. What is most shocking about the shift is that it pushed the YoY change for existing home sales positive (+2.9% YoY) for the first time since July 2021…
…but in context, that shift up to 3.96mm SAAR homes sold is nothing…
High borrowing costs have led to a shortage of previously owned homes on the market, discouraging many would-be home sellers from listing their properties for sale and having to part with their current low financing costs.
“Additional job gains and continued economic growth appear assured, resulting in growing housing demand,” NAR Chief Economist Lawrence Yun said in a prepared statement.
“While mortgage rates remain elevated, they are expected to stabilize.”
Last month, the inventory of available homes edged up 0.7% to 1.37 million, continuing to trend higher although well below pre-pandemic levels.
Despite the weakness in sales, tight inventory is keeping prices elevated, yielding one of the least affordable housing markets on record. The median sale price last month increased 4% from a year earlier to $407,200, the highest ever for any October, the NAR figures show.
Contract signings rose in all four US regions, led by a 6.7% jump in the Midwest.
Sales of single-family homes increased 3.5% in October; purchases of condominiums and co-ops were up 2.7%
Finally, while that’s all very exciting – a scintilla of growth off almost record lows – the fecal matter is about to strike the rotating object as rising mortgage rates lagged impact threatens…
In October, 59% of homes sold were on the market for less than a month, compared with 57% in September, and 19% sold above the list price. Properties remained on the market for 29 days on average, compared with 28 days in the previous month. First-time buyers made up 27% of purchases, still historically low.
Fortunately, the Biden/Harris administration is winding down. On the mortgage side, the mortgage market is already gone under Biden/Harris where mortgage purchase applications are down a whopping 60%.
Mortgage applications increased 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 November 15, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 1.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 1 percent lower than the same week one year ago. And down -60% under Biden/Harris.
The Refinance Index increased 2 percent from the previous week and was 43 percent higher than the same week one year ago.
Slowing economy, rising rates, too expensive housing. Not a good sign for the mortgage market.
A recent paper by Michael Stegman, Ted Tozer and Richard Green reminds me of The Who’s song “Won’t Get Fooled Again.” Except that apparently Stegman, Tozer and Green did get fooled again.
I remember testifying in the House of Representatives in Washington DC on the financial crisis and housing markets. I pointed out that low down payment mortgages lending to households with low credit scores was very dangerous. I had the data and presented it to the House committee on financial services.
Fast forward to today. The Urban Institute, a far-left think tank just published a paper by Michael Stegman, Ted Tozer and Richard Green entitled “Zero–Down Payment FHA Mortgages Would Be a Cost-Effective Way to Expand First-Time Homeownership.”
The problem with Stegman et al’s paper is that it ignores The Federal Reserve and Federal spending. After the financial crisis of 2008 when housing prices declined (especially in bubble states like Arizona, Nevada and Florida), Berananke and Yellen adopted a zero interest rate policy that resulted in housing prices rising again. Then we have Powell’s lowering of rates to near-zero following the Covid outbreak and the insane level of Federal spending that ensued helping to drive housing prices to dangerous bubble levels. Making first time homeowner purchases almost impossible.
So, like the 2000s, the pursuit of homeownership will lead to insance policy proposals. If nothing else, the Stegman et al proposal will lead to MORE inflation in housing prices and set the stage for a housing bubble burst of epic proportions.
Apparently, Stegman et al DID get fooled again. Or they just don’t care.
Confounded Interest - Anthony B. Sanders 
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