Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
I can’t wait to get back where we started from. In terms of the economy.
And the CRE office market is showing disaster. San Francisco office market availability rates have soared in Q1 2024 to over 35%, up from less than 10% in Q1 2019.
Welcome to The Streets of San Franciso!
We’re going down!
One month after the May Consumer Sentiment printed at a record 7-sigma miss to expectations, consumer sentiment once again “unexpectedly” slumped, this time from an upward revised 68.8 to 67.6, the lowest print since last November, and the biggest 3-month drop in sentiment (-13.8 points) going back to the covid lockdowns.
… which was not only a 5-sigma miss to the median estimate (an improvement from last month’s 7-sigma)…
… but also the biggest miss of 2024.
The collapse in sentiment was broad based, and hammered both current conditions – which plunged from 69.6 to 62.5, the lowest since 2022 and badly missing estimates of 72.2 – and also expectations, which dropped from 68.8 to 67.6 (and also far below the 72.0 estimate).
The decline in sentiment coincides with signs that the labor market, which has driven consumer spending over the last year, is also falling apart. The unemployment rate rose to 4% last month, the highest in more than two years, while jobless claims unexpectedly soared following a firing frenzy out of California.
“While lower-income families have, as a group, seen notable wage gains in a strong labor market, their budgets remain tight amid continued high prices even as inflation has slowed,” Joanne Hsu, director of the survey, said in a statement.
But wait there’s more, because if that was the “stag” part of the report, the UMich report also confirmed that the “flation” isn’t far behind, as the inflation outlook continued its recent deterioration, to wit: 1 Year inflation expectations remained unchanged at 3.3%, beating estimates of a drop back 3.2%, while 5-10 Year inflation expectations rose from 3.0% to 3.1%, the highest since November.
If that wasn’t enough, the slide in sentiment suggests restrained consumer demand in coming months. The university’s measure of buying conditions for durable goods decreased to the lowest level since December 2022, a glowing testament to just how tapped out the US consumer truly is.
In short: the verdict for Bidenomics is in, and it’s a complete disaster, as for Powell’s recent laughable comment that he can’t see the “stag” nor the “flation”… well, Fed chair, they just bit you on the ass.
On top of a poor consumer sentiment report, the PPI Final Demand index was down … again.
And The Fed and Powell keep losing money.
Biden at the G7, His new name is “The Wanderer.”
Joe Biden is a dishonest politician, so it is no wonder that he ignores actual data. Like claiming that crime is down under his leadership, when it is actually large cities like New York and Los Angeles not reporting their crime data to the FBI.
Take the May jobs numbers. The BLS reports that 272k jobs were added. However, the more accurate Household Survery reported a loss of -408k jobs in May.
While the Establishment Survey did indeed report that 272K “jobs” were added, this number also included multiple job holders; stripping those out, we get that the actual number of “employed” workers plunged by -408K.
On the jobless claims side, the number of Americans applying for jobless benefits for the first time surged last week to 242k (up from 229k and well above the 225k exp). That is the highest since August 2023…
On an NSA basis, claims exploded higher.
The last three weeks have seen the largest surge in claims since January…
Notably this surge is very VERY similar to what we saw last year (but not the prior few years, so not a ‘seasonal’ pattern per se)…
The surge in NSA claims was driven by California…
California leads the nation in initial jobless claims, thanks to Newsom’s $20 per hour minimum wage law for fast food restaurants. This one’s gonna hurt Californians for a long, long time.
Biden and Newsom WISH they were Atlas.
Well, it was the first week of June. Mortgage applications usually peak in May, so we are on the historic “dark side of the moon” for mortgage demand.
Mortgage applications increased 15.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending June 7, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 15.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 26 percent compared with the previous week. The seasonally adjusted Purchase Index increased 9 percent from one week earlier. The unadjusted Purchase Index increased 19 percent compared with the previous week and was 12 percent lower than the same week one year ago.
Beware of getting too excited about the19% WoW increase. It is 19% off an extremely low number.
The Refinance Index increased 28 percent from the previous week and was 28 percent higher than the same week one year ago.
This charts sums up the seasonal component to prepays.
The middle class and low wager workers are made for kicking. And that’s with Bidenomics did.
The headline consumer price index was unchanged MoM in May – the smallest change since July 2022 – just less than the +0.1% MoM expected. On a YoY basis, headline CPI rose 3.3% (less than the 3.4% exp) – but very much stuck in a range well above the 2% target for over year now…
Energy was the biggest drag on the headline CPI MoM…(Gasoline prices tumbled 3.6% in May from April, one key reason why the headline CPI was flat on the month. )
Core CPI rose 0.2% MoM (below the 0.3% exp) pulling the YoY change down to 3.4% (from 3.6% and below the 3.5% exp). That is the lowest Core CPI YoY since April 2021…
Core CPI has not had a down-month since President Biden was elected.
Core Services inflation slowed notably MoM…
The shelter index increased 0.4 percent in May and was the largest factor in the monthly increase in the index for all items less food and energy.
For context on how important housing costs are to US inflation data, the shelter index rose 5.4% over the last year, making up over two thirds of the total 12-month increase in the all items less food and energy index.
It does make one wonder were exactly the BLS is getting their BS OER data from…
The full breakdown…
Services INflation remains awkwardly stuck above 5% while Goods DEflation is at its weakest since January 2004…
SuperCore CPI fell 0.05% MoM – its first drop since Sept 2021, but that left the YoY level still above 5.0%…
Transportation Services costs tumbled MoM to drag SuperCore lower MoM…
We note that consumer prices have not fallen in a single month since President Biden’s term began (July 2022 and May 2024 was the closest with ‘unchanged’), which leaves overall prices up over 19.5% since Bidenomics was unleashed (compares with +8% during Trump’s term).
And prices have never been more expensive…
That is an average of 5.4% per annum (almost triple the 1.9% average per annum rise in price during President Trump’s term).
Since President Biden was elected, food prices at home are up around 21% and food prices away from home are up almost 23%…
And while the Biden administration will continue to gaslight voters with comments like “inflation is tumbling”… every man, woman, and child who actually buys food knows prices have NEVER been higher…
Finally, while the ‘flations’ have broadly tracked M2 lower, we note that M2 YoY is now starting to turn back higher once again…
Will the next President and Fed head face a 70s redux?
And is this guaranteed if Powell decides “insurance” cuts are required (for Biden?)
Too much debt should be the theme song for the US! Both for consumers and the Feral government (not a typo!)
Consumer credit increased by +$6.403 billion in April, much softer than consensus estimate of +$10 billion … more notable, however, was March data, given initial read of +$6.274 billion was revised down to -$1.099 billion.
Not to mention $13 trillion in mortgage debt (1-4 unit housing), but at least that is backed by property. Unlike The Feral government who borrows/prints with only a promise.
Consumer Debt Hits $17.69 TRILLION.
US national debt stands at $34.8+ trillion.
And growing awfully fast. Note that since the “pandamic”, debt as % of GDP has exceeded 100% and is projected to hit 166% by 2054. But look at the UNFUNDED LIABILITIES the need to be paid ($216+ TRILLION ($641.5k per citizen!). Pretty soon, we (the 99%) will be back on the chain gang paying for endless wars and government corruption. I wish Biden, Schumer, McConnell and other swamp creatures would consider all the spending the government is on the hook for rather than focus on spending that will help them get elected perpetually. There is no middle of the road anymore. The US is broke and has too much debt.
Of course, President Biden wants endless spending on wars (Ukraine, Israel, etc) and now wants an unlimited check to pay for the next pandemics. The Pretenders’ song “My City Was Gone” seems to be appropriate for the US as “My County Is Gone.”
Of course, some “economists” claim that the US can borrow/print unlimited amounts of money … until they can’t.
Under Bidenomics and Fed monetary “policies”, we now have the wreck of the US middle class.
To begin with, America’s paychecks are bigger than 40 years ago, but purchasing power of those larger paychecks is about the sames as it was 40 years ago. Great job Washington DC!!! … NOT!!!!
Meanwhile, credit card delinquencies are at the highest level since 1991.
Americans are feeling extreme financial stress.
Coping with Bidennomics and The Fed has been most difficult. Especially if you listened to Biden’s D-Day speech (almost stolen word-for-word from a Ronald Reagan speech).
Demented Joe Biden being led by the hand by his money-grubbing wife. “Joe, you will be here soon!”
2024 hasn’t been a good year for Bidenomics. The Economic Surprise Index is falling to its lowest point in years.
The economic confidence index has been terrible since Covid and Biden’s Reign of Ecoomic Error.
We need to give Biden the hook!’
And I don’t want The Lizard Queen either.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 1.8 percent on June 3, down from 2.7 percent on May 31. After recent releases from the US Census Bureau and the Institute for Supply Management, the nowcasts for annualized second-quarter real personal consumption expenditures growth and real private fixed investment growth declined from 2.6 percent and 3.1 percent, respectively, to 1.8 percent and 1.5 percent.
fff
Since I used The Animal’s version of the John Lee Hooker great tune “Boom Boom,” I will use another Animals tune for Joe Biden’s penchant for sniffing little girls. “Baby Let Me Take You Home.”
The Animals band. Not to be confused with the animals in the Biden Administration and Congress.
Job openings in April 2024 dipped to 8,059. Notice the trend (orange line) is below the trend set prior to Covid (red line).
Call it Washington DC soullessness.
Back in 2023, Socialist Paul Krugman declared that “the war on inflation is over!!! “We” won, at very little cost.” I love when elitists claim “We won!” since clearly 99% of Americans lost since food, housing and car prices up are double digits under Biden.
The problem is that food, energy, shelter, and used cars/trucks are a huge part of Americans consumption basket.
Under Biden, food CPI is up 23%. Home prices are up 34% and used cars/truck prices are up 17.7%.
A note to Paul Krugman, YOU may have won, but the rest of Americans lost. Consumer purchasing power of the US Dollar is DOWN 16.5% Under Biden.
Here is where we stand under Bidenomics.
Ask Joe if he cares.
Confounded Interest - Anthony B. Sanders 
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