A new $1.2 trillion government spending package Congress is trying to ram through faces significant headwinds in the House, where members are expected to vote on it later this morning.
The 1,012-page bill was introduced at around 3am Thursday morning – just 48 hours before a midnight Friday funding deadline. It must pass both the House and the Senate, after which President Biden will sign it (with crayons at the ready, we’re sure).
The package accounts for approximately 70% of discretionary government spending – and consists of six out of twelve total bills that Congress must pass each fiscal year to fund the government. The six others, around $460 billion in spending, were passed earlier this month.
According to Fox News, multiple GOP sources, two GOP lawmakers and one senior GOP aide think the package will pass, but by a tight margin.
On Thursday afternoon, however, the bipartisan deal hit turbulence – with one GOP lawmaker citing absurd pork contained within – including funding for LGBTQ centers and facilities that provide late-term abortions.
Pork City
As usual, Democrats slipped in as much pork as possible, including:– $850k for a gay senior home- $15 million to pay for Egyptian’s college tuitions- $400k for a gay activist group to teach elementary kids about being trans- $500k for a DEI zoo- $400k for a group to gives clothes to teens to help them hide their gender
$60,000,000,000 for Ukraine (of course). NOTHING for US border.
$1,140,000,000,0000 for pork barrelling
1.2 trillion in inflation, an increase of the money supply by 2% in a single spending bill.
The US Dollar’s purchasing power is down -16% under Gaslight Joe.
February’s existing home sales are like a scoop of cottage cheese. Seemingly satisfying until you look more closely at the data (or get hungry 30 minutes later).
Total existing home sales SAAR surged to 4.38mm – a 12 month high…
Source: Bloomberg
Homeowners may be accepting that mortgage rates are settling into a new normal and can’t delay moving any longer, NAR Chief Economist Lawrence Yun said on a call with reporters.
“Additional housing supply is helping to satisfy market demand,” Yun said in a statement.
“Housing demand has been on a steady rise due to population and job growth, though the actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices.”
With a 2-month lag, we can see why existing home sales may have risen, but with mortgage rates rising since then, we suspect the fun and games may come to an end again soon (even if the NAR economist thinks otherwise)…
The number of previously owned homes for sale climbed to about 1.07 million last month, and Yun said he expects that will continue to go up. At the current sales pace, selling all the properties on the market would take 2.9 months, the lowest in about a year.
Realtors see anything below five months of supply as indicative of a tight market.
Even with greater inventory, strong demand put upward pressure on prices. The median selling price advanced 5.7% to $384,500 from a year ago, the highest for any February in data back to 1999.
Sales rose in three of four regions, led by a 16.4% surge in the West
First-time buyers made up 26% of purchases in February, matching the lowest on record.
Biden continues to try to force Americans to buy electric cars and support China’s EV and battery industries! And are EVs ever expensive!
The Environmental Protection Agency released what it calls the “strongest-ever pollution standards for cars,” which it claims will “expand consumer choice in clean vehicles.”
The EPA expects plug-in electric vehicles to make up between 62% and 70% of the automotive market. But this unrealistic target ignores two key facts:
First, consumers are not lining up to purchase electric vehicles, which made up only 7.6% of 2023 vehicle sales despite heavy subsidies.
American drivers simply aren’t embracing EVs because they know these vehicles have shorter driving ranges and longer refueling times. Not to mention that they’re significantly more expensive.
The five-year cost to own an average electric vehicle is more than $92,000, according to the North American Auto Dealers Association.Compare that to a typical gas-powered vehicle, which over the same period costs $76,500.
Second, readily available charging infrastructure remains elusive for many EV users.
Many of the available chargers are level 2, which the magazine U.S. News notes “is fine if you have time to kill.”
Repair issues compound even the limited levels of charging, as only 73% of chargers in some major centers are in working order, according to Autoweek.
In the face of rapid decreases in the growth of electric vehicle sales, automakers are already scaling back EV production plans.
In December, Ford announced it was cutting planned production of its F-150 Lightning pickup in half due to “changing market demand.”
The Mackinac Center for Public Policy has warned automobile manufacturers for years that leaving consumers out of their long-term business plans was a recipe for failure.
Taxpayers not only pay with more expensive cars, they have to subsidize new production facilities.
In Michigan, lawmakers have already promised $200 million dollars of taxpayer money — and that’s just for one Ford battery plant in Marshall.
Notice that Biden has his right hand mysterioulsy over the cup holders where the transmission shifter would be on his gas-guzzling Corvette. When Biden drives a Nissan Leaf and sells his Corvette, I will almost believe Biden. No, he lies so much I can’t believe anything you see.
How bad is Bidenomics for the American middle class? We know that inflation is far higher under China/Ukraine Joe (even with those awful looking Hoka shoes), but the pain that is being felt is attrocious.
Housing costs have soared over the past four years
A monthly mortgage payment on a typical U.S. home has nearly doubled since January 2020, up 96.4% to $2,188 (assuming a 10% down payment).
Home values have risen 42.4% in that time, with the typical U.S. home now worth about $343,000. Mortgage rates ended January 2020 near 3.5%, keeping the cost of a home affordable for most households that could manage the down payment. At the time of this analysis, mortgage rates were about 6.6%.
Wages have not kept up
In 2020, a household earning $59,000 annually could comfortably afford the monthly mortgage on a typical U.S. home, spending no more than 30% of its income with a 10% down payment. That was below the U.S. median income of about $66,000, meaning more than half of American households had the financial means to afford homeownership.
Now, the roughly $106,500 needed to comfortably afford the mortgage payment on a typical home is well above what a typical U.S. household earns each year, estimated at about $81,000.
Buyers are teaming up, “house hacking,” and moving to more affordable areas
Metro areas where a buyer could comfortably afford a typical home with the lowest income are Pittsburgh ($58,232 income needed to afford a home), Memphis ($69,976), Cleveland ($70,810), New Orleans ($74,048) and Birmingham ($74,338). The only major metros where a typical home is affordable to a household making the median income are Pittsburgh, St. Louis and Detroit.
There are seven markets among major metros where a household’s income must be $200,000 or more to comfortably afford a typical home. The top four are in California: San Jose ($454,296), San Francisco ($339,864), Los Angeles ($279,250) and San Diego ($273,613). Seattle ($213,984), the New York City metro area ($213,615) and Boston ($205,253) complete the list.
Methodology
Quarterly median household income is taken from the American Community Survey (ACS) and Moody’s Analytics through 2022. Present-day estimates use quarterly changes in the Employment Cost Index provided by the Bureau of Labor Statistics (BLS) to chain ACS income to the current day.
Years to save for a 10% down payment is the number of years it would take the median household to save for a 10% down payment on a typical home in their metro, assuming a 5% annual savings rate.
Income needed to afford a home with 10% down is defined as the income needed to afford the total monthly payment on the typical home. The total monthly payment is based on the monthly mortgage payment, insurance, property taxes, and annual maintenance costs of the home.
Of course, tech town San Jose and San Francisco lead the nation in income needed to afford a typical home in a market. Los Angeles and San Diego are third and fourth, followed by Seattle. Pittsburgh PA has a lowest income to afford a home, probably because they signed Russell Wilson AND Justin Fields at QB.
Nike has made a pair of shoes fitting Biden’s international image.
And much of the debt burden falls on the middle class.
Serious auto delinquencies are on the rise.
And lowest earners saw the biggest increase in credit card delinquenices.
And who voters prefer as of today? Trump on interest rates and personal debt.
In addition to the absurd idea of removing title searches for government-guaranteed mortgages (now rely on attorney opinions), the Biden Administration is considering a homebuyer tax credit … that likely won’t help much.
And if you want to see which lenders have the largest concentrations of commercial real estate (CRE) loans, BankOZK takes the cake as the most concentrated lender.
The more the Biden Administration tries to “help” make housing more affordable, paradoxically makes housing even MORE unaffordable.
The NY Fed’s Empire State Manufacturing crashed and burned in March. NYFRB’s general business conditions index plunged 18.5pts in March to -20.9. A reading below zero indicates contraction, and the measure was weaker than all estimates in a Bloomberg survey of economists. Hey, I though illegal immigrantion was good for the economy!!!
Industrial production fell tp -0.23 YoY in February, not a stellar sign for the economy.
1. Everybuddy: 100% of workforce 2. Wisense: 100% of workforce 3. CodeSee: 100% of workforce 4. Twig: 100% of workforce 5. Twitch: 35% of workforce 6. Roomba: 31% of workforce 7. Bumble: 30% of workforce 8. Farfetch: 25% of workforce 9. Away: 25% of workforce 10. Hasbro: 20% of workforce 11. LA Times: 20% of workforce 12. Wint Wealth: 20% of workforce 13. Finder: 17% of workforce 14. Spotify: 17% of workforce 15. Buzzfeed: 16% of workforce 16. Levi’s: 15% of workforce 17. Xerox: 15% of workforce 18. Qualtrics: 14% of workforce 19. Wayfair: 13% of workforce 20. Duolingo: 10% of workforce 21. Rivian: 10% of workforce 22. Washington Post: 10% of workforce 23. Snap: 10% of workforce 24. eBay: 9% of workforce 25. Sony Interactive: 8% of workforce 26. Expedia: 8% of workforce 27. Business Insider: 8% of workforce 28. Instacart: 7% of workforce 29. Paypal: 7% of workforce 30. Okta: 7% of workforce 31. Charles Schwab: 6% of workforce 32. Docusign: 6% of workforce 33. Riskified: 6% of workforce 34. EA: 5% of workforce 35. Motional: 5% of workforce 36. Mozilla: 5% of workforce 37. Vacasa: 5% of workforce 38. CISCO: 5% of workforce 39. UPS: 2% of workforce 40. Nike: 2% of workforce 41. Blackrock: 3% of workforce 42. Paramount: 3% of workforce 43. Citigroup: 20,000 employees 44. ThyssenKrupp: 5,000 employees 45. Best Buy: 3,500 employees 46. Barry Callebaut: 2,500 employees 47. Outback Steakhouse: 1,000 48. Northrop Grumman: 1,000 employees 49. Pixar: 1,300 employees 50. Perrigo: 500 employees
But, according to the government-supplied data…
The number of American filing for jobless benefits for the first time last week dropped to 209k (vs 218k exp) with the NSA number tumbling to 200k…
Source: Bloomberg
How is this possible, you may ask… well let us show you the ways… New York State claims that its jobless benefits rolls collapsed last week. New York accounted for 99.75% of the weekly change in initial claims across the entire US as shown below…
Source: Bloomberg
Continuing Claims was a shit show – with a massive 112k person downward revision for last week from 1.906 million to 1.794mm. That is the 5th straight weekly downward revision of continuing claims…
Source: Bloomberg
But thanks to the adjustments, it all looks ‘normal’ and ‘stable’ at around 1.8 million Americans…
Source: Bloomberg
And WARN numbers are rising rapidly…
Source: Bloomberg
As a reminder, if you doubt the accuracy of the Biden admin’s data, here’s what the most recent FOMC Minutes said:
“While the recent trends prior to the meeting had been remarkably positive, Fed officials judged that some of the recent improvement “reflected idiosyncratic movements in a few series.”
Even they aren’t buying it, and neither should you!
Following yesterday’s release of Biden’s $7.3 trillion budget, the Biden administration bragged about lowering the deficit by $3 trillion over the next decade – an average of 0.8% of GDP over that period.
This would consist of roughly $2.6 trillion over 10 years in additional spending programs, offset by around $4.8 trillion in tax increases over the same period. Most of the tax and spending proposals have been included in prior budget proposals from the White House, according to Goldman’s Alec Phillips, however there are several new items.
The budget would increase the corporate alternative minimum tax on book income from 15% to 21%, raising $137 billion over the next decade. It also limits a corporation’s ability to deduct employee pay exceeding $1mm/year, raising $272 billion over 10 years. The largest proposed tax increases include; raising the corporate minimum tax from 21% to 28%, as well as a series of tax increases on high-income earners, including new Medicare taxes, and a new 25% minimum tax on incomes over $100 million, raising $500 billion over the next decade.
Of course, it has zero chance of passing under the current Congress – but that’s not the point.
As one DC strategist wrote in a morning email noted by CNBC‘s Brian Sullivan, the budget deficit will still grow by another $16 trillion over the next decade – and that’s with aforementioned tax hikes.
Without them, the deficit grows to $19 trillion.
In short, talk of ‘$3 trillion saved’ is total bullshit in the grand scheme of things, given how much the national debt will grow in the best case scenario.
“No family budget or business could exist with this kind of math,” says Sullivan.
Yes Brian, no family budget could exist with this kind of math AND SPENDING!
And the national debt is rising by $1 TRILLION every 100 days. Before Spending Joe’s budget!
Unlike what Grand-dad Joey Biden screamed at the State of The Union (SOTU) address, inflation is NOT been defeated. In fact, inflation has defeated Biden and The Federal Reserve.
The 3-month annualized CPI rate was rose to 2.8% from 1.9%. The 6-month annualized core rate dropped to 3.2% from 3.3%.
Energy costs surged MoM as Core Services inflation slowed MoM…
Source: Bloomberg
Full CPI MoM breakdown:
The index for all items less food and energy rose 0.4 percent in February, as it did the previous month.
The shelter index increased 0.4 percent in February and was the largest factor in the monthly increase in the index for all items less food and energy.
The index for rent rose 0.5 percent over the month, while the index for owners’ equivalent rent increased 0.4 percent.
The lodging away from home index increased 0.1 percent in February, after rising 1.8 percent in January.
The airline fares index rose 3.6 percent in February, following a 1.4-percent increase in January.
The index for motor vehicle insurance increased 0.9 percent over the month.
The medical care index was unchanged in February after rising 0.5 percent in January.
The index for hospital services decreased 0.6 percent over the month and the index for physicians’ services decreased 0.2 percent.
The prescription drugs index fell 0.1 percent in February.
The index for dental services was among those that rose in February, increasing 0.4 percent.
The index for personal care fell 0.5 percent in February, following a 0.6-percent increase in January.
The household furnishings and operations index fell 0.1 percent over the month, as did the new vehicles index.
Among other indexes that rose in February were apparel, recreation, and used cars and trucks.
Full CPI YoY breakdown:
The index for all items less food and energy rose 3.8 percent over the past 12 months.
The shelter index increased 5.7 percent over the last year, accounting for roughly two thirds of the total 12-month increase in the core CPI index
Feb Shelter inflation: 5.74% down from 6.04% in Jan
Feb rent inflation: 5.77%, down from 6.09% in Jan
Other indexes with notable increases over the last year include motor vehicle insurance (+20.6 percent), medical care (+1.4 percent), recreation (+2.1 percent), and personal care (+4.2 percent).
Core CPI rose 0.4% MoM (hotter than the +0.3% exp) and up 3.8% YoY (hotter than the +3.7% exp), but still the lowest since April 2021…
Source: Bloomberg
The 3-month annualized Core CPI rate was rose to 4.1% from 3.9%. The 6-month annualized core rate rose to 3.8% from 3.5%.
Core Goods actually rose MoM for the first time since June 2023…
Goods deflation continues (-0.3% YoY) but has flattened out, while services inflation remains stubbornly high at +5.2% YoY…
Source: Bloomberg
And one step deeper – the so-called SuperCore: Core CPI Services Ex-Shelter index – soared 0.5% MoM up to 4.5% YoY – the hottest since May 2023…
Source: Bloomberg
While SuperCore CPI slowed MoM, there was a large jump in Transportation Services MoM…
Source: Bloomberg
Finally, we note that consumer prices have not fallen in a single month since President Biden’s term began (July 2022 was the closest with ‘unchanged’), which leaves overall prices up 19% since Bidenomics was unleashed. And prices have never been more expensive…
Source: Bloomberg
That is an average of 5.6% per annum (more than triple the 1.9% average per annum rise in price during President Trump’s term).
So, about that shrinkflation – did companies only ‘get greedy’ when Biden took office?
But it gets worse, real wage growth has lagged significantly for the average joe in America…
Source: Bloomberg
Despite a very modest decline in Feb, Food costs are up over 21% since Biden’s term began, but non-supervisory wages are up only 18%.
Bidenomics for the win!
Are we going to see a replay on the ’70s?
Source: Bloomberg
The market narrative of slow and steady disinflation just broke harder.
…or are we still set for a massive wave of depressionary deflation?
Inflation remains hot, hot, hot although Biden/Yellen will undoubtedly say that it is lower than last year. But remember, consumer prices are up a staggering 19% under Bidenomics. THAT is a major tax of those making under $200,000 per year, Joey.
Holders of commercial real estate (CRE) debt are riding the tiger. Meaning that if interest rates don’t come down, there will be a lot of pain and suffering.
“We’re far from neutral now,” said America’s Fed Chairman, Jerome Powell, to the Senate Banking Committee. As The Fed moves closer to cutting rates.
All those rent-seekers stacked up with commercial real estate holdings nodded in violent agreement. That of course includes the nation’s regional banks, which continue to succumb to the power of their systemically important rivals, now so big that they cannot possibly be allowed to fail.
And this has turned America’s banking behemoths into for-profit wards of the state, recipients of an unspoken but ironclad insurance policy that underwrites catastrophic losses and adds them to the national debt.
“Interest rates right now are well into restrictive territory. They’re well above neutral,” added Chairman Powell without, well, sharing his definition of the word ‘well’. And truth be told, no one really knows the definition of ‘neutral’ when it comes to interest rates.
Economic PhDs will generally tell you that the neutral real interest rate is 0.50%. Their level of confidence is inversely proportional to the amount of capital they have at risk in markets — which would have been Newton’s Fourth Law had he bothered to study the art of economics.
Those of us less academically gifted, who must resort to taking risk for a living, lack the conviction of Nobel Laureates. We see that there are times in an economic cycle when 0.50% real rates stimulate growth, and times when they restrict economic activity.
Sometimes neutral rates have no effect at all. Which is to say that the economic impact of real rates simply depends. Like now when signals are far from uniform. Stock markets hit all-time highs despite collapsing commercial real estate, crypto and gold prices are soaring to records, massive government stimulus programs like the IRA are cranking up, student debt is being forgiven in successive waves, unemployment is near record lows, core inflation is starting to rise again, and the budget deficit is around 6% despite robust GDP growth.
All of which screams that a 0.50% real rate is preposterously low to everyone but economic PhDs.
Confounded Interest - Anthony B. Sanders 
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