Daddy (Ukraine) Warbucks Biden’s Hideous Debt Mess! (Biden Has Added $6.5 Trillion In Debt With Only $1.95 Trillion In Real GDP Growth As Jobs Report Reveals Weakness In Economy)

I watched Tucker Carlson’s interview with Russian President Vladimir Putin. Putin is an amazing contrast to our 81-year old President with dementia who can barely speak while Putin was articulate. Not at all what Hillary Clinton was raving about (she is still furious about losing to Trump after losing to Obama). One thing that caught my attention was Putin talking about The Fed’s endless printing of money. Well, THAT is how the US grows GDP these days. Borrow and spend with the private sector as an after thought.

Let’s revisit the HORRIBLE jobs report from December. Not only were all job gains in the past year entirely thanks to part-time workers, but native-born workers plunged by a another whopping 560 thousand, bringing the two-month total drop to just under 2 million. This meant that not only has all job creation in the past 4 years been exclusively for foreign-born workers, but there has been zero job-creation for native-born American workers since July 2018 (don’t believe us? go ahead and check the data directly from the Fed).

So, the Federal government is borrowing trillions of dollars so that 1) part-time jobs are created and 2) foreign born workers have jobs, but not native born Americans?? (Blogger Paul Krugman thinks that immigration will add $7 trillion in real GDP over the next 10 years and this will save Social Security and Medicare. Huh? I admit, millions of immigrants will spend money, but many will be on the Federal and State doles, so its tax dollars going to immigrants to spend.) This seems like Obama/Biden are using Cloward-Piven tactics to overwhelm Social Security, Medicare and other social services, NOT grow the economy as Krugman projects.

Typically, economists look at measures like M2 Money Velocity (Real GDP/M2). M2 Money Velocity is rising … but still remains below where it was pre-Covid under Donald Trump.

But a more relevant velocity is the velocity of DEBT. As in GDP/Debt. Under Biden, the US has added almost $6.5 TRILLION in debt while real GDP has risen by only $1.949 trillion. That amounts to a DEBT velocity of 0.30. Meaning that the US gets an anemic $30 in real GDP for every $100 in additional Federal debt.

Yes, the US economy is broken and requires endless money printing and debt financing to pay for endless wars and now millions of illegal immigrants getting on “the dole.” Then we have Biden’s forgiving student loan debt (inappropriately) and now Big Tech wants $7 trillion to develop AI (in a normal economy, tech companies would develop AI themselves, but under Obama/Biden, we are not in a normal economy).

Here is Daddy (Ukraine) Warbucks Biden with his biting dog and daughter Ashey.

Biden Too Demented To Be Prosecuted, But Remains President? Bitcoin Soars To Post-ETF-Launch Highs As Net Inflows Explode (US Goes Full Kafka!)

Biden is apparently too demented to be prosecuted for illegally sharing top-secret documents, but is able to be President?? And people wonder why Bitcoin is so popular??

Yesterday saw the third largest net inflow into spot Bitcoin ETFs, totaling over $400 million with iShares Bitcoin Trust (IBIT) seeing over $200 million inflows alone, dominating the $101 million outflow from GBTC…

Source: Bloomberg

The net inflow yesterday meant that 8,698 BTC were taken off the market and put into cold storage.

“We think bitcoin could be one of the most talked about brands on Wall Street in the next decade,” Mike Willis, CEO and founder of ONEFUND, told CoinDesk.

“You’re at the beginning of the ‘bitcoin era’ on Wall Street.” Although remiss to offer a price prediction, Willis said he thinks bitcoin could easily catch up to gold’s market cap.

That has pushed the total net inflow into spot bitcoin ETFs up to $2.23 Billion…

Source: Bloomberg

IBIT also became the first ETF to exceed GBTC’s daily trading volume. However, the total trading volume of all 11 spot Bitcoin ETFs fell below $1 billion for the first time since they launched.

Source: Bloomberg

The result of all this is that bitcoin prices have soared back up near $48,000, erasing all the post-launch ‘sell the news’ losses…

Source: Bloomberg

Interestingly, this is a seasonally positive period for crypto:

“The next few days are of paramount statistical importance as bitcoin tends to rally by +11% around Chinese New Year, starting on February 10 (Saturday),” Markus Thielen, head of research at Matrixport and founder of 10x Research.

“During the last 9 years, Bitcoin has been up every time traders would have bought bitcoin 3 days before and sold it ten days after the start of the Chinese New Year.”

Coinbase just issued a report that suggests Bitcoin spot ETF activity accounts for around 10-15% of total bitcoin trading activity across centralized exchanges.

Smaller tokens such as Ether, Solana and Cardano also pushed upward…

Source: Bloomberg

As CoinTelegraph reports, Coinbase analysts say there have been more important crypto themes emerging in the aftermath of the spot Bitcoin ETF launches in the U.S., including the rising decentralized finance (DeFi) activity, which could “add meaningfully” to the value proposition for Ether.

Ethereum community member and investor Ryan Berckmans believes that Ethereum’s switch from a proof-of-work to a proof-of-stake consensus mechanism could drive ETH’s price to as high as $27,000 during the bull cycle.

“Bitcoin appears set to resume its march up after the Grayscale outflows finally tapered off,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets.

The “halving narrative” will gather momentum, potentially taking Bitcoin past $50,000 in the next few weeks, she said.

The quadrennial halving cuts the quantity of Bitcoin that miners receive for operating power-hungry computers that secure the network by solving complex puzzles.

Halving is key to capping the supply of Bitcoin at 21 million tokens. Rewards drop to 3.125 coins per block from 6.25 coins in the upcoming event.

Previous halving events “preceded strong bull runs,” a team including DBS Bank Ltd. Chief Economist Taimur Baig wrote in a note.

“There is a simple economic reason why prices should rise. As the reward for mining decreases, the price for mining output (namely Bitcoin) must increase to compensate and not trigger a withdrawal of computational resources by miners,” the team said.

With the growing demand from institutional investors, the diminishing supply could help BTC hit new market highs.

The US has gone full Kafka where no news is too insane. Maybe this should be Biden’s campaign slogan?

Biden’s Phantom Jobs Market! Over One Million Jobs Reported In 2023 Didn’t Actually Exist

The infamous jobs report from the BLS is like a scene from the film “Phantoms.” Where nothing is what is seems.

The federal government in 2023 overestimated the number of jobs in the U.S. economy by an average of 105,000 per month in initial reports, equating to a cumulative monthly difference of 1.3 million, according to data from the Bureau of Labor Statistics (BLS).

The cumulative number of jobs reported each month was 1,255,000 less than previously thought, with new seasonal and census data affecting total employment estimates, according to data from the BLS calculated by the Daily Caller News Foundation. The huge downward revisions are in spite of a 115,000 upward revision in December, the only month that saw an upward revision to the employment level in 2023.

The biggest revision was for March, which was revised down by a total of 266,000 jobs, followed by January at 234,000 and April at 205,000, according to the BLS. The lowest downward revision was in November, with only 2,000, followed by 11,000 in October.

“Revisions are a normal part of the reporting process, but large changes, or adjustments that consistently move in the same direction, are not normal,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the Daily Caller News Foundation. “Instead, they’re indicative of something problematic with the BLS’ methodology. That can happen when market conditions change drastically enough to be outside of the assumptions used in their models.”

The revisions are due in part to an overestimate of the number of jobs in the U.S. economy in January 2023 at 155,007,000 instead of the revised 154,773,000, according to the BLS. The job level increased to a revised 157,347,000 by December, totaling an increase of 2,340,000 positions in the year.

The most recent jobs report in February also released an adjustment to the total jobs level, lowering March by 266,000 positions, according to the BLS. The jobs totals were also adjusted to recent census data, throwing off past estimates.

Recent years have not seen the same high downward revisions as 2023, with 2022 only seeing negative revisions in five months, equating to a downward revision of 66,000 for the year. March was the only month that was revised down in 2021, with the total number for the year being revised up by nearly 2 million as the country recovered from the COVID-19 pandemic.

Growth in government positions has bolstered recent job numbers, adding a total of 601,000 jobs to the U.S. economy in the past 12 months. The gains have led to an all-time record for government positions at 23,091,000, outdoing a surge in hiring from the 2010 census collections.

“When the economy was rapidly deteriorating at the onset of the Great Recession, the BLS repeatedly and consistently overestimated job levels, which then had to be revised down,” Antoni told the DCNF. “The worsening economic conditions fell outside of the assumptions used by the BLS statisticians, so the estimates became inaccurate. There could be similar problems today due to fallout from the government-imposed recession in 2020 because the labor market still hasn’t recovered.”

Biden is the Negan of economic growth.

The Truth About Biden’s Awful Jobs Report And Rising Credit Card Delinquencies (Weakest Jobs Report For January On Record, 90+ Day Delinquency Rate Rises To Almost 10%)

I think the Biden Presidency is nicely summed-up by Biden confusing France’s President Macron with former French President Mitterand. Particularly since Mitterand died in 1996. Is Biden seeing dead people??

Anyway, the Biden economy and his Bidenomic strategy is based on massive debt expansion, both public and private debt. Household Debt reached $17.5 Trillion in Fourth Quarter; Delinquency Rates Rise 

Credit card delinquecies (90+ days) rose to almost 10% in Q4 2023.

Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday.

Debt that has transitioned into “serious delinquency,” or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards.

Rising credit card delinquencies combined with the worst job additions in January on record.

But at least the 10Y-2Y US Treasury yield curve is ALMOST flat (h

Huh?

Deficit Joe Strikes Again! Record $10 Trillion In US Treasuries Coming To Market In 2024 As Budget Deficits SOAR Under “Deficit Joe” (Don’t Forget About $212.5 TRILLION In Unfunded Liabilities)

The great Will Rogers once said he never met a man he didn’t like. US President Joe Biden and Democrats have never met a spending opportunity they didn’t like (except for US border security, of course).

Under “Deficit Joe” Biden, Federal budget deficits have soared! And deficits are projected to grow!

Over the past year, we have been closely watching the staggering acceleration in the growth of both US debt (the chart below which is just one month old is already woefully outdated, as total US debt just hit $34.191 trillion on the first day of February)…

… and global debt.

The problem, as Apollo’s gloomy chief strategist Torsten Slok points out, is that this feverish pace will only accelerate further, as a record $8.9 trillion of government debt will mature over the next year.

Meanwhile, the government budget deficit in 2024 will be $1.4 trillion according to the CBO (realistically expect this number to hit $2.0 trillion), and the Fed has been running down its balance sheet by $60 billion per month.

The bottom line is that someone will need to buy more than $10 trillion in US government bonds in 2024. That is more than one-third of US government debt outstanding. And more than one-third of US GDP.

This may be a particular challenge when the biggest holders of US Treasuries, namely foreigners, continue to shrink their share.

More fundamentally, Slok muses, “interest rate-sensitive balance sheets such as households, pension, and insurance have been the biggest buyers of Treasuries in 2023, and the question is whether they will continue to buy once the Fed starts cutting rates.”

(Spoiler alert: no… but that’s what QE is for, and sooner or later, it’s coming back).

Apollo’s latest updated outlook on Treasury demand is below (pdf link).

And don’t forget about $212.5 TRILLION in unfunded liabilities (Social Security, Medicare, etc).

Slowdown! ADP Reports an Increase of 107,000 Private Payrolls As Powell Proclaims “No Sugar Tonight” (Why Do We Need Millions Of Illegal Immigrants?)

Slowdown! Bidenomics, based on historic binge spending and Fed sugar, is wearing out as the enormous sugar (stimulus) rush is over.

The hiring slowdown of 2023 spilled into January, and pressure on wages continues to ease. The pay premium for job-switchers shrank to a new low last month.

Another Soft Landing Proclamation

“Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay. Wages adjusted for inflation have improved over the past six months, and the economy looks like it’s headed toward a soft landing in the U.S. and globally,” says Nela Richardson, Chief Economist, ADP.

ADP National Employment Report

The ADP National Employment Report shows Private Sector Employment Increased by
107,000 Jobs in January; Annual Pay was Up 5.2%

Job Switching Payouts

Year-over-year pay gains for job-stayers reached 5.2 percent in January, down from 5.4 percent in December.
For job-changers, pay was up 7.2 percent, the smallest annual gain since May 2021.
Median Change in Annual Pay (ADP matched person sample) Job-Stayers 5.2%, Job-Changers 7.2%

ADP Notice

January’s report presents the scheduled annual revision of the ADP National Employment Report, which updates the data series to be consistent with the annual Quarterly Census of Employment and Wages (QCEW) benchmark data for March 2023. In addition, this revision introduces technical updates, namely, in re-weighting of ADP data to match QCEW data. The historical file was updated to reflect these revisions.

Notice Translation

ADP revises its data to match annual BLS data from March of 2023. The BLS will do the same in its annual revisions.

The BLS does not even back adjust the numbers so its historical record is bogus. And despite being incredibly lagging, the Fed makes key decisions on the data.

Job Openings Rise in December But Quits Tell the Real Story

There’s lots of meaningless chatter yesterday about job openings. However, actions speak louder than openings.

This report comes after Fed Chair Jerome Powell said “No Sugar Tonight” as in no expected rate cuts. That is, until it becomes obvious that Biden will lose the election, THEN The Fed will start cutting rates like crazy.

An example of the trash that Biden and Democrats are importing from Latin America, Africa and China. Among other sewers. I am sure that employers are lining up to hire this guy. … NOT! Correction: Biden may appoint this creep to his cabinet with the other losers.

Biden’s Wreck Of The US Economy! Mortgage Demand Fell To New 30-year Low In January, Down 54% From Pandemic Peak (Mortgage Demand Down 14% Over Last Year And 40% From Pre-Pandemic Levels)

Yikes! Bidenomics is a disaster! MBA mortgage purchase applications are down 54% from Pandemic Peak. I was going to play “The Wreck of the Edmund Fitzgerald” by Gordon Lightfoot and rename it “The Wreck of The US Economy.”

Mortgage demand fell to a new 30-year low in January 2024, down 54% from the pandemic peak. Mortgage demand is down 14% over the last year and 40% from pre-pandemic levels.

Mortgage applications decreased 7.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 26, 2024. Last week’s results included an adjustment to account for the MLK holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 7.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 8 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week and was 3 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 11 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 20 percent lower than the same week one year ago.

Shades Of “The Big Short”! Commercial RE Exposure Helps Crush Japan’s Aozora Bank (Follow Negative Profit Warning For NY’s Community Bancorp)

Shades of “The Big Short” and subprime crash of 2008.

Following a profit warning from New York Community Bancorp on Wednesday, largely attributed to continued turmoil in the commercial real estate sector (which led the bank to slash its dividend and bolster reserves leading to a 38% plunge in its shares and triggering the largest drop in the KBW Regional Banking Index since the collapse of Silicon Valley Bank last March) Japan’s Aozora Bank slashed the value of some of its US office tower loans by more than 50%, according to Bloomberg.

Like rows of falling dominoes, Aozora Bank, the 16th largest in Japan by market value, saw its shares plunge by 20% on Thursday after reporting a net loss of 28 billion yen ($191 million) for the fiscal year. This was in stark contrast to its earlier projection of a 24 billion yen profit.

Aozora wrote down the value of its non-performing office loans by 58%, including a 63% reduction in Chicago and between 51% and 59% in New York, Washington D.C., Los Angeles, and San Francisco – all of these cities are plagued with violent crime and controlled by radical Democrats.

In total, the bank’s US office loans were about 6.6% of its portfolio, or approximately $1.89 billion. It said 21 office loans worth $719 million were classified as non-performing, and as a result it increased its loan-loss reserve ratio on US offices to 18.8% from 9.1%.

“It’s a shock,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities Co., adding, “The expectation was the worst was over and that the bank had set aside enough provisions.” Guess not.

Far markets, this was another flashing red warning sign that not only is a tsunami of office loan defaults still on the horizon, but that banks continue to be woefully underprovisioned for the coming bloodbath.

“This is a huge issue that the market has to reckon with,” said Harold Bordwin, a principal at Keen-Summit Capital Partners LLC in New York, specializing in renegotiating distressed properties.

Bordwin said, “Banks’ balance sheets aren’t accounting for the fact that there’s lots of real estate on there that’s not going to pay off at maturity.”

Besides New York Community Bancorp and Aozora Bank, Deutsche Bank noted in fourth-quarter results:

“Interest rate environment remains key driver for refinancing risk and potential [credit-loss provisions] in 2024 especially in office, with further drivers being ongoing sponsor support and expiring rental agreements.”

Fed chair Powell delivered bad news for the CRE world in yesterday’s FOMC meeting, warning that a March rate cut isn’t happening (absent a shock of course). Perhaps most notably, the Fed removed the following sentence from the FOMC statement: “The US banking system is sound and resilient.” Cynics asked why the Fed no longer sees “the US banking system is sound and resilient” – is it a signal of rumblings in the economy near-term, or was it just a lie before, and now that bank dominoes are again falling, will Powell be forced to trot it back out?

Where will this lead? Likely more bank and pension fund bailouts. You didn’t really believe that hype about the Dodd-Frank banking legislation that there will never be another bank bailout did, you??

TBAC-O Road? Treasury Announces Big Cut In Borrowing (Despite Skyrocketing Deficits) But Shifting Towards More Expensive, Higher Duration Coupon Bonds

Constitution Avenue in Washington DC is actually becoming Tobacco Road. No, not the dysfunctional family of Georgia sharecroppers during the Great Depression, but the Treasury Borrowing Advisory Committee (TBAC).

On Monday, after we got the first part of the Treasury’s Quarterly Refunding Announcement (QRA), in which the Treasury unexpectedly announced a big drop in its borrowing estimates for Q1 (from $816BN to $760BN) coupled with a shockingly low calendar Q2 borrowing estimate of just $202BN (as a reminder we got the second part of the QRA this morning which came in very much as expected)…

… yields tumbled as this was viewed as an aggressively dovish outlook on the future of i) the US fiscal deficit and ii) the debt needed to fund said deficit. Here is another way of visualizing the US historical and projected marketable debt funding needs:

Commenting on this surprise drop in expected borrowing, on Monday we said that “the numbers also mean that the Reverse Repo facility will be fully drained by Q2, and we expect that on Wednesday we will learn that the bulk of the reduction in Q1 and Q2 estimates will be due to sharply lower Bill issuance for one simple reason: there is just no more Reverse Repo cash to buy it all.“

Boy, were we right: earlier today, in the Treasury’s presentation to the Treasury Borrowing Advisory Committee (TBAC) as part of the Quarterly Refunding, Janet Yellen revealed what the composition of this sharp drop in Q2 funding needs would be. As we expected, it was all bills!

In fact, as the chart below – which we have dubbed the scariest chart in the Treasury’s presentation to TBAC today (link here) – shows, with Bills expected to fund some $442 Billion of the $760BN funding deficit in the Jan-March quarter (the balance of $318BN funded by coupons), in Q2 the Treasury now anticipates a $245BN DECLINE in net Bills outstanding (i.e., not only no incremental Bill funding but a quarter trillion maturity in Bills outstanding). In other words, while we expected a “sharply lower” Bill issuance in Q2, the Treasury is actually expecting a $245BN drawdown in Bills.

But wait, there’s more: because while the market was expecting some pro rata decline in coupon issuance to go with the slide in net Bills (we were not) in Q2 to justify the sharp drop in long-end yields, it was not meant to be. In fact, just the opposite, because as highlighted in the chart above, net Coupon issuance in Q2 is actually expected to increase by $130BN to $447BN from $318BN in Q1. This is a huge shift in higher duration supply, and is hardly what all those who were buying 10Y bonds on Monday were expecting, and yes, that too was to be expected: with Bills now well above the “comfortable” ceiling of 20% as a percentage of total debt outstanding, the Treasury had no choice but to roll it back, especially since the Reverse Repo is already mostly drained. And sure enough, in its presentation, the Treasury no longer anticipates a flood of Bill issuance in the future.

That’s not all: while the Treasury said it does “not anticipate needing to make any further increases in nominal coupon or FRN auction sizes, beyond those being announced today, for at least the next several quarters”, the TBAC politely disagreed, stating that “it may be appropriate over time to consider incremental increases in coupon issuance depending on how the current uncertainty regarding borrowing needs evolves” (translation: as the need to bribe the population with more fiscal stimmies ahead of November rises, so will borrowing needs).

As for any naive expectations that any decline in issuance in structural instead of merely shifting away from Bills to Coupons, we have some more bad news: as the table below confirms, the Primary Dealer estimate of the US 2024 budget deficit dropped just $22BN in the past quarter, from $1.8 trillion to $1.778 trillion, a meaningless change (expect this number to rise sharply as the full brunt of fiscal stimulus in an election year become visible).

As for the bigger picture, well you can listen to either the Primary Dealers…

… or the CBO:

Both reach the same sad conclusion, the same one voiced by Nassim Taleb on Monday when he said that “we need something to come in from the outside, or maybe some kind of miracle…. This makes me kind of gloomy about the entire political system in the Western world.”

Sorry, Nassim, no miracles… just lots and lots of money printing coming.

And speaking of money printing, the fact that Bill issuance is about to grind to a halt in Q2 means that, just as we expected, reverse repo balances will tumble in the remaining two months of Q1…

… bringing it effectively to zero (which means the Treasury’s stock market liquidity pump is now almost drained), at which point the Fed will have to take over and taper QT as the alternative would be draining some $100BN in reserves every month at a time when total Fed reserves are already at the level which Waller hinted may be the infamous LoLCR floor which is a hard constraint at “10-11% of GDP.” The alternative is simple: a stock market crash just months before the November election, hardly the stuff Biden’s handlers or the anti-Trump Deep State would approve of.

Captain Obvious Award Goes To … Treasury Secretary Yellen Who Admits “High Prices Here To Stay” (Food CPI UP 21%, Gasoline Prices UP 38% Under “Inflation Joe”, Home Prices UP 33.2%, Mortgage Rates UP 154%)

Treasury Secretary Janet Yellen just admitted what the rest of Americans already knew: high prices are here to stay. Example? Food prices (CPI) are up over 20% under Inflation Joe while gasoline prices are up 38% under Clueless Joe.

On the housing front, the Case-Shiller National Home Price Index is up 33.2% under Biden. And Freddie Mac’s 3-year mortgage rate is up 154% under Biden’s leadership (c’mon man! Obama is pulling the strings on Puppet Joe).

Speaking during an interview with ABC News Live over the weekend, Treasury Secretary Janet Yellen admitted prices aren’t going down, contradicting arguments repeatedly made by the Biden White House about easing inflation. In 2021, Yellen claimed inflation was “transitory.”

For months officials in the Biden administration have falsely claimed prices on everyday goods and services were going down. In reality, they’re getting more expensive at a slower pace.

During a briefing at the White House last week, Press Secretary Karine Jean Pierre had trouble explaining complaints from Biden when he purchased a smoothie that cost $6.

“Last Friday, the president was at a coffee shop in Pennsylvania, and he seemed to be surprised that the smoothie was $6 and how expensive it was,” a reporter asked. “I’m curious. So is the president now realizing the costs that Americans are bearing?”

“So, look, when he went over to you all, to the press corps, he was having a good time, right? And offered, as you know, offered to buy them coffee,” Jean Pierre responded. “There was a big group there, and he made sure everyone got coffee and pastries. So I just want to make that really clear.”

That is wonderful, KJP! The White House Press Corps got free coffee and pastries! Yippee!!!

But the rest of us in America are suffering from Bidenomics and inflation. Like food prices having risen 21% under Biden, gasoline prices UP 38%, home prices UP 33.2% and mortgage rates UP 154%.