Today we saw the 10-year Treasury Note yield break through the 3% barrier, then retreat as is there was a reflecting barrier at 3%.
And in Europe, we saw a flash crash allegedly caused by Citi’s trading desk.
The selloff was triggered by a large erroneous transaction made by the U.S. bank’s London trading desk, according to people with knowledge of the matter who asked not to be identified discussing private information. A knee-jerk selloff in OMX Stockholm 30 Index in five minutes wreaked havoc in bourses stretching from Paris to Warsaw toppling the main European index by as much as 3% and wiping out 300 billion euros ($315 billion) at one point.
The US Dollar rose again as expectations of Fed monetary tightening due to inflation become a reality.
We all know (except for Biden apparently) that inflation is up 8.5% YoY as measured by the change in the Consumer Price Index (CPI). However, the CPI change doesn’t fully capture what is crushing Americans’ pocketbooks. Here is a brief update on where we stand prior to the upcoming Federal Reserve Open Market Committee meeting on May 4th.
Since Biden was installed as President on January 20, 2021, prices for key commodities have soared. Natural gas futures UP 192%, Regular Gasoline prices UP 73.6%, Commodity Research Bureau Foodstuffs UP 59%, Low sulfur Diesel futures UP 176%.
Since we now have the Biden’s Orwellian Ministry of Truth (actually The Department of Homeland Security’s “Disinformation Board”) which will start censoring free speech. And this post is what could fall under their reign of terror. Or in Biden’s case, reign of error.
Jen Psaki, the President’s talking head, has said that it is Russia and Putin’s fault. So, here are the same prices up to Russia’s invasion of Ukraine since Biden was installed as President: Natural gas futures UP 82.3%, Regular Gasoline prices UP 80.2%, Commodity Research Bureau Foodstuffs UP 50.1% ,Low sulfur Diesel futures UP 47.7%.
Yikes! So, even before Russia invaded Ukraine, the lethal combination of Biden’s green energy executive orders and The Fed’s continuing monetary stimulypto was deadly for American households.
On a sad note, The Biden Administration is considering cancelling student loan debt as a way to control inflation (?). Of course, cancelling student debt will lead to a surge in consumer spending and even MORE soaring inflation. Biden is suffering from The Medusa Touch. Everything he touches turns to stone.
While The Fed is expected to remove monetary stimulus, don’t expect inflation to return to pre-Biden levels. The anti-fossil fuels edicts from Biden are still in effect. Even if the bottlenecks clear up, Biden and Congress may unleash more Federal spending (although much of Federal spending benefits “Friends and Family” of Biden and Congress, not the American middle class or lower-wage workers).
Rising home prices and The Fed signaling an end to the perpetual punch bowl have resulted in the University of Michigan buying conditions for houses to hit the lowest level since 1982.
While bearish sentiment in markets highest since 2009 in the stock market.
I don’t get why Biden created a “Disinformation Control Board” led by Nina Jankowicz – a disinformation spewer. We already have disinformation media outlets like CNN, MSNBC, ABC, CBS, NBC, New York Times, Washington Post, etc., so why create a Federal control board? All in time for the midyear elections!!
If this move by Biden doesn’t terrify you, then you didn’t study history.
Heartaches in heartaches. US GDP growth for Q2 has stumbled to 0.446% as The Fed is launching quantitative tightening (QT) to fight the inflation that they caused in the first place.
According to the Atlanta Fed’s GDPNow real-time GDP tracker, US GDP growth has stumbled to a meager 0.446%. Despite the massive stimulus from The Federal Reserve and Washington DC’s massive fiscal stimulus.
Here is Dvorak’s New World Symphony, an appropriate piece the global turmoil that has taken place after Russia’s invasion of Ukraine.
Here is the ratio of the S&P 500 index against the Bloomberg Commodity Price Index. This ratio is plotted against The Federal Reserve’s balance sheet of assets. Notice the decline in the Commodity Ratio in 2022, even ahead of the Russian invasion of Ukraine.
Global currencies, on the other hand, have been really crushed since the Russian invasion of Ukraine. The Japanese Yen, China’s Renminbi and Europe’s Euro relative to the US Dollar are falling due to a variety of reasons. Covid lockdown in China, Japan’s insistence on monetary easing while other Central Banks are tightening and the Euro with Russia threatening nuclear war.
WTI Crude is back to $100 a barrel. Critical metals are down today related to a slowing global economy and wheat is up 2.75%.
Could it be that US Dollar hegemony is nearly over and commodity-backed currencies are the way of the future?
M2 Money stock YoY skyrocketed during the Covid mini-recession, peaking at 21% during February of 2021. The Dallas Fed manufacturing outlook grew to 38.1 in March 2021.
However, as M2 Money growth has slowed 11%, the Dallas Fed manufacturing outlook has plunged to near zero.
Do you want to see a magic trick? Like how governments shut down the US economy resulting in collapsing office occupancy rates while the price of office buildings rose dramatically (+16.3% since Q2 2020)?
Kastle’s “Back to work barometer” is showing that the 10 city average occupancy rate in the US is now only 42.8% as remote working has caught on. And the fear of yet another Covid mutation is keeping office occupancy below 50%.
Even Washington DC, home of Dr. Anthony Fauci, has only a 37.5% occupancy rate. Of the top 10 cities, Austin TX has the highest office occupancy rate at 62.4%.
So, the magic trick is not why America is so slow to return to the office, but why commercial office prices are rising so fast. Ah, Federal government STIMULYTPO! Aka, The Federal Reserve has been overstimulating the economy since 2008 and particularly since 2020 and Covid.
Speaking of a magic trick, here is how government’s make the average time to foreclosure up to over 7 years in Hawaii and 4.4 years in New York. In simple terms, you can buy a home in New York, never make a mortgage payment and live rent free for an average of 4.4 years.
So, the government’s magic trick is to 1) shut down local economies in fear of Covid, 2) provide excessive fiscal and monetary stimulus to combat the shutdown, 3) watch office building prices soar with stimulus as office occupancy remains below 50%.
Do you want to see a magic trick? Watch The Fed try to tighten monetary easing and NOT crash the economy.
Update for 04/25/2022. 10Y Treasury yields DOWN 8.7 bps.
And commodities are tanking. WTI oil is down 5%, iron ore is down almost 7%.
And the Dow is diving with increased expectations of Fed monetary tightening, but the expectations (green line) have been declining this morning.
Its Saturday and I am dreading markets opening on Monday. But here is where we sit today.
The 30-year mortgage rate has soared to 5.29%, the highest level since 2009 at the beginning of Obama’s Presidency. Since 2009, we have seen the purchasing power of the US Dollar decline further (orange line) while inflation (blue line) has soared. M1 (yellow) and M2 (green) has been growing since the financial crisis, but really took-off with the Covid outbreak in 2020 and The Fed’s massive overreaction coupled with Federal government stimulus.
Since the creation of The Federal Reserve System under President Woodrow Wilson, the purchasing power of the US Dollar has collapsed so much that $10 in 1913 in worth 34.8 cents today. But notice that since 1949, the CPI YoY has rarely been negative meaning that prices are pretty much only going up.
Instead of April showers bring May flowers, it is April expected Fed rate hikes (now 10.408 rate hikes by February 2023) bringing declining assets prices. In April so far, the S&P 500 index is DOWN 7%, the 10-year Treasury Note price is DOWN 5%, Bitcoin is DOWN 11%, the 3.5 coupon agency MBS price is down 3.2%.
We are seeing increased volatility in both the equity and bond markets.
Well, Powell and The Fed are hurling fireballs at mortgage rates and asset prices in April.
Federal Reserve Chair Jerome Powell said he saw merit in the argument for front-loading interest-rate increases, including a half percentage-point hike next month.“
I would say that 50 basis points will be on the table for the May meeting,” Powell told an IMF-hosted panel on Thursday in Washington that he shared with European Central Bank
President Christine Lagarde and other officials. “We really are committed to using our tools to get 2% inflation back,” he said, referring to the Fed’s target for annual price increases.
Central bankers are grappling with some of the highest inflation rates since the 1980s that are being further pressured as Russia’s invasion of Ukraine boosts food and energy prices and China’s coronavirus lockdowns tangles supply chains anew.
Equity markets in the USA and Europe are getting “Powell’d” and “Lagarde’d” today. As of noon today, the Dow is down 628 points (or -1.81%). Euro Stoxx 50 is down -2.24%.
I remember appearing on Fox Business’ Stuart Varney and Company where he asked me what will happen when The Fed starts to raise rates in a serious fashion. I made a ka-boom gesture at which he laughed. Stuart, I wasn’t joking!
Confounded Interest - Anthony B. Sanders 
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