Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
The Federal Reserve doesn’t care if market volatility has collapsed, even though volaltility is necessary for a well-functioning capital market.
The VIX, volatility of the CBOE S&P 500 index, has declined to 13.5 as The Fed continues to slow M2 Money growth.
And with M2 money withrawal, so goes bank deposits.
Is Jerome Powell actually Uncle Limelight?
Starter homes are simply unaffordable.
Treasury Secretary Janet “Too Low For Too Long” Yellen, and former Federal Reserve Chair, is partly responsible for a phenomenon plaguing America: the death of starter homes.
As Mish has discussed, with main markets no longer an option for first-time buyers, Point2 looked at the country’s 100 largest secondary cities for the median price of a starter home and renter households’ median income. Defined as large non-core cities within a metro, these cities used to be fruitful house-hunting grounds for first-time buyers exploring less-expensive options away from main cities. But as it turns out, unaffordability can put a dent in homeownership plans regardless of city type or size.
California Tops the List of Worst Places to Look
California has the dubious distinction of having the top least affordable starter home cities.
A starter home, according to the Census Department is priced in the bottom third of homes in the area.
Pomona, CA, is in fourteenth place. The average renter in Pomona makes $49,000 a year and needs to get to $121,000 a year. That’s nearly 2.5 times current salary.
In Burbank, CA, the average renter makes $63,000 year an needs to get to $193,000. That’s over 3 times current salary.
Within Grasp
In no market can the average renter make the plunge.
But in Independence, Missouri, or Broken Arrow, Oklahoma, the average renter is respectively just 2% and 5% short of the amount needed for a starter home
Not Shocking
None of this is shocking. It matches one one should expect looking at Case-Shiller home prices and mortgage rates.
The Fed wanted to produce inflation and it did. But for years the Fed did not even see the inflation because the manifestation of inflation was in asset prices, not the price of consumer goods.
Case-Shiller Top City Home Prices Decline From Year Ago for the First Time Since May 2012
Housing starts, like mortgage purchase demand, remains depressed compared to the housing bubble of the 2000s.
Now, will The anticipated Fed pause in rate hiking help? Not likely. The Fed still has over $8 trillion in monetary stimulus chasing assets. Too much Stimulypto.
Janet “Bubbles” Yellen probaby listened to too much Don Ho.
One has to wonder about The Feral Reserve. Since The Great Recession of 2008, The Federal Reserve has printed a staggering amount of money (know as QE). There is still about $8.3 TRILLION in monetary stimulus sloshing around the economy.
And M2 Money printing is up 167% since November 2008.
So, despite the talking heads from The Fed and CNBC, etc blathering about Fed tightening, there remains over $8 TRILLION in monetary stimulus chasing asset prices.
Is The Fed ACTUALLY the US economy? Or is The Fed the financing arm of the Democrat party?
Yes, The Fed looks like they are pausing .. rate hikes.
Welcome to the Bidenville Mortgage Depot! Where Bidenflation (caused by idiotic energy policies, crazy Fed money printing and insane Federal spending) has caused The Fed to raise rates crushing the US mortgage market.
Mortgage applications decreased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 2, 2023. This week’s results include an adjustment for the Memorial Day holiday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 12 percent compared with the previous week. The Refinance Index decreased 1 percent from the previous week and was 42 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 13 percent compared with the previous week and was 27 percent lower than the same week one year ago.
The rest of the story.
The East Palestine Ohio train wreck is symbolic of Biden’s economic programs. I don’t think the Vacationer in Chief (40% of time as President has been on vacation) has been there yet.
Simply irresponsible. Biden’s budget that is!
Biden signed the debt ceiling bill craftted by McCarthy (RINO-CA) and Schumer (Communist-NY). Its allows for uncontrolled spending and borrowing for at least 2 years. And as Milton Friedman once said “There is nothing more permanent than a temorary Federal program … or debt limitiations.
With Biden signaling that government has gone wild with no controls on fiscal responsibility (and Elizabeth Warren flailing her arms and screaming for regulations on cryptocurrencies), cryptos today are getting demolished.
China, Japan and the BRICs realize that there are no controls on ANYTHING coming out of Washington DC. Insane spending, an insane Federal Reserve, corrupt DOJ and FBI.
Doctor, doctor (Yellen), we’ve got a bad case of Federal corruption.
The US economy was sitting high on the global mountain top before Covid. Then Covid struck, The Federal Reserve and Congress went wild with stimulus spending and inflation went wild. This is Biden Country, a feeble shell of this once great nation.
As The Fed tries to counter the years of excess monetary stimulus pre and post Covid by raising rates, we have seen mortgage rates rise 143% under Biden’s leadership. At the same time, the US Treasury yield curves (short 2Y-3m and long 10Y-2Y) remain deeply inverted.
As of this AM, The Fed Funds Futures market is pricing in a chance of continued rate hikes by The Fed, but mostly we are at 5.25% at least until November when rates are forecast to begin declining.
And the Taylor Rule is still signaling rate hikes to 10.12%. We are at only 5.25%. And with Biden feebily running for reelection, the only path forward is rate CUTS.
Don’t kid yourself. The talking heads at The Federal Reserve (more like Feral Reserve) are only about halfway there in terms of rate hikes. There is still over $8 trillion in monetary stimulus sloshing around the economy.
The Taylor Rule implies a target rate of 10.12% while the current target rate is just over half that rate at 5.25%. A little over halfway there and The Fed is likely to pause rate hikes.
Of course, Yellen and Powell think The Taylor Rule is a pork roll product from Trenton, New Jersey.
Fear the talking Fed!
The May jobs report is out and, under normal circumstances, would led The Fed to raise rates. But these are not normal times, my friends.
The US economy (allegedly) added 339k jobs in May. That is the good news.
The not-so-good news? A large diverengence between the Establishment survey and Household survey. +339k versus -310k. What’s it going to be?
The bad news? While US average hourly earnings YoY cooled to 4.3%, inflation is still roaring at 4.9% (headline) and 5.5% (core). So Americans are still losing ground to inflation.
The unemployment rate rose to 3.7% in May while the underemployment rate rose to 6.7%.
With unemployment rising to 3.7%, the Taylor Rule implies a Fed Funds Target rate of 10.12%. We are currently at 5.25%. Or just a little over halfway there. But The Fed is talking a pause in rate hikes.
Even Powell is getting a headache.
Another day under Biden/Yellen.
Last night, “Republicans” joined Democrats to allow unlimited Federal spending and debt for the next two years. Way to go “Benedict McCarthy”!
But today, we saw that ISM Manufacturing printed at 46.9 for May, the 7th consecutive month of contraction.
Meanwhile, the Biden family twists the night away while Americans are ravished by inflation caused by bad energy policies and runaway Federal spending.
The new flag of the National Republican Party!
US Treasury Secretary Janet Yellen changed the drop dead date on a US default from June 1 to June 5, daring Speaker McCarthy to step over the line. The debt ceiting is so urgent that Biden went on vacation to Delware for Memorial Day weekend. In fact, Biden and Yellen expect McCarthy to dance.
White House and Republican negotiators tentatively narrowed differences but were still clashing Friday on key issues as the Treasury Department signaled extra time was available before a potential US default.
Treasury Secretary Janet Yellen announced the department expects to be able to make payments on US debts up until June 5 if lawmakers fail to act on the US debt ceiling. That set a more pointed date for a potential default but is also four days later than her previous comments eyeing trouble as soon as June 1.
The new so-called X-date buys negotiators for House Speaker Kevin McCarthy and President Joe Biden more time to strike a deal. The negotiating teams haven’t met in person since Wednesday but spoke late into the night Thursday and were in regular communication throughout the day Friday.
Yes, there isn’t really a crisis folks. Treasury collects tax dollars continuously so Treasury can prioritze debt payments and other disbursements. The only crisis is in the minds of the media.
Deputy Treasury Secretary Wally Adeyemo warned Friday that payments to Social Security beneficiaries, veterans and others would be delayed if there’s a default. But he said he’s gaining some confidence an agreement will be reached.
We’re making progress and our goal is to make sure that we get a deal because default is unacceptable,” Adeyemo said in an interview on CNN. “The president has committed to making sure that we have good-faith negotiations with the Republicans to reach a deal because the alternative is catastrophic for all Americans.”
The accord would also include a measure to upgrade the nation’s electric grid to accommodate sham renewable energy, a key climate goal, while speeding permits for pipelines and other fossil fuel projects that the GOP favors, people familiar with the deal said.
The deal would cut $10 billion from an $80 billion budget increase for the Internal Revenue Service that Biden won as part of his Inflation Reduction Act (big whoop). Republicans have warned of a wave of agents and audits while Democrats said the increase would pay for itself through less tax cheating.
What is taking shape would be far more limited than the opening offer from Republicans, who called for raising the debt ceiling through next March in exchange for 10 years of spending caps. House conservatives were already balking Thursday at the notion of a small deal, with the House Freedom Caucus sending a letter to McCarthy demanding he hold firm.
Treasury’s cash balance is at a low point and The Administration threatens Social Security recipients and veterans of delayed payments … while Biden goes on vacation for Memorial Day weekend to honor veterans??
Of course, Yellen know that all The Fed has to do to increase M2 Money growth again.
Meanwhile, bankrupties among large companies are highest since 2010.
In the mortgage market, current coupon nominal spreads 9Agency MBS 30Y coupon over Treasuries) are soaring.
Meanwhile, to honor US veterans, Biden goes on Memorial Day weekend and threaten veterans with delays in veteran benefits. Sigh.
Is Joe Biden REALLY Reverend Kane from Poltergeist II??
Confounded Interest - Anthony B. Sanders 
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