Tiny (Asset) Bubbles? Or HUGE Asset Bubbles? Is Charlie Kelly The REAL Fed Chair?

The Federal Reserve has been pumping liquidity (aka, air) since late 2008. And the stock market and commercial real estate prices have soared.

These are not tiny bubbles, but HUGE bubbles.

Is Charlie Kelly’s uncle Jack the real Fed Reserve Chair?

Why Residential Mortgage Rates Won’t Rise Over The Next Two Years (Ultra Bond Futures Trading At An Ultra Premium)

Mortgage lenders should rejoice at the continuing low level of 30-year mortgage rates and the 10-year Treasury yield.

The Covid-crisis can be seen in the following chart, starting in January 2020. It has been all downhill since January 1st in terms of rates and yields. With the exception of the blip in the Freddie Mac US Mortgage Market Survey 30 Year Homeowner Commitment rate around March 19, 30-year mortgage rates are barely above 3%.

The US Ultra Bonds futures price continues to trade at an ultra-premium.

The ultra premiums in ultra bond futures indicates that the Covid shutdowns are likely to return. Or continue to ravage the economy. And endless interference in markets by The Federal Reserve.

Fed Will Begin Buying Broad Portfolio of U.S. Corporate Bonds (Will Munis, Stocks and Residential Real Estate Be Next??)

Well, it was only a matter of time with foreign central banks buying corporate bonds … and stocks.

(Bloomberg) — The Federal Reserve said Monday that it will begin buying individual corporate bonds under its Secondary Market Corporate Credit Facility, an emergency lending program that to date has purchased only exchange-traded funds.

The central bank also added a twist to its buying strategy, saying it would follow a diversified market index of U.S. corporate bonds created expressly for the facility.

“This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility’s minimum rating, maximum maturity and other criteria,” the Fed said in a statement. “This indexing approach will complement the facility’s current purchases of exchange-traded funds.”

The SMCCF is one of nine emergency lending programs announced by the Fed since mid-March aimed at limiting the damage to the U.S. economy by the coronavirus pandemic. With a capacity of $250 billion it has so far invested about $5.5 billion in ETFs that purchase corporate bonds.

The Federal Reserve announced Monday it will begin purchases of individual corporate bonds.

The move comes nearly three months after first unveiling the Secondary Market Corporate Credit facility and one month after it began buying corporate-credit ETFs through the program.

The central bank will “create a corporate bond portfolio that is based on a broad, diversified market index of US corporate bonds,” according to a press release. (Like Fed Chair Jerome Powell’s portfolio?)

The Fed’s late-March announcement of its move into corporate bond purchases set a floor for risk assets and helped valuations rebound from their pandemic-induced lows.

Speaking of setting floors on risk assets, does that apply to ETF or residential housing too? How about municipal bonds debt like Chicago’s??

Fed Chair Jerome Powell channeling Thurston The Great Magician!

Atlanta Fed GDPNow Q2 Forecast Plunges To -42.8%

US Governors: “It’s our party and we’ll snub who we want to.”

The shutdown continues as Q2 GDP “growth” is now forecast to be … -42.8%.

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This comes on the heels of the St Louis Fed’s forecast of -48.07 for Q2.

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The shutdowns are strange since COVID-019 is 7th on the list in terms of US deaths.

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The Los Angeles County medical superintendant.

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Gov’t Shutdown Causing Economic Sodom and Gomorrah (Retail Sales Down 16.4% MoM, St Louis Fed Q2 GDP Down To -48.7%), Stock Market Shrugs

April’s economic numbers reflect the damage caused by the shutdown of the economy thanks to the pandemic.

Retail sales advance dropped 16.4% from March, Industrial Production declined 11.2%

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The St Louis Fed Economic News Index is showing -48.07. Let that sink in for a second.

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Industrial production is down 11.2%, the largest decline in modern history.

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But the stock market just shrugged off the news.

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Yet we rely on government to save us … when the government shutdown at state levels is causing the economic Sodom and Gomorrah.

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Cry Havoc! US M2 Velocity Sinks To Lowest Level In History As Of Q1 (Whither Q2?)

“Cry ‘Havoc!,’ and let slip the dogs of war low M2 velocity.”

In Q1, US M2 Money Velocity hit an all-time low as M2 Money Supply surged. That is, the ratio of GDP to Money Supply is indicating a stall.

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Of course, US 2Q GDP is expected to crash with the shutdown.

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And the equity markets plunged 2% when the actual “Dog of War” Fauci cast negativism on reopening the economy.

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The dogs of low money velocity are upon us!

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U-6 Unemployment Rate Spikes To 22.8% As Average Hourly Earnings Spikes To 7.9% YoY

A sign of the times. As governments around the globe shut down economies to prevent the spread of the Covid-19 condition.

The US unemployment rate rose to 14.7% in April, up from 4.4% in March.

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Yes, 20.5 millions jobs were lost in April.

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The U-6 unemployment rate (or full-time plus partial unemployment rate) rose to an astronomic 22.8%!

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Average hourly earnings YoY rose to 7.9% YoY.

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But look at the US employment total in labor force. Covid-19 / gov’t shutdown has wiped out labor force gains since 1999 and The Clinton Administration.

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I wish I knew a place that was open in Virginia, but I don’t.

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S&P 500 Implied Correlation Remains Elevated (70.56) As Volatility Subsides

March was truly a horrific month for employment and markets. But S&P 500 volatility is subsiding while the components of the S&P 500 remain at increased levels of implied correlation.

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Not surprisingly, JPMChase and Blackrock are highly correlated.

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The CBOE S&P 500 Implied Correlation Index measures the expected average correlation of price returns of S&P 500 Index components, implied through SPX option prices and prices of single- stock options on the 50 largest components of SPX.

Fed Chair Powell has upwards of $11.6 million invested with BlackRock, the firm that will manage a $750 billion corporate bond bailout program for the Fed.

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Alarm! US Personal Spending Tanks -7.5% MoM In March (Durable Spending Tanks 15.1% MoM)

Alarm! 

US personal spending tanked -7.5% MoM, exceeded only by durable goods spending that tanked -15.1% MoM in March.

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Personal income dropped by “only” -2% MoM.

An additional 3.8 million filed for jobless claims.

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Pending home sales tanked -14.5% YoY for March.

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Alarm!

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Roll Out The (Oil) Barrel! WTI Crashes Below $0 a Barrel With Traders Fleeing May Futures (Spot WTI At -37.63, May Futures At -24.92)

April virus brings May crashes. As in the spot price of WTI crude crashing to -37.63.

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(Bloomberg) — West Texas crude plunged into the negative for the first time ever. WTI has been under extreme pressure as demand has been destroyed by the coronavirus lockdowns and a oil price war between Saudi Arabia and Russia has flooded the market. In addition, a technical oddity kicked in today as traders fled the May futures contract ahead of its expiration tomorrow. The June contract is currently trading for over $22 a barrel in New York.

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May 20 Light Sweet WTI futures are DOWN to -24.92. But at least June and beyond futures prices are positive.

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Should we dance to the Oil Barrel Polka?

Here is the Grateful Dead’s version.

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A physical contract such as the NYMEX WTI has a delivery point at Cushing, OK, & date, in this occurrence May. So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market. This is very rare.

It means that in the last few days of the futures trading cycle, (which is tomorrow for this one) speculative or paper futures positions start rolling over to the next contract. This is normally a pretty undramatic affair.

What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.

This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.