US Gasoline And Food Prices Soar To All-time Highs As Fed Begins Removing Monetary Stimulus (10-year US Treasury Yield Jumps 8.7 BPS)

US gasoline prices just rose to an all-time high. Yes, even higher than the Dubya-era gasoline price surge of 2008.

Rising gasoline and diesel prices are helping drive up food prices to the highest level in history.

The proxy war the US is fighting in with Russia in Ukraine is helping drive up food prices. But at the core is Biden’s anti-fossil fuel drilling executive orders starting when Statist Joe (and The Fish) became President.

As The Fed begins unwinding their massive balance sheet, the 10-year US Treasury yield jumped 8.7 basis points.

Let’s Get Ready To Stumble (Into Recession)! Gasoline Prices UP 89% Under Biden, WTI Crude Oil UP 115% (As REAL Wage Growth Declines)

Let’s get ready to stumble!

Seriously, with soaring energy prices and soaring EVERYTHING prices (except for real wage growth), it is difficult to see how the US will avoid a recession.

Yes, everything is seemingly rising in price, yet REAL average hourly earnings growth keeps falling. Rising price + declining real earnings growth = eventual recession.

So, let’s get ready to stumble … into recession.

Fear The Talking Fed! US Industrial Production/Capacity Utilization Rise In The Face Of Inflation (M2 Velocity Near All-time Low As M2 Money YoY Still Sizzling At 9.85% YoY)

Most of us are painfully aware of rising food prices, particularly with the US fighting a proxy war with Russia. Wheat prices have doubled under Biden and the Russian invasion of Ukraine.

But inflation is everywhere. Rising home prices, rising gasoline and diesel prices, etc. When Jeep can see a Wagoneer for $100,000+, you know we have inflation.

The surprise this morning was retail sales, up 0.9% MoM (though still less than expected), despite rising prices. Odd since REAL wage growth is negative.

But the other bit of good news this AM is that US industrial production rose +1.1% MoM in April. And US Capacity Utilization is rising dangerously towards 80%, it is at 79% in April.

You will notice that Fed monetary tightening occurs when capacity utilization hits 80%, indicating an overheated (or OVERSTIMULATED) economy. Yes, we still have The Fed Funds Target Rate (Upper Bound) at only 1% and The Fed Balance Sheet still near $9 trillion. So, Fed stimulypto is still in play.

Meanwhile, M2 Money Velocity is near its historic low and M2 Money YoY is still sizzling at 9.85% YoY.

Wheat prices have doubled under Biden, and you can see how wheat futures soared when Russia invaded Ukraine.

So, despite The Fed’s intent to tighten, The Federal Reserve and Fed government are still overstimulating the economy. But what happens when the stimulus is gone?

Fear the Talking Fed!

Good News! Flexible Price Inflation Cools To … 20%, Export Prices Cool To 18% YoY As Jerome “Slowhand” Powell Reappointed As Fed Chairman (Taylor Rule Suggests Fed Rate Of 13.89%)

The US Senate yesterday confirmed the reappointment of Jerome “Slowhand” Powell as Federal Reserve Chairman.

The good news? Atlanta Fed’s Flexible CPI YoY cooled to 20% in April. The bad news? Flexible prices are still growing at 20% while wages are growing at 5.5% YoY.

On the export front, export prices are cooling and were at 18% YoY in April, down slightly from March. Import prices cooled to 12% YoY as The Federal Reserve has slowed asset purchases.

I would have preferred President Biden appoint a serious Federal Reserve Chairman liked Stanford University’s John Taylor (of Taylor Rule fame). In his honor, here is the Mankin version of the Taylor Rule which calls for a Fed Funds Target Rate of 13.89% while the current Fed Funds Target Rate under Powell and the Gang is … 1%.

Call it the Powell Boogie. At a very slow speed.

Powell is indeed “Slowhand.”

Spot The Loser! Japan’s Yen, China’s Yuan or Russia’s Ruble (Russian Ruble Bounced Back While Yen And Yuan Have Crashed)

I hope America’s foreign policy wizards (Biden, Harris and Blinken) weren’t relying on the Russian Ruble staying pulverized, because the Ruble (relative to King Dollar) has regained all its losses.

On the other hand, the Japanese Yen and Chinese Yuan have crashed harder than Biden’s popularity.

Actually, The Atlanta Fed’s flexible price inflation rate is 25%, up from 3.90% Pre-Joe.

Perhaps Biden, Harris and Blinken think Putin is a pasta sauce.

Bidenflation SOARS To 8.5%, Real Average Hourly Earnings Growth Falls To -3% YoY, Mortgage Rates Rise To 5.14% (The Four Horsemen Of The Inflation Apocalypse?)

The US inflation numbers were released this morning and they are grim. Inflation YoY grew to 8.5%.

With 8.5% YoY inflation, REAL average hourly earnings growth fell to -3% YoY.

And with The Fed intent on extinguishing their part of the inflation, Bankrate’s 30Y mortgage rate rose to 5.14%.

Energy is the biggest culprit (fuel oil up 70.1% YoY) thanks to the double whammy of 1) Russia’s invasion of Ukraine and 2) Biden’s restrictions on oil and natural gas production. Food at home is up 10% YoY.

Here is a colorful chart of MoM growth in prices.

The Taylor Rule model now says that The Fed Funds Target Rate should be 11.90%. Hence, Fed Stimulypto is still in place with the signal that rates will increase.

How about WTI Crude and Brent Crude soaring over 4% today?

Once again, the Four Horsemen of the Inflation Apocalypse (Biden, Powell, Pelosi, Schumer) overstimulated the economy and financial markets with excessive monetary stimulus (Powell) and excessive Federal spending (Biden, Pelosi, Schumer) where demand soared for products and supply naturally hasn’t caught up.

When Fed Gov Brainard Talks, Markets Listen! Brainard Says Fed Will Shrink The Balance Sheet At A Rapid Rate (10Y Treasury Yield Rises 16 BPS As Nasdaq Falls 300 PTS) Mortgage Rates Will SOAR!!

When Federal Reserve Governor Lael Brainard speaks, markets listen

Federal Reserve Governor Lael Brainard said the U.S. central bank will continue to tighten policy methodically and shrink its balance sheet at a rapid pace as soon as May. 

Brainard’s hawkish remarks sent bond prices crashing and 10Y bond yields up over 16 bps.

While Bankrate’s 30Y mortgage rate is down slightly today, the surge in the 10Y and 2Y Treasury yields could push mortgage rates above 5% by tomorrow,

Even Europe is feeling Brainard’s wrath. Italian 10Y sovereign yields are up almost 20 bps.

The NASDAQ index is down 300 points on Brainard’s utterance.

Gee thanks Lael from all us wanting to finance the purchase of a house.

Brainless and Brainard.

Weekend Update! Crude Oil Above $100, Diesel Fuel UP 155%, Coal UP 256% Under Biden, Mortgage Rates Now Above 4.5%

The news just keeps getting worse and worse. Russia is still assaulting Ukraine, WTI Crude prices are above $100 a barrel and climbing, the Cleveland Browns signed Deshaun Watson to replace Baker Mayfield at quarterback, etc.

But back to energy prices. Since Biden was sworn-in as President, WTI Crude Oil futures are up 125%, regular gasoline prices are up 89%, and diesel fuel prices are up 155%. Diesel is important since America uses diesel-powered trucks to transport goods to market.

Globally? The world inflation rate has grown from 2% in January 2021 to 6.82%. Global food prices are up 24%.

Yes, WTI Crude and Brent Crude are above $100 per barrel.

And coal prices are up 256% under Shoeless Brainless Joe.

Mortgage rates? Bankrate’s 30-year mortgage rate is now above 4.50%.

Let’s see if Dr. StrangeFedpolicy raises rates as aggressively as signaled.

Pelosi Cola! Latest Congressional Spending Spree Includes 21% Increase In Congressional Staff Allowance While Social Security Increases (COLA) By Only 5.9% (Pelosi/Schumer Prioritize DC Staffers Over Retirees)

US Speaker of the House and American Oligarch Nancy Pelosi together with Senate Majority Oligarch Charles Schumer passed yet another massive spending bill that seemingly benefited them and not the American middle class.

As part of the $1.5 trillion omnibus spending bill released Wednesday, the $5.9 billion fiscal 2022 Legislative Branch funding portion would substantially boost the office budgets of House members to pay staff more.

This legislation would provide $774.4 million for the Members Representational Allowance, known as the MRA, which funds the House office budgets for lawmakers, including staffer salaries. This $134.4 million, or 21 percent, boost over the previous fiscal year marks the largest increase in the MRA appropriation since it was authorized in 1996, according to a bill summary by the House Appropriations Committee. For paid interns in member and leadership offices, the House would get $18.2 million. 

Unfortunately, retirees received a Social Security Cost of Living Adjustment (COLA) of only 5.9%.

This is especially unfortunate given at inflation is growing at 7.9%. If we remove food and energy (two important categories for consumers and retirees), core inflation is growing at 6.4% YoY. As such, Social Security COLA doesn’t even keep pace with CORE inflation, let alone food and energy costs.

In August, Speaker Nancy Pelosi announced staffers’ salaries could exceed those of lawmakers. Members in both the House and Senate, with the exception of leadership, make an annual salary of $174,000. Staffers can make up to $199,300.

The Hill has a nice summary of the latest Pelosi/Schumer Spendapalooza, “Lawmakers feast on pork in omnibus.”

After an 11-year drought, congressional earmarks are back with vengeance.

The $1.5 trillion, 2,741-page omnibus spending package is loaded with funding for lawmaker pet projects, some of which could help incumbents in this fall’s elections.

The legislation includes more than 4,000 earmarks, according to a list of projects provided to The Hill by a Senate Republican aide that spanned 367 pages.

One of the biggest winners was New York — thanks to Senate Majority Leader Charles Schumer (D-N.Y.), who is up for reelection this year.

Schumer’s name is attached to 59 earmarks totaling nearly $80 million in the omnibus’s transportation and housing and urban development (HUD) section alone, according to a review by The Hill. He successfully requested funding for the projects either individually or with other lawmakers from his home state.

Is wild-spending Pelosi actually “The Bride of Chucky (Schumer)”?

Weekend Update: Oil, Commodities, Wheat, Soaring In Price, Mortgage Rates Down (Inflation Forecast To Worsen)

This has been a brutal week for consumers. With the Russia/Ukraine conflict raging and Congress seems determined to not allow for additional oil and gas production, and Biden’s anti-fossil fuel edicts still in place, we are seeing dramatic price increases in wheat (UP 89.5% since January 1, 2021), WTI Crude (UP 143% since January 1, 2021), and food stuffs (UP 55% since January 1, 2021).

Bankrate’s 30-year mortgage rate has actually been falling the last several days, which is good for prospective home buyers as the 10-year US Treasury Note yield has been declining.

The USD/Russian Ruble cross is skyrocketing and the USD/Euro is doing likewise. Russians visiting the US will find that their trip is suddenly unaffordable (as do many American citizens will its rampant inflation). As Bruce Willis said in “Die Hard,” “Welcome to the party, pal.”

On Friday, the US Treasury 10-year yield declined 11 bps.

And energy prices continue to soar, particularly UK Natural Gas Futures that rose 19.85% overnight.

The US inflation data will be released on March 10th and the consensus is that February CPI inflation will rise to 7.9% YoY.

But even the latest unemployment rate report (3.8%) is signalling that The Fed should be raising interest rates since it is lower than the Natural Rate of Unemployment or NAIRU (4.44%).

And we have the next Fed policy error on March 16th. The Fed dots plot looks like the glide slope for an aircraft, but the message is that rates will be going up at future meetings.

And just for amusement, I present to you the infamous Hindenburg Omen chart that forecast the 2008/2009 stock market correction. Since that correction, the Hindenburg Omen has been flashing “danger” but the only correction was the COVID-linked correction of early 2020. While the Hindenburg Omen is flashing red right now, The Federal Reserve’s balance sheet (green line) has protected against market corrections. Let’s see what happens if and when The Fed decides to remove the epic monetary stimulus.

Its anyone’s guess as to whether The Fed will actually tighten monetary policy.