Addicted To Gov! $350 Billion In Brand New Central Bank Behind Market Rally (On Top Of US Fiscal Inferno!)

You might as well face it, markets are “addicted to gov.” Government monetary interference, that is. Government money printing and massive Federal spending.

According to Goldman calculations, $350BN of liquidity (in USD terms) was added in November from the G4 central banks + the PBOC was nothing short of a fire hose.

In fact, this was the third largest monthly increase this year after January and March 2023.

The US addition of $60bn for a third consecutive week plus weaker dollar are the main drivers.

While the BoJ keeps adding liquidity via bond purchases, increases in the TGA balances in the past 20 days have net drained Yen liquidity.

Looking forward over the year end and at the start of 2024, Goldman thinks that the US can keep adding liquidity via high bill issuance and RRP withdrawal over the next couple of months (something we discussed last month in “How Treasury Averted A Bond Market “Earthquake” In The Last Second: What Everyone Missed In The TBAC’s Remarkable Refunding Presentation“), while the dollar contribution to benign liquidity conditions could face some headwinds due to the risk of pricing out of some of the March Fed cuts as a result of the strong positive FCI impulse in November.

Goldman’s one-factor model for risky assets based on the liquidity cycle suggests that US IG and EM hard currency debt are cheap and the bank’s STS FX carry and Brent Vol Carry indices have under-performed the benign liquidity environment and may catch up the next two months.

The US and Eurozone money supply and lending growth indicators remain weak, implying extended downside bias in domestic demand and inflation in H1-2024 (i.e., higher likelihood for easing absent a reflationary shock out of China or a supply-driven commodity price surge).

Finally, The US policy impulse (comprising of liquidity, fiscal stance, as well as nominal and real forward rates) has moved sideways in October and November after some renewed tightening in September. The GS FCI index eased nearly -100 basis points (-1.4z) in November.

Doctor, doctor (Yellen), we got a bad case of distortionomics (where the 1% wins and the 99% fall behind). After all, under Dr. Yellen as our Treasury Secretary, we are suffering from massive fiscal inferno with wild government spending. I would use “Government Gone Wild!” but the thought of Yellen … well, never mind.

Meanwhile, while John Kerry pushes for ending ALL coal powered plants (good luck charging the thousands of EV charging stations on wind/solar power!), China is building NUCLEAR plants. While US green wimps (Kerry comes to mind) whine whenever nuclear plants are mentioned for the US.

Back In Red! Factory Order Plunge -3.6% In October, Largest Drop Since COVID Lockdowns

US factory orders are back in red.

Factory orders tumbled even more than expected, down 3.6% MoM – the biggest drop since the COVID lockdowns (April 2020). September was also revised lower (making October’s decline even worse) from +2.8% MoM to +2.3% MoM…

Source: Bloomberg

The big monthly decline and revisions dragged orders down 2.1% YoY (the biggest drop since Sept 2020).

Core factory orders also dropped (-1.2% Mom), leaving them down 2.2% YoY – the eight month in a row of annual declines…

Source: Bloomberg

The final Durable Goods Orders data for October confirmed the preliminary print plunge down 5.4% MoM.

Finally, we note that it could have been a lot worse as Defense spending shot up 24.7% MoM (as non-defense dropped 15.8% MoM0…

On a year-over-year (YoY) basis, factory orders grew at a rate of … 0% in October as M2 Money growth remains negative. Apparently, the economy is addicted to gov money printing.

Not a great report with a year until the Presidential elections.

Foul Powell On The Prowl! Odds Of March Rate Cut Hits 80% As Gold Soars To All-time High (10Y Treasury Yield Drops Below 5%)

Foul Powell on the Prowl!

Despite Powell’s confusing messaging on inflation, the market is pricing in an 80% chance of a rate cut in March 2024.

The Fed’s dots plot shows the same thing: Fed target rate falling like a paralyzed falcon.

As gold soars to an all-time high.

The difference between California governor Gavin “Toothsome” Newsom and Leave it to Beaver’s Eddie Haskell is that Eddie Haskell was more sincere.

Thunderstruck! US Pending Home Sales Index Slumps To Record Low -6.6% YoY As Mortgage Rates Ease And Purchase Applications Stall (30Y Mortgage Rate Still Up 156% Under Biden)

The US housing and mortgage markets are thunderstruck by The Fed’s attempts at cooling inflation down to 2%.

After a small bounce last month – following the puke in August – pending home sales dropped 1.5% MoM in October (better than the 2.0% MoM decline expected). This left YoY sales down 6.6% (negative for the 23rd straight month)…

Source: Bloomberg

The Pending Home Sales Index dropped back to a new record low…

Source: Bloomberg

By region, only the Northeast saw an increase in pending sales last month.

Sales fell the most in the West, down 6%, while contract signings in the South and Midwest slipped 1.9% and 0.4%, respectively.

Home sales are rising in places with more inventory, Lawrence Yun, NAR’s chief economist said, noting that purchases of new houses are up so far this year because of builders’ ability to create inventory.

“During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years,” Yun said in a statement.

“Recent weeks’ successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied.”

The trend in pending home sales is following the mortgage rate (with a one month lag) and is set to fall further still…

Source: Bloomberg

The pending-home sales report is a leading indicator of existing-home sales given houses typically go under contract a month or two before they’re sold.

How long with Powell and his pals be able to keep this ‘higher for longer’ stress up as Americans’ largest source of wealth evaporates?

Mortgage rates have fallen recently, but are still up a staggering 156% under Biden.

And mortgage purchase applications keep falling.

Here is The Fed keeping a close eye on the housing and mortgage market.

Fiscal Inferno! US Debt Hits $33.7 Trillion With Unfunded Promises Hitting $211.7 TRILLION, $629k Per Citizen! (REAL Hourly Compensation Has DECLINED By -5.1% Under Bidenomics)

We are currently in a fiscal inferno under Biden/Yellen.

And US Treasury Secretary Janet Yellen is just a girl who can’t say no … to big government spending.

In fact, Congress and the Biden (mis) Administration are spending like the proverbial drunk sailors in port. US national debt is up to $33.7 TRILLION. That transates to $259,103 per taxpayer. With US debt to GDP of 138%!

Now, HERE IS THE REAL BAD NEWS! Unfunded promises that politicians made to Americans (Social Security, Medicare, Medicaid, etc.) now stands at $211.6 TRILLION. That equates to $629,000 per citizen. Maybe that should be the deal at the southern border: all immigrants must pay $629,000 for admission!

And the Federal budget deficit keeps on getting worse.

The budget deficits under Biden/Yellen have been the worst in history. So much for Biden whispering “Bidenomics is working!”

Rents in the US remain unaffordable to many.

And Yellen, our nation’s financial consigliari, hasn’t said much about the dire decline in income tax receipts.

But Biden’s favorite country China, a classic top-down command economy like Biden and Yellen love,

On Sunday, President Joe Biden tweeted, “Right now, real wages for the average American worker is higher than it was before the pandemic, with lower wage workers seeing the largest gains. That’s Bidenomics.” That’s right, Joe! Except real hourly compensation has DECLINED by -5.1% under Biden.

Livin’ On A Prayer … And Credit! US Consumer Debt Hits $17.3 TRILLION As Credit Card Delinquency Growth Highest Since Covid Lockdown (UMich Inflation Expectations SOAR To Highest Since 2011!)

Under Bidenomics, with its high inflation rate and crushing negative wage growth, consumers are draining their savings and living on a prayer …. and consumer credit to cope.

US consumer credit just rose to $17.3 trillion, up dramatically since Biden’s inaugaration as El Presidente of the United Banana Republics of America.

What is worriesome in the transition rates (like current to 90-days delinquent) Credit cards (blue) and auto loans (red).

A closer look at credit card delinquency rates on a year-over-year (YoY) basis, showing the fastest growth in delinquencies since the Covid economic lockdowns.

Then we have commercial real estate delinquencies are now the highest the have been since 2013.

Meanwhile, University of Michigan consumer sentiment about inflation spiked to 4.4%. That is the highest medium-term inflation expectation since 2011.

The US consumer is being shot through the heart and Biden and The Fed are to blame. Biden gives gov a bad name.

Interest On US Debt Skyrockets Above $1 Trillion For The First Time Ever (Annual Interest Payments On 30-year Mortgage In 2020 Was $8,500, But Has Almost Tripled To $24,300!)

Another day, another dose of bad fiscal/monetary news. Not surprising with the US Treasury being run by Janet Yellen, who doesn’t seem to know much economics. In fact, with Biden/Congress spending like drunken sailors in port, inflation and The Fed’s counterattack, we see that interest of US debt just hit $1 TRILLION!

$1.027 trillion in interest is calculated by multiplying the average interest rate on marketable US Treasury debt (which according to the Treasury is 3.096% as of Oct 31) by the $26.003 trillion in marketable US debt (as of Oct 31) which nets off to $805 billion, and adding to this non-marketable debt interest (which as of Oct 31 was 2.884% multiplied by the amount of non-marketable debt which is $7.696 trillion) and which in turn is an additional $222 billion in interest. Add across and you get $1.027 trillion.

Naturally, this calculation of estimated real-time interest costs – which is entirely based on Treasury data – is different than what the Treasury actually paid. Interest costs in the fiscal year that ended Sept. 30 ultimately totaled $879.3 billion, up from $717.6 billion the previous year and about 14% of total outlays, however that number is merely lagging what the pro forma print currently is, and will inevitably catch up to it, and then lag on the other side even as pro forma interest payment start dropping (once interest rates plunge after the next QE/YCC is launched).

Fans of exponential functions, we got you covered: the unprecedented surge in both interest rates and interest expense in the past two years means that total US interest has doubled since April 2022 and that’s with the inherent lag in interest catch up – as a reminder, the vast majority of 5, 7, 10 and 30 year debt is still locked in at much lower interest rates, and as such, rates will continue to rise as all of the existing debt rolls into much higher rates over the coming years.

Looking ahead, the staggering surge in both yields and total long-term Treasuries in recent months confirms the government will continue to face an escalating interest bill. As a reminder, we were the first to point out that it took just one month after US federal debt first rose above $33 trillion for the first time, to spike by another $600 billion.

On the personal finance side, annual Interest payments on a 30-year, fixed-rate mortgage before Biden was $8,500, but after Biden it almost tripled to $24,300! That means that annual mortgage interest rose 186% under Biden.

Biden’s Mortgage Market! Mortgage Demand (Applications) Increase By 2.5% From Previous Week As Mortgage Purchase Demand Down -20% From Last Year (Refi Demand Down -7% From Last Year While Mortgage Rate Is UP 169% Under Biden)

US inflation is lower than it was a year ago (cheers from The View CNN and MSNBC cheerleaders), but inflation remains stubborning above The Fed’s 2% target rate and will likely remain above 2% for the nexf few years. So mortgage demand is much like inflation … mortgage demand increased in the latest week but generally is very low compared to last year.

Mortgage applications increased 2.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 3, 2023.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week and was 7 percent lower than the same week one year ago.

The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 20 percent lower than the same week one year ago.

The 30-year fixed mortgage rate dropped by 25 basis points to 7.61 percent, the largest single week decline since July 2022. But, mortgage rates are up 169% under Biden and Bidenomics.

Bideomics is over, under, sideways, down. Mostly down.

Simply Unaffordable! Income Needed To Buy A Home Is $111k While Median Household Income Is Only $78k, Credit Card Delinquencies Highest Since 1991, REITs Down > -10% YTD (Bitcoin, Gold UP YTD!)

Bidenomics is a windfall for the donor class (high rate of return on campaign contributions) while the middle class gets beaten to a pulp. Waiting for Biden to lean over and creepily whisper “It’s working!” Even though it is clearly not working, at least for the middle class.

Evidence that Bidenomics is not working and destructive? Try the surging income needed to buy a house under Biden. Home prices are rising faster than median household income. As in $111,000 income needed to buy a house, while median household income is only $78,000. So, housing is simply unaffordable under Bidenomics. The Biden era is outlined in pink.

Mortgage purchase applications have collapsed to 1994 levels.

Meanwhile, stressed households are seeing credit card delinquencies at the highest level since 1991.

And thanks to Uncle Spam (given how Uncle Sam is destroying the middle class it is now Uncle Spam), 2023 interest payments are the same as the total debt from 1980! Spam, which the Federal government has devolved into, is very high in fat, calories and sodium and low in important nutrients, such as protein, vitamins and minerals.

2022 was a bad year for investments under Bidenomics. 2023 year to date is showing huge gains for Bitcoin, the NASDAQ and gold. Bringing up the rear are long duration Treasuries and REITs (real estate investment trusts), both earning negative returns thus far of less than -10%.

When will we see rats fleeing the sinking SS Bidenomics as it sinks? JPMorgan Chase stock slips after bank says CEO Jamie Dimon is selling 1 million shares.

Biden, Treasury Secretary Janet Yellen and Fed Chair Jay Powell have a bad case of screwing you (Doctor, Doctor).

Biden’s Highway To Hell! Subprime Auto Loan Delinquencies Erupt, Highest Rate On Record (Higher Than Great Recession And Covid Recession!)

Biden’s Highway to Hell!

Bidenomics has been a massive windfall for the top 1% of households in terms of wealth due to the emphasis on green energy transformation. But for the 99%, Bidenomics has been a disaster (unless you consider low-paying job creation a victory).

The auto sector, considered a leading economic indicator, pinpoints the arrival of the crushing auto loan crisis and even the possibility of the onset of the next recession. In late January, we Fitch revealed tat consumers are falling behind on auto payments – the most since the peak of the Great Financial Crisis. Fast forward nine months later, to September, that rate just hit the highest level in nearly three decades.

And with interest rates rising the fastest in history,

And Discover projected charge off rate for 2023 would more than double from its current 1.82% to as much as 3.90%!

In what could be the early innings of the auto loan crisis, something we called a “perfect storm” earlier this year, Bloomberg cites new Fitch data:

The percent of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings.

“The subprime borrower is getting squeezed,” said Margaret Rowe, senior director with Fitch.

Rowe said, “They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”

What has been widely known is the consumer has been funding car purchases with even more debt to afford record-high prices, with many monthly payments exceeding $1,000. Factor in the Federal Reserve’s most aggressive interest rate hiking cycle in a generation, elevated inflation, and the restarting of the federal student loan payments, tens of millions of consumers are under immense pressure this fall.

An endless stream of retailers, such as Walmart, Nordstrom, Macy’s, and Kohl’s – all of whom have recently warned about a consumer slowdown. Banks have also raised concerns, such as Morgan Stanley’s Mike Wilson, who believes the consumer is ‘falling off a cliff.’ And the latest high-frequency data from Barclays shows card spending has taken another leg down.

As delinquencies rise, Cox Automotive forecasts that 1.5 million vehicles will be seized this year, up from 1.2 million in 2022. That’s still below pre-pandemic levels, but the numbers could soar if a recession materializes in 2024.

Bloomberg cited Bankrate data that shows consumers with excellent credit can lock in an average interest rate of around 5.07% for a new car and 7.09% for a used vehicle. Those with bad credit should expect a new car rate of 14.18% and 21.38% for a used car.

The perfect storm we described earlier this year is unfolding.

At least residential mortgage delinquency rates remain low. With elevated home prices, the incentive to default on a loan is limited.

So The Perfect Storm hasn’t hit residential real estate … yet. But with households needing $114,000 in annual income to afford a typical home …

But at least home prices aren’t rising as fast as olive oil and orange juice!! Wow, that excesssive stimulypto by The Fed and Federal government is really screwing things up in the economy.

Biden is like George Clooney in “The Perfect Storm” sending the US out into stormy, violent seas while obessing about Ukraine and protecting Iran/Hamas.