Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
No problemo, says James “Bully” Bullard, President of the St Louis Federal Reserve. Bullard said that US recession fears are overblown with consumers “healthy.”
Really Jim?
Inflation is so bad they REAL average hourly earnings growth keeps falling and is now -3.34% YoY.
Apparently, real GDP growth of ZERO doesn’t bother Bullard either.
Apparently, we are still Under The Thumb of The Federal Reserve.
The US economy is out of time.
As a recession approaches, we are seeing the WIRP implied Fed o/n rate (green line) declining. And with The Fed chickening-out, we saw a surge in equities (NASDAQ composite index in blue).
Gasoline prices are falling too (orange line), but due to rising global economic slowdown. But notice that The Fed’s balance sheet (yellow line) is still growing despite repeated signals that Covid stimulus would be removed (I call this Quantitative Frightening).
As I mentioned above, The Fed has stopped trimming their balance sheet despite signals to the market of getting rid of the Covid stimulus. As Billy Preston sang, “Nothing From Nothing.”
The Atlanta Fed GDPNow Q2 forecast is for … 0% GDP growth despite the massive monetary stimulus and fiscal stimulus from Biden/Pelosi/Schumer.
And yes, the S&P 500 has officially entered a bear market under the leadership of Joe “The Bear” Biden.
So, Biden’s economic agenda (read, just spend more money and inflation declines?) is failing. Hence, The Fed is backing off a bit helping to drive up stock prices.
US markets are addicted to gov.
What a legacy for Biden/Pelosi/Schumer/Powell, the four horsemen of the inflation apocalypse.
As inflation soars, the University of Michigan Consumer Sentiment index plunged to its lowest level in history.
None of the contributions to consumer sentiment are positive.
The good news? The University of Michigan Buying Conditions for housing only fell to its lowest level since 1982.
Speaking of housing, more than 8 million Americans are late on rent as prices increase.
The four horsemen of the inflation apocalypse.
The kids running Washington DC are not as sharp as pistols (which they want to take away) when they do the DC stomp.
Thanks to massive Fed monetary stimulus still stalking the housing market, US new home sales rose +10.7% MoM (from April to May), but were down -5.9% YoY (from May 2021 to May 2022) as mortgage rates rose.
Median price of new home sales rose 42% since May 2021, thanks to Fed stimulypto. And Federal government stimulus spending.
Yes, like the predators from the movies, The Fed’s balance sheet is still stalking markets.
Fed Chair Jerome Powell.
Despite what Biden and his muppets say, there is a good chance that the US will slip into recession over the next 24 months. And with that, we are seeing a slight drop in US mortgage rates.
Inflation is surging, and The Fed seems intent on “inflation fighting” but may have to pause that fight the impending recession. This is called a “U-turn” although Powell didn’t mention that is his testimony yesterday.
According to Mortgage News Daily, the 30-year fixed dropped below 6% to 5.88%.
Europe is signaling their u-turn to recession fighting as 10-year sovereign yield have dropped over 10 basis points this morning. Australia and New Zealand are dropping hard as well.
Here is the Federal Reserve’s open market committee deciding on the direction of interest rates … inflation fighting or recession fighting?
Although mortgage rates have been rising quite fast, The Fed’s balance sheet is only being reduced quite slowly, leading to a continuation of the hot, hot, hot housing market.
But the expectation of Fed rate hikes is causing mortgage rates to soar and borrowers are trying to get buy housing before The Fed chokes off rates.
Mortgage applications increased 4.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 17, 2022.
The seasonally adjusted Purchase Index increased 8 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 10 percent lower than the same week one year ago.
The Refinance Index decreased 3 percent from the previous week and was 77 percent lower than the same week one year ago.
So, the housing market remains hot, hot, hot but not mortgage refi applications. But Powell and Company will likely choke-off purchase applications as well.
The US is a movin’ on up to the high side … of energy prices.
Today, WTI crude oil futures broke through the $110 barrier.
The WTI Crude crack spread, the differential between the price of crude oil and petroleum products extracted from it, is up 535% under President “I HATE OIL!” Biden and diesel fuel is up 121%.
WTI crude is up 1% today.
“Crack? I thought crack was something that Hunter did!” – Joe Biden
US Treasury Secretary and former Federal Reserve Chain, Janet Yellen, admitted on ABC’s This Week that US inflation is “unacceptably high”and prices are likely to stick with consumers through 2022, and that the US economy is likely to slow down.
“We’ve had high inflation so far this year, and that locks in higher inflation for the rest of the year,” she said Sunday on ABC’s “This Week.”
“I expect the economy to slow,” she said, adding: “But I don’t think a recession at all inevitable.”
US inflation accelerated to 8.6% in May, a fresh 40-year high that signals price pressures are becoming entrenched in the economy. Those figures dashed any hope that inflation was starting to ebb, prompting the Federal Reserve to unleash its biggest interest-rate increase since 1994.
Hey, I thought strangling the US mortgage market and housing markets was supposed to cool the inflation rate, Janet.
On the good news/bad news front, cryptocurrency Bitcoin fell to $17,600 earlier today before rebounding to above $20,000 as the expectation of further Fed rate increases diminished (Yellen admitted the economy is slowing).
Yellen ignored rising mortgage rates which is putting a chokehold on the US housing market.
Hey Janet! So you are admitting that Biden’s energy policies AND massive Congressional spending bills ARE helping to drive prices through the roof and that Fed rate increases won’t tame the savage inflation beast?
As The Federal Reserve tightens the monetary noose (Fed Chair Powell said Fed ‘acutely focused’ on returning inflation to 2%), the US economy is slowing. In fact, May’s Industrial Production report is half of what was expected. Industrial production declined to 0.20% MoM versus the expected 0.4%. At the same time, capacity utilization rose slightly to 79%., but still below expectations.
Mortgage rates are rising rapidly, but the growth has cooled slightly as the economy cools.
Bitcoin is getting demolished by The Fed’s reaction to inflation.
And “It’s Not Always Sunny In Philadelphia.” Since the Philadelphia Fed’s Business General Conditions has dropped into negative territory with, among other things, The Fed’s monetary tightening. And they’ve only just begun (no Carpenters’ songs!).
Here is Phil Hall’s article on housing and The Federal Reserve’s noose tightening. US housing starts dove -14.4% MoM as mortgage rates soared.
If the Biden Administration and Federal Reserve jointly produced a dating site …
But its most central banks too. Look at German home prices against the ECB’s balance sheet
I couldn’t sleep at all last night … after The Fed cranked up their target rate 75 basis points.
The odds of a recession grew to 71.7% as The Fed hikes rates.
Over the next 24 months, the probability of a US recession is 98.5%.
The NASDAQ index tanked -4% today on the fallout from yesterday’s Fed actions.
Do I detect a trend in The Fed’s latest Dot Plot??
So, will The Fed continue to go head-over-heels on monetary tightening?
Confounded Interest - Anthony B. Sanders 
You must be logged in to post a comment.