Fear The Talking Fed! Mortgage Payments Rise 43.4% YoY As Fed Jawbones Monetary Tightening (But Still Has Not Shrunk Balance Sheet Yet)

Mortgage rates have increased dramatically under “Middle Class Joe” as The Federal Reserve attempts to choke-off inflation caused by … The Fed coupled with Biden’s energy policies (hope you are enjoying those high gasoline and diesel prices!) and the Federal government’s staggering spending spree under Pelosi, Schumer and McConnell.

Thus far, The Federal Reserve has leveled-out out their Treasury Note and Bond purchases, increased their Agency Mortgage-backed Securities (AgMBS) holdings, but strangely have reduced their holding of Treasury Inflation-Protected Securities (TIPS) in the face of rising inflation.

And while The Fed Funds Target rate is a lowly 1%, it is projected to rise to 2.890% by the February 1, 2023 FOMC meeting. That should send mortgage rates up.

As if mortgage rates haven’t skyrocketed already, thanks to The Fed’s jawboning about having to raise rates and extinguish inflation.

With sizzling mortgage rates (cooling a bit as the global economy slows), home mortgage payments have risen +43.4% YoY.

Now we have President Biden trying to scare us about the Monkey Pox, yet leaves the southern border wide open. One would think that Biden would shut the borders (as if the surge in Fentanyl, sex trafficking and other diseases aren’t reason enough. But I do predict another massive spending bill from Biden/Congress to combat Monkey Pox and the resurgence of Covid variants.

Meanwhile The Fed jawbones fighting inflation with monetary tightening in the future, even if they jawboning causes mortgage rates to soar and mortgage payments to spiral.

Weekend Update! Commodities Versus S&P 500 Index (How To Hedge Against The Fed And Biden’s Policies)

We have a double whammy facing investors, The Federal Reserve wanting to take away the monetary punch bowl and Federal energy policies that are crushing middle-class households and lower-wages workers.

But how do you hedge against The Federal Reserve tightening and Biden’s reckless energy policies?

Take a look at investing in commodities (S&P GSCI Commodity-Indexed Trust and the Bloomberg Commodity Index) versus the S&P 500 Total Return index since The Fed began signaling that they would take away the monetary punch bowl.

Yes, commodities like food and gasoline/diesel prices are up dramatically under Biden’s energy policies (not to mention the USA’s proxy war with Russia).

The Fed seems determined to remove the Fed “Snake juice” from the economy.

Inflation Fightin’ Fed? Fed Can’t Fight Food And Energy Inflation, But They Can Crash The Housing Market (To Tame Total Inflation, Fed Would Have To Raise Rates To 21.38%!)

Inflation Fightin’ Fed?

Kansas City Fed President Esther George said The Fed isn’t focused on impact of rates on stocks (or pension funds, apparently).

The inflation that is crushing Americans is due to energy and food price increases. That is, the non-core inflation. Under Biden, food is up 63%, gasoline is up 92% and diesel prices are up 112%. But The Fed doesn’t consider food and energy prices, per se.

If we look at the Taylor Rule considering fighting inflation including food and energy, The Fed would have to raise their target rate to … 21.38%.

Now, The Fed can clearly cool-off the housing market by raising rates. In fact, my fear is that they go too far and crash the housing market. The Fed will NEVER get to 20% again like we last saw under Volcker in 1981. 20% rates certainly cooled home prices back then and Fed rate hikes helped crash the housing market in 2008.

So, when The Fed says they want to be the inflation-fightin’ Fed, we must be aware what The Fed can and cannot do. They can’t tame the inflation beast in the form of food and energy prices (unless they crash the economy), but they can crush home prices.

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.”

Freddie Mac 30Y Mortgage Rate Skyrockets To 5.30% (Feddie And The Dreamers?)

The Freddie Mac 30-year mortgage rate is rising faster than a SpaceX moonshot!

I’m telling your now that The Fed is killing the dreams of millions of Americans by pricing them out of the housing market. Home price growth is lethal as is the increase in mortgage rates.

Do The Feddy!

Putting Cryptos In A Crypt? Bitcoin Rallies, Ethereum Down As Cryptos Collapse (Microstrategy Bond Plunges To $78.34)

Call this “Nobody’s Everything.” Crytpocurrencies are getting clobbered. But then again, the S&P 500 is not doing so well. But crypto stalwarts Bitcoin and Ethereum have down even worse.

At the dollar strengthens, Bitcoin has gotten pummeled.

But at least Bitcoin rose this morning along with Bitcoin Cash. And XRP. But the others are getting clobbered.

Microstrategy bonds are getting crushed.

April Inflation “Cools” To 8.3% YoY, But Food Up 9.4%, Gasoline Up 43.6%, Shelter Up Only 5.1%? (Real Avg Weekly Earnings At -3.4% YoY)

April’s inflation numbers are out and, at first glance, inflation seems to be cooling from 8.5% YoY in March to 8.3% YoY.

But the headline inflation numbers do not accurately reflect the pain and suffering of American households. Food is up 9.4% YoY and gasoline is up 43.6% YoY.

The strange way the BLS measure “shelter” shows that housing only grew at 5.1% YoY. That’s odd since home price growth is almost 20% YoY and rent growth is near 20%.

Runaway home prices and rents are especially painful given that inflation is destroying the purchasing power of the dollar for consumers. Real average weekly earnings YoY are at -3.4% YoY.

Hence, the purchasing power of the US Dollar keeps eroding.

Good luck out there with inflation still roaring, and food/housing/energy prices soaring.

Here is a photo of American children trying to create energy from flying a kite made from progressively devalued US currency.

“Middle Class” Joe’s War On … The Middle Class (WTI Crude UP 102% Under Biden, Reg Gasoline UP 83%, Diesel Fuel UP 111%)

Joe Biden likes to sell himself as “Middle Class” Joe. But Middle Class Joe declared war on the middle class with executive orders on fossil fuel drilling and killing the Keystone pipeline. Hence, his press conference on reducing inflation left off one thing: he could rescind the aforementioned executive orders. But he didn’t. So its Band-Aids on Band-Aids.

Since Biden was elected President, WTI Crude Oil futures are up 102%. Regular gasoline is up 83% and the lifeline of the shipping industry, diesel, is up 111%. Of course, inflation measures don’t measure the harm to the middle class at 8.5% YoY.

Here is Biden’s speech, blaming everyone but himself for inflation. And then walks away (as usual) when asked a tough question. But he lied. He COULD cancel his executive orders on oil and natural gas exploration, but didn’t. Instead, he blamed Trump and MAGA voters.