Fauci’d! Office Occupancy Remains Low At 42.8% While Office Prices Soar +16.2% With Fed Stimulus (Average Time To Foreclosure In Hawaii Is Over 7 Years??)

Do you want to see a magic trick? Like how governments shut down the US economy resulting in collapsing office occupancy rates while the price of office buildings rose dramatically (+16.3% since Q2 2020)?

Kastle’s “Back to work barometer” is showing that the 10 city average occupancy rate in the US is now only 42.8% as remote working has caught on. And the fear of yet another Covid mutation is keeping office occupancy below 50%.

Even Washington DC, home of Dr. Anthony Fauci, has only a 37.5% occupancy rate. Of the top 10 cities, Austin TX has the highest office occupancy rate at 62.4%.

So, the magic trick is not why America is so slow to return to the office, but why commercial office prices are rising so fast. Ah, Federal government STIMULYTPO! Aka, The Federal Reserve has been overstimulating the economy since 2008 and particularly since 2020 and Covid.

Speaking of a magic trick, here is how government’s make the average time to foreclosure up to over 7 years in Hawaii and 4.4 years in New York. In simple terms, you can buy a home in New York, never make a mortgage payment and live rent free for an average of 4.4 years.

Of course, the states with the longest average times to foreclosures at JUDICIAL foreclosures states (seen here is gray). Hawaii is now a judicial foreclosure state. That is, you must line up for a judge to hear your case.

So, the government’s magic trick is to 1) shut down local economies in fear of Covid, 2) provide excessive fiscal and monetary stimulus to combat the shutdown, 3) watch office building prices soar with stimulus as office occupancy remains below 50%.

Do you want to see a magic trick? Watch The Fed try to tighten monetary easing and NOT crash the economy.

Update for 04/25/2022. 10Y Treasury yields DOWN 8.7 bps.

And commodities are tanking. WTI oil is down 5%, iron ore is down almost 7%.

And the Dow is diving with increased expectations of Fed monetary tightening, but the expectations (green line) have been declining this morning.

REAL Mortgage Rates At -3.25%, REAL Wage Growth At -2.99% YoY While REAL Home Price Growing At +11.7% YoY (Powell And Fed Singing “No Sugar Tonight”)

For the moment, Fed Chair Jerome Powell and several Fed governors are singing “No sugar tonight” for the economy.

As The Fed sings “No sugar tonight” exemplified by the number of expected Fed rate hikes by February 2023 has grown to 10.4. Mortgage rates are now the highest since 2009, but inflation is the highest in 40 years. The result? The REAL 30-year mortgage rate is -3.25%.

REAL average hourly earnings are now a terrible -2.99% YoY thanks to the worst inflation in 40 years. REAL home prices are growing at 11.8% YoY.

Traders are betting that even with the Fed boosting its target for the federal funds rate by 2.5 percentage points this year to 3% won’t be enough to get the inflation rate back down to 2% over the next decade from around 8.5% currently.

In nominal terms, mortgage rates are seemingly trying to rise to 2007 levels (6.5%). But the gap between the 30-year mortgage rate and Fed Funds target rates is back to 2009 levels.

Talk about Fed and Fed government OVER stimulypto! Even REAL US home prices grew at 12% YoY pace while the REAL Fed Funds Target rate is -8.04%.

Fed Fireball! Mortgage Rates Climb To Highest Level Since 2009 As Fed Attacks Inflation And Markets Get Crushed (S&P 500 Index Down 7% In April, Bitcoin Down 11%)

Its Saturday and I am dreading markets opening on Monday. But here is where we sit today.

The 30-year mortgage rate has soared to 5.29%, the highest level since 2009 at the beginning of Obama’s Presidency. Since 2009, we have seen the purchasing power of the US Dollar decline further (orange line) while inflation (blue line) has soared. M1 (yellow) and M2 (green) has been growing since the financial crisis, but really took-off with the Covid outbreak in 2020 and The Fed’s massive overreaction coupled with Federal government stimulus.

Since the creation of The Federal Reserve System under President Woodrow Wilson, the purchasing power of the US Dollar has collapsed so much that $10 in 1913 in worth 34.8 cents today. But notice that since 1949, the CPI YoY has rarely been negative meaning that prices are pretty much only going up.

Instead of April showers bring May flowers, it is April expected Fed rate hikes (now 10.408 rate hikes by February 2023) bringing declining assets prices. In April so far, the S&P 500 index is DOWN 7%, the 10-year Treasury Note price is DOWN 5%, Bitcoin is DOWN 11%, the 3.5 coupon agency MBS price is down 3.2%.

We are seeing increased volatility in both the equity and bond markets.

Well, Powell and The Fed are hurling fireballs at mortgage rates and asset prices in April.

Slipping Into Darkness! Bidenflation And Fed’s Reaction Causing Social Security And Pension Funds To Get Clobbered (Mortgage Rates Keep Climbing)

US President Biden went green and signed executive orders on his first day to limit oil and natural gas exploration of Federal lands and offshore (also, killed the Keystone Pipeline), helping to drive up energy prices and food prices. These orders begat inflation (also caused by the massive Covid relief by the Federal government). The highest inflation in 40 years begat The Federal Reserve signalling a tightening of Fed monetary policy … to fight the problem caused by The Fed in the first place … too much monetary stimulus for too long. Fiscal and monetary fanaticism and ignorance is forever busy and needs feeding

There was an interesting article on MarketWatch entitled “Bond rout exposes Social Security’s insanity.” The headline was “Every dollar of yours that’s invested in the Social Security trust fund is invested in low-yielding government bonds.”

Yes, another disastrous consequence of The Fed’s lax monetary policy since 2008, helping to push Treasury yields extremely low. And REAL Treasury yields into negative territory.

But here we sit today with The Fed threatening to trim their balance sheet and raise rates … to combat the inflation they helped create in the first place. Now we have the 10-year Treasury Note price falling like a paralyzed falcon with expected hate hikes going above rate hikes by February 2023 (based on Fed Funds Futures prices).

Most pension funds also invest heaving in US Treasuries, along with agency Mortgage-backed Securities (AgencyMBS).

Plus we have the Treasury curve slipping into darkness.

Speaking of “Slipping Into Darkness,” mortgage rates are soaring.

Meanwhile, Biden, Fed economists and Congress are merrily partying at some DC nightclub.

What is hip? NOT Biden, Pelosi, Schumer or Powell.

The Biden Inflation Scorecard! House Price Growth UP 69%, Food UP 58%, Gasoline UP 72%, Diesel Fuel UP 154%, Fed Bal Sheet UP 21% (Mortgage Rates UP 83.3%)

Under President Biden’s Reign of Error, inflation is the highest in 40 years. But Powell and The Fed are still overstimulating the economy, and Congress is contributing to the inflation disaster with short-sighted political policies and spending (flooding the economy with stimulus spending helping to drive up prices). Even Democrat US Senator Elizabeth Warren gets it.

Here is Biden’s inflation scorecard in one chart. Under Inflation Joe, foodstuffs are up 58%, gasoline is up 72%, diesel fuel is up 154%, and green energy element Lithium is up 645% (no wonder electric car manufacturer Telsa is raising their prices 10%). Of course, The Federal Reserve keeps on expanding its balance sheet, UP 50.3% under Inflation Joe.

House price growth is up 69% and the 30-year mortgage rate is UP 83.3% and currently is at 5.28%. The orange line is the growth path.

Yes, prices have risen even more after Russia Invaded Ukraine on February 24, 2022. But most of the inflation was baked-in prior to the Russian invasion. Sorry Jen Psaki, but you are wrong about inflation being all Putin’s fault.

Reversal Of Fortune! How Fed Monetary Stimulus And Federal Covid “Relief” Made The 1% Wealthier And The Bottom 50% Worse Off (Fed Anticipated To Raise Rates By 100 BPS At Next Two Meetings)

The Covid epidemic was bad enough with the government shutdowns and deaths. But was even worse is that all the Fed monetary stimulus and Federal government stimulus “relief” led to a reversal of fortune. In that, the share of net worth held by the top 1% grew and the gap between the 1% and bottom 50% hit an all-time high.

Now that the 1% have fed at the Federal trough, The Fed is anticipated to raise rates by 100 basis points at the next two meetings.

Remember, REAL average hourly earnings are getting crushed under Biden and his pro-1% policies.

This is a nightmare for the American middle-class and lower-wage households.

How Biden And Congress Helped Crush Netflix Stock Price (Declining REAL Earnings Led To Crash In Neflix Subscriptions)

Netflix, the movie and TV show subscription service, suffered an extraordinary decline in its stock price. But like the film “Margin Call” that pretends the Lehman Brothers bankruptcy in 2008 was a surprise, it really is no surprise that Netflix is getting crushed. Why? Thanks to Bidenflation, millions of American households are suffering (REAL average hourly earnings are declining under Biden) and many of those were Netflix subscribers.

Netflix’ earnings per share soared when Biden was first installed as President, likely due to effects of Biden’s/Pelosi’s/Schumer’s Covid stimulus. But alas, fiscal stimulus is short-lived but the negative effects of inflation are long-lasting.

Inflation Joe, the bully of the middle class and low-wage workers. But at least millionaires will get more electric cars charging stations! /sarc

Inflation Joe And Slow-Walking Jay! REAL Fed Funds Target Rate Lowest In History As Bidenflation Crushes Middle Class And Low Wages Workers (REAL Home Price Growth Is Now LOWER Than The Peak Of The 2000s House Price Bubble!)

Inflation Joe and Slow-Walking Jay. The bullies of the middle class and low-wage workers.

As inflation crushes the middle class and low wage workers, we see that the REAL Fed Funds Target Rate (based on headline inflation) is the lowest in history. Notice that the REAL Fed Funds Target Rate tends to hit its lowest negative reading DURING recessions, although The Fed has had a poor track record since the Dot.com bubble burst and the 2001 recession meaning that the REAL Fed Funds Target rate has been in negative territory (that is, the rate of inflation has exceeded The Fed Funds Target Rate for much of the post-2000 era).

The “good” news? Inflation caused by The Fed’s negative interest rate policy (NIRP?) has actually led to REAL home price growth to slow 11.6855% YoY, lower than the peak of the 2005-2007 house price bubble.

With The Fed’s OVERSTIMULATION of markets with historically low REAL Fed Funds Target Rate, we can see that the US unemployment rate is overheated (that is, below the Congressional Budget Office (CBO) Short-term Natural Rate of Unemployment. Yes, it appears that Slow Walking Fed Chair Jay Powell should be raising The Fed’s target rate AND removing (at least) the Covid monetary stimulus.

Inflation Joe is a career politician, so it is not surprising that he is trying to blame Russia for the horrid inflation in the US. However, inflation grew from 1.4% when Biden took office to 7.9% when Russia invaded Ukraine. The latest inflation report was 8.5%, so Russia is only partly to blame for rising prices since February 24, 2022. The rest is due to Inflation Joe, Slow Walking Jay and Congress.

Again, Congress helped drive prices through the roof by massive Federal spending (aka, Covid stimulus “relief”). Hence, the Four Horsemen of the Inflation Apocalypse is appropriate. And now Biden is once again pitching massive government spending (Build Inflation Back Better?).

Here is Joe Biden and his inflation bat, Lucille.

Have a peaceful and pleasant Easter Sunday.

The Big Short 2? Subprime Credit-Driven Bubble Versus Fed Loose Policy Driven Bubble (Will The Fed Burst Yet Another Housing Bubble? Michael Burry Thinks Not)

The book and movie “The Big Short” revolved around the 2005-2007 housing bubble driven by lending to borrowers with subprime credit (and little or no underwriting). As we know, Bear Stearns, Lehman Brothers and other investment banks too large positions in subprime asset-backed securities (SABS) that became highly toxic once the demand for high-yield subprime ABS dried up. The decline in US home prices coupled with soaring 90-day mortgage delinquencies led to the failure of Bear Stearns and Lehman Brothers along with Fannie Mae and Freddie Mac being put into conservatorship by their regulator.

Fast forward to today. Mortgage originations by credit scores of 620 or less have shriveled while home price growth YoY is even higher than the subprime mortgage crisis of 2005-2007. So, is the US facing another “Big Short” scenario? Yes and no.

The answer is no in that lenders have tightened their credit box sufficiently so that investment banks are no longer buying large quantities of subprime credit paper. The answer is yes if we consider that the current housing bubble is fueled by extraordinary monetary stimulus due to Covid (as well as rampant Federal government stimulus spending).

Following the Federal Reserve of Dallas’ lead, here is a chart of REAL home price growth YoY against REAL average hourly earnings YoY. I added REAL Zillow house rents YoY as well.

Look at the affordability gap during the Subprime Bubble of 2004-2006 and then the Fed Bubble of 2020 to today. Both bubbles show a disconnect between REAL home prices and REAL wages. REAL Zillow home rents are not as high as REAL home price growth, but still how a huge gap in rent affordability.

So, what can upset the apple cart? How about Jay and The Gang jacking up mortgage rates making home affordability even worse (unless it slows home price growth).

Thanks to The Fed’s propose quantitative tightening, mortgage rates are soaring and mortgage costs along with them. Mortgage costs, thanks to The Fed driving up housing prices AND mortgage rates, are substantially higher than during the subprime mortgage housing bubble.

The Fed’s whipsaw approach helped crash home prices during the subprime mortgage crisis by dropping rates too fast at first (helping to ignite a housing bubble) then raising rates too fast (helping to crash housing prices).

Now, Michael Burry of The Big Short fame (portrayed by Christian Bale) thinks that The Fed has no intention of fighting inflation meaning that he doesn’t think The Fed will raise rates all that much. “The Fed’s all about reloading the monetary bazooka. So it can ride to the rescue & finance the fiscal put,” Burry added.

Yikes! Time for investing in cryptocurrencies like Bitcoin and Ethereum?

This scene from the film “The Big Short” won’t be happening again. But I agree that no one is paying attention … again.

Fed’s Fahrenheit 451! Freddie’s Mortgage Rate Hits 5% For First Time In A Decade As Fed Keeps Buying Assets

WASHINGTON (AP) — Long-term U.S. mortgage rates continued to climb this week as the key 30-year loan rate reached 5% for the first time in more than a decade amid persistent high inflation.

The average 5% rate on the 30-year mortgage was up from 4.72% last week, mortgage buyer Freddie Mac reported Thursday. The average rates in recent months have been showing the fastest pace of increases since 1994. By contrast, a year ago the 30-year rate stood at 3.04%.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, jumped to 4.17% from 3.91% last week.

Yet The Federal Reserve’s balance sheet keeps on growing.

The Federal Reserve reminds me of the Ray Bradbury novel Fahrenheit 451 where the fireman actually burn books rather than extinguish fires.