Feelin’ Hot, Hot, Hot! US Inflation Soars To 8.6% YoY For May, Fed Expected To REALLY Start Jacking-up Rates (Mortgage Rates Rise To 5.58%, The Highest Since 2009)

Inflation, the bane of the middle class and working families, just rose to 8.6%.

Core inflation, that excludes energy and food, actually declined slightly to 6% from 6.2% in April. But since most families are concerned with gas prices and food, (not to mention home prices growing at 21.17% YoY), core inflation really underestimates the suffering.

Under Biden’s leadership in cooperation with eternal Fed stimulus (until now), inflation started at 1.4% YoY and has increased to 8.6% YoY. The Fed’s balance sheet has increased by 20.27% (more monetary Stimulypto!), Case-Shiller home prices started at 10.44% YoY and has now doubled to 20.55% YoY. Regular gasoline started at $2.57 and is now at $5.42, up 102%. Food is up 61%.

The Fed is expecting two half-point hikes followed by quarter-point increases.

And mortgage rates keep rising as The Fed fights the inflation fire.

Here is a video of Milton Friedman speaking on inflation.

On the hotter than expected inflation news, the US Treasury 10Y-2Y curve flattened to 12 bps.

Tower of … inflation?

Pennies From The Fed! Who Gained The Most From Fed Stimulypto? The Top 1%, Of Course! (Fed Helps Homeowners, Not Renters)

Pennies from Heaven. That is what the bottom 50% received from The Federal Reserve’s massive doses of monetary stimulus (or stimulypto).

There was one big dose of monetary stimulus in late 2008 surrounding the financial crisis and housing bubble burst, another doses (aka, QE 2 and QE3) then the biggest dose of all with the outbreak of Covid in early 2020.

President Biden should have mentioned on Jimmy Dimmel last night that The Federal Reserve has helped the bottom 50% with its endless monetary stimulus.

But if you were fortunate enough to own a home (the top 1% are likely homeowners), then you benefited from The Fed’s monetary stimulypto.

And I noticed that Biden didn’t mention plunging REAL average weekly earnings YoY.

The Federal Reserve’s monetary “policies” have benefited the top 1% and homeowners relative to the bottom 50% (who often rent and got clobbered with 20% growth in rents).

Great job, Fed! Making housing more unaffordable for rents (combine rising rents and declining REAL wages and we have a real affordability problem).

Home affordability for first time homebuyers?

And what is with Biden’s ear lobes? As inflation is rising, his ear lobes are shrinking.

Weird, wacky stuff.

The inflation numbers are out tomorrow. I noticed that Biden and Jimmy Dimmel only discussed gun control, not the sad state of the economy under Biden.

Moving? Diesel Prices UP 117% Under Biden, Gasoline UP 106%, Natural Gas UP 281%

As I line up my move from Fairfax VA to Columbus OH, I am getting a variety of quotes from moving companies. And wow! The cost of moving using a national moving company for a 4 bedroom house is $15,000 to $20,500. That includes International, North American and Bekins.

One of the reasons for the high cost of moving is the massive increase in diesel fuel used for trucking. Diesel fuel under Biden has risen 117%. And since it was revealed that natural gas often is used for electric charging stations, and NATGAS is up 281% under Biden (but there aren’t many electric moving trucks yet).

The other problem facing moving companies is labor scarcity. Despite our open borders with Mexico and millions flowing across the border, moving companies STILL can’t find crews. Both Mayflower and United refused to give me a quote for moves under $1,000.

And for any of you who say “Do it yourself!”, I am physically disabled and can’t do it.

I wonder if it would be less expensive if we used horse-drawn moving vans?

Fed’s Limbo Rock! Mortgage Purchase Applications Drop 18% WoW (And -21% YoY), Refi Applications Drop 6% WoW (And -75% YoY) How HIGH Can They Go??

Its The Fed’s Limbo Rock! Except that it is how HIGH can they go? Mortgage rates have soared 71.4% over the past year as The Fed signals tightening of monetary policy.

Mortgage applications decreased 6.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 3, 2022. This week’s results include an adjustment for the Memorial Day holiday.

The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index decreased 18 percent compared with the previous week and was 21 percent lower than the same week one year ago.

The Refinance Index decreased 6 percent from the previous week and was 75 percent lower than the same week one year ago.

In related news (debt), consumer debt is rising at 7.5% YoY while the personal savings rate plunged to 4.4% in May as consumers borrow more and save less to cope with inflation.

How HIGH can The Fed go?

Fed Data Shows a Half Century of Moderate Growth in the Fed’s Balance Sheet Through Two World Wars – Then a Seismic Explosion Under Bernanke, Yellen and Powell (Mortgage Rates Rise To Highest Since June 2009)

Wall Street on Parade had an excellent article showing the seismic explosion in the Fed’s Balance Sheet after the housing bubble burst and ensuing financial crisis.

Here is my version of their chart since 2000 where you can seen the seismic shift in the balance sheet (toxic green slime line), particularly with The Fed’s response to Covid. The Fed is signaling a tightening in monetary policy to help reduce inflation (blue line).

But notice that M2 Money Velocity (GDP/M2) is now near the all-time low along with consumer purchasing power.

How BIG is The Fed’s balance sheet? Try more that a third of size of US GDP.

And as The Fed signals its inflation-fighting intentions, mortgage rates have shot up to 5.51%, the highest mortgage rate since June 2009.

Here is a video of the seismic shift in The Fed Balance Sheet, now that they are allegedly tightening monetary policy.

Speaking of seismic shifts, the Atlanta Fed’s Q2 GDP tracker just fell to +0.9%.

The Fed’s noose is tightening on the economy.

Mr. Freeze! Natural Gas Futures UP 5.53% This Morning (UP 255% Under Biden), Housing Square Footage Goes Up With Fed Easing (Stay Warm!)

You better hope it doesn’t get Cold Outside. Because the cost of heating your house just rose 5.74% this morning (natural gas futures). To $9.01.

Between Biden’s anti-fossil fuel policies and the war in Ukraine, natural gas futures are up 255% under Biden.

With rising natural gas prices, one would think American consumers and American home builders would start building higher-density housing like duplexes.

But The Federal Reserve has helped America build BIGGER houses (as in greater square footage).

Note that following the financial crisis and the takeover of the US economy by The Fed, median square footage of US housing starts rose with Fed easing. Median square footage started falling as The Fed leveled-off its asset purchases (green line). But when Covid struck and The Fed really went to town (aka, monetary stimulypto), median square footage started rising again.

The above chart demonstrate the conflict that can arise between a Presidential Administration and The Federal Reserve. President Obama wanted more green apartments built and less suburban growth, but thanks to The Fed, we got median square footage of new builds rising. But once The Fed took its enormous foot off the monetary accelerator pedal, median square footage started falling. Then Covid struck, The Fed intervened, and median square footage rose again.

But with alleged Fed monetary tightening, we should should see the demand for larger homes decline relative to smaller homes.

Mortgage rates have been climbing rapidly, making housing acquisition relatively less affordable.

Black Knight’s monthly P&I payment to average purchase price says it all.

My version of the Black Knight chart is slightly different, but tells the same story: home prices and mortgage rates are rising FAST with Fed stimulus, but should slow down.

I guess we can call both Biden and Fed Chair Powell jointly “Mr Freeze” for housing.

The Fed has helped make housing not only more expensive, but larger in size. And the Biden Administration and war has helped make heating those large houses more costly.

The Fed’s Missouri Boat Ride! Housing Acquisition Index Rises 114.5% Under Biden As Housing Price Reductions Rise 70% YoY (House Price Growth Will Freeze)

I call this The Federal Reserve’s Missouri Boat Ride.

Meaning that The Fed has kept monetary stimulus in play for too long since late 2008 helping to lower mortgage rates from over 6% in November 2008 to 2.98% in November 2021. Then came “The Missouri Boat Ride” as The Fed signaled monetary tightening, leading to mortgage rates skyrocketing to their highest level since 2010.

The result of rising home prices AND mortgage rates? Housing acquisition prices (home prices * 30 year mortgage rates) have skyrocketed.

Between rising home prices and rising mortgage rates, we see that number of prices reductions increasing at nearly 70% YoY (chart courtesy of WolfStreet.com).

Of course, Congress and the media will never ask Janet Yellen (former Fed Chair [2013-2018] and current Treasury Secretary) WHY she kept massive monetary stimulus around for so long. Or why current Fed chair Powell did the same with Covid-related monetary stimulus.

Time to buy gold and silver??

Weekend Update! Gasoline Prices UP 101% Under Biden, Mortgage Rates UP 89%, Foodstuffs UP 58% (Crude Oil Futures UP 142%)

This is not the legacy that will endear President Biden to voters. Regular gasoline prices have risen 101% under Biden.

But it not just gasoline and diesel that are soaring (while the rest of us are sore!), CRB Foodstuffs are up 58% under Biden while the 30-year mortgage rate is up 89% under Biden.

And this morning, WTI crude futures are up +1.71%.

And up 142% under Biden.

Prices are sizzling and clobbering the American middle class and low wage workers. But former Federal Reserve Chair and current US Treasury Secretary Janet Yellen never saw it coming.

Biden’s just killing us. And Powell is making up for Yellen’s keeping monetary stimulus too high for too long. Price? Mortgage rates are soaring.

Home Price Cost Index SOARS 114.5% Under Biden As Mortgage Rates AND Home Prices SOAR (Labor Market OVERHEATED As REAL Wage Rate Declines)

Instead of President Ronald Reagan saying ““Mr. Gorbachev, tear down this wall” we need someone to tell President Biden and Federal Reserve Jerome Powell to “Stop driving up prices and making housing unaffordable.” Unfortunately, The Fed thinks that raising interest rates will temper price increases — it won’t. But it could tamper home price growth.

So what we are left with is soaring home prices AND soaring mortgage rates, leaving this scary chart. The housing cost index has risen 114.5% under Biden.

Its only going to get worse from here.

Today’s jobs report for May showed that the U-3 unemployment rate remained the same as April, 3.60%. However, that is lower than the NATURAL rate of unemployment of 4.445% indicating that the labor market is overheated. Historically, The Fed has tightened monetary policy by raising rates when this has happened. So, look for The Fed to keep raising rates.

As I have mentioned before, REAL hourly wage growth is negative since March 2021, just after Biden signed his executive orders canceling drilling on Federal lands and cancelling the Keystone Pipeline. Later, he canceled off-shore drilling permits and Alaska drilling. Now we have REAL average hourly wages declining at -2.8% YoY as The Fed has been reducing M2 Money supply YoY.

Listings of homes is up 11% YoY, the highest in several years.

Let’s see how the housing market does with soaring mortgage rates.

How do you spell stagflation? M-O-N-E-Y … tightening.

The Federal Reserve Board of Governors playing “Hurting housing two times.”

Simply Unaffordable! Real Home Price Growth At 12% YoY, Real Wage Growth At -1.864% (Inflation Making Americans Suffer As Mortgage Rates Rise FAST)

Simply unaffordable!

President Biden met with Federal Reserve Chairman Powell to discuss how to control the inflation that is crushing the middle class and low-wage workers.

Here is a good example of why Biden is worried. There is a mid-term election on the horizon and people are angry and scared. Housing, generally the largest asset owned (or rented) by a household is simply unaffordable thanks, in part, to the over-stimulation of the economy by 1) The Federal Reserve in terms of money printing and 2) the Federal government in terms of fiscal stimulus in response to the Covid outbreak in March 2020.

In nominal terms, the gap between US home prices (Case-Shiller National Home Price Index YoY – US Average Hourly Earnings YoY) is near the all-time high.

Yes, home price growth exploded upwards when The Fed rapidly expanded their balance sheet in response to the Covid outbreak … and only now are considering shrinking the balance sheet.

In terms of house prices, CoreLogic has a nice chart depicted the odds of home prices dropping over the coming year. I circled Columbus Ohio because that is where I am moving (knock on wood).

And then we have the 30-year mortgage rate rising with The Fed’s expected tightening of monetary policy. That will certainly make housing even less affordable, unless house price growth cools dramatically.

You might as well face it, we’re addicted to gov.

Doctor, doctor (Yellen), we’ve got a bad case of UNAFFORDABLE HOUSING.