US Real GDP Annualized QoQ printed at -1.5%. And GDP prices QoQ printed at 8.1%, also higher than expected.
At least Personal Consumption printed higher than expected at 3.1%.
Import prices (goods) led the way at 20.9%. Part of Biden’s brilliant strategy of reducing domestic oil production and import expensive energy from overseas?
Consumers are spending more, but the personal savings rate is down to the lowest level since 2013 at 6.2% as consumers try to cope with inflation.
If we look at 90+ days late for mortgages (yellow line), we see that the surge in unemployment with the Covid outbreak and subsequent government shutdowns (red line) did not lead to a surge in mortgage foreclosures.
This situation is quite unlike 2008 when collapsing home prices and the subsequent surge in the unemployment rate led to a 90+ days late surge on mortgages (yellow line).
Difference between today and 2008? The Federal Reserve’s asset purchase (green line) surge happened twice AFTER the 2008 housing crash. Once in late 2008 through 2014, then a second, bigger surge in March 2020 after the Covid outbreak. One big difference is the surge in home prices, home price growth was 3.69% YoY in December 2019 and skyrocketed to 19.80% as of February 2022. This translates to a massive increase in homeowner equity, leading to a lower probability of default.
So, there you go. Powell and The Federal Reserve made housing unaffordable for millions of Americans, but The Fed did help thwart another mortgage default crisis. BUT we will see what happens with future rate hikes from The Fed.
Here is Attom’s US Foreclosure Starts chart. Yes, that is hardly a surge, although foreclosure starts did rise in Q1 2022.
So, The Fed has helped make housing simply unaffordable. Look at the growth of REAL home prices relative to REAL average hourly earnings.
The US Q1 GDP report is due out tomorrow morning. The forecast is for -1.3% decline in GDP.
The Atlanta Fed GDPNow real-time GDP tracker is for 1.806% for Q2. If this holds, then recession fears will diminish.
Even though the US may avoid consecutive negative GDP quarters, M2 Money Velocity (GDP/M2 Money) got crushed by The Fed’s reaction to Covid back in 2020.
The reason why home prices are still raging at 17.3% YoY? The Fed’s monetary stimulypto is STILL in place! The Fed’s balance sheet (green line) is still staggering, and The Fed Funds target rate (white line) is a measly 1%.
Atlanta Fed President Raphael Bostic is talking about a pause in Fed tightening. Which they haven’t paused yet.
Fed Chair Jerome Powell is really “slowhand,” not Eric Clapton. Bostic is now a member of The Fed’s “Slowhand” strategy.
Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 20, 2022.
The Refinance Index decreased 4 percent from the previous week and was 75 percent lower than the same week one year ago. And under Biden, the refinance index is down -83.2%.
The good news? The seasonally adjusted Purchase Index increased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 16 percent lower than the same week one year ago. And the mortgage purchase applications index is down -12% under Biden.
While mortgage interest rates are up 71.7% than one year ago and mortgage rates are up 87% under Biden. As The Federal Reserve signals (but not yet accomplished) monetary tightening.
Once again, The Fed is dead set on cooling inflation caused by 1) Biden’s anti-drilling policies and 2) the remnants of the Federal government spending splurge to combat Covid. The Fed has been increasing their asset purchases (purple line) as inflation increase (blue line). Now they are signaling a decline in the balance sheet (green line) in the hope that it will cool inflation. Fat chance.
Let’s see how DEAD SET The Fed is about tightening monetary policy in the face of rising energy and food prices while a war rages in Ukraine and China in a Covid lockdown.
I have never seen two Federal entities make such a mess in my life. The Federal Reserve and The Federal government.
The good news? The 10-year Treasury yield is down -12.9 BPS this morning generally resulting in lower 30-year mortgage rates. Of course, the reason why the 10-yield is falling is generally bad news.
The bad news? US New Home Sales fell -16.6% MoM in April as mortgage rates skyrocketed.
Since the installation of Joe Biden as President, new home sales have plunged -31.2%, mortgage rates are up 88.9%, and framing lumber prices are up 29.2%.
Biden is out there bragging about rising energy prices which he views as a necessity to force the conversion of America to electric cars and trucks. Biden is the first President in history to gloat over the suffering of American households.
Under Biden, regular gasoline prices are up 92%, diesel prices are up 111%, and CRB Foodstuffs are up 61%.
Say, framing lumber for housing is cheaper than food. Maybe Biden will suggest Americans transform to being beavers and gnaw on wood.
Mortgage applications decreased 11.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 13, 2022.
The Refinance Index decreased 10 percent from the previous week and was 76 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 12 percent from one week earlier. The unadjusted Purchase Index decreased 12 percent compared with the previous week and was 15 percent lower than the same week one year ago.
Of course, The Fed has about as much chance of slowing down energy and food prices as I do of becoming King of the United States. But Jay the Revelator may be able to cool housing demand with rising mortgage rates.
Goldman Sachs Senior Chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.”
I am not surprised. Take a look at The Fed’s Overnight Reverse Repo operations. As inflation surged in 2021 and 2022, banks are parking more funds at The Fed. Fear?
We are seeing the S&P 500 futures down today after a nice rally on Friday. The &P 500 forward 12-month P/E ratio is back to pre-Covid, pre Federal spending surge, pre Fed monetary Stimulypto of 2016.
Goldman Sachs see the 10-year Treasury yield rising to 3.3%. That bodes ill for 30-year mortgage rates, perhaps push mortgage rates up another 40 basis points to 5.80%.
Foodstuff are up 61.5% under Biden’s Reign of Error. Gasoline prices are up 85.8%, diesel prices are up 111%. Yet the government inflation index (aka, CPI) is up only 8.3% in April.
But while energy and food prices are soaring, the CRB Spot Metals Index has plummeted -15% since May 4 as Covid is ravaging the Chinese economy. Recession alter anyone?
And then we have soaring home prices and rents. But notice that Zillow’s Rent index is slowing down as mortgage rates soar.
We have a stalling Chinese market, down 28% since October. Is Biden President of China??
On the currency front, the Russian Ruble is soaring relative to the US Dollar while the Chinese Renminbi, the Japanese Yen and the Euro (or in this case, the Gyro) are sinking like a rock.
If I compare the Russian Ruble and Ukrainian Hryvnia, you can see Ukraine is losing the currency war with Russia.
Inflation Inferno thanks to Biden’s misguided energy executive orders and cancellation of Alaskan and Gulf of Mexico drilling leases.
Biden’s economic mismanagement team: American Gothics Treasury Secretary Janet Yellen and Fed Chair Jay Powell.
In the two-pronged attack out of Washington DC, The Federal Reserve is tightening their monetary policy in an effort to combat 40-year highs in inflation (caused by excessive Federal spending and Biden’s ill-advised energy policies), causing residential mortgage rates to soar 93.4% under Biden’s Reign of Error.
It is almost like the Biden Administration and The Federal Reserve are engaged in an economic demolition derby to see who can cause the most destruction to America’s middle class and lower-wage workers.
We should call the current administration and The Federal Reserve “Demolition Men.”
Confounded Interest - Anthony B. Sanders 
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