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.

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.

Inflation Nation! Real Average Weekly Earnings Growth Lowest Since 2007 (-3.6%) While Mortgage Payments UP 50% (US Treasury 2Y Yield Dumps 12 Basis Points)

Feeling hot, hot, hot! Inflation, that is.

US real average weekly earnings growth YoY is down to -3.60%. That is the lowest since 2007 and is worse than The Great Recession and financial crisis of 2008.

And look at this chart of mortgage payments under Biden. The US was actually experiencing DECLINING mortgage payments YoY in 2019 and 2020. But under Biden’s leadership, mortgage payments have increased by 50% making housing even MORE unaffordable for the middle class and lower-income households.

And now for something kind of scary. The US today suffered a 12 basis point decline in the 2-year Treasury yield, generally a bad sign for the economy. As if we needed more bad news for today.

Highest inflation in 40 years, worst wage growth since 2007 and rising mortgage payments. We will need all the luck we can get.

Biden’s Fastest Economic Recovery In History? Or Recession? Flexible Inflation Rate Hits 20% And Q1 GDP Stalled At <1% (Real Average Hourly Earnings Dive To -2.72% YoY) As Fed Drive Rates Up

Government response to COVID in the form of business shutdowns resulted in massive job losses, then as governments opened the economy up again, job gains were incredible. The Hill had an article discussing the whipsaw in jobs entitled “Biden is delivering the fastest economic recovery in history. Why hasn’t anyone noticed?”

Well, the US have gone from “fastest economic recovery in history” to real GDP growth of less than 1% (Atlanta Fed GDPNow for Q1). In addition, the flexible price CPI less food and energy is a whopping 20%.

You can see “The Biden Miracle!” in the following chart. Hires (red line) dropped with Covid shutdowns, then spiked when governments opened economies again. Throw in the trillions of Federal government Covid stimulus and trillions in Fed monetary support, the Biden Miracle sees less like a miracle and more like an extremely expensive way to add jobs. But the interesting problem facing the Administration is the massive spike in job openings relative to hires (again, governments opening-up plus Federal Stimulypto).

Now for a real downer of a chart. Inflation is so toxic that REAL average hourly earnings YoY is down -2.72%. Hardly the best economic growth in history.

Now we have Jerome Powell and The Blackhearts threatening quantitative tightening starting in May. Here is The Fed’s theme song “We love printing money.”

But The Fed is already slowing the growth of monetary base, although this Fed Stimulypto is still growing much faster than pre-Covid.

At least the 10Y-2Y Treasury curve is back above 0 bps as the Atlanta Fed’s GDPNow Q1 forecast falls to under 1%.

Remember, The Fed is planning on shrinking the balance sheet by $95 billion. The Fed’s balance sheet is just shy of $9 trillion. Which is around 1% per month.

With rising expectations of Fed quantitative tightening (QT), residential mortgage rates keep climbing.

Despite a slowing economy teetering on recession and a war raging in Europe, The Fed is tightening monetary policy. Allegedly to fight red-hot inflation.

When Fed Gov Brainard Talks, Markets Listen! Brainard Says Fed Will Shrink The Balance Sheet At A Rapid Rate (10Y Treasury Yield Rises 16 BPS As Nasdaq Falls 300 PTS) Mortgage Rates Will SOAR!!

When Federal Reserve Governor Lael Brainard speaks, markets listen

Federal Reserve Governor Lael Brainard said the U.S. central bank will continue to tighten policy methodically and shrink its balance sheet at a rapid pace as soon as May.

Brainard’s hawkish remarks sent bond prices crashing and 10Y bond yields up over 16 bps.

While Bankrate’s 30Y mortgage rate is down slightly today, the surge in the 10Y and 2Y Treasury yields could push mortgage rates above 5% by tomorrow,

Even Europe is feeling Brainard’s wrath. Italian 10Y sovereign yields are up almost 20 bps.

The NASDAQ index is down 300 points on Brainard’s utterance.

Gee thanks Lael from all us wanting to finance the purchase of a house.

Brainless and Brainard.

Euphoria! CoreLogic February Home Price Index UP 20% While Real Hourly Wages Decline (Wine Prices UP 25.1%, Foodstuffs UP 52.7 Under Biden)

Euphoria!

CoreLogic’s Home Price Insights revealed that home prices rose 20% YoY in February despite REAL average hourly earnings declining -2.678% YoY. THAT is euphoria! Or Stimulypto, as I like to call it.

No, The Federal Reserve still hasn’t removed its staggering monetary stimulus. Notice that M2 Money Stock is still growing at a torrid 11% pace.

20% YoY home price growth in February? CoreLogic has increased their forecast of home price growth to 5%, likely because The Federal Reserve is imitating a sloth in removing its monetary Stimulypto.

Of course, there are other assets growing at lightning speeds. US Regular gasoline prices are UP 75.4% under Biden. Foodstuffs are UP 57.2% since Biden was installed as President. At least ground beef is only up 16.8% while the fine wine index is up 25.1%.

Speaking of wine, Hitching Post II in Buellton, CA must be suffering from rising food and grape costs too (I highly recommend eating there and using their HP Magic Stuff at home). Not to mention their spectacular wines. Roast artichokes anyone??

Bidenflation Leads To 23% Rise In Fixed-rate Mortgage Payments As Home Price Growth Hits 19% (Fertilizer Prices UP 166% Under Biden, Gasoline Prices UP 77%)

Inflation under President Biden (aka, Bidenflation) has hit 7.9%, the highest in 40 years. And no Joe, the inflation surge was well underway before Russia invaded Ukraine on February 24, 2022.

As The Federal Reserve is allegedly going to try to fight inflation by raising their target rate, the 30-year mortgage rate has risen from 2.88% on Biden’s inauguration to 4.56% today.

The surge in mortgage rates from 2.88% to 4.56% represents a 58.3% increase in mortgage rates under Biden. That translates to an increase in the 30-year fixed-rate mortgage (FRM) payment of 23%. Apparently Biden-Powell (not to be confused with Baden-Powell, the founder of the Boy Scouts) are not interested in keeping homes affordable for most Americans.

I summarize the predicament facing Americans in the following chart. Home prices were growing at a 19% YoY pace in December (Case-Shiller updates will be available tomorrow for January). Inflation is growing at 7.9% and M2 Money continues to grow.

US fertilizer prices are up 166% under Biden while regular gasoline prices are up 77% under Biden. But to be fair, fertilizer and gasoline prices jumped with Russia’s invasion of Ukraine. Fertilizer prices were up 66% under Biden BEFORE Russia invaded Ukraine and regular gasoline prices were up 50%.

Meanwhile, back at the fixed-income ranch, the US Treasury 10Y-2Y curve has flattened to 14.5 BPS as Fed Funds Futures signal 9 rate hikes over the coming year.

And the US Treasury 10Y-5Y curve continues to invert.

In short, Biden and Congress are anti-fossil fuel, pro-renewable energy helping to drive up energy prices and inflation PRIOR to Russia invading Ukraine. Powell and The Federal Reserve are trying to fight what Biden and Congress did with creating energy-related inflation.

Simply Unaffordable! Soaring US Home Prices + Soaring Mortgage Rates + DECLINING Real Wages Makes US Housing Unaffordable For Millions (MBA Refi Applications Drop 14.37% From Preceding Week)

US housing is getting simply unaffordable.

US mortgage rates are soaring, US home prices are soaring, The Fed’s balance sheet is still growing, and US average hourly earnings are growing at a fraction of home price growth.

The unafforable nature of US housing prices is similar to that of 2005-2007 when home price growth greatly exceeded wage growth.

Another side effect of soaring mortgage rates: MBA refinancing applications plunged 14.37% from the preceding week.

Let’s see if The Fed actually tries to extinguish the affordability fire.