Financial Markets And Real Estate
The US economy is Slippin’ Into Darkness.
The Fed’s favorite yield curve measure, the implied yield on 3-month T-Bills in 18 months less the 3-month T-bill yield has inverted. Note that this curve inverts prior to a recession.
The new face of reckless Fed policy and Federal spending. 19 straight months of negative REAL earnings growth as America re-elects the same irresponsible fools that are turning the US into Venezuela.
Sam Bankman-Fried’s bankrupt digital-asset exchange FTX was hit by a mysterious outflow of about $662 million in tokens in the past 24 hours, the latest twist in one of the darkest periods for the crypto industry.
Customers still coming to terms with the platform’s Friday plunge into Chapter 11 proceedings were subsequently confronted with what the general counsel of its US arm, Ryne Miller, described as “abnormalities with wallet movements.”
Miller said on Twitter that FTX had begun moving digital assets into cold storage — wallets that are unconnected to the internet — following its bankruptcy filing on Friday. The process was later expedited “to mitigate damage upon observing unauthorized transactions.”
Blockchain analytics firm Nansen, which gave the overall estimate of $662 million in withdrawals, said the coins flowed out of both FTX’s international and US exchanges. A separate analysis by Elliptic stated that initial indications showed almost $475 million had been stolen from the exchange in illicit transactions, with the stablecoins and other tokens that were taken being rapidly converted to Ether on decentralized exchanges — “a common technique used by hackers in order to prevent their haul being seized.”
And like that, O’Biden’s Treasury secretary Janet Yellen FTX Debacle said that it shows need for crypto regulation. Or Yellen could suggest a “buyer beware” tactic, but she is part of the most aggressively regulatory administration in history, MORE regulation is needed! /sarc
Regulate, regulate, dance to THEIR music!
At least Yellen is noticing Bankman-Fried (a new twist on Kentucky-Fried) and FTX since she is seemingly oblivious to the harm being done by The Federal Reserve and The Federal government with regards to inflation and debt growth. She is a Bird of War.
Like this chart of the Purchasing Power of the US Dollar CPI. Janet?
Or how about this chart of US Public Debt Outstanding and Real GDP growth per capita? The Fed and Federal government broke the bank, so to speak, by bailing out the banks in the financial crisis (pink box) and then again for the Covid crisis (orange box). Janet?
Damn it, Janet. Why don’t you discuss the Medicare and Social Security crisis (remember Joe Biden said Republicans may try to fix it which Biden turned into a nasty attack claiming that Republicans were going to take away your Social Security).
Lastly, the US has $172.6 TRILLION in unfunded Federal promises. Janet? A least FLA Senator Rick Scott tried to address the problems with Social Security, but Nasty Joe Biden “yelled Republicans are going to take away your Social Security!” I argue that O’Biden, Yellen and Democrats are going to let SS blow-up rather than take on politically challenging issues. Social Security liability is $22.23 trillion yet O’Biden just promised $500 billion per year to third-world countries and keeps sending billions to Ukraine. Janet?
On the crypto side (that Yellin’ Yellen wants to regulate), at least Dogecoin is up 10.37%.
They call Yellen “The Breeze” because she breezes by the hard decisions and focuses on the easy problems like calling for regulation of cryptos.
Perhaps Sam Bankman-Fried could be ordered to do KFC ads as “The Colonel.”
Former Obama economist and Harvard University President Lawrence Summers says that the FTX meltdown whiffs on an Enron-like scandal.
“A lot of people have compared this to Lehman. I would compare it to Enron,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “The smartest guys in the room. Not just financial error but — certainly from the reports — whiffs of fraud. Stadium namings very early in a company’s history. Vast explosion of wealth that nobody quite understands where it comes from.”
Lehman, Enron? How about Solyndra, one of the biggest political boondoggles in US history.
About two years after the Obama administration co-signed $535 million loans to Solyndra, the company filed for bankruptcy on September 1, 2011. A 2015 report from the Department of Energy found major flaws in Solyndra’s business practices and claimed the company made “inaccurate and misleading” statements to obtain the loan guarantees, and also found fault with Department of Energy oversight.
Which brings us to FTX and Sam Bankman-Fried (the son of Stanford law professor Barbara Fried and co-founder of the political fundraising organization Mind the Gap, which advocates for progressive political candidates and funds get-out-the-vote groups). Sam Bankman-Fried was a big Biden donor. What are the odds that The Federal government will impartially investigate SBF and the FTX fiasco? ZERO!
Why did FTX run into trouble?
FTX has a native cryptocurrency token called FTT, which traders use for operations like paying transaction fees. Last year, Mr. Zhao sold his stake in FTX back to Mr. Bankman-Fried, who paid for it partially with FTT tokens.
On Nov. 2, the crypto publication CoinDesk reported on a leaked document that appeared to show that Alameda Research, a hedge fund run by Mr. Bankman-Fried, held an unusually large amount of FTT tokens. FTX and Alameda are meant to be separate businesses, but the report claimed that they had close financial ties.
Binance announced on Nov. 6 that it would sell its FTT tokens “due to recent revelations.” In response, FTT’s price plummeted and traders rushed to pull out of FTX, fearful that it would be yet another fallen crypto company.
FTX scrambled to process requests for withdrawals, which amounted to an estimated $6 billion over three days. It seemed to enter a liquidity crunch, meaning it lacked the money to fulfill requests.
How did Binance intervene?
On Tuesday, Binance said it had reached an agreement to bail out FTX by buying the company. But, Mr. Zhao added in the announcement, “Binance has the discretion to pull out from the deal at any time.”
In a concurrent announcement, Mr. Bankman-Fried said the deal would protect customers and allow FTX to finish processing their withdrawals. He attempted to dispel rumors of conflict between FTX and Binance, adding, “we are in the best of hands.”
His last quote made me laugh.
Bitcoin plunged another -6% today as gold (gold line) and the S&P 500 (yellow line) rose. Moral to the story? Nothing has been the same since The Fed started tightening.
All cryptos are down today (except Litecoin). The three biggest, Bitcoin, Ethereum and Binance Coin are all down over 5%.
Why does Sam Bankman-Fried remind me of the late John Belushi?
Here is Sam Bankman-Fried defending his actions to his law professor Mom.
The October Senior Loan Officer Opinion Survey on Bank Lending Practices came out yesterday and its a doozy.
The Net Percentage of Domestic Banks Reporting Stronger Demand for Mortgage Loans is sinking faster than Joe Biden’s oratory skills as The Fed tightens their monetary belts.
Jumbo mortgages, those that are greater than FHFA’s conforming loan limit, are tanking as well.
And today, the University of Michigan (BOOO!!) consumer survey for housing buying conditions fell to the lowest level in recorded history.
Given the latest inflation numbers (improving from disastrous, 8.2% YoY to really horrible, 7.70% YoY), and unemployment rate rising from 3.5% to 3.7%, we now see that Taylor Rule estimate for Fed Funds is now … 13.85%. The US is currently at 4.00%. THAT is a big gap!
Yes, The Fed will not be able to fill the gap between the Taylor Rule and the current Fed Funds Target Rate, without incredible damage being done.
Unfortunately, this is an ACTIVE FAILURE for The Fed which has left monetary stimulus too high for too long since late 2008.
On a personal note, I am glad the midterm elections are over. We saw John Fetterman arguing until he was blue in the face that he loved fracking and will continue to let Pennsylvania frack. Then PA governor-elect Josh Shapiro came out yesterday and said that PA will end all fracking. And we are to believe that Lt Gov Fetterman did not talk with PA Attorney General Shapiro about fracking? To quote Joe Biden, “C’mon man!”
The inflation numbers are out for October and they still stink (headline inflation still sizzling at 7.7% YoY).
But the number that really irks me is … REAL average hourly earnings growth is at a horrifying -2.8% YoY because of Biden’s terrible policies (aka, Bidenflation).
Real average hourly earnings growth YoY has been negative since March 2021. That is 19 straight months of negative earnings growth under Biden/Pelosi/Schumer’s reign of error.
Overall, airfares are leading followed by gasoline and household energy.
So, Pennsylvania elects this guy to perpetuate Biden/Pelosi/Schumer’s awful policies?
Now that the midterm elections are over (except for counting of million of mail-in ballots, a massive moral hazard risk), President Biden has proclaimed that he isn’t changing any of his horrid policies. And apparently, neither is The Federal Reserve.
Despite the headlines that The Federal Reserve is rapidly downsizing its massive balance sheet of assets, The Fed is just letting their enormous holdings of mortgage-backed securities (MBS) run off. That is, just letting MBS mature. So, The Fed’s System Open Market Holdings of Agency MBS has barely declined.
Here is the table of MBS run-off. The mass of MBS doesn’t start to mature until … 2039. It is Treasuries that are maturing.
So, The Fed is raising its target rate rapidly, although that is likely to reverse course in the first half of 2022.
Meanwhile, mortgage applications fall to lowest level since 1997 with Fed tightening.
“So Mr Bond…let me tell you my plan for global domination.”
The midterm elections are now over, so let’s go back and look at economic news, rather than listening to election hysteria.
The net percentage of domestic banks tightening standards for small, large, and middle-market firms is tending towards recession.
Note that M2 Money YoY has collapsed.
Biden’s magic trick was to turn the economy into a train wreck.
Example? The 30-year mortgage rate was 2.88% on Biden’s inauguration day (January 20, 2021). They are now 7.32%, a 154% increase under Biden.
The US economy is suffering from knucklehead energy policies, reckless Federal spending and rampant inflation.
And why I won’t watch of subscribe to Peacock.
Yes, this is an economic double whammy!
First, according to Black Knight, US home values declined -2.6% over the past three months.
Second, the US Treasury 10Y-2Y yield curve remains near 1980s low.
There is a third whammy, rising utility costs (highest in a decade).
Yes, its a double whammy!
Here is the US midterm election in one chart.
According to Real Clear Politics, the generic Republican polling data FAVORABLE (red line) is at 47.9% while Democrat polling data favorable polling data (yellow line) is at 45.4%, advantage Republicans.
Biden has been a disaster as President (energy mandates, Afghanistan debacle, endless funding of Ukraine, highest inflation in 40 years, and every time he opens his mouth. But it is the “kitchen table” issues where Biden is getting clobbered: inflation, rising gas, food and diesel prices. One Democrat Congressman, Sean Patrick Maloney, said “Let them eat Chef Boyradee.” I can’t believe how tone deaf some politicians can be.
Biden’s UNFAVORABLE polling numbers (orange line) are directly related to the US headline inflation rate. Inflation was 1.4% YoY when Biden became President and it is now 8.2% YoY (blue line).
And I don’t think Biden’s hateful rhetoric toward “MAGA Republicans” is helping him. I thought his set looked like the movie “Doom” with Duane “The Rock” Johnson and Karl Urban.
Confounded Interest - Anthony B. Sanders 
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