US existing home sales in July rose to 5.99 million SAAR, beating expectations. But the inventory of home available for sale remains low by historic standards.
The median price of existing homes declined to 17.8% YoY with The Federal Reserve pumping money into the system like there is no tomorrow.
Bloomberg had the following headline: “Sales of Existing Homes in U.S. Rise as Inventory Picks Up.” While that is a true statement, existing home sales inventory is still down 12% YoY.
I wonder if the attendees at the Jackson Hole Fed conference will be discussing the gut-wrenching home price growth? Rumor has it that Fed Chair Powell will use J-Hole as a platform to suggest paring back on the monetary stimulus.
The KC Fed Jackson Hole conference is a US policy makers’ Davos, an uber-elite US location. You would think that the KC Fed would hold their conference in Kansas City or Omaha, Nebraska as a show of support for the working men and women. But nooooo. They have to hold it where Liz Cheney (GOPe, WYO) lives. And other elites have expensive vacation homes.
(Bloomberg) — When U.S. Federal Reserve officials head to their annual mountain retreat next week to talk economic inequality, they’ll be sitting in the country’s wealthiest county.
Wyoming’s Teton County, home to Jackson Hole, has the nation’s highest per-capita income from assets, according to a study by the Economic Innovation Group. The analysis found a sharp increase in geographic concentration of asset ownership over the past decades.
Jackson Hole, a rural community near the majestic Grand Teton national park and renowned ski slopes, has attracted the ultra-rich in recent years, pulling away from the rest of the country.
The EIG report, released Wednesday, specifically looked at income from interests, dividends and rents. The gap between counties with the lowest and highest asset income per capita rose sixfold between 1990 and 2019, as income skyrocketed in centers of finance, technology, mining and recreation.
Income from assets — a measure of wealth that excludes wages and government assistance programs — make for about a fifth of personal income nationwide.
It’s soared in places like New York City and the San Francisco Bay Area. Meanwhile, across Appalachia, the Deep South and much of the Midwest, it stagnated, representing a negligible source of income.
“I was pretty shocked that so much of the country has derived so little benefit from the boom in asset prices and asset values that we’ve seen over the past couple of decades,” Kenan Fikri, research director at EIG, said in an interview.
Asset ownership offers people something to fall back on during periods of economic uncertainty that could result from unemployment, illness, or, as it has been the case for many Americans over the past year, a pandemic. But for those who live paycheck to paycheck, saving and investing is hardly an option.
Income inequality as measured by the GINI ratio? It has risen steadily since Fed’s massive balance sheet expansion. Then again, it has been rising steadily since the 1960s with the largest jump in income inequality occurring when Bill Clinton, the Arkansas populist, was President.
Bad optics for policymakers, unless that truly don’t care about the middle-class.
The famous Hindenburg Omen, the technical indicator that predicted the 2008 correction in the stock market, has just flashed “ALARM” again.
To be sure, there hasn’t been a major correction in the stock market since the financial crisis, primarily because The Federal Reserve has constantly goosed the markets since late 2008.
Just as the Shiller CAPE ratio is signalling ALARM!
As is the Buffet Indicator.
I have no doubts that the Fed will withdraw its monstrous stimulus from the market after the Jackson Hole Fed conference. … NOT!!!!
Maverick Capital posted this nugget today showing The Buffet Indicator (US equity market cap/GDP) and US Corporate Profits / GDP. All I can say is “simply unsustainable.”
Headline! “Fed’s Kaplan says delta variant could cause him to rethink his tapering view”
Face it, the Federal Reserve may alter its growth path on asset purchases of Treasuries and Agency Mortgage-backed Securities, but it is doubtful that they will pare back their balance sheet. Call it “A Never-ending balance sheet for you” world.
Why? Seemingly never-ending Covid crisis, etc.
Let’s look at US Treasury yields today. The 10-year Treasury yield is up slightly to 1.25% as of 10am EST.
Here is a chart of the 10-year Treasury yield, Fed Funds effective rate, Fed Balance sheet and reverse repos since the Covid outbreak and Fed massive intervention. Bottom line, the have repressed the short-term interest rates and put downward pressure on the 10-year Treasury yield.
As the 10-year Treasury yield remains repressed DESPITE HIGHEST INFLATION RATE SINCE 2008, the Freddie Mac 30-year mortgage rate remains repressed as well. Yes, that mean NEGATIVE REAL MORTGAGE RATES.
This produces a REAL mortgage rate of -2.56%.
The spread of mortgage rates over the 10-year Treasury yield is about 173 basis point since 1971.
Where will Treasury yields go from hear? If we believe technical analysis like the Ichimoku Cloud, the 10-year Treasury rate will likely rise.
And The Fed’s Dots project also see rates rising (at least on the short-end.
Negative real mortgage rates and blistering home price growth?
Will the attendees at the KC Fed Jackson Hole conference discuss these matters? Or will it just be a Federal Reserve Soul Shake (dance)?
The minutes of the July Fed meeting suggest officials may signal an impending start to asset purchase tapering at the September gathering — provided jobs numbers remain on track in the interim — and make an announcement in November.
Rising infections counts have not spurred an uptick in new jobless claims. High-frequency data show some customers are shying away from eating out, but the overall impact on restaurant reservations is limited. The bigger challenge for many companies is retaining and hiring enough workers to meet strong demand, evident in low layoff counts and persistent mention of labor shortages.
In other words, IFF Covid doesn’t cause further economic damage (or governments don’t shut down economies), then The Fed will consider a mild taper of their balance sheet.
But as of this morning, The Fed’s reverse repo facility keeps on rising along with The Fed’s balance sheet. At least M2 Money Supply growth has leveled off.
That should result in an increase in Treasury yields and mortgage rates, all things being equal. And assuming the Biden Administration and governors don’t panic and go into economic lockdown … again.
The US Treasury curves since the Covid recession of 2020 have shown optimism in recovery … then reality dawned.
Well, it looks like The Fed will start tapering after all.
Initial jobless claims fell again to 348K and continuing jobless claims fell to 2,820K.
Unless Biden’s disastrous Afghanistan withdrawal sends shock waves through the global economy (or Covid Delta/Lamba variant strains get worse and hurt the economy), we should see The Fed start tapering their balance sheet.
The 10Y Treasury yield rose slightly on the jobs report.
The Tapir, the symbolic mascot of The Fed’s tapering programs.
Company spent $50.7 million on 100-ounce gold bars in August
Customers can now pay for software in gold or Bitcoin
Palantir Technologies Inc. said it’s preparing for another “black swan event” by stockpiling gold bars and inviting customers to pay for its data analysis software in gold.
The company spent $50.7 million this month on gold, part of an unusual investment strategy that also includes startups, blank-check companies and possibly Bitcoin. Palantir had previously said it would accept Bitcoin as a form of payment before adding precious metals more recently.
A spokeswoman for Palantir said no one has yet paid in either Bitcoin or gold. Accepting nontraditional currencies “reflects more of a worldview,” Shyam Sankar, the chief operating officer, said in an interview. “You have to be prepared for a future with more black swan events.”
The gold purchase was buried in a securities filing last week for its quarterly financial results and reported earlier this week by Barron’s. The acceptance of gold as a form of payment hasn’t been previously reported.
Palantir’s 100-ounce gold bars will be kept in a secure location in the northeastern U.S., according to the filing. “The company is able to take physical possession of the gold bars stored at the facility at any time with reasonable notice,” Palantir wrote.
Palantir, co-founded by the technology billionaire Peter Thiel and Chief Executive Officer Alex Karp, makes software used by governments and businesses. It fashions itself as a company of free thinkers. Palantir relocated to Denver last year and mocked its peers in Silicon Valley on the way out. In the interview, Shyam compared Palantir’s culture with an “artist colony,” rather than a tech company churning out software on an assembly line.
Governments have strongly embraced Palantir software to help them make sense of the coronavirus pandemic, the current so-called black swan, a random and unpredictable event.
The company has some $2.3 billion in cash and is exploring creative uses for that money. Palantir said in May that it was considering investing in Bitcoin. And it’s taking stakes in startups that are customers of Palantir software, an approach that helped buoy sales results in the second quarter.
Here is a chart of the US Dollar, Bitcoin, and Gold over the past year.
United Wholesale MortgageUWMC has announced plans to become the first national mortgage lender to accept cryptocurrency for home loans.
What Happened: CEO Mat Ishbia previewed the Pontiac, Michigan-based company’s expansion into the cryptocurrency realm during the second-quarter earnings call on Monday.
“We’ve evaluated the feasibility, and we’re looking forward to being the first mortgage company in America to accept cryptocurrency to satisfy mortgage payments,” Ishbia said. “That’s something that we’ve been working on, and we’re excited that hopefully, in Q3, we can actually execute on that before anyone in the country because we are a leader in technology and innovation.”
In an interview with the Detroit Free Press, Ishbia offered more details on which cryptocurrencies would be considered in transactions.
“I think we’re starting with Bitcoin, but we’re looking at Ethereum and others,” Ishbia said. “We’re going to walk before we run, but at the same time, we are definitely a leader in technology and innovation and we are always trying to be the best and the leader in everything we do.
“That’s the plan,” he added. “Obviously there’s no guarantees – we’re still working through some details. But absolutely.”
Why It Matters: One of the first homebuying deals in the U.S. involving cryptocurrency took place in 2014 with the $1.6 million sale of land in Lake Tahoe for a home site. The transaction was completed with payment via Bitcoin (CRYPTO: BTC).
However, the heavily regulated and risk-averse mortgage industry hasn’t embraced cryptocurrency. The government-sponsored enterprises that dominate the industry’s secondary market, Fannie MaeFNMA+ Free Alerts and Freddie MacFMCC+ Free Alerts, will not accept any transaction in a digital asset.
If UMC plans to package its cryptocurrency-based loans for secondary market sale, the borrower’s cryptocurrency payment would have to be converted into dollars and the borrower would need to provide documentation to verify ownership of the digital assets as part of the loan underwriting process.
Of course, then we have the University of Michigan conditions for buying a home crashing as well.
Rising home prices and rising construction material costs? Yikes.
Of course, the NAHB had this to say:
“Our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions,” NAHB Chief Economist Robert Dietz said in a statement.
Perhaps, but The Fed needs to slow down its money printing as well.
You must be logged in to post a comment.