Not Always Sunny! Philly Fed Business Conditions Declines To -16.6 In June (Powell Aka Green Man Faces Tricky Task of Explaining Rate Pause in Congress)

As I discussed yesterday, the Misey Index under Biden remains elevated compared to that of Trump pre-Covid despite massive financial stimulus from Green Man (The Federal Reserve under Jerome Powell).

Now we have more evidence of an impending recession with the Philly Fed General Business Conditions index falling to -16.6 in June as Green Man (M2 Money growth) stalls.

Federal Reserve Chair Jerome Powell (aka, Green Man) will have an opportunity this week to clarify what many found a confusing message on the path of interest rates, with the added task of assuring Democrats and Republicans the economy is on track.

The Fed chief will face questions from lawmakers on Wednesday and Thursday, his first testimony on Capitol Hill since early March, before banking-sector turmoil prompted sharp criticism of the Fed and forced officials to rethink their policy strategy. Since then, the most acute financial strains have eased, but questions remain about the extent to which tighter credit will weigh on the economy, and what that means for the Fed.

Powell will need to reassure Republicans the Fed is not backing down from its campaign to contain price pressures, while pointing Democrats to the resilience of the economy as officials prepare to raise rates further this year.

“The Democrats are nervous because they would rather declare victory and move on,” said Stephen Myrow, a managing partner at Beacon Policy Advisors and a former George W. Bush Treasury official. “I think they’re going to try to caution this time against further increases. But Republicans are just going to hammer away and act like inflation hasn’t come down.”

Powell will be fresh off the Fed’s June 13-14 meeting, where he and his colleagues left rates unchanged for the first time in 15 months but signaled they may deliver two more hikes this year. Fed watchers and investors struggled to digest the message from Powell’s post-meeting press conference, and lawmakers last week said they planned to press him for an explanation.

“Right now there’s a lot of confusion about the next step,” Thom Tillis, a Republican senator from North Carolina, said Thursday.

Well, Senator Mel Tillis, there is no confusion. The DC Elites and Big Banks don’t want to disrupt the flow of money to the political donor class (including China and Ukraine payments to Biden’s family, now up to $30 million). The Fed may raise rates one more time and claim victory again their “War on Inflation!” then start cutting again as the Presidential election approaches.

Jerome Powell (aka, Green Man).

The B.I.D.E.N System! Biden Plans To Release Additional 10-15 Million Barrels Of Crude Oil From Strategic Petroleum Reserve (Regular Gasoline Prices UP 62% Under Biden And Diesel Fuel Prices UP 101.4%)

Joe Biden reminds me of Dennis Reynolds from “Its Always Sunny In Philadelphia.” And his D.E.N.N.I.S System. But Biden’s System is blatant politics. With the midterm elections in November and Democrats looking a bit behind, Biden is pulling out the political guns by 1) ramping up student loan forgiveness … again and 2) releasing 10-15 million MORE barrels from the Strategic Petroleum Reserve to lower gasoline prices. Particularly after his failed attempts to get the Saudis to pump more oil (too bad Biden put the kabash on US energy exploration and cancelled the Keystone pipeline).

Having said that, we can see that BEFORE the latest SPR order, the US Strategic Petroleum Reserve, meant to cope with national emergencies like … Russia dropping a nuke on the US, has declined -36% under Nuclear Joe.

At the same time, regular gasoline prices are UP 62% under Biden and the all-important diesel fuel prices are UP 101.4% under Biden.

Of course, expect The B.I.D.E.N System to do everything in its power to destroy the economy if Republicans win the midterms. Including no more SPR release.

The B.I.D.E.N. System.

Bubble? UMich Buying Conditions For Houses (Good) Collapses To 32%, Fed O/N Reverse Repos Breach $1 Trillion

The University of Michigan survey of consumers is out and their buying conditions for housing (good) was a disasters. Only 32% on consumers view buying conditions for a house as good. That means that 68% think buying conditions are not good. Why? With the Case-Shiller National Home Price Index growing at a scorching 16.6% YoY making housing simply unaffordable for many Americans.

On a different note, The Fed’s overnight reverse repo facility (aka, the slosh” just breached the $1 trillion mark.

Then we have this tantalizing headline on Bloomberg: “Traders Pile Into Tail-Risk Bets That Fed Won’t Hike at All”.

Treasury yields are rising amid optimism over the global recovery but there has been a run on Eurodollar options betting the Federal Reserve will opt not to raise interest rates at all.

Traders this week have been busy snapping up Eurodollar call options on underlying March 2025 futures that target three-month Libor to fix below 0.5%. These pay off if markets price the Fed keeping its benchmark at its lower bound until then. Futures markets are currently anticipating Libor will rise to about 1.47% by the first quarter of 2025.

So, it looks like The Fed (aka, Greenman) may not be going anywhere.

Have a wonderful weekend!