Biden’s Limbo Rock! US Consumer Confidence Remains Depressed 51.1 With Inflation Ravaging Households, Housing Sentiment Even Worse At 45 (Biden Approval At 38.1%)

How low will consumer sentiment (and Biden’s approval ratings) go? This is Biden’s limbo rock.

One measure of how bad things are in the US for the middle-class and low-wager workers ix consumer sentiment from University of Michigan. The latest University of Michigan survey of consumers remains depressed at 51.1.

The consumer sentiment index was at 80.7 at the beginning of 2021, but has plunged dramatically with rising gasoline, food and inflation in general. Biden’s popularity has sunk from 55.8 in January 2021 to 38.1 today.

How about housing sentiment? Housing sentiment was 134.0 in January 2021 but has plunged to a depressing 45 with inflation and rising home prices (and rent). And with declining sentiment about housing, Biden’s popularity has plunged.

Yes, this is Biden’s limbo rock. How low will his popularity go?

The Core? Flexible Price Inflation Rises To 18.74% While Core Inflation Plunges To 8.40%, “Fats” Waller Backing 75 Basis Point Hike (30Y Mortgage Rate Rises To 5.83%)

As Americans are painfully aware, inflation is the highest in 40 years prompting The Federal Reserve to remove the massive punch bowl. In fact, Federal Reserve Governor Christopher “Fats” Waller backed raising rates by 75 basis points this month.

How hot was the recent inflation report? The Atlanta Fed’s flexible price index rose to 18.74% YoY. On the other hand, the CORE flexible price index (less energy and food) plunged to 8.46% YoY. The 30-year mortgage rate from Bankrate rose slightly to 5.83% as the implied overnight rate for the July FOMC meeting rose to 3.45%.

Inflation is ravaging consumers with the savings rate falling by -46.3% YoY while consumer credit rose 7.3% YoY. Yes, thanks to high inflation, consumers are saving less and borrowing more.

When even CORE flexible price inflation is 8.40% YoY, you know that The Fed and Federal government have made serious policy errors.

Bottle Of Wine? Strong US Dollar And Soaring Inflation Is A Brutal Cocktail For S&P 500 Firms (Will The Fed Pivot To QE Again?)

The US Dollar keeps strengthening as inflation skyrockets. Good news?

Bear in mind that a strong dollar is a two-edged sword. The US Dollar Index has risen 16% year-over-year, presenting a big hurdle for US firms with business overseas.

That strength of the greenback will rise until the Fed makes a dovish policy pivot.

And that pivot is forecast to occur at the Feb ’23 FOMC meeting.

But will The Fed pivot?

The Biden Cocktail. A fine wine turned to vinegar.

Fed Fireball? US PPI Final Demand UP +11.3% YoY As Fed May Raise Rates 100 Basis Points At July 27th FOMC Meeting (Stocks In A Sea of Red)

Face it. The Biden Administration has little interest in trying to increase the supply fossil fuel energy which would anger his “green” base (like building more refineries or allowing for more crude oil and natural gas exploration). So, the burden of “inflation fighting” falls on the frail shoulders of The Federal Reserve.

Given today’s US Producer Price Index Final Demand prices rising +11.3% YoY in June, it seems that The Fed has not been able to extinguish the “Tower of Inflation.” But, Fed Funds Futures are pointing to a near 100 basis point (or 1%) increase in The Fed Funds target rate at the July 27th Fed Open Market Committee (FOMC) meeting.

The Fed Funds Futures Data points to a +0.920 (almost 1%) increase at the July 27th FOMC meeting. Followed by rate cuts.

And with the fear of a near 100 basis point increase, today’s stock markets are a sea of red.

It is up to Fed Chair Jerome Powell and policy error brigade to extinguish price increases caused by 1) bad Biden energy policies and 2) too much spending by Biden and Congress. It is like trying to wave-down the Super Chief train with a cigarette lighter.

Yet, the Frail Fed will try to waive down The Super Chief inflation engine with Fed Fireballs. Aka, rate increases of 100 basis points.

Update! Dow down over 500 points this AM.

Small Business Optimism Crashes As Inflation Rises To 9.1% YoY (REAL Avg Weekly Earnings Plunge To -4.4% YoY)

In case you are wondering why Biden’s approval ratings are so terrible, check out this chart.

Under Biden’s Reign of Error, inflation has soared to 9.1% YoY and the NFIB Small Business Optimism Index has crashed.

REAL Avg Weekly Earnings plunged To -4.4% YoY.

With the hot inflation numbers, the US Treasury 10Y-2Y yield curve inverted to -17.6 basis points.

And in honor of US First Lady Jill Biden’s idiotic comments about Hispanic culture, we see that inflation is hitting tacos hard.

Alarm! US Mortgage Purchase Applications Tank 14% From Previous Week As Fed Turns Up Rate Heat (Refi Applications Index Down 80% YoY)

Alarm!

The Federal Reserve is reversing its excessive monetary stimulus policies left over from the financial crisis of 2008 (and Covid) and the mortgage industry and potential home buyers are paying the price.

Mortgage applications decreased 1.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 8, 2022. This week’s results include an adjustment for the observance of Independence Day.

The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 14 percent compared with the previous week and was 18 percent lower than the same week one year ago.

The Refinance Index increased 2 percent from the previous week and was 80 percent lower than the same week one year ago.

The Shallows! Traders Fully Price 75-Basis-Point Fed Hike at July Meeting As Mortgage Rates Decline Slightly (Fed Fighting Inflation At All Costs!)

Here we go loop de loop! Traders are pricing in a 75 basis point rate increase at the July FOMC meeting despite collapsing Fed 5-year inflation breakeven rates.

Money markets are betting on a three quarter-percentage point hike by Federal Reserve officials later this month, wagering the US will need to ramp up the pace of monetary tightening to tame inflation.

The repricing comes ahead of a key inflation report due Wednesday. The headline figure for June is set to accelerate to 8.8% year over year, the highest since 1981.

Bankrate’s 30Y mortgage rate fell slightly ahead of today’s inflation report with the expectation of The Fed hiking their target rate by 75 basis points to 2.338% at the July 27th Fed Open Market Committee meeting.

Trader expectations from Fed Funds Futures data:

Last night I watched “The Shallows” on Peacock TV. I thought from the title that it was going to be a biography of The Federal Reserve, but it was a film about a surfer being attacked by a shark.

The Great Divide … In Affordability! REAL Rents Rising At 6.16% YoY As REAL Hourly Earnings Declining At -3.47% YoY (Growing Homelessness And Rise In Home Sale Cancelled Transactions)

We are across the great divide! In terms of house prices and affordability.

We are all aware that inflation is soaring, since the Covid outbreak in 2020 and the massive overaction by The Federal Reserve and Federal government in terms of stimulus spending and economic lockdowns.

Things were “normal” before Covid in that REAL housing rent (white line) and REAL average hourly earnings YoY (yellow line) moved together. But after Covid shutdowns and Federal stimulus “relief” (orange line), we see that inflation (blue line) took off along with the growth in housing rent. The problem, of course, is that REAL average hourly earnings YoY has been declining. I call this “The Great Divide in housing affordability”.

The question, of course, is whether The Federal Reserve will continue their “war on inflation” with a 75 basis point rate increase.

Inflation is at its fastest pace in 40 years, and is expected to increase even higher in tomorrow’s inflation report.

Gasoline prices have been dropping recently, but remain above $4.50 per gallon (regular gas price was $2.40 per gallon on Biden’s inauguration day. And no, it wasn’t the Biden Administration selling nearly 1 million barrels of crude oil from the strategic petroleum reserve to the Chinese government-owned Sinopec that Biden’s son Hunter is an investor (so, The Big Guy aka Joe Biden gets a 10% piece of the action). It is a slowing global economy that is helping to lower gasoline prices.

Between soaring gasoline prices and soaring home rents, it is little wonder that there is a serious homeless problem in places like New York and California.

With rising mortgage rates, we are seeing a surge in pending home sales cancellations.

Atlanta Fed’s Raphael Bostic thinks that the US economy is so strong that it can easily handle a 75 basis point increase at the next FOMC meeting. Fortunately, he is not a voting member.

I wonder if Joe Biden sings “Carry On My Wayward Son” to Hunter?

Slippin’ Into Darkness! US Treasury 10Y-2Y Curve Inverts To -4.85 BPS (Fed Expected To Reverse Tightening In March 2023)

The US economy is slippin’ into darkness.

The US Treasury 10Y-2Y yield curve steepened after Biden’s inauguration as President, a sign of economic optimism. Then reality began to dawn when inflation began to surge (blue line). Then The Fed stepped in to combat inflation by signaling an increase in their target rate (green line). The result? The 10Y-2Y Treasury curve is inverted at -4.85 BPS, generally an indicator of an impending recession.

But never fear! The Feral Reserve is expected to reverse its rate increases by March 2023.

So, it looks like The Fed will be returning to its “low rider” rate policies in early 2023.

In other words, hold on, The Fed is coming. Again.

Hurt So Good? Copper Down -27% Since March 3rd, Bitcoin Down -70% Since Nov ’21 (Is The Fed Killing Off The Economy Or Just Removing “Free Money”?)

In the court of The Copper King!

Copper, one of the economic measures of a growing economy, is down -27% since March 3, 2022 as recession looks more likely.

Let’s compare copper with another famous asset, Bitcoin. Bitcoin, a cryptocurrency, is down 70% since November 9, 2021.

As I discussed yesterday, The Fed’s five-year forward breakeven inflation rate has plunged to its lowest levels under Biden as the global economy is slowing.

Notice that copper prices fit pretty well with The Fed’s 5-year breakeven inflation rate.

It looks like The Fed is killing-off the economy in their quest to tame inflation.

The Biden economy doesn’t hurt so good. It hurts bad!