Biden’s State of the Union address saw him bragging about his record job creation (actually, it was the private sector, not Biden than created jobs) and historic unemployment rate. What Biden didn’t mention (along with not discussing the porous Mexican border with fentanyl pouring across or why he failed to shoot down a Chinese spy balloon until after it has passed over numerous military reservation) is that the unemployment rate always hit a low point just prior to a recession.
So, here we sit at 3.4% unemployment. But we also see the US Treasury yield curves (10Y-3M and 10Y-2Y) remaining deeply inverted.
The US Treasury 10-year yield is up 5.5 basis points today.
And Bankrate’s 30-year mortgage survey rate is up slightly today.
Copper set to be most valuable opportunity in race to net zero
Electric vehicles and wind turbines are main demand drivers
Everything is a race when it comes to the energy transition. A race against time to reach net-zero emissions by the 2050 crunch point; a race to build enough wind turbines and replace gas-guzzling cars with electric vehicles; a race between superpowers to shore up domestic supply chains and capture the economic benefits of decarbonization.
There’s one common thread that runs through them all: the need for metals. A greener future is impossible without copper to expand the world’s electricity grids, lithium for batteries and aluminum for solar panel frames.
Companies are now hunting for more direct access to these essential raw materials as they recognize metals will form the backbone of the energy transition. General Motors Co., for example, announced at the end of last month that it will invest $650 million in Lithium Americas Corp. and help develop the Thacker Pass mine in Nevada. The automaker is also reportedly competing to buy a stake in the base metals unit of mining giant Vale SA, according to Bloomberg News.
What exactly is driving this hunger for metals? Achieving a net-zero world will entail electrifying as much as possible. BNEF estimates the size of the global power grid will have to almost double to 152 million kilometers by 2050, requiring masses of steel, copper and aluminum. This means the expansion of grids will use the most copper out of all energy transition applications, coming in at 427 million tons between now and mid-century.
Clean electrons will need to flow through those grids, enabled by the scale-up of wind and solar power. Wind turbines are projected to consume the most metals overall by 2050 if the world gets on track for net-zero emissions. Today, steel accounts for nearly 90% of the materials used by weight in offshore wind and about 25% in onshore wind, although as turbines get bigger, they will use less steel on a per-megawatt basis. Consumption of rare earth metals such as neodymium will become more intense, however, as permanent magnet generators become more common in turbines.
Rising demand for energy transition metals is essentially a given at this point. The real question is whether there will be enough supply. As things currently stand, lots of these metals, including copper and cobalt, are at risk of a shortfall in the coming decades unless current reserves can be supplemented with new geological discoveries and projects, and recycling of old material is stepped up.
Many countries have known resources of metals – in other words, natural occurrences of minerals in high concentrations and sufficient quantities. But not all of these resources have been turned into reserves that can be profitably mined yet. This requires time and investment to go through the exploration, discovery and feasibility stages, and these processes could be thwarted by policy.
Here are metals today.
So, people get ready! Whether you agree with green energy policies or not, it is where markets are headed. Personally, I am sticking to my gasoline guzzling cars until I am ordered not to drive them. Stated differently, if Joe Biden can drive a gas guzzling V-8 in a Chevy Corvette, why can’t I?
At least I didn’t leave classified documents in my garage.
Here is where we set today. The cost of insuring for a US debt default remains elevated as the US has hit its statutory debt limit. This is happening at the effective rate of interest on US mortgage debt is rising.
Help us McCarthy! Because Biden and Schumer don’t want to cut ANY spending.
While Joe Biden may not have a wooden heart, he definitely has a wooden head. Particularly given the number of whoppers he told during the State of Joe Biden’s Mind speech last night.
Biden took credit for creating more jobs in two years than any administration had in four years. Well, that is incredibly misleading (but it is Joe Biden after all). The US economy saw an economic shutdown in 2020, then a “revival” after the government shutdowns ended.
What Biden failed to mention in his SOTU address was that 12,539k jobs were added under Trump from May 2020 through January 2021. Once Biden was installed as President, jobs added under Biden was 12,104k through January 2023. Heck, Biden didn’t even beat Trump’s last year in office!
I am using the BLS numbers which showed that amazing January jobs report of 517k jobs added. Amazing, particularly since M2 Money growth YoY has stalled.
But ADP jobs added in January shows a different picture: -986,000 jobs lost in January.
Starting in 2009 with the housing bubble burst and ensuing financial crisis, The Federal Reserve bought agency mortgage-backed securities (MBS) in an effort to provide stability to the then suffering housing and mortgage markets. Flash forward to today and The Federal Reserve still has $2.62 TRILLION in Agency MBS in its System Open Market holdings. And declining very slowly.
All this is happening as M2 Money growth YoY has gone negative and both mortgage rates and home price growth are slowing.
Is the US mortgage market that fragile that requires The Fed to support it?
The answer is yes if we look at the Mortgage Bankers Association weekly applications index. The Refinance Index increased 18 percent from the previous week and was 75 percent lower than the same week one year ago. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 37 percent lower than the same week one year ago.
I noticed that Biden didn’t mention how mortgage purchase applications since he was installed as President have fallen -45%. Mortgage refi applications have dropped -88% since February 5, 2021.
At least the US house payment to income ratio has declined since the peak. But still higher than at the peak of the US housing bubble in 2006.
After Jerome Powell raved about the strong US labor market and oddly ignored the staggering crowding-out of US interest payments on its massive debt, the US Treasury’s 3-year debt auction was … a Hinderburg moment.
First, the high yield at today’s auction of 3-year Treasury notes was 4.073%. This occured as the allotment to brokers and dealers collapsed along with M2 Money growth YoY.
Then we have this horrible chart of the 3Y auction stop through, crashing into uncharted waters. A stop-through indicates when the highest yield the Treasury sold in the auction is below the highest yield expected when the auction began – the “when issued” level.
Last week’s strange jobs report (massive discrepancy between the Establishment and Household data) did push expectations of further Fed rate hikes up. In fact, the US Treasury 10-year yield is up 10 basis points this morning.
The US Treasury 10Y-3M yield curve remains inverted at -106 basis points while the implied Fed rate hike for the June 2023 FOMC meeting jumps to over 5%.
Today’s jobs report from the Bureau of Labor Statists (BLS) was stunning. 517k jobs added! Very strange since the ADP jobs added report on Febuary 1st was only 106k. THAT is a huge discrepancy (probably a seasonal adjustment in the BLS reporting).
Average hourly earnings rose to 4.4% YoY. Too bad headline inflation is still roaring at 6.5%. So, the inflation tax is still overwhelming wage growth.
The spread between the January jobs report (BLS) and the ADP jobs added report (ADP) is similar to the infamous jobs report that the Philly Fed “corrected” (orange circle).
Here is the summary of the BLS numbers.
And on the strange jobs report, US Treasury 10-year yields are up 10+ basis points.
Where were the jobs added? How about “Hey Bartender!” since leisure and hospitality added 128k jobs in January.
Leisure and hospitality added 128,000 jobs in January compared with an average of 89,000 jobs per month in 2022. Over the month, food services and drinking places added 99,000 jobs, while employment continued to trend up in accommodation (+15,000).
In January, employment in professional and business services rose by 82,000, led by gains in professional, scientific, and technical services (+41,000). Job growth in professional and business services averaged 63,000 per month in 2022.
Government employment increased by 74,000 in January. Employment in state government education increased by 35,000, reflecting the return of university workers after a strike.
Health care added 58,000 jobs in January. Job growth occurred in ambulatory health care services (+30,000), nursing and residential care facilities (+17,000), and hospitals (+11,000).
Employment in retail trade rose by 30,000 in January, following little net growth in 2022 (an average of +7,000 per month). In January, job gains in general merchandise retailers (+16,000) and in furniture, home furnishings, electronics, and appliance retailers (+7,000) were partially offset by a decline in health and personal care retailers (-6,000).
Construction added 25,000 jobs in January, reflecting an employment gain in specialty trade contractors (+22,000). Employment in the construction industry grew by an average of 22,000 per month in 2022.
In January, transportation and warehousing added 23,000 jobs, the same as the industry’s average monthly gain in 2022. Over the month, employment in support activities for transportation increased by 7,000.
Employment in social assistance increased by 21,000 in January, little different from the 2022 average gain of 19,000 per month.
Manufacturing employment continued to trend up in January (+19,000). In 2022, manufacturing added an average of 33,000 jobs per month.
Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; information; financial activities; and other services.
The source of the jobs miracle? Changes in how jobs are measured.
Changes to The Employment Situation Data | | | | Establishment survey data have been revised as a result of the annual benchmarking | | process, the NAICS 2022 conversion, and the updating of seasonal adjustment factors. | | Also, household survey data for January 2023 reflect updated population estimates. | | See the notes at the end of this news release for more information. | |_________________________________________________________
The Federal Reserve slowed its drive to rein in inflation and said further interest-rate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades.
Policymakers lifted the Fed’s target for its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75%. The smaller move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that.
The unanimous decision by the Federal Open Market Committee was in line with financial market expectations.
Markets are forecasting a pivot after the June meeting in 2023.
The face of The Federal Reserve. Although Yellen is now Biden’s Secretary of Treasury.
Confounded Interest - Anthony B. Sanders 
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