US Core Inflation Jumps By Most Since 1991 (While Rent Inflation Fell To Lowest Rate Since 2015)

Well, The Federal Reserve finally got its wish: INFLATION!

U.S. consumer prices rose in July by more than expected on a bounce in auto and apparel costs. The so-called core figure, which excludes volatile food and fuel costs, climbed 0.6% from the prior month, the biggest surge in almost three decades, according to a Labor Department report Wednesday. The headline figure also increased 0.6%, following the same gain in June. The trend reflects a rebound in demand for goods and services from the depths of the pandemic-induced lockdowns earlier this year.

But on a YoY basis, core inflation rose only 1.6%.

But rent inflation fell to 2.8% YoY, the lowest since 2015.

Gold Tanks, Jay Z And Will Smith Fund Alchemy (Ethereum-Applications)

Jay Z, Will Smith-Backed Ethereum App Opens Doors to Public. Tom Haverford will be pleased! And Federal Reserve of Minneapolis President Neel Kashkari (aka, IMHOTEP) will not be pleased.

(Bloomberg) — The behind-the-scenes blockchain startup Alchemy, which powers 70% of the applications on Ethereum, is stepping into the public eye as it opens its services to any company or developer looking for tools to build smart contract-based projects.

Founded in 2017 by Nikil Viswanathan and Joe Lau, Alchemy until now has operated in private mode where customers had to apply to use its software developer tools. Viswanathan, 32, and Lau, 31, met at Stanford University, where they both served as teaching assistants for a database class. They have since gone on to create a firm that counts as investors Duncan Niederauer, Charles Schwab, John Hennessy, Jay Z, Jerry Yang, Ruchi Sanghvi and Will Smith. The co-founders want to remove the complexity from building blockchain applications so the nascent industry can grow.

“We’re all here because we believe blockchain will be as powerful as the internet,” Viswanathan said in a telephone interview. The San Francisco-based firm counts 4 million users worldwide and says the applications that use its services see about $7.8 billion a year move through them. Still, it’s difficult to build applications from scratch, Lau said in an interview.

“Everyone wants to build skyscrapers in Ethereum, but we don’t have the tools right now,” he said. “We have picks and shovels.”

Picks and shovels to build skyscapers? No wonder progress is so slow!

Both gold and Ethereum have risen since the Covid outbreak while the US Dollar has tanked.

But today we saw gold drop almost 4% and Ethereum decline 2.5%. Dash and EOS dropped over 5% today.

Tom Haverford will be pleased about Jay Z investing in Alchemy while Neel Kashkari hates cryptocurrencies.

The Federal Reserve’s TRUE Dual Mandate! Taylor Rule Suggests Target Rate Of -8.58% As Federal Spending Rages Out Of Control

The Federal Reserve has a dual mandate: stable inflation and low unemployment. Well, core inflation is currently at 1.2% (core PCE growth is at only 0.95%) and unemployment (thanks to Covid-19) is at 11.1%. Not quite on target.

The Taylor Rule model using an aggressive specification suggests that The Fed lower their target rate to -8.58%.

Of course, Congressional spending is out of control with mandatory spending (entitlement programs, such as Social Security, Medicare, and required interest spending on the federal debt) since the days of George HW Bush and Bill Clinton. And especially post financial crisis.

Of course, mandatory spending on Medicare is soaring out of control.

Defense outlays are projected to grow with non-defense outlays declining,

Of course, the TRUE dual mandate of The Federal Reserve is propping up the S&P 500 index and NASDAQ.

Good luck to everyone trying to cope with out of control Congressional spending and Fed money printing.

The question is … will Congress and President Trump/Biden reign in their prodigious spending after Covid-19 passes?

Here is my answer. Where are the Budget Hawks when we need them??

Crash By The Dashboard Light? US Q2 GDP Crashes -32.9% QoQ As Home Prices Decline -0.3% In May (CMBX Prices Crashing)

Many thought that a housing price crash and another financial crisis was a long shot. Until Q2 GDP crashed by 32.9%. And it turns out that the FHFA purchase-only house price index declined by -0.3% in May.

On the commercial real estate side, multifamily and hotel (both hit hard by the Covid-19 shutdown) are in CMBX series 9 while CMBX series 6 has a large share of retail properties.

While CMBX BBB- S9 is ad 79.360, CMBX BBB- S6 is down to 67.310. March and Covid were a disaster.

I can see a crash by the dashboard light.

Negative Rates Next? Gold Surges As US Dollar Tanks, Fed Remains Silent (Bizarro World)

The Federal Reserve Open Market Committee (FOMC) decided to do nothing, except say that ZIRP (zero interest rate policies) are going to continue for a long time. And that MORE fiscal stimulus is needed. As long as Mayors and Governors continue their economic lockdown policies, more monetary and fiscal stimulus will be needed.

Where does The Fed go from here (given that Covid-19 seems to be growing still)? The implied Fed policy rate looks to be negative by 2021.

Gold is surging as investors figure out that our fiat currency cannot support the reckless spending in Washington DC.

Let’s see what Fed Chair Jay Powell (aka, Thurston Powell III) comes up with. Hint: Fed buying stocks and going to negative rates.

Fed Crushes Put Call Ratio, Gold Mirrors Real 10-Y T-Yield

One of the more interesting ratios in the market is CBOE’s US Equity Put Call Ratio. The ratio hit a local high in March due to the Covid-19 virus. And subsequent state and local economic shutdowns. The Federal Reserve responded like the US Cavalry by cutting the Fed Funds Target rate and ballooning The Fed’s balance sheet. The Fed also helped to crush the Put Call ratio.

Meanwhile, gold keeps pace with the 10Y REAL Treasury yield.

The Fed to the rescue!

US Dollar Forms Death Cross, Inverted From Gold Spot (Bond Bulls Still Stampeding)

The U.S. dollar’s decline may be just getting started, according to a widely-watched technical indicator. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 of its major peers, formed a death cross pattern on Friday, with its 50-day moving average dropping below its 200-day one. The gauge has tumbled more than 3% this month amid concern over the spread of the coronavirus in the U.S. and wrangling between lawmakers over the next stimulus package.

But against gold …

(Bloomberg) — Bond investors keep getting bombarded with fresh reasons to stay bullish after another record-breaking week in Treasuries.

As the five-year yield plumbs near all-time lows, the 10-year benchmark is again testing levels notched in the depths of the pandemic despair. Leveraged-funds keep pulling back their bearish bets to the lowest since early 2018.

With U.S-China tensions raging again, Wall Street is telling clients to stay constructive and investors are finding it tough to wager against securities they deem the most overvalued in decades.

And Fed policies are likely to keep Treasuries yielding less than the inflation rate.

Why does this remind me of Kevin’s Famous Chili?

Natural Born Crisis Killers? TED Spread Down To 13.29 While Gold Soars To $1,900

There is no doubt that The Federal Reserve panicked over Covid-19 by setting interest rates near zero and printed money like there is no tomorrow. The TED spread is now at 13.92, about where it was pre-Covid breakout.

(Wikipedia) The TED spread is an indicator of perceived credit risk in the general economy, since T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. An increase in the TED spread is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing. Interbank lenders, therefore, demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases. Boudt, Paulus, and Rosenthal show that a TED spread above 48 basis points is indicative of economic crisis.

Well, the TED 3-month spread is only 13.29 which is far below the 48 basis point spread indicative of an economic crisis.

But The Fed hasn’t killed gold speculation. In fact, The Fed is likely scaring everyone into buying gold and silver.

Happy TED day!

Atlanta Fed GDPNow Q2 At -34.7% QoQ, M2 Stock Soaring, M2 Velocity Likely To Be A Disaster (Fed Buying German Automaker Bonds)

More like Constitution Avenue Freeze Out.

US Q2 GDP will be released on July 30th. At that time, M2 Money Velocity will be officially released (Nominal GDP / M2 Money Stock).

Let’s see where are today. The Federal Reserve is printing money at a rate of 25% YoY. Meanwhile, the Atlanta Fed GDPNow forecast for Q2 is -34.7% QoQ. This will be the WORST M2 velocity is history.

Even worse, the 10 year Treasury yield is near its all time low (orange box). Meaning that mortgage rates are near their all-time low as well.

Meanwhile, The Federal Reserve is merrily purchasing corporate bonds … with the largest two of the top four purchases being German automakers, Volkswagen and Daimler (Mercedes). Japanese auto maker Toyota is at 6th and German automaker BMW is at 8th.

Negative M2 velocity and The Fed buying foreign bonds? Add in Joe Biden’s Federal spending wish list of over $10 TRILLION …

What you say, Janet (Yellen) darling?

Gimme Shelter! Silver Surges As Covid-19 Fears Escalate (Bitcoin Flat)

The Covid-19 fears fanned by the media and politicians are leading investors to seek shelter in alternative investments other than just broad market indices.

Since The Federal Reserve kicked-up their assets purchases (SOMA) back in March, gold initially surged along with the S&P 500 index while silver lagged. But suddenly silver is playing catch-up in a big way.

The volatility surface for silver resembles a silver mine.

Bitcoin rose until May … then flat lined.

The question is … which asset do you love?