Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Not only did the ISM Manfacturimng Report on New Business Order fall to 44.3, but price PAID also fell as The Fed hikes rates (yellow line) and slowing M2 Money growth (green line).
Office REITs are really hurting as Count Powellula sucks the blood (liquidity) from the market.
Count Powellula. “I vant to suck the blood from your economy.”
Apparently, foreign Central Banks have lost faith in Biden and The Federal Reserve. Foreign Central Banks are selling US Treasuries.
Other than The Fed, Japan and China are the two largest holders of US Treasuries. And they are bailing.
Wake Biden up before all the Central Banks go-go.
While Resident Biden is on good terms with the Mexican drug and sex trafficing cartels that control our southern border, the oil cartel just stuck their fingers in Biden’s eyes by cutting oil productions. Riyadh, Saudi Arabia was irritated last week that the Biden administration publicly ruled out new crude purchases to replenish SPR
Today, crude oil futures are up 6.62% to over $80 per barrel.
Sunday’s surprise OPEC+ production cuts have redefined the outlook for crude prices, bringing $100 a barrel back into the frame.
Prior to the announcement, the cartel’s own numbers suggested the group would need to pump more oil, not less, in the second half. With the International Energy Agency expecting a demand surge later this year, there’s now renewed risk of a fresh inflationary impetus for the global economy.
Under Biden’s Reign of Error, diesel prices are up 64% while the Strategic Petroleum Reserves (SPR) have been drained by -42%.
St. Benedict, help protect us from Biden and The Federal Reserve.
Former Fed Chair (and current Treasury Secretary) Janet Yellen protected President Obama by raising The Fed’s target rate only once while Obama was in office. Then raised rates 8 times after Donald Trump was elected in November 2016. Well, Fed Chair Jerome Powell was following Yellen’s TLFTL (Too Low For Too Long) playbook by delaying raising rates once inflation hit 2% in March 2021. Then Powell started raising rates like crazy, unlike Yellen and her zero interest rate policies (ZIRP or ZORP for zero OUTRAGEOUS rate policy).
One of the safe assets that Federal regulators encouraged banks to hold was agency mortgage-backed securities. The orange circle denotes when headline inflation YoY hit 2% (March 2021). Powell and the gang waited over a year (remember, they said inflation was “transitory”). But another Democrat, Biden, was now President and Powell (like Yellen) didn’t want to rock the boat. So, Powell and the gang waited until headline inflation hit 7% before they took action. Like Yellen, Powell waited too long .
The result? Agency mortgage-backed securities (MBS) got clobbered (white line) as MBS duration (purple line) rose dramatically. Duration is the weighted-average life of MBS and is a measure of risk.
Any surprise that unrealized losses have been piling up at US banks? Not really, only some regional banks weren’t paying attention and got crushed.
And US bank deposits are crashing despite Biden’s and Yellen’s saying the “all is well!”
Yellen and Powell praising ZORP (Zero OUTRAGEOUS rate policies).
Well, the University of Michigan consumer sentiment indices are out for March … and they are ugly.
As a baseline, consumer confidence in February 2020 (just before Covid) was 101. After Covid and massive Fed stimulus and Federal government spending spree, consumer confidence in March fell to 62.0, a far cry from 101 under Trump.
Even worse, the UMich buying conditions for housing hit 142 in February 2020 but has declined to 47 in March 2023.
Why would ANYONE have confidence in the US economy under a complete fool with dementia like “China Joe” Biden??
Inflation is slowing just a little. But my feeling about The Fed (that partly caused the problem in the first place by keeping rates too low for too long (TLTL) under Yellen is all I can do is laugh.
The US Core Deflator (Personal Consumption Expenditure CORE PRICE Index YoY fell only slightly in February to a still-high 4.6% in February despite The Fed jacking up interest rates and slowing M2 Money growth.
I thought Biden and Congress passed the inflation reduction act??
I forgot. Under Obama/Biden, the US is now a failed state. Or a banana republic without bananas. Way to go Joe!
Fed Funds Futures are pointing to one more rate hike at the May FOMC meeting, then a turnaround with The Fed cutting its target rate.
Too bad the Taylor Rule is calling for a target rate of 10.29%.
The Fed Funds Target rate (upper bound) is STILL negative at -1.0356%.
Soaring rates to fight inflation is causing unrealized losses to plague US banks.
Like the film, “He Never Died”, The Fed never died. And neither did quantitative easing.
Pending home sales grew in February for the third consecutive month, according to the National Association of REALTORS®. Three U.S. regions posted monthly gains, while the West declined. All four regions saw year-over-year decreases in transactions.
The Pending Home Sales Index (PHSI)* — a forward-looking indicator of home sales based on contract signings — improved 0.8% to 83.2 in February. Year-over-year, pending transactions dropped by 21.1%. An index of 100 is equal to the level of contract activity in 2001.
More notably, the YoY growth rate has been NEGATIVE for 20 of the last 21 months. And 15 straight months.
Biden’s energy policies + insane Federal spending = inflation = Fed slowing M2 Money growth. Hence, pending home sales YoY is down -21.1%.
Well, the regional banking crisis has one positive outcome: mortgage rates dropped -46 basis points since last week. The result? Mortgage demand increased 2.9 percent week-over-week (WoW). Although I don’t recommend banking incompetence by bank management and “regulators” as a strategy to increase mortgage demand.
Mortgage applications increased 2.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 24, 2023.
The Market Composite Index, a measure of mortgage loan application volume, increased 2.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3 percent compared with the previous week. The Refinance Index increased 5 percent from the previous week and was 61 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 35 percent lower than the same week one year ago.
The rest of the story.
We need a doctor to fix this mess, just not Dr. Yellen or Dr. Jill.
Consumer considence (according to the Conference Board) remains below pre-Covid levels despite the massive Federal spending spree and Fed money printing).
Confounded Interest - Anthony B. Sanders 
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