Strange Days! US Mortgage Rate Falls To 6.97% As Banking Crisis Persists (Yellen, Bank Consolidations, Bailouts And The Return Of QE)

Strange days, indeed.

Despite endless promises from Washington DC that there would never be another bank bailout, the Biden Administration bailed out Silicon Valley Bank (SVB) by removing the $250,000 cap on deposit insurance. Then Treasury Secretary Janet Yellen added that in the future, only banks that posed SYSTEMIC RISK to the economy will be bailed out. Translation: only the big four Too Big To Fail (TBTF) banks will be bailed out. Meaning that the Biden Administration prefers big banks to community banks. “Middle-class Joe” loves BIG Pharma, BIG defense, BIG tech, BIG media and now BIG banks. He should rename himself “Big Joe” Biden for the 2024 Presidential election.

Of course, we are aware of The Fed’s about face on shrinking their balance sheet (green line). While Bankrate’s 30-year mortgage rate has now declined below 7% to 6.97%, it has only fallen -15 basis points since the recent peak of 7.12% on 3/2/2023 when the 10-year Treasury yield was 4.056%. So, the 10-year Treasury yield has fallen -62.7 basis points since 3/2/2023 while the 30-year mortgage rate dropped only -15 basis points.

On the European banking front, Credit Suisse is kaput and both Swiss Bank and Deutsche Bank are considering buying the assets of Credit Suisse. In other words, MORE bank consolidation.

Here is a chart of US bank consideration as of 2009 with 37 banks in 1990 shriveling to 4 mega, TBTF banks in 2009 that remain today. But will the now unprotected community and local banks be absorbed into the 4 superbanks? Time will tell, but if history is repeated, the answer is yes.

The KBW bank index continued to fall despite the bailouts of SVB and Signature Banks. But at least total returns on Treasuries and MBS that banks hold increased with the return of QE!

Yellen and Biden compete for the Knucklehead Of The Century Award. While not as sloppy as the sudden Afghanistan withdrawal, bailing out the Silicon Valley elites will not end well.

Jobless Claims Rise As Layoffs Soar At Fastest Pace (UP 410% MoM) Since Lehman Collapse (UP 427% On YoY Basis)

I am waiting for tomorrow’s employment report to see if the Biden Administration plays it straight or give another padded report like first half 2022. But in the meantime, according to Challenger Gray & Christmas, U.S.-based employers announced 77,770 job cuts in February. It is 410% higher than the 15,245 cuts announced in the same month last year.

February’s total is the highest for the month since 2009…

So far this year, employers announced plans to cut 180,713 jobs, up 427% from the 34,309 cuts announced in the first two months of 2022. It is the highest January-February total since 2009

While many of the job cuts is coming in the tech sector,

we are seeing more industries reporting a rise in unemployment claims.

And then we have total delinquent consumer loans at 24.8 million. Highest since 2009.

I wonder if the answer to tomorrow’s employment report lies in one of the nine boxes of Biden’s documents taken from a Boston office?

Sink The Economy! S&P 500 Down -6% Since Fed Started Raising Rates On May 4, 2022, Equity REITs Down -16% (Pension Pain From Interest Rate Increases)

Interest rates are an important driver of the economy and financial markets. And what has happened to the S&P 500 index since The Federal Reserve started raising their target rate on May 4, 2023 to fight surging inflation?

Since that fatal day, the S&P 500 index has fallen -6% and equity REITs (commercial real estate) has fallen -16%.

What about returns on US Treasuries and Mortgage-backed Securities (MBS)? Same thing. PAIN!

Although The Fed has pledged to keep raising rates to fight inflation (and further decimate retirement accounts), investors are pointing to a peak (terminal) Fed rate of 5.44% at the September 2023 FOMC meeting. Then rate cuts following the September 2023 meeting.

Of course, much of the blame belongs to former Fed Chair Ben (QE) Bernanke and current Treasury Secretary Janet “Too Low For Too Long” Yellen who never met a Fed rate hike that she liked. But Yellen LOVES giving away US taxpayer dollars … to Ukraine.

South Of The Border? Price Of Insuring Against US Debt Default Rises To 76.75, More Expensive Than Mexico, Almost As Expensive As Guatemala

South of the border, down Mexico (and Guatemala) way.

What a mess in Washington DC. While House Republicans are at lagerheads with Senate Democrats and Resident Biden over Federal spending cuts, the price of insuring against a debt default just rose to 76.75.

How bad it that? Put it this way. Millions are fleeing Mexico and Guatemala and coming to the US. But Mexico has a lower cost of insuring against a debt default than the USA. And Guatemala is almost as expensive as the USA.

It will all be over soon, according to CDS prices.

Maybe the USA needs Gene Autry as Homeland Security Chief instead of Alexander Mayorkas. Even Smiley Burnette would be better at securing the border than Mayorkas.

US Pending Home Sales UP 8.1% MoM In January, But Down -22.4% YoY (Negative YoY Growth For 19 Of Last 20 Months)

US pending home sales rose 8.1% in January. At the same time, pending home sales declined -22.4% on a year-over-year (YoY) basis.

So, YoY pending home sales growth has been negative for 19 of the last 20 months.

US Durable Goods NEW ORDERS Fall -4.5% In January As Fed Retreats (Defense Capital Goods New Orders UP 25.4% YoY)

The Federal Reserve is retreating from its Covid-era monetary expansion. And with the retreat, US durable goods NEW ORDERS fell -4.5%% in January. The worst reading since … Covid in 2020.

A breakdown of new orders shows that while NONDEFENSE capital goods orders dropped -5.4% YoY in January, DEFENSE capital goods orders increased by 25.4% YoY.

Damn, it feels good to be a gangster.

The Thrill Is Gone! US Existing Home Sales Crash -37% YoY In January (Median Price YoY Falls To 0.67%) As The Fed’s Thrill Is Gone

The thrill is gone from housing as The Fed tightens away.

Well, January’s existing home sales numbers were horrific. Down -37% year-over-year (YoY) and down -0.7% MoM.

The median price of existing home sales fell to 0.67% YoY.

I am now posting my Podcasts on Spotify.

But before I go for experimental therapy for my brain tumor, I will leave you with this diddy. Inflation expectations are on the rise, not falling like Biden and Yellen keep screaming.

Shot Through The Heart! US Bankrupties Had Worst Start To 2023 Since 2010 (US Credit Card Delinquencies Growing At Fastest Rate Since 2010 Too)

The US economy, despite the tight labor market, has been shot through the heart by Biden’s economic policies. The Biden Administration (aka, Obama’s third term as President) is giving government a bad name.

On the corporate side, US bankruptcies in 2023 had the worst start to a year since 2010 and the financial crisis.

On the personal finance side of the ledger, the delinqueny rate on credit cards is growing at the faster rate since 2010.

Throw in 22 straight months of negative REAL wage growth, and have a scary situation facing middle America.

And the shate of outstanding subprime auto debt (30 days or more delinquent) is up to the highest rate since … well, you know when. The financial crisis of 2009-2010.

The US middle class is living on a prayer, because Washington DC doesn’t care.

But don’t worry. Mayor Pete, the EPA and Ohio governor Mike DeWine claim the air is good to breath and the water safe to drink in East Palestine Ohio.

Why isn’t Greta Thunberg racing to Ohio to protest the dumping of toxic chemicals?

Is Biden’s Economic Plan Working? Real Disposable Personal Income Down -6.4% YoY In 2022 (Worst Since The Great Depression)

President Biden touts his economic plan as being a great success. But the data says otherwise. Real Disposable Personal Income, for examplge, was down -6.4% year-over-year (YoY) in 2022. That is the WORST reading since The Great Depression.

And to cope with inflation, Americans have expanded their credit useage, but credit card delinquencies are through the roof.

So much for “Middle Class Joe” and The Forgotten Man. Biden hasn’t forgotten, he just doesn’t care.