US Treasury Yield Curve Inverts To -82 Basis Points, Worst Since 1981 As Fed Tightens Policy (112 Straight Days Of Inversion)

Whoop there it is!

The US Treasury 10y-2y yield curve descended further into inversion at -82 basis point, the worst since 1981.

This is not a good sign, since the 10Y-2Y curve typically inverts just prior to a recession.

The current US Treasury curve is currently humped at 1 year, then declining rapidly. The swaps curve is peaking at 9 months, then declining rapidly.

The Fed Funds Futures market is pointing to a peak Fed Funds rate of 5% at the May 3rd FOMC meeting.

Yes, a recession is headed our way.

Fed Dead Redemption! US Treasury 10Y Yield Up 10 BPS As US Debt And Unfunded Liabilities Hits $204 TRILLION (50 BPS Rate Hike Expected At Fed’s 12/14 Meeting)

The start of a new week and the US Treasury 10-year yield is up 10 basis points, always a noteworthy change. And with it, the 30-year mortgage rate should climb.

Meanwhile, the political elite party in Washington DC as the US National Debt hit $31.4 TRILLION and unfunded liabilities (the amount that the political elites promised Americans) hit $173 TRILLION for a grand total of … $204 TRILLION.

Since Biden/Pelosi/Schumer are in a lame duck session with Republicans taking the House in January, let’s see if Republicans can halt the insanity in Washington DC.

Be that as it may, Fed Funds Futures are pointing at a 50 basis point rate hike at the December 14th FOMC meeting.

Seriously, how is The Federal Reserve going to cope with $204 TRILLION … and growing Federal debt AND unfunded liabilities?

US Home Price Growth Slows To 10.65% YoY In September As Fed Tightens

The Covid outbreak of early 2020 begat a massive surge in monetary stimulus which has dissipated. Notice that home price growth is dissipating as well.

Also causing problems for housing is NEGATIVE REAL WAGE GROWTH. While the US is suffering from inflation and decling real wage growth, trading partner Germany has even a worse REAL WAGE GROWTH problem.

Where? Florida is doing great!!

Do I detect a trend?

World Yield Curve Inverts For First Time Since At Least 2000 (US Yield Curve Has Been Inverted For 107 Straight Days) Drums Along The Potomac??

Do I hear Drums Along The Potomac or East River??

The hawkish drumbeat from central bankers is raising fears of a downturn, with global bonds joining US peers in signaling a recession, as a gauge measuring the worldwide yield curve inverted for the first time in at least two decades. 

The US Treasury 10Y-2Y yield curve, on the other hand, has been inverted for 107 straight months.

And in Europe, 10-year sovereign yields are dropping like a paralyzed falcon.

The world and US yield curves are pointing to trouble. And drums along the Potomac (DC) and East River (NYC).

Bad Sign! What Interest Rates Are Telling Us (US 10Y-2Y Curve Inverts To -80 Basis Points, Euro 10Y Yields Falling, Fed Funds Rate Priced At 2.301% By January 2024)

What interest rates are telling us is a bad sign.

With an impending railroad strike that can torpedo the US economy (but if that is possible, why is the Biden Clan vacationing in Nantucket for Thanksgiving weekend when Joe should be talking with railroads and the unions to not let this happen?), let’s see what interest rates are telling us.

First, the US Treasury 10Y-2Y yield curve continues to descrend into the abyss (now at -80 basis points).

Second, the latest Fed Dot Plot (from September, new one will be issued during December) show that The Fed thinks that their target rate, while rising in 2023, will likely start falling again in 2024.

Third, since it is Thanksgiving Day, US bond markets are closed. But in Europe, the 10-year sovereign yields are falling, a sign that the ECB is reversing course by increasing monetary stimulus and/or a European are slow down.

Fourth, US mortgage rates have cooled since peaking (locally) at 7.35% on November 3, 2022 and now sit at 6.81%, a decline of 54 basis points. A clear sign of cooling.

Fifth, how about Fed Funds Futures data? It is pointing to a peak Fed Funds Target rate of 4.593% at the June FOMC meeting. Then a decline in rates to 2.301% by January 2024.

Now, go and enjoy your Thanksgiving dinner with friends and family (up 20% since last year), courtesy of Jerome Powell, Joe Biden, Nancy Pelosi and Chuck Schumer.

Bankrupt FTX Hit by Mysterious Outflow of About $662 Million (Yellen Calls For Regulation But Ignores Obvious Inflation and Debt Crisis) At Least Dogecoin Is Up Today

Sam Bankman-Fried’s bankrupt digital-asset exchange FTX was hit by a mysterious outflow of about $662 million in tokens in the past 24 hours, the latest twist in one of the darkest periods for the crypto industry.

Customers still coming to terms with the platform’s Friday plunge into Chapter 11 proceedings were subsequently confronted with what the general counsel of its US arm, Ryne Miller, described as “abnormalities with wallet movements.”

Miller said on Twitter that FTX had begun moving digital assets into cold storage — wallets that are unconnected to the internet — following its bankruptcy filing on Friday. The process was later expedited “to mitigate damage upon observing unauthorized transactions.”

Blockchain analytics firm Nansen, which gave the overall estimate of $662 million in withdrawals, said the coins flowed out of both FTX’s international and US exchanges. A separate analysis by Elliptic stated that initial indications showed almost $475 million had been stolen from the exchange in illicit transactions, with the stablecoins and other tokens that were taken being rapidly converted to Ether on decentralized exchanges — “a common technique used by hackers in order to prevent their haul being seized.”

And like that, O’Biden’s Treasury secretary Janet Yellen FTX Debacle said that it shows need for crypto regulation. Or Yellen could suggest a “buyer beware” tactic, but she is part of the most aggressively regulatory administration in history, MORE regulation is needed! /sarc

Regulate, regulate, dance to THEIR music!

At least Yellen is noticing Bankman-Fried (a new twist on Kentucky-Fried) and FTX since she is seemingly oblivious to the harm being done by The Federal Reserve and The Federal government with regards to inflation and debt growth. She is a Bird of War.

Like this chart of the Purchasing Power of the US Dollar CPI. Janet?

Or how about this chart of US Public Debt Outstanding and Real GDP growth per capita? The Fed and Federal government broke the bank, so to speak, by bailing out the banks in the financial crisis (pink box) and then again for the Covid crisis (orange box). Janet?

Damn it, Janet. Why don’t you discuss the Medicare and Social Security crisis (remember Joe Biden said Republicans may try to fix it which Biden turned into a nasty attack claiming that Republicans were going to take away your Social Security).

Lastly, the US has $172.6 TRILLION in unfunded Federal promises. Janet? A least FLA Senator Rick Scott tried to address the problems with Social Security, but Nasty Joe Biden “yelled Republicans are going to take away your Social Security!” I argue that O’Biden, Yellen and Democrats are going to let SS blow-up rather than take on politically challenging issues. Social Security liability is $22.23 trillion yet O’Biden just promised $500 billion per year to third-world countries and keeps sending billions to Ukraine. Janet?

On the crypto side (that Yellin’ Yellen wants to regulate), at least Dogecoin is up 10.37%.

They call Yellen “The Breeze” because she breezes by the hard decisions and focuses on the easy problems like calling for regulation of cryptos.

Perhaps Sam Bankman-Fried could be ordered to do KFC ads as “The Colonel.”

MMT Alert! US Debt At $10.7 Trillion In Q4 2008, Now At $30.6 Trillion, +186% In 14 Years (M2 Money UP +162.5%) US Unfunded Liabilities At $172.4 TRILLION!

Ever since the financial crisis of 2008 and the election of President Obama and a Democrat Congressional sweep, the US has embraced Modern Monetary Theory (MMT or borrow, print and spend without consequence). And between the financial crisis and the Covid crisis of 2008, we have seen an increase in US public debt from $10.7 trillion in Q4 2008 to a staggering $30.6 trillion as of Q2 2022. That is a staggering increase of 186% in only 14 years.

How about US Money stock? M2 Money stock has grown by 162.5% since the beginning of 2009 and the “Blue Wave” of 2008. And nothing has been the same.

The Covid outbreak in early 2020, we saw Fed money printing that has never seen before … or since. But one thing is for sure, M2 Money Velocity (GDP/M2) is near all-time lows.

Then we have headline US inflation as a function of M2 Money growth YoY.

To paraphrase Alexander Dayne from Galaxy Quest, “They broke the financial system, they broke the bloody financial system!”

And it is the midterm election “silly season” where no politician will discuss the complete and utter mess they have made. According to US Debt Clock, US national debt is already up to $31.26 trillion (OMG!), but the REALLY scary number that not a single politician will address is UNFUNDED LIABILITIES OF $172.4 TRILLION.

Can we go back to the gold standard? Or silver standard? Or ANY standard for that matter??

Instead, we have porous borders and patently UNSOUND money, thanks to MMT.

How Biden And The Fed Defanged The FANG Index And Clobbered Growth And Real Estate ETFs (Cousin Eddie And Clark Griswold Strike Again!)

There is no doubt that Biden is the Cousin Eddie of politics with his gifts that keep on giving. Like rampant inflation, soaring food, gasoline and diesel prices, and Pelosi/Schumer’s helping hand in creating price controls that will kill potential cures for illnesses.

In addition to rampant 40-year highs in inflation, we have the Clark Griswold of the economy, Fed Chair Jerome Powell, slamming his foot on the economic breaks to combat inflation created by Biden’s energy mandates and reckless Federal spending (like the aforementioned, laughable “Inflation Reduction Act.”

So, Biden helps creates massive inflation and Powell and the Gang counterattacked by raising their target rate with more to come (at least until May 2023). And with the implied Fed Funds rate soaring (red line), we are seeing the FANG stocks (Facebook or Meta, Amazon, Netflix and Google) falling more rapidly (white line) than the S&P 500 index. Which is also falling like a rock (yellow line). All this is happening as M2 Money YoY crashes and burns.

How about growth versus value under Cousin Eddie and Clark Griswold? The Vanguard Growth ETF and Vanguard Real Estate ETF are plunging with Fed tightening (red line). Vanguard’s Value ETV (yellow line) is down too, but not by as much.

Yes, Washington DC elites. The gift that keeps on giving … bad things.

Thanks to my former GMU student Andrew Edwards for the Cousin Eddie suggestion!

US Q3 Real GDP At 1.8% YoY, GDP Price Index Falls To 4.1% YoY As M2 Money Crashes Most In History (UST 10yr – 3mo Yield Curve Inverts) Heating Oil UP 162% Under Biden

US Q3 GDP numbers are out and they are … meh. Only Biden and Karine Jean-Pierre would cheer about 1.8% real GDP growth. At least real GDP growth wasn’t negative!

Real GDP rose 2.6% after -0.6% in Q2 and 1.8% YoY. But the most interesting data bit is the GDP Price Index. It fell to 4.1% in Q3 down from a whopping 9.0% in Q2.

But wait! Also declining at a stall speed is M2 Money.

And brace yourself for a cold winter. Heating oil is UP 162% under Biden.

Deceleration Nation! US Home Price Growth Slows Most On Record In August As Fed Hits Brakes, But Still Growing At 12.99% YoY (US Treasury 10-yr Yield DOWN -17 BPS Today)

Alarm! US home prices are decelerating as inflation rages and The Fed tightens.

Home price growth in the US slowed the most on record as a doubling of borrowing costs (thanks to the US Federal Reserve) has sapped demand.

A national measure of prices increased 13% in August from a year earlier, but is down from 20.79% in March, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.

The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated. 

While 13% growth sounds good, it is not good for renters looking to buy a home.

According to S&P/CoreLogic/Case-Shiller, Southern (red) cities Atlanta, Charlotte, Dallas, Miami and Tampa all still grew at over 20% YoY. Other cities like blue cities Detroit, Minneapolis, Portland, San Francisco, Seattle and Washington DC are grew at UNDER 10% YoY.

It looks like some people have taken three steps and left blue states for red states.

On related news, I always said in my classes that +/- 10 basis point in the US Treasury yield is a big deal. This morning, the US Treasury 10-year yield is DOWN -16.1 bps. In fact, the 10-year yields are down across the board globally.

Its that smell of impending recession.

Well, they certainly aren’t calling Biden “The Breeze.” Except for the recession that is going to clobber the US.