Movin’ On Up To The Dark Side! US Core Inflation Rises To Highest Level (6.6% YoY) Since 1982, Bond Volatility Now Highest Since Covid Lockdown (REAL Weekly Wage Growth Declines To -3.8% YoY)

The US is movin’ on up, to the dark side, while DC elites live in deluxe apartments in the sky. The US is movin’ on up to the dark side, we finally got a piece of the Banana Republic pie. … And its tastes horrible!

Today, the BLS released its inflation data. And it was terrible.

To begin with, headline inflation remains high at 8.2% YoY while CORE inflation (headline less food and energy) rose to 6.6% YoY.

Meanwhile, REAL average weekly earnings growth YoY further declined to -3.8% YoY.

On the bond front, the Bank of America ICE bond volatility index rose to Great Recession/banking crisis levels (also achieved during the Covid government shutdowns).

But back to the low-ball BLS inflation data. The biggest gain in price is … fuel oil at 33.1% YoY. Food at home rose 13.0% while gasoline rose 18.2%. Rent, according to the BLS, rose 6.6%.

Biden has probably been told by Ron Klain and Susan Rice that this is a good report.

What Was The White House Press Secretary Talking About? REAL Disposable Income Growth Is NEGATIVE And Diesel Prices Are Skyrocketing (Gasoline Prices Rising Too) Will The Fed Pivot Soon?

I feel sorry (sort of) for people like White House Press Secretary Karine Jean-Pierre who has to read ridiculous scripts in defense of awful Federal policies. For example, yesterday she touted Biden’s “accomplishments” of rising real disposable US income and declining gasoline prices. What? Doesn’t she read Confounded Interest?? /sarc

First, REAL disposable personal income growth for the US is NEGATIVE and has been since Biden and Congress embarked on their green energy crusade driving US inflation to its highest level in 40 years. Not exactly a great sales point for the midyear elections.

If we look at REAL average hourly earnings growth, a similar measure, we see that it is negative also. So, what on earth is Jean-Pierre talking about?

She also mentioned that gasoline prices are falling. Except that they are rising again. Apparently her talking points were from September.

Then we have diesel fuel prices, the backbone of the shipping industry, rising like crazy as Biden drains the strategic petroleum reserve.

Meanwhile, The Federal Reserve is tightening their uber-loose monetary policies (thanks Bernanke, Yellen and Powell). Will The Fed pivot to help with the midterm elections OR will The Fed keep trying to extinguish inflation by raising rates and withdrawing Fed monetary stimulus?

The we have Biden speaking (incoherently) with Jake Tapper about the possibility of recession.

The Perils Of Fed Tightening 3: US Taxpayers Getting Scaled By Fed Losses Thanks To Fed Tightening

The Federal Reserve, in their war on inflation (partly caused by excessive monetary stimulus since late 2008 under Nobel Laureate Ben “The Mad Money Printer” Bernanke) has led to large losses on their Treasury holdings as rates rise. The bill, of course, goes to Janet Yellen and The US Treasury. Ultimately, that burden is paid-for by US taxpayers.

Instead of “Blinded By The Light,” we are getting scalded by Biden’s policies and The Fed.

At least the top 1% made a fortune off of “Big Ben’s” printing press.

Now its time to pay the piper!

The Perils Of Fed Tightening 2: US Mortgage Rates Climb To Highest Since 2000, Mortgage Demand Falls To Lowest In Recorded History (Great Job DC!!)

Happy Columbus Day!

As I discussed yesterday in my post entitled “The Perils Of Fed Tightening In One Chart (Or Sweet Home DC!) Treasury Yield Curve Remains In Reversion And Stock Market Declining As Fed Reduces Money Supply Growth,” The Federal Reserve is tightening its monetary policies to combat 40-year highs in US inflation caused by 1) Biden’s anti-fossil fuels mandates, 2) excessive and reckless spending by Biden and Congress and 3) excessive monetary stimulus from The Federal Reserve.

Another casualty of The Fed’s tightening and reduction in M2 Money supply are … the mortgage and housing markets. The US mortgage rate has soared to 7.04% (highest since 2000) and mortgage DEMAND has fallen to the lowest level in recorded history.

Here is my chart from yesterday showing the inversion of the US Treasury 10yr-2yr curve and decline in the S&P 500 index as The Fed tightens.

And then we have this chart showing the most-extreme foreign Treasury outflow since March 2020.

At least The Fed is predicted to start cutting rates again in March 2020.

Yes, Biden and Powell have reenacted Kevin’s famous chili spill. And Ben Bernanke, the creator of QE from late 2008 was just award the Nobel Prize in economics for distorting financial markets.

The Perils Of Fed Tightening In One Chart (Or Sweet Home DC!) Treasury Yield Curve Remains In Reversion And Stock Market Declining As Fed Reduces Money Supply Growth

Sweet home DC! At least for the ruling elites. For the rest of us mortals, Bidenflation is crushing our finances.

To combat Bidenflation, The Fed has signaled that they will continue to raise interest rates. But at what cost?

(Bloomberg) — The world’s leading central banks are finally pushing their interest rates into restrictive territory, causing fears of overkill in financial markets and stoking chatter that policymakers may need to pivot at some point.

And with the withdrawal of monetary stimulus comes the slowdown of US M2 Money growth (green line). And with that slowdown, we see a declining stock market and an inverted US Treasury yield curve.

Of course, Biden could reverse his green energy agenda and allow for oil and natural gas exploration … again. Or begin building nuclear power plants again. But nooooo.

Another peril is rising mortgage rates.

Here is the S&P 500 against global liquidity.

Speaking of Freddie King, here is Joe Biden’s favorite song: hideaway.

US Mortgage Rates Rise To 7.04% As Housing Market Chills (WTI Crude And Gasoline Prices On The Rise Again As Biden Fails To Convince OPEC To Pump More Oil)

Under “Nuclear Joe” Biden, the US is truly the land of confusion.

As the Biden Administration touts “affordable housing,” we are seeing the 30-year mortgage rate rise above 7% as The Federal Reserve fights inflation … caused by the Biden Administration. Meanwhile, US home prices are falling.

The Biden Administration launched a war on domestic energy production, resulting in crude oil prices rising 74% under Biden and regular gasoline prices rising 62.4%.

As Biden pleaded with OPEC to increase oil production, he was embarrassingly rejected. Hence, West Texas Crude Oil prices have begun to rise again along with gasoline prices (pink box).

How about unemployment and the 10yr-2yr yield curve?

US Economy Adds 263K Jobs In September, REAL Average Hourly Earnings Growth At -3.06% (100 Million NOT In Labor Force)

Yesterday, I told my family “The good news is that Rotolo’s Pizza tastes even better reheated in the morning. The bad news? I ate the only two piece left.”

Which brings me to the September jobs report. The good news is that 263k jobs were added to the US economy. That means 10,521k jobs have been added in the 21 months under Biden! (Bear in mind that 12,100k jobs were added in the 7 months under Trump following the Covid economic shutdown, yet no media outlet trumpeted that accomplishment).

The bad news? While nominal average hourly earnings grew by 5% YoY, when I subtract Bidenflation from that number I get -3.06% growth. Or should I say that REAL wages are shrinking under Biden.

Now for the “Biden Miracle” of jobs being added. Here is a chart of NFP jobs added (white line) against M2 Money and headline inflation. Both The Fed and the Federal government pumped trillions into the economy leading to the highest inflation rate in 40 years. Once governments stopped with their Covid shutdown nonsense, jobs would return regardless of who was President. BUT Federal spending and Fed money printing went off the rails in early 2020.

As Paul Harvey used to say, “Here is the rest of the story.” Labor force participation fell in September and the U-3 unemployment rate fell slightly to 3.5%.

But labor force dropouts increased leading U-3 unemployment to decline. The number of people NOT in the labor force grew to nearly 100 million. Nothing has been the same since Covid.

So what will The Fed do? According to Fed Funds Futures data (WIRP), The Fed will keep raising rates until March ’23 then slowly start lowering interest rates again.

And with that “positive” jobs report, The Dow is down almost -500 points and the NASDAQ is down over -3%.

And with Fed tightening, we are seeing a collapse in M2 money supply.

Great Reset?? US Treasury 10yr Yield Tanks -20 Basis Points (UK 10yr Tanks -24.1 BPS)

As I frequently told my investment and fixed-income securities students at Chicago, Ohio State and George Mason University, any 10 basis point change in the US Treasury 10-year yield is significant.

But how about today’s 20 basis point decline in the US Treasury 10-year yield?

The UK’s 10-year yield is down even more at -24.1 basis points. Germany is down -18 bps and France is down -10.3 bps.

Speaking of credit default swaps, Credit Suisse is back to financial crisis levels while UBS and Deutsche Bank are not … yet.

And gold jumped $28.5 dollars today as POP goes the yield.

With all the turbulence in markets thanks to the war in Ukraine and Biden’s green energy mandates and spending (not to mention Statists like Klaus Schwab screaming about a Great Reset), I was reminiscing about more simple times.

The Great Recession, Part Deux? Evidence From the S&P 500, Treasury Bonds, Mortgage-backed Securities And The Unemployment Rate (Doesn’t Look Good)

Are we looking at The Great Recession, Part Deux?

First, let’s look at the S&P 500 index since August 24, 2020 (white line) and compare that to just before The Great Recession 04/15/06 – 05/17/08. They look pretty similar.

Second, let’s look at returns on long-term US Treasuries (10yr+, white line) and US mortgage-backed securities (gold line) since The Fed undertook “Operation Crush Inflation!” (green line).

I saw The President’s press secretary fielding questions about the declining stock returns and impending recession. She responded “But the labor market is strong!” Well, Ms. Karine Jean-Pierre, I am sure President’s Biden economic advisor Jared Bernstein told you unemployment was at a very low level just prior to 1) The Great Recession and 2) The Great Covid-shutdown Recession). So, claiming that the US employment market is strong economy ignores that unemployment will surge if the economy slows … which is what The Fed is trying to do.

There is a rush to hedge the downside with The Fed tightening the monetary noose.

Unfortunately, KJP’s feeble answers to the shriveling economy remind me of The Office episode when Dunder-Mifflin’s CEO said that “Dunder-Mifflin is still a strong economy.”

Here is a photo of Joe Biden with his press secretary explaining that the US economy is still strong.

Fed Tilts Toward Third 75 Basis-Point Hike on Stubborn Inflation (Fed’s Target Rate Expected To Hit 4.395% By March ’23 Then Fall, Mortgage Rates Rising)

Inflation is stubborn because “goin’ green!” by 1) restricting US fossil fuel production and exploration and 2) Biden/Congress endless spending splurge since Covid. So, The Federal Reserve has a tough problem: cooling inflation while US energy prices are up 54% under Biden. And those higher energy prices have percolated through the entire economy in terms of food prices and heating prices.

Where do we sit? The US Treasury 10yr-2yr yield curve remains inverted (a sign of impending recession). Mortgage rates are the highest in 14 years as The Fed tightens.

If we look at Fed Funds Futures data, we can see that traders expect The Fed’s target rate to rise to 4.395% by March 2023’s FOMC meeting. Then traders expect The Fed to take their enormous foot off the tightening pedal.

Yes, inflation is crushing the middle class and low-wage workers. Average hourly earnings YoY after we subtract inflation are negative.

Taylor Rule? Currently, the Taylor Rule based on Core inflation of 4.56% YoY suggests a Fed target rate of 9.14%. Since traders anticipate the target rate to peak at 4.395%, The Fed will almost be halfway towards cooling inflation.

The problem is … Fed Chair Powell and Treasury Secretary Yellen don’t like rules limiting their “power.” Powell and Yellen think the Taylor Rule is a New Jersey ham product.