Iron Man? Avocado, Iron Ore And Gold Prices Surge With Global Tariffs And Uncertainties (Crazy Train! Wage Growth Now Exceeds Home Price Growth!)

I was torn between Iron Man and Crazy Train, but finally decided on Iron Man to represent recent price surges in iron ore, gold and … avocados.

Or maybe Crazy Train is more appropriate since US core inflation numbers are signaling low inflation. But since I love avocados and guacamole, rising Haas avocado prices are a burden.

avogoldiron

Both the Case-Shiller 20 metro home price index and hourly wage growth are higher than core inflation (PCE price growth). The good news is that wage growth now exceeds home price growth nationally.

inlfhousing

Also note that wage growth YoY is over twice that of core inflation.

All abroad The Fed crazy train!

totallyguac

 

Jaws! All Quiet On The Debt Front Prior To FOMC Meeting (Vol Cube Showing Stress At Both Ends Of The Curve)

Yes, and the woman going for a night swim in the film “Jaws” felt perfectly safe too. Until the music started.

SIFMA has an excellent chart documenting the explosion of debt issuance since 1998 that   amped-up with The Fed’s intervention in 2008.

export_1562689177106

Despite the massive growth of long-term debt (with correspond high duration risk), the interest rate volatility cube is showing calm seas … except at the short-end of matures .. and now the long-end is starting to show more volatility.

volcube070919

Is it my imagination, or do those volatility spikes look like shark fins??

The Fed Funds Futures market is showing 1-2 Fed Funds rate cuts for the next two meetings.

fedfundrate

And the expected future outcomes are pointing in the downward direction.

arcofthe

Even Austria is showing a steep decline in their 100-year bond yields.

austria100y

While it is seemingly all quiet on the bonds front, volatility is emerging at both ends of the maturity curve. HEDGE!!!!

jaws.jpg

Bizarro Invasion! Denmark And German Sovereign Yields Negative (And 10Y German Yields BELOW The ECB Main Refinancing And Deposit Rate!)

The European Central Bank’s President, Mario Draghi, 8-year term is up in October … and  Christine Lagarde of the International Monetary Fund has been chosen to replace him. Will Lagarde continue Draghi’s policies (yes) or change course (no)?

But Europe has been invaded by the bizarro legion.

Case in point. Both Germany and Denmark have negative sovereign yields out to 20 years. Germany, which has issued longer maturity sovereign debt, has slightly positive yields beyond 20 years.

gerden

And the German 10-year Bund yield is now below the ECB Main Refinancing Rate, ECB Deposit rate and the European Financial Stability Facility (EFSF) rate. How bizarre is that?

germbunds

Yes, the monetary Bizarro legion has invaded earth (or at least Japan and Europe).  And the US monetary policy has been bizarro since Alan Greenspan.

sup169biz

 

 

Coastal Cities Lead In Apartment Rents (SF, NYC, San Jose, Boston, DC), Akron Ohio And Wichita Least Costly Rents

Not surprisingly, apartment rents in the US are the highest in land-use restricted coastal cities like San Francisco, New York city, San Jose CA, Boston and Washington DC. Other west coast cities and Miami round out the remaining top ten most expensive apartment rents.

Rent_Report-1068x705

According to Zumper, North Carolina (Raleigh and Charlotte) and Arizona (Glendale and Scottsdale) along with Fort Worth TX saw the biggest increases in apartment rents.

Raleigh, NC saw one bedroom rent climb 5.1%, which was the largest monthly rental growth rate in the nation, to $1,040. This large bump moved the city up 2 positions to become 49th most expensive rental market.

Charlotte, NC took a 5 ranking bump up to 26th with one bedroom rent climbing 5% to $1,260 and two bedrooms increasing 2.2% to $1,370.

Glendale, AZ jumped up 7 spots to rank as the 67th most expensive city. One bedroom rent grew 5% to $840, while two bedrooms were up 1.9% to $1,070.

Scottsdale, AZ saw one bedroom rent climb 4.5%, settling at $1,380, and up 3 positions to become the 21st priciest city.

Fort Worth, TX moved up 3 spots to rank as 40th with one bedroom rent jumping 4.5% to $1,150 and two bedrooms increasing 2.3% to $1,340.

On the downward side, tax- and pension-crazy Chicago has fastest declining rents. And it is Always Sunny In Philadelphia for rents!

 

Chicago, IL fell 2 spots to rank as the 17th priciest city with one bedroom rent dropping 5.1%, which is tied with Bakersfield’s growth rate as the largest dip in the nation, to $1,490.

Bakersfield, CA saw one bedroom rent drop 5.1%, settling at $740, and down 7 positions to become 86th.

Anchorage, AK moved down 3 spots to 62nd with one bedroom rent falling 4.2% to $910. Two bedrooms, on the other hand, were flat at $1,150.

Atlanta, GA took a 4 ranking dip to 22nd with one bedroom rent decreasing 4.2% to $1,370 and two bedrooms down 3.3% to $1,740.

Philadelphia, PA one bedroom rent dropped 3%, settling at $1,310, and down 2 spots to rank as the 24th priciest city. Two bedrooms stayed stable at $1,700.

Of the top 100 cities, LeBron James’s home town of Akron has the lowest apartment rents in the nation. Followed closely by other non-coastal cities like Wichita, Detroit, Lubbock TX and Tucson AZ. And if you are taken back to Tulsa, you will find relatively inexpensive apartment rents.

Screen Shot 2019-07-03 at 12.25.32 PM

 

Godzilla Alert! Trillion-Dollar Monster Lurks as Bonds Price Out Duration Risk (Historic High Risk!)

So much for MMT (modern monetary theory) where deficits and debt don’t matter. Size and quality of debt DOES matter. Just look at the interest rate risk of staggering debt loads, not to mention the credit risk!

(Bloomberg) — Investors riding easy-money policies are breeding a trillion-dollar monster in the bond market, the likes of which has never been seen in decades of history.

Wall Street will tell you it’s low risk for now — one that’s been hyped-up for years. But on the current trajectory, just a modest bump in yields near record lows could inflict a world of pain for traders all over the globe.

Dovish monetary bets, relentless demand for safe assets and conviction in the lowflation era are spurring money managers to gorge on long-maturity bonds, or duration risk.

One measure of the relative compensation investors receive to hold longer-dated obligations is a whisker away from a 58-year low. Over in Europe, they’re taking a century of risk for yields barely above 1% in order to escape a $13 trillion global stockpile of negative debt.

All that is leaving duration, a measure of sensitivity to interest-rate changes, near all-time highs across sovereign debt markets. As hopes rise of a U.S.-China breakthrough on trade, bond bulls could suddenly find themselves on the backfoot.

rechighduiration

And the interest rate volatility cube seems to be giving the middle finger to investors.

intvolcube

Debt now emerges as the new Godzilla in the room.

godzilla-poster