Free Republic

After Jerome Powell raved about the strong US labor market and oddly ignored the staggering crowding-out of US interest payments on its massive debt, the US Treasury’s 3-year debt auction was … a Hinderburg moment. First, the high yield at today’s auction of 3-year Treasury notes was 4.073%. This occured as the allotment to brokers and dealers collapsed along with M2 Money growth YoY. Then we have this horrible chart of the 3Y auction stop through, crashing into uncharted waters. A stop-through indicates when the highest yield the Treasury sold in the auction is below the highest yield expected when...

The Federal Reserve is doing Archie Bell and The Drells “Do The Tighten Up!” Over the fourth quarter, significant net shares of banks reported having tightened standards on C&I loans to firms of all sizes. Banks also reported having tightened all queried terms on C&I loans to firms of all sizes. Actually, banks are tightening standards across the various credit boxes. And as banks tighten up their credit box, we are seeing the median age of US homebuyers rising from 31 to 47 years. This is reminding me of Germany where you save for your entire life to buy a...

The Hill has an interesting story: 5 takeaways on a surprisingly strong jobs report. “The U.S. economy added 517,000 jobs in January, more than doubling Wall Street expectations and turning up its nose at prognosticators of an imminent recession. The unemployment rate dropped to 3.4 percent, the lowest level since 1969. Analysts were expecting it to move in the opposite direction, ticking up to 3.6 percent.” Yes, I was expecting U-3 unemployment to increase to 3.6% as well. What happened? Seasonal adjustments (BLS doens’t provide non-seasonally adjusted data). But the shocking headline (mostly due to seasonal adjustements) was not as...

Last week’s strange jobs report (massive discrepancy between the Establishment and Household data) did push expectations of further Fed rate hikes up. In fact, the US Treasury 10-year yield is up 10 basis points this morning. The US Treasury 10Y-3M yield curve remains inverted at -106 basis points while the implied Fed rate hike for the June 2023 FOMC meeting jumps to over 5%. Mortgage rates? Likely to rise.

Strange days indeed! Today’s jobs report from the Bureau of Labor Statists (BLS) was stunning. 517k jobs added! Very strange since the ADP jobs added report on Febuary 1st was only 106k. THAT is a huge discrepancy (probably a seasonal adjustment in the BLS reporting). Average hourly earnings rose to 4.4% YoY. Too bad headline inflation is still roaring at 6.5%. So, the inflation tax is still overwhelming wage growth. The spread between the January jobs report (BLS) and the ADP jobs added report (ADP) is similar to the infamous jobs report that the Philly Fed “corrected” (orange circle). Here...

President Biden had better give his State of the Union Address before the economy worsens any more. In January, the Challenger, Gray and Christmas jobs cuts index was a doozy. Jobs cuts rose 440%. This is happening as The Federal Reserve keeps its feet on the monetary brake pedal. Many of the job cuts are in the tech sector, but job cuts are now spreading across the economy as a recession looms. This morning, the US Treasury 10-year yield is down only -3.5 basis points, but it is Europe where the action is. UK is down -16.2 basis points and...

The Federal Reserve slowed its drive to rein in inflation and said further interest-rate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades. Policymakers lifted the Fed’s target for its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75%. The smaller move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that. The unanimous decision by the Federal Open Market Committee was in line with financial market expectations. Markets are forecasting a pivot after the June meeting in 2023. The...

The US economy is slowing down. In fact, ADP jobs added just printed at 106k in January, the lowest reading since August 2021. ADP jobs added follows the slow down of M2 Money growth YoY as The Fed tightens its monetary policy. Do I detect a trend (orange line)? I doubt that January’s ADP report will be mentioned in Biden’s State of the Union address.

The Case-Shiller index is out for November 2022. Too bad it is January 31, 2023. Call it “Happenings 2 Months Time Ago.” On a year-over-year (YoY) basis, the Case-Shiller National home price index slowed to 6.77%. On a month-over-month (MoM) basis, the CS National index fell -0.54%. That is the 5th straight month of home price declines. Only San Francisco fell on a YoY basis (down -1.6%). Five metro areas were above 10% and they are all in the South. Atlanta, Charlotte. Dallas, Miami and Tampa. On MoM basis, every metro area in the Case-Shiller 20 index saw price declines...

The important labor market cost index, the US Employment Cost Index (ECI) fell in Q4 2022 to 1.0%, down from 1.2% in Q3. Notice that ECI is falling as M2 Money growth falls. Fed meeting coming on Wednesday!

The Federal Reserve’s Open Market Committee (FOMC) is meeting on Wednesday. What will they do? First, The Fed Funds Target (upper bound) is above the Core US inflation rate YoY. Second, M2 Money growth YoY has slowed to -1.3%. Of course, the members of the FOMC might decide that this is not enough and may keep raising rates and shrinking The Fed’s enormous balance sheet. In the “Haven’t they suffered enough?” arena, US real disposable income has fallen by -21% since Biden was sworn-in as President. On the other hand, the Taylor Rule is still pointing to a target rate...

Welcome to the wonderful world of Bidenomics, giving the US 40 year highs in inflation leading The Federal Reserve to remove its enormous monetary stimulus (known as “The Punch Bowl.” I previously pointed out that US Real GDP was actually less than 1% year-over-year (YoY) in 2022, hardly a fantastic number given the trillions in Biden/Pelosi/Schumer spending (Omnibus, Infrastructure, etc) and Powell/Fed’s whopping monetary stimulus in 2020. But real disposable income, the amount households have left to spend after adjusting for inflation, had been falling for 7 straight months. In fact, REAL disposable personal income peaked in March 2021, shortly...

I was interviewed by James Rosen at Fox News on the exploding US debt and whether it is a problem. I said “Yes, the sheer size of the US debt load in unsustainable and will get worse if interest rates rise.” Well, here we are! The US paid $853 billion in interest for the $31 trillion in debt in 2022. That is more than the US Defense budget in 2023. If the Fed keeps rates at at these levels (or higher), the US we will be at $1.2 trillion to $1.5 trillion in interest paid on the debt. The US...

Despite polticians like President Biden cheerleading his great economic accomplishments and Treasury Secretary Janet Yellen dipping into Social Security to fund the Federal government (much like Biden’s dipping into the Strategic Petroleum Reserve), there are serious problems facing America’s middle class and low-wage workers. Inflation is still brutal (but slowing) and REAL weekly earnings growth has been negative for 21 straight months (meaning that Biden’s bragging about wage growth has been destroyed by the inflation created by his energy policies and massive spending sprees). Personal spending rate YoY has plunged -53.5% to cope with inflation. To quote Joe Biden (Chauncy...

Kansas City is a wonderful city. But the KC Fed’s Services Survey is not. In fact, it plunged to -11 for January. Rough start to the new year. The decline in the KC Fed survery mirrors that of other regional Fed indices, indicating a slowdown in the US economy as The Fed withdraws the monetary punch bowl, Despite the hoopla, remember that US Real GDP growth only grew at less than 1% on a year-over-year basis in 2022. Apparently, The Federal Reserve doesn’t have a whole lotta love for middle class America.

The US housing market continues to struggle as The Federal Reserve continues to fight inflation. Today’s pending home sales are another nail in housing casket. Pending home sales declined -34.4% year-over-year (YoY) as M2 Money growth went negative (-1.3% YoY). At least UMich buying conditions for housing increased … to 44, well below 100.

There was a hilarious film with Hillary Swank and Aaron Ekhart called “The Core” where earth’s core stops spinning and the earth gets cooked by the Sun’s rediation. Now we learn that the Earth’s inne core has actually stop spinning. This time, however, all that has happened is that Joe Biden is President which is almost as bad, But also related to “The Core” is that the important Personal Consumption Expenditures (PCE) are out for December along with PCE price deflator numbers. In short, personal income was up 0.2% month-over-month (MoM) in December while personal spending was down -0.2%. REAL...

Today’s GDP report from the BEA reminds me of the Peggy Lee song “Is That All There Is?” Between the massive Fed monetary stimulus since late 2008 (and particularly since Covid in 2020) and all the Federal spending (Covid relief, Inflation reduction, Omnipork spending bill, etc.), US real GDP rose by only 2.9% in Q4 from Q3. But signs of slowing underlying demand mounted as the steepest interest-rate hikes in decades threaten growth this year. Gross domestic product increased at a 2.9% annualized rate in final three months of 2022 after a 3.2% gain in the third quarter, the Commerce...

The December new home sales report is good news and bad news. The good news? US new home sales rose by 2.3% in December from November to 616k units sold SAAR. That is the good news. The bad news? Since December of 2021, new home sales fell -23% year-over-year (YoY). The median price of new home sales rose 7.8% YoY, but the trend as The Fed withdraws monetary stimulus (orange line) is not good. Perhaps there is a communications breakdown between the Biden Administration and The Federal Reserve.

U.S. oil refining margins, also known as the 3-2-1 crack spread, jumped to a three-month high on Tuesday — and that’s an indication the country faces an ongoing product shortage that might lead to higher gasoline and diesel prices at the pump. The 3-2-1 crack spread is a great indicator to gauge fuel product tightness. High spreads indicate gasoline, diesel, jet fuel, and other petroleum products are in short supply, while low spreads mean an abundance of supply. Spread direction is also important — if rising, it would mean fuel inventories are declining. The simple calculation of refining margins is...