Keyword: retread
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As we are painfully aware, inflation is still high at 7.1% Year-over-year (YoY). To cope with inflation, consumers have been gutting their savings and increasing their use of credit. In November, consumer credit increased 7.9% YoY while personal savings fell -64.8% YoY. The good news? Inflation month-over-month is expected to be 0% tomorrow. So, inflation will be gone in November?
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Zoltan! The Federal Reserve will be the backstop of the Treasury market this year to alleviate dysfunction resulting from its increasing size and the retreat of regular buyers. That’s the view of Credit Suisse Group AG analyst Zoltan Pozsar, who in a note to clients Friday predicted the Fed will restart asset purchases during the summer of 2023. In Pozsar’s analysis, relative-value funds won’t buy Treasuries unless they cheapen a lot relative to overnight index swaps, and banks with sagging reserves are more likely to tap the funding markets than to buy Treasuries. FX-hedged buyers have been “priced out,” and...
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December’s ADP jobs report is out and it is a good news. bad news type of report. First, the good news. 235k jobs were added in December. Now for the bad news, job stayers saw their annual salary growth fall to 7.3% Year-over-year (YoY). But while job growth remains good (which will allow The Fed to keep raising rates), the trajectory in the pink box is slowing. The breakdown from ADP.
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Silvergate! Customers withdrew about $8.1 billion of digital-asset deposits from the bank during the fourth quarter, which forced it to sell securities and related derivatives at a loss of $718 million, according to a statement Thursday. Executives said on a conference call that Silvergate may become a takeover target. The collapse of Sam Bankman-Fried’s FTX sparked a crisis for Silvergate, which held deposits for FTX units and Alameda Research, the trading firm at the heart of the crypto exchange’s downfall. Lawmakers are also scrutinizing the bank. Silvergate plunged 44% to $12.34 at 9:48 a.m. in New York, the steepest decline...
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Mortgage applications generally nosedive in the last two weeks of the year (seasonality effect), but Federal Reserce monetary tightening to fight inflation is making the last two weeks worse than usual. Mortgage applications decreased 13.2 percent from two weeks earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 30, 2022. The results include adjustments to account for the holidays. It marked the lowest mortgage applications since 1996. The Market Composite Index, a measure of mortgage loan application volume, decreased 13.2 percent on a seasonally adjusted basis from two weeks earlier....
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As we begin 2023 (and I am still bummed-out over Ohio State University losing a nail-bitter to Georgia in the Peach Bowl), we need to look at the condition of one of the most important sectors of the US economy.\, housing. If we look at the US Housing Leading Growth index (courtesy of RecessionAlert.com) has slumped to its worst reading since the recessions of 1982 and 2008. And then we have the OCED leading indicators for the US falling as M2 Money growth slows. My favorite chart shows US home price growth falling faster than University of Michigan football team’s...
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Today is all quiet of the financial market front since the US stock and bond markets are closed. But as the new year starts, we have to ask the following question: is the US already in a recession? Well, if you follow the NBER business cycle tracker, the answer is no. Unfortunately, the NBER only tells us if we are in a recession after iti has already happened. A simple measure of IMPENDING recession is the US yield curve which is currently inverted. Typically, a recession occurs within months of the yield curve inverting. But if we look at real...
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Wipeout! More tech tantrums. China’s Covid surge. And above all, no central banks riding to the rescue if things go wrong. Reeling from a record $18 trillion wipeout, global stocks must surmount all these hurdles and more if they are to escape a second straight year in the red. With a drop of more than 20% in 2022, the MSCI All-Country World Index is on track for its worst performance since the 2008 crisis, as jumbo interest rate hikes by the Federal Reserve more than doubled 10-year Treasury yields — the rate underpinning global capital costs. And in the US,...
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Trying to survive high inflation under Joe Biden is difficult, but surviving The Federal Reserve’s counterattack to Bidenflation is even more difficult. Two people who constantly appear in the business are ARK’s Cathie Wood and TSLA’s Elon Musk. A third we can add is Sam Bankman-Fried of FTX and Alameda Research infamy. So which one was the best at surviving Bidenflation and The Fed’s counterattack? Answer? None of them. Since the same day last year, we have seen M2 Money growth plunge and The Fed Funds Target rate rise rapidly from 25 basis points to 4.50%, a rapid increase. But...
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US existing home sales in November collapsed by -38.6% YoY as M2 Money growth runs out of gas. The above chart is similar to yesterday’s “Ski Slope” chart of US home prices YoY. What will President Biden do about this dire situation? Our “Vacationer in Chief” is off on yet another vacation to St. Croix in the US Virgin Islands, so probably nothing. Now that Biden is sunbathing, what will his Treasury Secretary Janet Yellen do?
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As the global economy slows and global central banks continue to tighten, we are seeing gasoline and diesel prices falling. But bear in mind that US gasoline prices remain 30% higher since Biden was sworn-in as President. Diesel prices are up a staggering 78% since that fatal day. Speaking of tightening monetary policy, the US Treasury yield curves have flattened/inverted since The Fed started tightening with rate increases to fight inflation. Let’s see how inflation does with Congress’ $1.7 trillion, unread Omnibus bill. Aka, Grand Theft Congress. Pelosi is holding an iPhone and Schumer is holding the scope rifle. McConnell...
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One of the big problems with Federal goverment and Federal Reserve monetary stimulus is … it wears out. Just look at M2 Money growth. US existing homes sales fell -7.70% in November to 4.09 million units SAAR. And since the same month last year, existing home sales are down -35.4% YoY. The good news? The median price of existing homes fell to 3.21% YoY. The bad news? The ark is really bad pointing to a bad December. Inventory for sale (orange line) remains below pre-Covid shutdown levels. Of course, will the Federal government and Federal Reserve come riding to the...
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US housing starts plunged -16.4% since the same time last year (aka, YoY) as The Federal Reserve continues tightening its monetary policy. Since October (aka, MoM), housing starts only dropped -.049% in November. 1-unit detached starts were down -4.06%. But multifamily (5+) starts were up 4.85% MoM. Building permits were down -11.24% from October to November (baby, its cold outside!) and down -22.4% since November 2021 (aka, YoY). Now, watch as President Biden and The Fed make housing construction disappear.
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The highest interest rates in 15 years are delaying home dreams, putting business plans on ice and forcing many Americans to agree to loan terms that would have been unimaginable just nine months ago. Biden’s anti-fossil fuel policies are helping drive up prices and The Federal Reserve is hiking rates to cool it off. Most of all, the surge in borrowing costs is punishing the cash-poor. And it’s about to get worse as the Federal Reserve carries on with its anti-inflation campaign and keeps hiking rates next year. As the Fed’s most aggressive interest-rate hike cycle in a generation filters...
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Ain’t this a kick in the … head. Rising mortgage rates courtesy of The Federal Reserve’s tightening to fight Bidenflation has led to a Covid-level plunge in the NAHB Homebuilder Market Index. Everything seems to be going down with a sinking M2 Money growth. And today, the 10-year US Treasury yield is up over 10 bps. Watch out mortgage rates!
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Like the Mel Gibson movie “Apocalypto!”, we are seeing the US middle class and low-wage workers being economically sacrificed by The Federal Reserve, the Biden Administration and Congress. Despite the rhetoric that Fed stimulus (aka “Stimuypto!”) is being removed, the US remains plagued by NEGATIVE real 10-year Treasury yields, NEGATIVE real Fed Funds Target rate and NEGATIVE real average hourly earnings growth under Inflation Joe. This chart demonstrates the Stimulytpo problem. Prior to Covid, US wage growth was consistently higher than headline inflation. But starting in March 2021, three months after Biden became President, headline inflation became higher than wage...
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California Screamin’! 6 of the top 8 metro areas with the largest home price crash in 2022 were in California, according to Redfin. Sadly, I lived in three of these metro areas (Austin TX, San Jose CA and Phoenix AZ), although I wouldn’t confuse correlation with causation. The trend for home price growth (blue line) is definitely on the downturn as The Fed removes its ample stimulus (green line). Here is California governor Gavin (Nancy Pelosi’s nephew) Newsome screaming about crashing California home prices.
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The numbers coming out today are not good. November numbers were 1) US Industrial Production was down -0.2% MoM, 2) manufacturing production is down -0.6%, 3) retail sales advanced down -0.6% (most in 11 months) and … The Empire State Manufacturing outlook was down -11.2% and the Philadelphia Fed (or Phed) business outlook was down -13.8% in November. And with all this bad news, global equity markets are dropping like a paralyzed falcon. But at least Biden traded a dangerous international arms dealer for WBNA star Brittney Griner. Possilby the worst trade in history after the Chicago Cubs traded future...
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As expected, The Federal Reserve raised their target rate by 50 basis points to 4.50%, the highest Fed target rate since November 2007. The only thing interesting that happened was Powell’s hawkish statements about The Fed wanting to keep tightening to fight inflation caused under “Inflation Joe” Biden. But the NEW Fed Dots plot looks like an Olympic Ski jump with expectations of DECLINING Fed target rates.
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Fun week ahead. US inflation numbers are out on Tuesday (forecast? CPI YoY = 7.3%, Core CPI YoY = 6.1%) and The Federal Reserve’s Open Market Committee (FOMC) rate decision is on Wendesday. So, where are we sitting on Monday? First, the US Treasury 10Y-2Y yield curve has been inverted (a precursor to recession) for 116 straight days). Second, the likelihood of recession in 2023 is 100%. Third, with the forecast of core inflation at a still numbing 6.1%, The Fed seems dead set on raising their target rate by 50 basis points to 4.50% on Wednesday. dddd So, as...
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