Disgusting: No matter how you cut it, core cpi inflation is up in October

 Seasonally adjusted core cpi inflation is trending higher since July, and ticked up from 3.25% year over year in September to 3.30% in October.

Not seasonally adjusted inflation is up to 3.33% in October from 3.31% in September, also trending higher since July.

And yet Jerome Powell keeps cutting the Fed Funds Rate, 50 basis points in September and another 25 basis points last week. 10Y yield minus 2Y has been showing its displeasure ever since, reversing its healthy trend. So has the 30Y mortgage.

Congress continues to spend like drunken sailors, and Powell has joined them with loose monetary policy now after not tight enough policy EVER.

The whole thing is DISGUSTING. And the election changes NOTHING.

 

Well, that didn't last long lol: 30-year mortgage ticks up from 6.08 to 6.12

 

The prices people must pay for tiny homes are so sad

 

40-year-old pays $1,600/month to live in a tiny home by the beach—it’s smaller than a parking spot

 

I live in a backyard ‘tiny home on wheels’ for $725 a month—here’s why I’m ...

 

 

The median monthly mortgage payment in the U.S. is $1,100, based on the most recent American Housing Survey data provided by the U.S. Census Bureau.

Today's toxic assets, if you're a bank, are AAA-rated 30-year fixed rate mortgages from 2020-2021, and 10-year and 20-year US Treasuries of the same vintage

A bank would normally keep AAA assets happily, and hold them to maturity in many instances.

Having to sell them in a rising interest rate environment is where all hell can break loose.

No one wants to buy a UST paying 0.89% when T-bills pay 4.5%, so you have to sell it at a loss to raise cash.

A bank without cash is a failed bank.

Be kind to your banker. He's not having a good week. Even if he didn't pay you interest like he should have since 2008.

 

The wizards of smart at Silicon Valley Bank loaded up on mortgage backed securities in the last few years, and when they needed to raise cash recently they had to sell some at a big loss

$1.8 billion.

That sparked the run.

The problems have been known for months by people like Chris Whalen.

This guy below actually tweeted out some particulars in January. This was no surprise.

Except to the federal regulators, who were completely asleep at the switch.

This is what happens when your bond portfolio is full of low-yielding securities. No one wants them when you have to sell them in the new higher interest rate environment. It's not a problem if you will "hold to maturity".

SVB wasn't very smart loading up on this stuff. Apparently they did not even hedge this otherwise foolish over-large position.

Hell, it's probably all California MBS, too. Think the outrageously overpriced homes, refinanced at rock bottom rates, of the very elite who have all their personal and business banking at SVB which is now blowing up. And all the second tier businesses and their employees dependent on them.

It's an inferno devouring their wealth from every side.

And they are screaming like stuck pigs for a bailout.

 

 

Distressed debt reaches $271 billion after five straight weeks of growth

 Growing Pile of Distressed Debt Signals Coming US Default Wave

(Bloomberg) -- A heap of distressed debt is expanding in the US corporate bond market and investors worry that a burst of defaults will follow. The amount of dollar-denominated bonds and loans trading at levels indicating distress is the largest since September 2020, reaching $271.3 billion last week after five straight weeks of growth, according to data compiled by Bloomberg. ... the supply of distressed debt is still a fraction of the almost $1 trillion peak level in 2020 . . ..     

With long-term Treasury investments down 32% year to date, and long-term investment grade down 30%, you can imagine what's happening downstream and behind the scenes.

Bloomberg cites Carnival Corp. as an example, which had to pay 6% for loans in 2021 but is paying 10.75% now. That's 79% more expensive for Carnival.

Have you tried to buy a house?

A 30-yr fixed rate mortgage would have cost you on average 3.14% one year ago. Today it'll cost you 7.08%, an increase of over 125%.

US home price plunge is ‘just beginning’ as housing market rapidly cools: economist

Do you own stocks?

You are still down over 18% year to date despite the 7% rebound in October.

 

The recent stock market rally can be rightly viewed as part of an orderly selling process which has been underway all year. The March high failed the January high, and the August high failed the March high. The current rally is unlikely to succeed the August high. It has to be remembered this is all occurring in the context of a rising interest rate environment, which is negative for stocks, housing, and bonds.

Bull market advocates, who have stocks to sell to you, don't forget, have persistently ignored the distorting effects of Fed interest rate suppression. In fact, they've counted on that suppression. They call it the Fed Put. They laugh at these puny Fed rate hikes, and make gazillions off the inflation trade. Now they're ignoring the unwind, too, which is affecting all debt. Stocks are debts, too, don't forget. Up or down, they make money off the direction. The bull market cheerleaders are worse than used car salesmen.

October 31 marks the end of the fiscal year for investment companies, who have dividends to distribute by calendar year's end to avoid taxation as registered investment companies. In an already down year, they have had a huge incentive to finish the fiscal year on as strong a note as possible. That may account for the strong October for stocks.

Normally the investment companies would be selling their losers by October 31 for tax-loss harvesting purposes. If that's happening you wouldn't know it from the monthly view of the S&P 500 in October. The DOW and the Russell 2000 were up even more. Even the NASDAQ is up in October.

But the S&P 500 low of the year did occur on October 12 at 3577, ringed by heavy selling on Sep 30 and Oct 14, after which it has been elevator up. That was probably the tax-loss harvesting for fiscal 2022.

In any event rising interest rates remain negative for the bond market, the housing market, and for stocks. The consequences of massive debt repricing are only just beginning to be felt. Stocks will hold out the longest because they can. First the bonds, then the housing, then the stocks. The rest of us are just collateral damage.

The expected 0.75 point Fed interest rate decision is Wednesday, November 2, less than one week before the election. Don't expect the Fed to do more than this, even though they damn well ought.   

The Fed is all talk and no action fighting inflation

 The effective federal funds rate stands at 2.33% and $8.85 trillion remains on the balance sheet while Powell makes speeches.

Borrowing is still very cheap for the big boys and the Fed's finger on the scale makes it impossible to know the true value of its mortgage backed securities and US Treasuries.

Meanwhile inflation rages at 8.5% in July.

The market "rout" is merely another yawn as Americans get punished at the grocery store and the gas station.

Current GDP of $24.883 trillion, reported 8/25, implies a fairly valued market level of around 1,600 not 4,057. The S&P 500 remains 153% above that.

They remain rich, and you remain . . . the reason why.

 

Institutional investors have bought up 20% of mobile home parks and jacked up the rents on the low income residents, devouring widows' houses

 The plight of residents at Ridgeview is playing out nationwide as institutional investors, led by private equity firms and real estate investment trusts and sometimes funded by pension funds, swoop in to buy mobile home parks. Critics contend mortgage giants Fannie Mae and Freddie Mac are fueling the problem by backing a growing number of investor loans. ...

Driven by some of the strongest returns in real estate, investors have shaken up a once-sleepy sector that’s home to more than 22 million mostly low-income Americans in 43,000 communities. Many aggressively promote the parks as ensuring a steady return — by repeatedly raising rent. ...

George McCarthy, president and CEO of the Lincoln Institute of Land Policy, said about a fifth of mobile home parks, or around 800,000, have been purchased in the past eight years by institutional investors.

He was among those singling out Fannie Mae and Freddie Mac for guaranteeing the loans as part of a what the lending giants bill as expanding affordable housing. Since 2014, the Lincoln Institute estimates Freddie Mac alone provided $9.6 billion in financing for the purchase of more than 950 communities across 44 states. ...

Soon after investors started buying up parks in 2015, the complaints of double-digit rent increases followed.

More.

CNBC story blames capitalism's law of supply and demand for inflation: 92 million millennials caused it, not Federal Reserve interference with interest rates and mortgages

... too many people with too much money chasing too few goods ... millennials are still making up the largest chunk of the homebuyer market by generation ... 

More.

Meanwhile, this housing bubble dwarfs the last one, and we're supposed to blame millennials for it.

Sounds like a repeat of the excuse for the last one: greedy Baby Boomers.

Just forget about Zero Interest Rate Policy artificially driving down borrowing costs for over a decade, and forget about the crappy low-yielding $2.7 trillion in MBS still on the Fed Balance Sheet nobody wants, because millennials are to blame!

The chutzpah.

This is as good a day as any to remember that Ben Bernanke's Fed under Obama bailed out the banksters and hung 6.5 million homeowners out to dry

 Bloomberg, August 21, 2011, here:

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. ...

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc. ...

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

 

Housing market conditions update, now vs. then

 Housing market conditions, now vs. then:

Average borrower FICO score today: 751

In 2010: 699

Underwater today: virtually none (2.5% with less than 10% equity)

In 2011: more than 1 in 4 underwater (25% plus)

Today: 2.5 million ARMs (8% of mortgages)

In 2007: 13.1 million ARMs (36% of mortgages)

Facing resets today: 1.4 million ARMs (56%)

In 2007: 10 million (76%)

Mortgage delinquencies today: 2.1%

In 2010: 11.3%

 

Housing remains as unaffordable as ever. The cost of the median new one is up a whopping 45% in April 2022 vs. April 2020, to $450,600. 

More:

Here’s why this housing downturn is nothing like the last one

Wow, WaPo's Glenn Kessler almost becomes Rush Limbaugh, doubts Bernie's $1 trillion bailout claim

If anything, Bernie underestimates the scope of the secret loans during the financial crisis ten years ago. The Freedom of Information Act inquiry which brought them to light went all the way to the Supreme Court. Ben Bernanke only relented at the last second.

Discount Window lending behind the scenes during the crisis period soared into the multi-trillions of dollars by the time it ended in 2010 while everyone was fixated on the shiny object known as TARP ($700 billion, about a tenth the size of the generally accepted figure of $7.7 trillion). That's probably why TARP was undertaken to be honest: Oh look! A deer!

The DW loans were made to all kinds of entities for whom normal lending had disappeared. In too many cases very questionable collateral was put up. The loans were ultra-cheap, at rates unavailable to homeowners defaulting on their comparatively much more expensive mortgages because they had lost their jobs. Many of the loans rolled over and over and over again for protracted periods to keep the entities from going under, while Bush & Co. and then Obama & Co. did nothing for Joe Six-pack. Many millions lost their homes while businesses which should have gone bankrupt did not.

Hard to believe this clueless so-called fact checker still has a job.

What matters to Rush Limbaugh is that Trump get reelected in 2020, not that we get jobs, pay raises and The Wall

Politics, not people, is what matters to Rush Limbaugh.

We now face two years of gridlock, attacks, investigations and impeachment because feckless Republicans lost the US House.

Trump and the Republicans squandered their first year, and delivered nothing consequential for average Americans in their second, and now they've paid the political price. Losing 30+ seats and not even running in 30+ more is retreating, not fighting.

Meanwhile we get bupkis, as usual.

The only redeeming thing is that we might get some good judges because Republicans still control the US Senate, but that doesn't pay the mortgage.

The housing bubble may be over, but the mortgage debt bubble sure isn't

dailyvaluewatch.blogspot.com

Martin Wolf for The Financial Times likes business historian Adam Tooze's important new book CRASHED: HOW A DECADE OF FINANCIAL CRISES CHANGED THE WORLD

See Martin Wolf, What really went wrong in the 2008 financial crisis?

Tooze has been making the rounds at places like Bloomberg (and especially here) and CNBC promoting the theses of the new book, and was notably interviewed yesterday on Bob Brinker's radio program "Money Talk" (the dismissive summary of the interview provided here is notably blind to Tooze's importance, weakly observing how Tooze maintains that "money has no tangible underpinning", which is about all that grabs the attention of libertarian fundamentalists).

Those more popular presentations give only a tantalizing hint of the narrative power this trained historian brings to the story of the 2008 panic.

To see that in action there is an important lecture available here which Tooze gave at the American Academy in Berlin earlier this year, on March 13th.

"Conservatives" will doubtlessly recoil at Tooze's characterizations of the role played by them during the financial crisis. That those conservatives are really the GOP's libertarians is a distinction the significance of which seems lost on Tooze.

That said, the value of Tooze's perspective goes far beyond the subject of the warring factions of libertarian fundamentalism and neoliberalism, however important those are for understanding our times.

For one thing, Tooze is almost unique in describing in such vivid detail the dominating role now played by the "dollar" in the global economy (American analyst Jeffrey Snider being the notable but obscure exception). It takes an historian. This is, of course, the eurodollar, the proper understanding of which permits Tooze to show how the financial crisis in the United States centered in the mortgage market was globalized via international banking through London and Frankfurt independently of the wishes of the state actors. It also reveals to him that the most important global economic relationship has not been the US with China but the US with London.

Same as it ever was. The king and his colonies still rule the world, with a little help from the Bank of England.

For another, Tooze's work shows the degree to which the global economy has been captured by the bankers in providing these eurodollars, who acted unilaterally behind the scenes, first in the US (Ben Bernanke) and regrettably only later in Europe (Mario "whatever it takes" Draghi), to provide liquidity swaps in the trillions of dollars during the financial crisis while politicians argued about how states should deploy mere billions.

One inescapable conclusion ten years after the financial crisis is that citizens of states are in larger measure no longer masters of their own destinies, and haven't been for a very long time. They are today really ruled by technocrats in charge of central banks who work now more, now less in concert with their host governments to manage economic flows. The danger of this global state capitalism is that it might one day slip back into the outright fascism it so closely resembles.

To the millions of unemployed who were not bailed out in the crisis and who lost their homes and their hope in the United States and in the PIIGS, or to the hundreds of thousands of Muslims now in Chinese reeducation camps, it already has.

The crisis for neoliberalism does not come from capitalist fundamentalism. It comes from its growing list of victims.

Wells Fargo sets aside $8 million to compensate about 400 homeowners foreclosed from 2010-2015 due to computer glitch

Well whoopdedoo. That's about only $20,000 a pop.

Sorry you lost your job. Here's a sandwich.

Story here.

The only reason itemized deductions are on the table is a minority of 30% of tax filers itemize

And when it comes to minorities, they're only as effective at protecting their interests as their lobbyists. We'll see how strong those lobbyists remain, but Republicans in the House and the Senate are clearly divided, and seem to have joined the side of the enemy. The latter aim to pitch deductibility of state and local income taxes, while the former aim to pitch deductibility of mortgage interest.

It's weird beyond odd that Republicans are having a war over tax deductions when they should be having a war over spending. Republicans used to be the "no new taxes" party, but have become the "no tax deductions" party instead, which means they're more interested in raising revenues than in cutting your taxes (which implies cutting spending).

Just 44.7 million itemized in 2015, out of 149.7 million returns.

Watch your wallets.

Discussed here.

"Middle class" according to Pew Research Center is just trying to make everyone feel better

MarketWatch here says that Pew estimates middle class household income for a family of 3 at between about $35,000 and $105,000 for 2011.

To understand how too liberally defined that is, consider that in 2011 almost 60% of individual wage earners made $35,000 or less . . . about 91 million wage earners out of 151 million.

Actually the middle third of all those paycheck earners, 50 million, made between just $15,000 annually and not quite $40,000, the average of which is about $27,500. Make over $40,000 and you were already in the top third of individual wage earners that year.

A couple making $27,500 can survive in this world, but it wouldn't have been able to buy the median priced home of $225,000 in 2011. Just financing that without a down payment, an impossibility, at the average 30-year rate of 4.5% in 2011 would have meant 50% of income going to principal and interest.

Putting 10% down would drop that to 45% of income, still hardly affordable. And who do you know making $27,500 with $22,000 saved for a down payment on a house?

They'd be renting, most likely, and not yet solidly middle class.

In 2016 the average median sales price of a home in the US soared to nearly $314,000, putting the American dream even farther out of reach than ever before for the majority.

University of Georgia historian minimizes the magnitude of foreclosures during the Great Depression, missing their significance for the value of homeownership today

Stephen Mihm, at Bloomberg here:

While home ownership became increasingly popular in the early twentieth century, the U.S. was still a majority-renter nation in 1930, though by this time homeowners numbered 48 percent of the total population. But the Great Depression knocked that figure back down to 43 percent, roughly on par with late nineteenth century levels.

Things changed dramatically in the 1940s, when home ownership levels began moving toward unprecedented highs, hitting 66 percent by 1980. Economists are still arguing over why that happened, but the most compelling explanations are pretty banal and do little to support the sentimental blather associated with home ownership.

Does this guy even know that the nonfarm foreclosure rate nearly quadrupled between 1926 and 1933?

Through 1933 there were over 1 million completed foreclosures, about 1% of US population of the time. Compare that to the current crisis. We've had 8.5 million completed foreclosures since 2004, about 2.5% of population. 

Homeownership as a cultural value in the post-war was so high because so many people lost their homes before it.

And it still is today and will continue to be, despite what some people say with an axe to grind from the safety of their sinecures.

Newsflash for those of you who think Trump's talk of an inherited mess is silly

You obviously had full-time work under Obama. We didn't for almost eight years, and not even part-time work for five. Our best money-saving work years are now all lost.

You obviously enjoyed the stock market recovery and even continued to invest, but we had to sell assets to preserve them and liquidate some just to survive.

Now we're stuck with non-income producing investments thanks to Ben and Janet and a stock market which is too expensive for a sane person to buy.

You obviously refinanced your mortgage at rock bottom rates, but we couldn't without that full-time job. And now that we can, it's hardly worth the expense thanks to Elizabeth Warren and her CFPB.

Meanwhile the gutters leak, the driveway needs paving, and the snowblower needs an overhaul.

You obviously drive on fresh wheels, but our cars are 10 and 20 years old in 2017. We'll probably keep them another ten because our mechanic is an honest Christian.

You obviously feel entitled to vacations and take them regularly, but we haven't had a real one since the 1990s.

You obviously enjoy dining out at restaurants, but we shop for bargains and cook at home almost every night.

You obviously consume healthcare like you do jet fuel, but we only go to a doctor, dentist, ENT or ophthalmologist when we absolutely have to because it's all out of pocket because of ObamaCare.

At Christmas we mostly give each other necessities, like new shirts socks and underwear, just so we have plenty of things to open to make the holiday seem more festive than it is.

We don't have television service because it's a costly waste of time, but for entertainment we enjoy listenting to Donald Trump on the radio dressing you down.

He's the best thing that's happened to us in years.