Doug Noland: Epic Stimulus Overload

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
Ten-year Treasury yields jumped 13 bps this week to 2.48%, the high going back to March. German bund yields rose 12 bps to 0.42%. U. S. equities have been reveling in tax reform exuberance. Bonds not so much. With unemployment at an almost 17-year low 4.1%, bond investors have so far retained incredible faith in global central bankers and the disinflation thesis.
Between tax legislation and cryptocurrencies, there’s been little interest in much else. As for tax cuts, it’s an inopportune juncture in the cycle for aggressive fiscal stimulus. And for major corporate tax reduction more specifically, with boom-time earnings and the loosest Credit conditions imaginable, it’s Epic Stimulus Overload. History will look back at this week – ebullient Republicans sharing the podium and cryptocurrency/blockchain trading madness – and ponder how things got so crazy.
From my analytical vantage point, the nation’s housing markets have been about the only thing holding the U. S. economy back from full-fledged overheated status. Sales have been solid and price inflation steady. While construction has recovered significantly from the 2009/2010 trough, housing starts remain at about 60% of 2004-2005 period peak levels. It takes some time for residential construction to attain take-off momentum. Well, liftoff may have finally arrived. As long as mortgage rates remain so low, we should expect ongoing housing upside surprises. An already strong inflationary bias is starting to Bubble. Is the Fed paying attention?

This post was published at Wall Street Examiner on December 23, 2017.

Coming Housing Boom Could Mean It’s Time to Add Raw Materials

In its November report, mortgage security firm Freddie Mac called 2017 the ‘best year in a decade’ for the housing market by a variety of measures. These include low inflation, strong job growth and historically-low mortgage rates. This assessment is very encouraging, not just for homebuyers and builders and the U. S. economy in general, but also for commodities, resources and raw materials as we head into 2018.
Although past performance is no guarantee of future results, it’s still instructive to look back at how materials performed the last time the U. S. was ramping up housing starts and mortgages. The last housing boom, which peaked in 2006, was accompanied by elevated commodity prices. We could see a return to these valuations over the next couple of years on higher demand, a stronger macroeconomic backdrop and cyclical fundamentals, as shown in the following chart courtesy of DoubleLine Capital:
Speaking on CNBC’s ‘Halftime Report’ last week, DoubleLine founder Jeffrey Gundlach said he thought “investors should add commodities to their portfolios’ for 2018, pointing out that they are just as cheap relative to stocks as they were at historical turning points.
‘We’re at that level where in the past you would have wanted commodities’ in your portfolio, Gundlach said. ‘The repetition of this is almost eerie. And so if you look at that chart, the value in commodities is, historically, exactly where you want it to be a buy.’

This post was published at GoldSeek on Thursday, 21 December 2017.

How Fed Rate Hikes Impact US Debt Slaves

But savers are still getting shafted.
Outstanding ‘revolving credit’ owed by consumers – such as bank-issued and private-label credit cards – jumped 6.1% year-over-year to $977 billion in the third quarter, according to the Fed’s Board of Governors. When the holiday shopping season is over, it will exceed $1 trillion. At the same time, the Fed has set out to make this type of debt a lot more expensive.
The Fed’s four hikes of its target range for the federal funds rate in this cycle cost consumers with credit card balances an additional $6 billion in interest in 2017, according to WalletHub. The Fed’s widely expected quarter-percentage-point hike on December 13 will cost consumers with credit card balances an additional $1.5 billion in 2018. This would bring the incremental costs of five rates hikes so far to $7.5 billion next year.
Short-term yields have shot up since the rate-hike cycle started. For example, the three-month US Treasury yield rose from near 0% in October 2015 to 1.33% today. Credit card rates move with short-term rates.
Mortgage rates move in near-parallel with the 10-year Treasury yield, which, at 2.39%, has declined from about 2.6% a year ago. Hence, 30-year fixed-rate mortgages are still quoted with rates below 4%, and for now, homebuyers have been spared the impact of the rate hikes.

This post was published at Wolf Street on Dec 11, 2017.

US Home Prices Surge At Fastest Pace Since July 2014

As the latest housing data shows an uptick in sales, Case-Shiller’s 20-City Composite index surged 6.19% YoY in September – the fastest rate of gain since July 2014.
As Bloomberg notes, the residential real-estate market is benefiting from steady demand backed by a strong job market and low mortgage rates. The ongoing scarcity of available houses on the market, especially previously-owned dwellings, is likely to keep driving up prices.
Eight cities have surpassed their peaks from before the financial crisis, according to the report.

This post was published at Zero Hedge on Nov 28, 2017.

Deutsche Bank Enters the Economic Fringe, Considers ‘End of Fiat Money’

Fiat currencies have had nearly a 46 year run of success. But with cryptocurrencies ‘all the rage,’ what Deutsche Bank Strategists Jim Reid and Craig Nicol call ‘inherently unstable’ fiat currency system without any commodity backing might be coming to an end, they assert.
The end of a demographic trend will usher in another inflationary period, Deutsche Bank asserts The idea of tying the supply of money to a commodity such as gold was that it kept government spending in check because money was in limited supply.
The US abandoned the gold standard in 1971, anchoring the currency’s value, not to a commodity but rather the faith in a government. This was followed by a sharp rise in inflation resulting in mortgage rates rising to near 20% annually by 1981. The resulting debasement of currency value and loss of buying power might have ended the fiat monetary system if it were not for the deflationary period that came along in the 1980s.
This gentle deflationary trend is about to come to an end, Reid and Nicol think.

This post was published at FinancialSense on 11/06/2017.

World’s Longest Bull Market (55 Years) In Australian House Prices Is Over, According To UBS

This morning, CoreLogic released its monthly report on Australian house prices – the world’s longest running bull market. Finally, measures to tighten credit standards and dissuade overseas buyers (especially Chinese in Sydney and Melbourne) are beginning to bite and price rises ground to a halt last month. From the report…
Since moving through a peak rate of growth in November 2016, capital gains across Australia’s housing market have been losing momentum, with national dwelling values unchanged over the month of October. For October, conditions were flat across both the combined capital cities and the combined regional areas of Australia, however over the past twelve months growth in the capital cities (+7.0%) has outperformed the regional areas (+4.9%).
CoreLogic head of research Tim Lawless said, ‘The slowdown in the pace of capital gains can be attributed primarily to tighter credit policies which have fundamentally changed the landscape for borrowers.’
‘Lenders have tightened their servicing tests and reduced their appetite for riskier loans, including those on higher loan to valuation ratios or higher loan to income multiples. Additionally, interest only borrowers and investors are facing premiums on their mortgage rates which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties.
‘In fact, the peak rate of growth in dwelling values lines up closely with the peak growth rate for investment lending in late 2016. We saw the housing market respond in a similar fashion through 2015, and the first half of 2016 as investors faced tighter credit conditions following the announcement from APRA that lenders couldn’t surpass a 10% speed limit on investment lending.’

This post was published at Zero Hedge on Nov 2, 2017.

Nobody’s Buying Hamptons Mega-Mansions Because ‘Small Is The New Big’

Any realtor worth their salt will tell you, when it comes to the home-buying habits of wealthy hedgies and bankers, gaudy McMansions and sprawling estates are so last season.
Or, as they say in Greenwich: ‘Small is the new big.”

Owners of large homes in tony Hamptons neighborhoods hoping to cash in on a frothy housing market before the inevitable rise in mortgage rates will be disappointed to learn that the trend of buyers favoring lower-priced homes continued in the third quarter, according to the latest Douglas Elliman Real-Estate Report. This left the high end of the market in a double-bind as supplies of new homes hit the market while sales tapered off…
Purchasers agreed to pay more than the asking price in 10 percent of deals for properties under $3.3 million — this quarter’s definition of ‘non-luxury’ homes, making up the bottom 90 percent of the market, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest share of transactions with bidding wars since the firms began tracking the data in the second quarter of 2016.

This post was published at Zero Hedge on Oct 27, 2017.

Housing Bubble 2 Gets Complicated: Pending Home Sales Plunge in San Francisco Bay Area, Drop in all California

But upward pressure on already crazy home prices persists.
Pending home sales in California fell 6% in September compared to a year ago, the third month in a row of year-over-year declines, after having dropped 3.5% in August and 2.6% in July.
‘Entering the fall home-buying season, the housing market momentum waned,’ the California Association of Realtors said in its report. Brokers ‘reported slower open house traffic, and listing appointments and client presentations fell below positive territory in September.’
The report cited ‘continued housing inventory issues and affordability constraints,’ as home prices have moved out of reach for many people, despite historically low mortgage rates. This ‘may have pushed the market to a tipping point.’
Pending home sales are an indication of what actual sales might look like over the next few months. They’re notoriously volatile. But in the San Francisco Bay Area, pending homes sales have been plunging in the double digits for months. And now Southern California is catching the cold.

This post was published at Wolf Street on Oct 25, 2017.

Housing Recovery? US Mortgage Applications Tumble Most Since 2016

After dismal housing starts and permits data yesterday, the ‘housing recovery’ narrative took another knock this morning as mortgage applications tumbled 4.1% last week – the biggest drop since December 2016.
While mortgage rates were unchanged, both purchases and refis fell notably…
Purchases down 2.7% after rising 1.7% in prior week Refis fell 5.7% after rising 3.3% in prior week

This post was published at Zero Hedge on May 17, 2017.

If Mortgage Rates Tick Up Even a Little, What’ll Happen to Canada’s House Price Bubble?

The question now being asked, years too late: How will this end? ‘Homeowners and potential first time homebuyers are now even more vulnerable to a payment shock from rising mortgage rates,’ the National Bank of Canada warns in its housing affordability report.
Eight years of super-low interest rates in the US have succeeded in inflating home prices in many cities way past the peaks of the housing bubble that imploded during the Financial Crisis. A boom-crash-boom movement. But home prices in Canada barely dipped during the Financial Crisis and then continued soaring. So a boom-boom movement.
Canada’s largest markets – the metros of Toronto and Vancouver – have made it into the bubbliest housing markets in the world. After eight years of aggressive monetary easing around the globe, and super-low mortgage rates, topped off with home prices soaring over 30% year-over-year in Toronto in March, even the Bank of Canada and the provincial governments are beginning to fret. The question now being asked, years too late: How will this end?

This post was published at Wolf Street on Apr 25, 2017.

Brace Yourself, The Warning Signs Are Getting Darker – Episode 1258a

The following video was published by X22Report on Apr 19, 2017
Gold has been slammed down again, but gold moved up and is continually resisting. Harvard study show an increase of minimum wages causes a 4-10% chance of restaurants closing. IBM tumbles as earnings collapse. Used car prices are plunging as leases are coming due, this is not going to go well for the auto manufacturers. Mortgage rates fall a little which did not help applications. Mnuchin covers for Trump about the dollar, Trump is setting him up. Larry Fink warns of dark signs ahead. The economy is being brought down, everything is in place. Maduro is ready to sell all the gold for dollars.

The Panic Is On – First Effects Showing Up

New home sales totaled 49,000 units in February, according to an estimate released today by the Census Bureau. That number is the actual number of sales during the month as estimated by the Bureau. It was not seasonally adjusted (NSA). It was derived from housing starts and permits data, along with a tiny sample survey of US home builders. That estimate will be revised on each monthly release over the next 4 months. Those revisions can be quite large.
The 49,000 sales were 4,000 units, or 8.9%, greater than a year ago. The 8.9% increase shows the growth rate accelerating. It was at zero just 2 months before. That was the lowest growth rate of the past 12 months. The high was a 25.7% year over year gain in September. That was not an outlier. The year over year gain in July was 25.6%. The market was blowing off in the third quarter thanks to all time record low mortgage rates of 3.4%. That compares with 4.2% today.
February sales were 8,000 higher than January or a difference of 19.5%. That compares with a gain of 15.4% in February 2016, with that month having an extra day thanks to leap year. The average February gain from 2006 to 2016 was 4,300 units or 13%. This February’s increase was greater than 8 of the 10 preceding Februaries. However, we have to take this month’s number with a grain of salt, since it is subject to a large revision next month and a smaller one in ensuing months. It may not have been as ‘good’ as it currently looks.

This post was published at Wall Street Examiner on March 27, 2017.

The Media Flip Flops On The Economy,Retail Apocalypse Is Here,Crisis Around The Corner-Episode 1235a

The following video was published by X22Report on Mar 22, 2017
Retail nightmare continues, Sears, JC Penny and Payless going under. Corporate media admits that retail is in trouble, they are calling it, retail apocalypse, this is the start of admitting the economy is in crisis mode. The Auto industry is cratering. Mortgage rates move up, application decline, and existing homes sales plummet. The entire system is getting ready to implode on itself. Russia will be paying off the rest of its debt, meanwhile the debt problem in the US gets worse.

Mortgage rates jump as economy revs up

Rates for home loans jumped in the most recent week as economic data firmed enough to seal a Federal Reserve rate hike, mortgage finance provider Freddie Mac said Thursday.
The 30-year fixed-rate mortgage averaged 4.30%, up nine basis points during the week. The 15-year fixed-rate mortgage averaged 3.50%, up from 3.42% last week.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.28%, up five basis points during the week.
Freddie’s survey data was collected before the Fed’s decision was announced Wednesday. That statement was accompanied by commentary that was more dovish than most investors had expected, including a signal that policy makers would likely hike only two more times in 2017, rather than three, helped nudge the 10-year note even lower.

This post was published at Market Watch

10Y Treasury Yields and 30Y Mortgage Rates Remain in Tight Range (Mortgage Purchase Applications Rise In Spite of Rate Increases)

So much for the meme that rising rates would crush the housing market.
(Bloomberg) The benchmark 10-year Treasury yield remains within its 34-basis-point trading range since the start of December after the Federal Reserve raised rates Wednesday, while leaving unchanged its projected path of hikes this year and next. The relative calm is a change for a market prone to shocks in the past few years, including an unusual bout of volatility in October 2014 and a plunge in yields last year in the wake of the U. K. vote to leave the European Union. After Donald Trump won the U. S. election, the 10-year yield swung 37 basis points in one session.
Freddie Mac’s 30 year mortgage committent rate has also remained in a tight range, although Freddie’s 30 year rate is in a tighter range of 24 basis points since December 1, 2016.

This post was published at Wall Street Examiner on March 16, 2017.