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You Are Gonna See Some People In A Need-To-Sell Situation

A report from Richmond Biz in Virginia. “Joe Dunn, a veteran local mortgage executive, said as of last week around 135 of George Mason Mortgage’s more than 300 employees have since CMG Financial’s poaching began last month. Dunn said the downsizing brought on by CMG may prove timely for GMM. ‘I know this sounds crazy, but the good news is a lot of mortgage companies are laying off people, so we feel like we’re more right-sized now than we were before because there is a decrease in volume,’ he said.”

The Business Journal. “The same companies in the home financing business that in the past three years have done remarkably well financially, and expanded to hundreds of cities nationwide, are now in a bind. National companies such as and Movement Mortgage already have announced layoffs in the thousands, and chances are hundreds of smaller mortgage outfits across the country will either close shop or merge with another company to keep the lights on.”

“GoPrime Mortgage founder John Rodgers said in the past few days that every mortgage company needs to make some cuts because the margins in the business have nearly disappeared. ‘To survive, one needs to adjust and cut costs,’ says Rodgers, adding the overheated housing market’s ripple effect may become much wider if policymakers do not pay attention to the macro winds.”

The International Business Times. “Major banks last week reported mixed first-quarter results, with JPMorgan’s net earnings dropping by 42%, while Wells Fargo & Co. missing revenue estimates. ‘Megabanks reporting weak earnings were expected this quarter amid consumers’ rising concerns about inflation and the risk of recession,’ said Gabe Krajicek, CEO of Kasasa. ‘With as much as 60% of U.S. consumers living paycheck to paycheck, it’s not a surprise to see spending cutbacks.'”

Hawaiian Real Estate Dreams. “Kona pending sales for February 2022 are down 43% to 174 units when compared to 2021, houses, condos, and land.  This is of note since these  turn into sales and explain the low numbers we are seeing in closings each month so far this year.  Overall sales are down 30% over 2021 at 93 this month. With the changes in lending, it will lead to more complexes having to use the higher down/higher interest rate loans and buyers won’t qualify for this type of loan and condos that historically have not had issues with lending will begin to stack up on the market. This may lead to complexes with small amounts of vacation rentals to change their rules to disallow them to avoid this issue that lowers their property values.”

“Lending has had a drastic shift that is just now beginning to be felt. Fannie Mae and Freddy Mac buy most of the residential loans in the US, including second homes in Hawaii. They have changed their rules to not allow condo complexes with vacation rentals to qualify. Wow, this is huge!  If they google the complex and find any vacation rentals online, or check the association disclosure that they receive in the lending process and it says ‘yes’ to vacation rentals, the complex will be disallowed.”

“This makes it ‘non-warrantable’ and that leaves us with pretty much only First Hawaiian and Bank of Hawaii as the only two local lenders who will cover this type of loan product. A non-warrantable loan has a higher down payment and interest rate.”

The Oregonian. “County documents to be presented at next week’s meeting show that there are 186 licensed short-term rentals in unincorporated Clatsop County. If the county commission approves the new ordinance, just 77 of those permits could be renewed. Several homeowners, real estate agents and coastal visitors, however, wrote to the commission expressing concerns about the financial losses that might result from limiting vacation rentals. Bobak Baradar, who owns a rental property in Clatsop County, said he doesn’t buy the complaint that rental homes are eating into the housing supply for year-round residents.”

“‘For the housing market in the entire U.S., prices are going through the roof, and homes are selling above asking price,’ he said. ‘They’re trying to use vacation rentals as an excuse for that, but housing prices across the U.S. don’t make sense.'”

The Tennessean. “As the state legislature takes steps to prevent local communities from regulating short-term rentals, Tennessee residents are speaking up to ensure the voices of seniors are heard. While there’s nothing inherently wrong with homeowners listing their properties or an extra room for rental, there has been a boom in real estate investors, LLCs and commercial operators buying up houses for the sole purpose of operating them as vacation rentals.”

“As our seniors live out their twilight years, the negative impact of short-term rentals and the revolving door of neighbors is clear. Along with the safety impact, there is a financial reason for concern as well. The unregulated buildup of commercially operated short-term rentals is affecting the housing market. States like Arizona have passed similar bills to SB 0871 and HB 0645, and the impacts on cities like Sedona are immense.”

“The Arizona Republic detailed the housing shortage that has ensued since the preemption legislation took effect, noting, ‘Sedona had an estimated 200 to 300. vacation rentals before the new law took effect. Today, vacation rentals have grown to more than 1,000 homes, or 20% of Sedona’s total housing inventory. … The result? In one of Arizona’s most beautiful places, many can’t find a place to live.'”

From Bisnow. “As both retail and office suffered the worst of the pandemic, investors of all stripes flooded into multifamily. The resultant increase in competition has led to some buildings selling for prices that leave veterans of the sector scratching their heads. ‘We are in a bubble,’ said Stroock partner Lorie Soares Lazarus, a commercial real estate attorney based in Los Angeles. ‘The numbers we’re seeing in multifamily, it’s hard to see how those can be sustained.'”

“‘Some of the value-add buyers had money sitting on the sidelines, and now that needs to be placed, but I have been amazed and astonished at the prices some people are paying for these products,’ Integral Group President of Real Estate Vicki Lundy Wilbon said. ‘At those prices, I don’t think they can withstand a lot of downward pressure in the market.'”

“In many Florida markets, Colliers projects rent to grow by as much as 20% over the next 12 months, though its valuation team has been underwriting for 10%-12% growth in its most recent deals, Colliers Executive Managing Director Casey Babb told Bisnow. In some cases, apartment buildings with more vacancy are trading at a premium because current leases are well below market no matter how recently they were signed.”

“‘That’s something that is breaking the model, frankly, for a lot of people in the industry,’ Babb said. ‘But if you’re not underwriting that sort of rent growth into your model, you will not win deals.’ In the current environment, debt service payments could easily eat up a property’s income if rent growth falls short or interest rates rise beyond a loan’s underwriting projection, Babb said.”

“‘If they’re not making the right assumptions — if they underestimate the taxes, insurance goes up beyond what they thought, if the rent growth slows down in any meaningful way, if interest rates go up to the mid-fours or higher, you are gonna see some people in a need-to-sell situation,’” Babb said. ‘They’re way out ahead of their skis.'”

The Globe and Mail. “Nearly 30 per cent of outstanding mortgage credit has a variable rate, up from just 18 per cent before COVID-19. And for eight consecutive months, variable rate mortgages have accounted for more than half of new home loans, according to the latest Bank of Canada data. Now, the central bank is rapidly raising its benchmark interest rate to tame inflation. Most homeowners with a variable rate won’t notice an immediate impact: Their monthly payments are fixed. However, more of that cash will go toward interest and less to paying down principal. Others will see an immediate increase in mortgage costs.”

“The country’s embrace of variable rates – and broader yet, frothy conditions in the housing market – is leading to some gloomy predictions on Bay Street as lending rates climb.”

“‘Over all, we believe the growing reliance on variable rate mortgages could have a double whammy effect: First, the Bank of Canada rate hikes will be transmitted to Main Street much quicker than in past cycles, hitting disposable income,’ Jean-Michel Gauthier, a strategist at Bank of Nova Scotia, wrote to clients. ‘Second, the hit to the housing market, and thus the wealth effect, will also be much quicker. The path for a safe landing from overheated conditions and unmoored inflation is thus narrow.'”

From News Talk New Zealand. “There are fears thousands of first home buyers will be tipped into financial distress by rising mortgage rates, as the Reserve Bank tries to battle inflation. Many will be paying thousands extra each month to service their mortgages. One person about to battle higher mortgage rates is Liam, who bought his first home in Pakuranga heights last year. Liam said he was ‘a bit worried’ about borrowing costs increasing when his fixed term ends next year.”

“He estimates his annual borrowing costs could jump by an additional $25,000 once he comes off his fixed term. Liam has turned his garage into an extra room and living space, where he lives so he can rent out the house. He is worried that rising interest rates and an uncertain economy could make things difficult, and has been putting aside money to help deal with rising costs, but he’s unsure whether those savings will be enough. ‘If I save $100 a week for a year, that’s $5200 – so [$25,000] is a massive amount extra,’ Liam said.”

“A first home buyer in Auckland might have borrowed $750,000 last year at 2.6 per cent. If mortgage rates hit 6 per cent, that mortgage would cost in excess of $1500 more each month – about $4500 a month in total. Interest rates are already nudging 6 per cent at some banks. Mortgage broker Bruce Patten warned rates ‘could definitely’ hit 6 per cent. Patten said that wherever rates landed there would be pain. ‘There will be people who have to sell and sell down.'”

This Post Has 118 Comments
  1. ‘the good news is a lot of mortgage companies are laying off people’

    I saw some people talking about slowdowns and listings piling up. Last decade I was in Sedona and the news on this blog was becoming clearer, but it hadn’t sunk in really. A local UHS who was kind of a big shot came up to me one Sunday afternoon after doing an open house at a brand new condo project with airboxes going for around 900k. He said, “I didn’t have one person stop in all day.” Those condos went bust.

    1. “after doing an open house at a brand new condo project with airboxes going for around 900k.”

      I bet these condos are at least 1.5mil these days. Collapse will be epic this go around.

    2. With all of these mortgage companies laying off staff and shrinking operations, I wonder where the financing will come from going forward to sustain the never-ending red hot cakes real estate boom?

      1. There are still plenty of mortgage originators for new builds or buy/sell. These layoff are from the crater in the refi business, specifically the cash-outs.

        1. Well, somebody has to make bank selling 5%+ 30-year mortgages. But between a smallish number of homes on the market at generally overvalued prices and a dearth of customers willing and able to qualify for a 5% mortgage that would fund a purchase anywhere near last year’s prices, they may find themselves facing a customer shortage, and a need to make layoffs.

          Think of the morgage market version of Glengarry Glen Ross, if you want to get the idea.

    3. the good news is a lot of mortgage companies are laying off people’

      This is just “gettin” started. Long ways to go and LOTS of companies to close and people to lose their jobs and homes. Keep in mind, Brokers, loan officers and RE people in general, believe in RE and many I knew owned more than 1 home.

      1. “Brokers, loan officers and RE people in general, believe in RE and many I knew owned more than 1 home.”

        Correct. And they’ve been narrating this thing for a good number a years.

        Their nightmare is just beginning.

    4. I remember watching the number of licensed loan agents in NV dropping from about 10,000 to under a 1000 when I was in the biz during the last bust. Licensed brokers went from over a 1000 to under a 100 by the time it was over. Sure hope these folks saved their shekels.

      1. I hope their boats show up on Craigslist, their cars on the used lot, and their wives on a corner in the red light district.

    5. When the bubble implosion becomes undeniable, will Twitter and Facebook start banning posts about it as financial misinformation?

  2. ‘In many Florida markets, Colliers projects rent to grow by as much as 20% over the next 12 months, though its valuation team has been underwriting for 10%-12% growth in its most recent deals’

    I’ve pointed this out for years. They are making loans based on rents that don’t exist. Eventually they’re fooked.

      1. Embedded tweet:

        This week Blackstone listed all their assets in Eastern Washington for sale

        297 units outside Spokane, WA

        428 units in Tri-Cities, WA

        Very curious

        Both acquired in 2018/2019, so maybe it’s just time, but still.. wonder what they know others don’t

        1. what they know

          Interest rates just went up and will probably go higher…House prices will go down. Gas and food are increasing so high rents will be hard to pay. Except that others know.

          1. Good points.

            1. Rental income got shellacked by the rent moratoriums
            2. Appreciation is getting shellacked by 5% interest rates
            3. The 5% rent increase/year business model is getting shellacked by general inflation.

            So much for the SFH rental business. Heh, I wonder how all those FIRE Millenials are doing — you know, the ones who retired at age 35 and plan to survive by living in a tiny house, reusing tea bags, collecting passive income, and running a YT vlog. (hmmm… better shift from YT to onlyfans)

  3. ‘Fannie Mae and Freddy Mac buy most of the residential loans in the US, including second homes in Hawaii. They have changed their rules to not allow condo complexes with vacation rentals to qualify. Wow, this is huge! If they google the complex and find any vacation rentals online, or check the association disclosure that they receive in the lending process and it says ‘yes’ to vacation rentals, the complex will be disallowed’


    1. I’m super curious how you stumbled across this Hawaiian real estate agents blog post about the fanny May and Freddie Mac condo mortgage changes?
      This seems huge for short term rental markets across the country and maybe one of the first death blows to really hot urban markets.
      I tried googling information about this and only came across new requirements from Fannie and Freddie regarding disclosures of structural integrity of the condos because of the Miami condo collapse last year. There was nothing in any other publication about Fannie and Freddie disallowing short term rentals in complexes where they were going to underwrite the loans.

      Good job Ben!

      1. A reader who lives out there sent it in. I would never have come across it otherwise. This sort of input has always been a perk of reading this blog.

      2. I was also curious (skeptical) that a single STR would doom an entire building and did some searching. This is what I found, which makes more sense to me:

        “When a project functions more like a vacation rental resort, the building can become ineligible for Fannie/Freddie-backed financing. This is stemming from new language in the revised Fannie and Freddie guidelines that disqualifies buildings if they are “transient in nature,” meaning the bulk of the units are for short-term rentals of less than 30 days.”

  4. ‘With as much as 60% of U.S. consumers living paycheck to paycheck, it’s not a surprise to see spending cutbacks’

    Is that a lot?

      1. Klaus Schwab: “You will own nothing, and you will be happy”.

        Mr. Banker: “You will own nothing, and I will be happy”.


    1. ‘With as much as 60% of U.S. consumers living paycheck to paycheck, it’s not a surprise to see spending cutbacks’

      That’s what happens when you pay a grossly inflated price for what is always a depreciating asset…. then double down on those losses by financing for decades.

      Golden, CO Housing Prices Crater 24% YOY As Sellers Slash Double Digits Across Denver Area

  5. Yes there is .

    They are basically making their condo or room or house an hotel.
    Violating zoning regulations.
    Ignoring health, safety and fire codes.
    And not paying hotel taxes.

    “While there’s nothing inherently wrong with homeowners listing their properties or an extra room for rental,”

    1. Are there really zoning regulations against STR for spare room in your personal home? That kind of thing tends to be self-limiting. Few people want to host a stranger in the spare bedroom one night at a time.

      1. ** “Few people want to host a stranger in the spare bedroom one night at a time.”

        . . unless your renting out Lincoln’s bedroom for campaign payola & favors. THEN it’s A-OK.
        no pesky zoning exemptions needed.

      1. ppsf is meaningless unless you’re estimating and bidding work. Houses aren’t bought and sold by the square foot. They depreciate too rapidly and are simply a commodity after they’re constructed.

        The good news is prices fell 26%…… and cratering fast!

        1. I know you love to joke about this. But houses pretty much do sell by the square foot, which is why Tool Brothers and Beazer and Ryan et al air-pump a simple 4-bed center-hall colonial into an outsized McManse with princess suites and primary bedrooms with sitting areas and two living rooms; anything to increase the square footage without adding more expensive HVAC or plumbing.

          [and you know this, but it’s okay to pretend you don’t]

          1. I wonder how you increase the square footage without changing the energy plan.

            Useless square footage is a big liability. It is only seen as a positive by bubble heads, who have surrendered any shred of logic.

        2. No Donk…. Houses aren’t transacted by the square foot. By now you should know I don’t joke.

    1. “lock the door”? are you kidding me??! any realtor brave enough to walk my neighborhood would be talked-to-death at the doors of bored seniors!

    1. I don’t know about forever, now that the central banking cartel realizes the possibility of extreme, protracted risk premium suppression in the electronic printing press era.

      However, it seems likely that it will take many years, if not decades, to undo the damage to market-based financial mechanisms that ordinarily favor socially desirable projects and filter out losers, which resulted from the nonstop flood of easy money into the global financial system from 2009-2022. A possible historic reference reset period is 1929-1949.

          1. We’ve seen this movie before. Recession will arrive, rates will drop again, doesn’t matter if we have inflation. There’s no Volker to save us this time.

          2. “We’ve seen this movie before. Recession will arrive, rates will drop again, doesn’t matter if we have inflation. There’s no Volker to save us this time.”

            You’re in for the surprise of your life.

  6. Not fake news.

    I purchased a nice used car over the weekend. I was gonna pay cash but the dealer found me a bank that would finance a 5 year USED car loan at 3.25%.

    I guess a used car has the same low risk as a US treasure. And about half the risk of a new house.


    1. The Financial Times
      Tech start-ups
      Sell-off in tech stocks spreads to private start-ups
      Investors have turned cautious following a boom period of billion-dollar valuations
      The Hopin platform
      Zanbato’s market price for shares in the online conferencing start-up Hopin fell 40% in the first quarter
      Miles Kruppa in San Francisco yesterday

      Shares in start-ups are sinking in private trading as a sell-off in public technology companies and a pause in new listings send shockwaves through Silicon Valley.

      Forge Global, one of the largest venues for trading in private start-ups, said the prices of companies on its platform had fallen 19.9 per cent in February and March compared with the fourth quarter of last year.

      Zanbato, a private share trading platform, said its index tracking more than 100 of the most widely traded private companies had fallen 1 per cent during the first quarter this year. The index’s last negative quarter came in mid-2020, when the spread of coronavirus caused turbulence in private markets.

      The data suggest investors in private companies are growing cautious following a bumper year of venture capital investment that lifted hundreds of young tech companies to billion-dollar valuations.

      Zanbato’s chief executive Nico Sand said the spread between prices sought by buyers and sellers widened during broader market volatility in January and February.

      “Since then spreads have come in as markets found new clearing prices, which drove an uptick in trading activity in March and early April,” he said.

      The drops match a sell-off in public markets, with the Nasdaq Composite index sliding about 15 per cent this year. Some of last year’s largest public tech listings, such as the Korean ecommerce company Coupang and electric carmaker Rivian, have fallen even farther.

  7. When will Biden cancel my mortgage debt? WTF. Don’t just help the lesbian studies debt donkeys.

    1. My daughter is still holding out hope for student debt cancellation. Not all my kidz paid attention to my lessons…

      1. My little brother has two undergrad degrees and said he thinks the government should forgive all student loan debt because it’s usury.

        The man works in finance and he is literally that stupid.

        1. “The man works in finance and he is literally that stupid.”

          Many of the young today are completely bereft of personal responsibility. This likely had its roots in K12 school with participation trophies for everyone.

    1. “The Mesa County commissioners who had been esteemed as staunch conservatives were suddenly attacked for not living up to a new scale of far-right, conspiracy-laden conservatism. Longtime important political issues, like the management of natural resources and balancing budgets, were lost in the shouting over election fraud and pandemic hoaxes.

      For some residents, Mesa County was no longer just Republican red. It was red in the face as Boebert and Peters catapulted the county into the national media with regular appearances or mentions on Fox News, on far-right podcasts and in the pages of the New York Times and the Washington Post.”

      The 2020 election was stolen, CCP Flu is a medical genocide, and the New York Times and Washington Post don’t decide how Mesa County should be governed, the voters of Mesa County decide that.

  8. – Good Monday morning HBBers! A Few Twitter tidbits. FYI.

    Alf @MacroAlf
    In 2021, the 30-year US mortgage rate adjusted for long-term consumer CPI expectations dropped to 0%

    In the 1990s, this rate was around 4-6%

    Such a drop alone almost fully explains US house prices going 2.5X since then

    Make borrowing marginally cheaper, and ”magic” happens
    7:07 AM · Apr 17, 2022·Twitter Web App
    [see chart]

    Michael A. Arouet @MichaelAArouet
    US average annual mortgage payment 👇 The 2005/2006 bubble looks almost cute compared with recent developments. And some people really deem real estate as an inflation hedge at the moment. Ht @EdwardGofsky
    4:56 AM · Apr 16, 2022·Twitter for iPhone
    [see chart]

    Edward Gofsky @EdwardGofsky
    The U.S average annual mortgage payment is now 35% higher than the mortgage bubble in 2006. The only difference is now in 2022 we have 8.5% inflation and 50x the debt. With the Fed 8% behind the curve battling the monster known as inflation things are about to get wild. $GLD $SLV
    5:38 PM · Apr 15, 2022·Twitter for iPhone
    [see chart]

    Adam Taggart
    “According to Redfin, 12% of homes on its site saw sellers cut prices in the week ending April 9. That was the biggest one-month spike Redfin saw in price cuts since 2015. Over the past month, there was also a 3% drop in requests for home tours.”
    Adam Taggart @menlobear
    · Apr 16
    And so it begins…

    “Redfin: More sellers are cutting home prices as housing market demand begins to soften”
    2:37 PM · Apr 16, 2022·TweetDeck
    By Lance Lambert
    April 15, 2022 6:53 AM MDT

    it’s just a gully
    @DiMartinoBooth #realestateinvesting #realestate
    I’m seeing a lot of this in Tampa.
    Just bought in 2021 and relisted 5 months later.
    [image link here:]
    8:30 AM · Apr 18, 2022·Twitter for Android
    [speculation nation, courtesy of cheap $ from the Fed.]

    1. Here are he Median household income and median Home price data from the peaks last bust and current. St. Louis Fed data
      Median House hold income Peak last bust $50,233 Current $67,521.
      Increase = 34.4%
      Median Sold Home Peak last bust $257,400 Q4 2021 $408,100
      Increase = 58.5%

    2. And that’s why Elon Musk wants to buy Twitter instead of creating yet another new platform. It’s not all about politics and vaccines.

    3. “In 2021, the 30-year US mortgage rate adjusted for long-term consumer CPI expectations dropped to 0%”

      How’s that looking at current inflation rates of 8%+ (or is it 15%+ ?).

  9. It seems like Mr Banker has his best customers in the crosshairs as interest rates arise from the dead.

    1. The Financial Times

      The IMF warned on Monday that private debt accumulation across the world would act as a drag on growth as households and companies prioritised paying interest and reducing the amount they owed rather than spending and investment.

      It forecast that over the next three years, deleveraging would knock 0.9 per cent off GDP in advanced economies and 1.3 per cent off emerging markets’ output levels. The IMF and World Bank’s spring meetings began in Washington on Monday.

      Although many better-off consumers saved money during lockdowns, the pandemic forced lower-income households to take on more debt. Overall private debt increased by 13 percentage points of GDP in advanced economies and by almost as much in China during the pandemic, the fund said.

      The drag on growth would be worst in countries that had increased debt in poorly performing sectors, where governments were also trying to lower borrowing, where interest rates were rising fast and where inefficient insolvency regimes were not in place.

    2. might be persuaded that I’m top tier when Mr. Banker sends me a glossy postcard for a free dinner w/sales pitch at my local hoity toity steakhouse.

      ** until then it’s still drop& gimme 20 you worthless pukes

  10. – The Fed’s only real mandate:
    1) Promoting wealth and income inequality via an ongoing, and massive wealth and income transfer from workers/labor/producers to capital/banks/corps./looters & moochers. This is accomplished by the Cantillion Effect and associated inflationary money supply expansion as enabled by fiat currency (i.e. monopoly $): those insiders with first access to the fiat/printed $ make out like bandits and also receive bailouts at taxpayer expense when their bets go wrong. Everyone else gets the screwed. Maximum moral hazard. The strip-mining will continue until morale improves!

    “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” – Louis D. Brandeis

    “The last duty of a central banker is to tell the public the truth.” – Alan Blinder, former Vice Chairman of the Federal Reserve, 1994 on the PBS Nightly Business Report

    “Quantitative Easing is the last desperate gambit in this game of stimulating asset prices.” – Jeremy Grantham

    “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” – Frederic Bastiat

    “People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.” – John Kenneth Galbraith

    “When you see that in order to produce, you need to obtain permission from men who produce nothing – When you see that money is flowing to those who deal, not in goods, but in favors – When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – When you see corruption being rewarded and honesty becoming a self-sacrifice – You may know that your society is doomed.” – Ayn Rand, Atlas Shrugged

    “Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’” – Francisco’s “Money” Speech – from “Atlas Shrugged” by Ayn Rand

    “Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. – Ayn Rand, Atlas Shrugged
    If the Fed Is Fighting Inflation Why Is the Balance Sheet Still Expanding?
    April 18, 2022
    by Michael Maharrey

    “If the Fed is fighting inflation and has ended quantitative easing, why is its balance sheet still going up?”

    “In the week ending April 13, the balance sheet grew by $27.9 billion, hitting a new record of $8.965 trillion. This is up about $3 billion from its previous high in March.”

    “As Peter Schiff put it in a tweet, “For all the talk of fighting inflation and shirking its balance sheet, the Fed continues creating more inflation and expanding its balance sheet!””

    We shouldn’t be seeing a growing balance sheet in the midst of historically high inflation.

    “Even if balance sheet expansion has slowed to a trickle, it continues to expand. Given the inflation problem and all the talk about fighting rising prices, you would expect the Fed to be shrinking its balance sheet. It certainly would be if it was serious about an inflation fight.”

    That raises a question: given the surging CPI, why wait to begin running off the balance sheet?

    Because the Fed knows it can’t do it without tanking the entire economy.

    “This is the worst war on inflation ever.”

    Here’s the reality; while the Fed is talking about fighting the inflation fire, it is still pouring gas on the inflation fire. An expanding balance sheet means the Fed is still engaged in expansionary monetary policy. So far, the inflation fight is a lot of talk and not much action.

    1. dayum! red pilled rh is so freakin’ smart I don’t even care what she looks like; that’s my next ex right there I tell ya what if she ever hits the market!!
      (sorry mayim, the buzzer just doesn’t klickety klick in comparison)

      just messin w/ya RPRH. a little Monday humor!

  11. Via ZH:

    A federal judge threw out the federal government’s mask mandate for airports, airplanes and other public transportation Monday, ruling the Centers for Disease Control and Prevention exceeded its authority by imposing the mask requirement days after the agency extended it another two weeks.

    U.S. District Judge Kathryn Kimball Mizelle, who was appointed by former President Donald Trump, issued a ruling that declared the mask mandate unlawful and blocked it by vacating the order and sending it back to the CDC “for further proceedings.”

    1. ‘The agency had claimed that Public Health Services Act of 1944 gave it power to regulate travelers but the judge disagreed, finding the law only grants the agency the ability to “to directly regulate individuals only if they are traveling into the United States from abroad or are ‘reasonably believed to be infected with a communicable disease in a qualifying stage.’”

      “Before COVID, the CDC had really played more of a background role, a sort of advise and consent, role to the state public health authorities. It had never before it sort of come to the forefront of a public health situation and said we’re going to dictate, directly dictate how people can conduct themselves and how people can use their property. And that was really unprecedented,” Brant Hadaway, a lawyer for the plaintiffs in the mask mandate case, told The Epoch Times.’

      “And so the pattern is really that when a federal agency, which is part of the executive branch of government, suddenly starts claiming newfound powers in a statute that has existed for decades, the courts are going to take a close look at that. And that’s what the courts have been doing,” he added.’

      1. judge rules against airline masks: oh, how brave.
        2 YEARS 2 LATE to do any real good! notice how he waits until the tide turns before taking a stand. typical. what a coward !!

        “Justice delayed is justice denied”
        William E. Gladstone

    1. Great time to be a spectator of the upcoming trainwreck between rising mortgage rates and home prices. It’s gonna be epic.

      1. The shorts should be drooling, but despite touting capitalism “get shorty” seems to be part of the fed’s response plan.

    1. I had to research who this person is. After doing so I’m relieved that I don’t have all that long left in this world. Makes me want the next 20 or so years fly by.

    1. That happens when long-term Treasury yields are expected to drastically increase in the foreseeable future.

      1. I keep seeing that 1.2% one-month consumer price increase for March cited in MSM financial reports, including a front page article in today’s WSJ.

        I’m not sure whether financial journalists lack the math chops to report this at an annualized rate (e.g. 15%+), or if their handlerz simply don’t want that number out there in the MSM.

          1. At that rate, the value of the dollar is more than halved once every 36 months = 3 years:

            1-1/1.02^36 = 51% loss of real value in 36 months.

        1. Here’s a helpful math lesson for any real financial journalists who read here:

          Monthly price multiplier at 1.2% monthly rate of inflation =
          100% + 1.2% = 101.2% = 1.012

          Annual inflation multiplier at 1.2% monthly rate of inflation =
          1.012^12 = 1.154

          Annualized rate of inflation at 1.2% monthly rate is
          1.012^12 – 1 = 0.154 = 15.4%.

          Like Barbie sez, “Math is hard.” But you can do it!

          1. PS To compute the time for the dollar to lose half its value at a 1.2% monthly inflation rate, use the “Rule of 72” as a rule-of-thumb:

            72/1.2 = 60 months = 5 years.

            Check: 1-1/1.012^60 = 51% loss of real dollar in five years time.

            Got societal impoverishment?

    1. Oh my. I’ve cut down some hundreds of trees over the years but I am not exactly a “logger”. Neither is this guy!

      Mistakes come in threes I’ve been told.

      I see three or four. This guy looks like a central banker to me.

  12. Is it safe to assume the Fed won’t stand pat until the stock market has majorly CR8Red?

    1. Business
      CAPITAL IDEAS: A dud of a stock market

      Given that the Fed is in the mood to slow the economy without a care for the stock market, we should pay more attention to it than usual.
      by Allen Harris
      Posted on April 18, 2022

      “If stocks don’t fall, the Fed needs to force them.” —Bill Dudley, former NY Federal Reserve Bank President (2009–2018), on how far the Fed should go to get inflation under control, in his Bloomberg op-ed.

    2. I thought that stonk and housing price increases generated wealth effects, but had nothing to do with inflation, according to Fed rhetoric.

      How did inflation suddenly become attached at the hip to risk asset price gains?

  13. Would risk asset prices collapse if real yields on Treasurys suddenly tilted positive?

    We’ll know soon.

  14. The Financial Times
    US Treasury bonds
    Fed tightening sends US ‘real yields’ to brink of positive territory
    Surge in inflation-adjusted Treasury yields marks latest ‘headwind’ for risky assets
    Yields have jumped in the first months of this year as the Federal Reserve moves to reduce its $9tn balance sheet
    © FT montage/Dreamstime
    Eric Platt in New York and Colby Smith in Washington
    3 hours ago

    US inflation-adjusted bond yields are on the verge of turning positive for the first time since March 2020 in a surge that is heaping further pressure on riskier corners of financial markets.

    So-called 10-year real Treasury yields have soared more than 1 percentage point since early March, hitting a high of minus 0.05 per cent on Monday, in a sign bond payouts are coming close to exceeding medium-term inflation expectations.

    The jump in real yields has been triggered by the Federal Reserve’s bid to slow intense price growth by aggressively tightening monetary policy. The move is already eroding one of the pillars that has underpinned a powerful rally in stocks and riskier corporate bonds from the depths of the coronavirus crisis two years ago.

  15. Markets
    China Economy
    Investors turn cautious on Chinese stocks amid growth concerns
    Published Mon, Apr 18 202211:09 PM EDT
    Evelyn Cheng
    Key Points
    – While the first quarter ended with more than $20 billion in net inflows to mainland Chinese stocks, the bulk occurred in January, and the pace of buying dropped sharply as the quarter progressed, data from EPFR Global showed.
    – “Anything that relates to China we can find in causality and reasoning from either Russia or [the] U.S. right now,” said Steven Shen, manager of quantitative strategies at EPFR.
    – There’s been “sizeable outflows from China equities since last year, reflecting a notable de-risking on China,” according to Max Luo, director of China asset allocation at UBS Asset Management.

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