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No Protection From The Bloodbath

It’s Friday desk clearing time for this blogger. “The Federal Reserve looks on course to lose money next year as it raises short-term interest rates to try to rein in inflation, according to former New York Fed President William Dudley. ‘If they’re losing money they’re not going to be selling agency MBS,’ Dudley said. ‘Every one they sell is going to add to their losses.'”

“Real estate stocks are part of the downward trend, including both REITs and other large publicly traded real estate companies. The worst hit is regional mall-owning REITs, with returns down about 37.7%. Office specialists have seen their returns down an average of about 30%, self-storage is off 23.3% and healthcare off 13.4%. Even REITs specializing in the darling property types of the pandemic era—industrial and apartments—have taken a shellacking this year. Industrial REIT returns are off more than 27.7% and apartment REIT returns are off more than 23.5%.”

“And size provides no protection from the bloodbath. Office specialist Vornado Realty Trust is down more than 36% year to date, and more than 9.5% in the last five days while Equity Residential, the largest public multifamily landlord by asset value, has seen its stock tumble more than 24% this year, and 4% over the last five days. Major investors are feeling the pinch too. Blackstone Group, which has made headlines recently with its multibillion-dollar deals in real estate — such as buying  American Campus Communities for nearly $13B — is down almost 30% year-to-date and a whopping 18.6% just this week. Homebuilders, who have spent the last year trying to meet strong demand for their product, are getting no love from investors either. PulteGroup, for example, is off more than 35% this year, and 16% this week.”

“Last month’s sales tally was one of the lowest for May in records dating back to 1988. After falling to an 18-year low last winter, Southern California listings rose 29% to 34,193 homes last month, according to Zillow. ‘The market’s changed,’ said Katherine Orth of Sierra Madre, a broker-associate with DPP Real Estate. ‘It’s not like a bubble bursting. It’s more like a punch in the stomach. … The sellers are coming to the realization the party is over.'”

“Redfin figures show that more home sellers are adjusting their asking prices downward. Redfin Deputy Chief Economist Taylor Marr said said nearly 21% of sellers in Los Angeles County and nearly 28% in Orange County and the Inland Empire dropped their listing price last month, compared with 10% dropping their prices in May 2021. ‘All of these areas have had pretty dramatic increases in price drops, and they’re likely to continue increasing,’ Marr said.”

“The post-pandemic housing bubble in Denton is already beginning to deflate. The larger housing market bubble in Denton County is starting to come unglued. New home inventory is rising rapidly as the backlog of new construction finally works its way to the market. New listings from builders rose by a staggering 236% in Denton County last month. That’s not a misprint. The supply of new homes in Denton County is up 136% year-over-year in terms of months of inventory through May.”

“My inbox has seen a lot of activity the past few weeks from builders offering new sections of homes and ‘opportunities’ for would-be buyers. The opportunities for buyers are going to improve in the months ahead as housing bubble 2.0 begins to unwind. The bid for some of the overpriced luxury new construction is really hitting a big air pocket as buyers suddenly have second thoughts about locking in record-high prices for some of the lovely new homes on postage-stamp lots.”

“The Orlando market includes Orange, Osceola, Lake and Seminole counties. While prices continue to soar, there are signs that balance in the market could be on the way. According to the ORRA, inventory increased by 44.2% from April 2022 to May 2022. Over 1,200 additional homes hit the market, which is the highest monthly inventory increase Orlando has ever seen.”

“More than 60% of the municipalities tracked by the Home Builders Association of Arizona have issued fewer single-family homebuilder permits this year through April than the same period last year — another sign the Valley’s housing market is cooling. The drop in April permits was a precursor to what we are seeing play out today, said Steve Hensley, senior manager of Zonda Advisory. ‘The drop in permit activity is likely partly a function of builders pulling back on their speculative inventory building in anticipation to slowing demand. Market conditions are shifting as well as homebuyer strategy,’ he said.”

“Ron Magoon has a stark description of the home mortgage market for small New Hampshire banks these days. It’s ‘pretty much dried up,’ the CEO of Franklin Savings Bank said.”

“Des Moines Area Association of Realtors President Jen Stanbrough said a shift in the market may be on the horizon after 10 years of rising prices. She noted some recent price cuts as mortgage rates have pushed even higher in June. ‘What I’m seeing from price reductions, that we have not seen for a while, we will start to see a little bit of correction coming in maybe our June numbers, but I think we’re going to see that more to the end of July or August,’ Stanbrough said.”

“Utah’s housing inventory is at a 22-month high — and the number of offers for homes is down, too. That’s according to Kara Loftus, Vice President of mortgage services with Mountain America Credit Union. ‘We just don’t really know what’s going to happen. We’re in uncharted territory right now,’ said Loftus. ‘We might see a leveling off, even a decrease in values, which could affect your ability to sell your homes in the next couple of years,’ added Loftus.”

“Mariano Rivera was seemingly so desperate to sell his New York home in the Westchester County suburbs that he offloaded it for $2 million less than what he paid for it in 2006. Property records show that Rivera, 52, purchased the nine-bedroom, 8.5-bathroom estate for $5.7 million with his wife, Clara, at that time. But he finalized the sale of his home on June 9, with a $3.78 million closing price. Initially, the Riveras listed the property at an already significant discount: $4 million. It is unclear why the baseball icon was willing to take a significant loss from the start.”

“A foreclosure sale on condominium units at 1002 Walnut St. in Boulder will be permitted to go forward on Wednesday, despite the owner’s request to have a court impose an injunction on the sale. George Williams LLLP, with headquarters at 6700 Lookout Road in Boulder, filed a request for injunctive relief Monday in an attempt to stop the sale on Wednesday of the property. The company signed a promissory note, secured by a deed of trust, on Dec. 11, 2020, for more than $5.7 million.”

“Canada’s housing market continued to cool down from its red-hot pandemic pace in May, with the average price of a Canadian home that sold during the month going for $711,000, a decline of more than $100,000 in the past three months. The biggest factor driving the national number lower is Ontario, where most markets are seeing significant price declines. Rishi Sondhi, an economist with TD Bank, said there’s an interesting regional story playing out beneath the picture of the national market.”

“‘It’s also likely the case that some GTA buyers purchased their homes before selling their old ones [thinking the market would remain hot] and are now being forced to accept lower prices to complete their transactions. We would, however, expect this dynamic to run its course in relatively short order,’ Sondhi said.”

“Cailey Heaps, CEO of Toronto-based real estate firm Heaps Estrin, says the slowdown in Toronto is mostly happening in the suburbs, where prices jumped the most during the pandemic as buyers sought more space. Now, the market is regressing to the mean. ‘People who are going to be disposing of properties now are people who didn’t forecast the change in interest rates and they just can’t carry their properties,’ Heap said.”

“Sweden’s inflated housing market is teetering on the brink of a correction as price expectations turn south and buyers withdraw from a sector that hit record heights last year. The changing fortunes have been so dramatic that it ‘can almost be likened to the reaction after the fall of Lehman Brothers at the start of the global financial crisis,’ Fastighetsbyran’s chief executive, Johan Engstrom, said. The developments mark a far cry from last year when house prices soared to the highest level ever as a large number of Swedes made use of unprecedented central-bank stimulus to upgrade into bigger homes. The rally even prompted one prominent asset manager to warn the market had been gripped by hysteria.”

“A closely watched indicator of Swedish home prices tumbled the most since the onset of the pandemic. The proportion of households expecting a drop in prices totaled 47%, marking an increase of 23 percentage points from the previous month, according to the survey by SEB AB. With sellers and buyers unable to agree on deals, ‘there will likely be price weakness in many places over the coming months,’ Fastighetsbyran’s chief executive said. It’s a view that is already feeding into the country’s biggest market, Stockholm.”

“Pia-Lotta Svensson, a realtor with a branch of Fastighetsbyran in Stockholm, says current prices on her patch of Sodermalm — a once bohemian but now affluent suburb of the capital — would have been down as much as 10% if sellers would have accepted what buyers offered to pay. ‘Something happened after the first Riksbank rate increase,’ Svensson said in an interview. ‘Then came the media reports about inflation and at the same time supply doubled in a week.'”

“The number of houses sold across the Waikato fell by more than 30 per cent in the year to May, with reports of more listings and fewer buyers. And six districts within the Waikato saw monthly price falls. ‘The urgency to act is all but gone,’ said REINZ Waikato director Neville Falconer. ‘Buyers are acting with caution and waiting for prices to decline further, whilst some are struggling to secure finance.'”

“House prices are set to plunge by 18 per cent in the next two years in Sydney and Melbourne, one of the major banks has warned. Fear over plunging house prices will mean the property market does suffer in the short-term as the fear of missing out that drove the frenzy in the past few years dries out, according to Dr Andrew Wilson, consultant economist at Bluestone Home Loans.”

“‘In the short-term however, housing markets will again be confronted by the fear factor with the usual predictions from the usual suspects of house price crashes and an uncertain outlook on rates and the economy, motivating buyers and sellers to sit on their hands,’ he said. ‘The usually quieter winter selling season will be exacerbated this year by falling confidence and the fear factor resulting in likely continued downward pressure on home prices with non-discretionary sellers just having to accept what the market offers.'”

“As recently as October, forecasting firm Oxford Economics predicted that Shenzhen would be the world’s fastest-growing city between 2020 and 2022. If Shenzhen is in trouble, that is a warning sign for the world’s second-largest economy. The city is ‘the canary in the mine shaft,’ said Richard Holt, director of global cities research at Oxford Economics, adding that his team is keeping a close eye on Shenzhen. Another of the city’s major companies, top-selling property developer China Evergrande, sparked fears of a collapse last year under its heavy debts that would have wreaked havoc with China’s financial system. Down the road, Ping An Insurance Group Co, China’s largest insurer, took big losses on property-related investments.”

“In a dense area of apartments near High Tech Park, one of the city’s clusters of tech companies, estate agents would normally be swamped with graduates looking to find homes in May. An agent, who gave his name only as Zhao, told Reuters last month that business is down 50% from a year ago. ‘This place should be bustling with people, I shouldn’t have a moment of rest,’ he said, lounging on his e-scooter outside a building with 30 studio flats where rent is 2,000 yuan a month. He said several have been empty since November.”

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This Post Has 99 Comments

  1. From the video above:

    Jun 16, 2022 THIS Will Trigger the Toronto Real Estate Market Crash. There is something brewing in the Toronto Real Estate Market these days when interest rates are going up while real estate prices are going down. There’s a clause that’s buried deep in everyone’s mortgage contract and it’s called a trigger rate. When this rate is hit due to higher interest rate hikes from the Bank of Canada, we’re going to see a lot of fixed payment variable mortgages jump up big time! It’s a systemic issue that mortgage holders can face when the interest rates are going up rapidly. Be sure to tune in to this episode of PPTV to learn more about how this mortgage clause could trigger a Toronto Real Estate Market crash.’

  2. “The Federal Reserve looks on course to lose money next year as it raises short-term interest rates to try to rein in inflation, …”

    Is it technically even possible to lose money when you own an electronic printing press technology?

    1. The Fed absolutely can lose their capital. The Fed can only print money against assets (bonds, gold) received.

      I suppose the Fed *could* in theory raise more capital from their member/shareholder banks. Or get a capital bailout from the USG in the form of being given some USG bond for which the Fed would not have to issue dollars in return. It is all quite cringe-worthy and would make the Fed lok bad and the USD crater.

    2. electronic printing press technology

      Yet bitcoin is ridiculed to high heaven here.

  3. ‘New listings from builders rose by a staggering 236% in Denton County last month. That’s not a misprint. The supply of new homes in Denton County is up 136% year-over-year in terms of months of inventory through May. My inbox has seen a lot of activity the past few weeks from builders offering new sections of homes and ‘opportunities’ for would-be buyers’

    Shack builders – yer fooked.

    1. ‘New listings from builders rose by a staggering 236% in Denton County last month. That’s not a misprint.

      Is that a lot?

  5. ‘If they’re losing money they’re not going to be selling agency MBS,’ Dudley said. ‘Every one they sell is going to add to their losses’

    What do you expect when yer loaning money at 6% and inflation is 9% Bill?

    1. What kind of brain-dead “investor” is going to buy the Fed’s toxic-waste MBSs when shack prices are cratering and foreclosures start to soar?

      1. what kind of investor? I’ll tell ya what kind of investor: the union-backed retirement funds here in CA that circle-jerk each other to new heights to collect the ever increasing fees which their salary is based on.

        same as private companies C-level share buybacks when their bonus is based on share price.

        same as the proverbial “we gotta pay our union backed heroes much more or they are gonna defect to neighboring cities” tripe.

        (it’s been a few years since this charade so expect a resumption fairly soon, led by the always shrill socialist mob at the Sac Bee)

        and all of this torrent of typing won’t change a damn thing

        “the grabbing hands, grab all they can.” DP

    2. I keep wondering: Would it work better to temporarily hike the policy rate up to 12%, or whatever it takes to get real interest rates back into positive territory, then ratchet down from there, rather than proceed at a snail’s pace to increase rates while holding out hope inflation will die down, even though real interest rates are negative and highly stimulative?

      1. “hike the policy rate up to 12%, or whatever it takes to get real interest rates back into positive territory”

        This is an election yr…doubt ‘they’ let it happen.

        2. I’m just thinking that a quick adjustment to a positive real interest rate might be less painful than a slow process of bouncing a bowling ball down to the basement which lasts for over a year.

      2. Define “better.” A hike to 12% would instantly throw millions out of their homes now, and again six months later when millions more lose their jobs.

        FYI: just how many people in this country know what a “real” interest rate is?

          1. Not instantly. But unemployment would soar and it would be nearly impossible to sell a house. Eventually many of the unemployed would be foreclosed.

      3. All they really have to do now is be patient, they have already set the stage for everything to blow up. They essentially control mortgage rates and have jacked them higher than any time in the last 10 years. This alone is enough to cause significant deflation but it doesn’t happen overnight. (or does it?) One could easily argue that it is already happening but there is a lag for people to feel it.

        So many small businesses have survived over the years by refinancing a house that kept going up. How many people do you know that gave themselves personal bailouts fairly routinely? I know people that have been doing it for 20 years! This is a huge issue. In past downturns there was meat on the bone to borrow. This time they are all trapped (can’t afford to lose the low rate they locked) and the bailout already happened. It is a similar situation for many corporations. A crash is already baked in, all we have to do now is watch it unfold.

        It is fascinating watching the psychology whipsaw. It wasn’t long ago that they were saying no rate increases until 2023. Now look at what they are talking about! Those clowns are just winging it while they e-trade from home. This crash is going to become the textbook example of why you shouldn’t let a bubble form in the first place. There is going to be a jaw dropping amount of surplus property available at steep discounts in 4-5 years. In the mean time there will be metric crap tons of personal property being discounted in a year or two. All we have to do is wait patiently and show up with cash.

        1. This crash is going to become the textbook example of why you shouldn’t let a bubble form in the first place.

          I kind of thought the previous crash already did that. But people have short memories.

        2. “There is going to be a jaw dropping amount of surplus property available at steep discounts in 4-5 years.”

          Wiping out the Chinese specuvestors in order to create an affordable home purchase opportunity for young American families would be an awesome win-win situation.

      1. the will let maturing MBSs roll off the books. I doubt that they will sell too much – remember that they are supposed to drop $17.5B in MBSs every month,

        2. The Financial Times
          Monetary policy
          Fed begins quantitative tightening on unprecedented scale
          US central bank’s move to reduce $9tn balance sheet comes alongside steep rate rises to tackle persistent inflation
          A montage of the Federal Reserve seal and arrows pointing down
          On Wednesday, the US central bank will stop pumping the proceeds of $15bn of maturing Treasuries back into the $23tn market for US government debt
          Kate Duguid in New York, Colby Smith in Washington, Tommy Stubbington in London June 14 2022
          Line chart of $ trillions showing The Fed’s balance sheet has ballooned

          The mammoth task of shrinking the Federal Reserve’s $9tn balance sheet has finally begun.

          On Wednesday, the US central bank will stop pumping the proceeds of an initial $15bn of maturing Treasuries back into the $23tn market for US government debt, the first time it has done so since it kicked off its bond-buying programme in the early days of the coronavirus pandemic.

          While the Fed has flagged its plans for so-called quantitative tightening well in advance, investors are not clear what the impact will be of a process that has never been attempted at such scale before. The move could further unsettle a bond market already battered by speculation that the Fed is poised to accelerate the pace of its interest rate rises.

          “The Fed has been a big buyer and a big stabilising influence in the markets for a couple of years,” said Rick Rieder, chief investment officer for fixed income at BlackRock.

          “Losing that, with the uncertainty around inflation and growth, means that volatility in the rates market is going to be high, much higher than we witnessed over the last couple of years,” he added.

          The unease in financial markets challenges the Fed’s assertion that balance sheet reduction will be a dull, predictable endeavour — likened to “watching paint dry” by former chair Janet Yellen the last time the central bank embarked on the exercise in 2017.

          As was the case then, the Fed is allowing bonds to mature and will not reinvest the money, rather than selling them outright — a more aggressive alternative.

          Members of the Federal Open Market Committee in May officially agreed to cap the run-off at an initial pace of $30bn a month for Treasuries and $17.5bn for agency mortgage-backed securities, before ramping up over three months to a maximum pace of $60bn and $35bn, respectively. That translates to as much as $95bn per month.

          When the amount of maturing Treasuries falls below that threshold, the Fed will make up the difference by reducing its holdings of short-dated Treasury bills. Active sales of agency MBS may also eventually be considered.
          …

          1. ‘investors are not clear what the impact will be of a process that has never been attempted at such scale before’

            That’s the spirit! Neeked swimmers!

  6. “Redfin figures show that more home sellers are adjusting their asking prices downward. Redfin Deputy Chief Economist Taylor Marr said said nearly 21% of sellers in Los Angeles County and nearly 28% in Orange County and the Inland Empire dropped their listing price last month, compared with 10% dropping their prices in May 2021. ‘All of these areas have had pretty dramatic increases in price drops, and they’re likely to continue increasing,’ Marr said.”

    No mention of San Diego. I guess it’s still red hotcakes down here?

  7. ‘Then came the media reports about inflation and at the same time supply doubled in a week’

    Look up Pia-Lotta, it’s Harry Potter.

    1. I doubt their calculation factored in how expensive it can be to own a home when resale values are falling.
      The false belief that real estate always goes up is endemic among real journalists.

  11. The Fed plans to ‘reset’ the housing market—raising the likelihood of falling home prices
    By Lance Lambert
    June 16, 2022 2:52 PM PDT

    It’s not just about how expensive housing became—it’s how fast it got there. It only took 24 months for U.S. home prices to soar a staggering 37%. For comparison, the biggest two-year spike leading into the 2008 housing crash was 29%.

    Heading into this spring, the Federal Reserve decided it had seen enough. The central bank quickly raised interest rates, which saw the average 30-year fixed mortgage rate climb to 6%—up from 3.2% at the start of the year. Those higher rates, which have priced out many home shoppers, ultimately ended the pandemic housing boom. Now we’re in a sharp slowdown, with the Mortgage Bankers Association reporting on Wednesday that mortgage applications are down 16% on a year-over-year basis.

    As this shift occurred, we heard very little from the Fed. Well, that was until chair Jerome Powell addressed reporters on Wednesday.

    Here’s what Powell had to say: “We saw [home] prices moving up very very strongly for the last couple of years. So that changes now. And rates have moved up. We are well aware that mortgage rates have moved up a lot. And you are seeing a changing housing market. We are watching it to see what will happen. How much will it really affect residential investment? Not really sure. How much will it affect housing prices? Not really sure. Obviously, we are watching that quite carefully…It’s a very tight market. So prices might keep going up for a while, even in a world where rates are up. So it’s a complicated situation and we watch it very carefully. I’d say if you are a homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again.”
    …

  12. Bitcoin your brother in-law talked you into buying not working out?

    Has your stock portfolio taken a bit of a tumble?

    Does the neighbor across the street have the same house you bought ln Mach for $800k listed for sale at $500k with no showings and no offers?

    Try yelling Hoochie Mama!!!

    https://youtu.be/oqm4LG8_3vE?t=61

  13. New Home Market Update for June 2022 | Part One | Living in Sarasota and Manatee Counties

    Jun 6, 2022

    https://www.youtube.com/watch?v=PT6FAFDQHso

    29 minutes. This is a deep dive on new shacks. Shift, no price increases, then at 3 minutes: No Bidding! What was happening in many cities was basically an auction. Now gone. Exact same thing just happened in Phoenix. They now call it first come first serve, meaning they are sitting there unsold.

  16. Increasing Inventory Causing Market Shift? – Phoenix Market Report (early June)

    Jun 16, 2022

    https://www.youtube.com/watch?v=qWVXdHQLtHA

    10 minutes. Just before 5:00 he mentions Avondale has seen a “sharp drop” in prices. I wish the graph was clearer or that he slowed down to see the crater, but oh dear! And similar stuff was shown for Glendale and Phoenix.

  17. Just Spoke To Ken McElroy About Real Estate Prices (Main Takeaways)

    https://www.youtube.com/watch?v=uKhBAiySoSU

    20 minutes. I think this guy is in Phoenix. McElroy is a big multi-family guy. At 6 minutes says all these guys have walked away from $1M “deposits” rather than close cuz interest rates/economy. Later talks about a Phoenix used car dealer who says now it’s “fallen off cliff.”

  18. As a renowned economist stated so eloquently, “Get rates back up into their long term historical range of 12% to 15% and most of these problems go away on their own.”

    He’s right… and we’re well on our way.

    Coatesville, PA Housing Prices Crater 21% YOY As Chester County And Philadelphia Area Housing Prices Drop Like a Rock

    https://www.movoto.com/coatesville-pa/market-trends/

  22. DEER VALLEY

    The Perfect Storm: What just happened to the real estate market?

    Jun 16, 2022 Many folks, which would include most Realtors, are asking “what the #$&! just happened to the real estate market?” Price reductions left and right, mortgage rages doubling almost overnight, record inflation, oh my!

    “The Shift” was swift and caught people off guard. In today’s video Jeremy Larkin breaks down the “perfect storm” that led to this real estate shift and offers a helpful perspective on what we might expect next! Larkin was born and raised in St. George, Utah’

    https://www.youtube.com/watch?v=5FO-wDxlVtc

    4:43. By Jove, I think he’s got it!

    1. Many folks, which would include most Realtors, are asking “what the #$&! just happened to the real estate market?

      What happened? Inflation and interest rates happened. And if they think it’s bad now, just wait until we have 10% interest rates on mortgages.

      I think that a lot of people already “get it”, which is why there is a sudden rush to the exits, and it’s going to get worse. There are 600 active listings in my little burg (there were 100 in February). I predict there will be 1000 by September, a probably more.

    2. I remember being in Park City during Sundance in 05 and 06 then later in 12 and the amount of high end inventory was growing and little mining shacks propped up being gutted and selling for 1 mil+.

  23. I know an old guy and long time owner who was waiting until the pinnacle peak to sell, then just put his house on the market. Of course he was too late, just like everybody else. People thought they were so sophisticated, yet it was greed, and it did them in.

    1. Of course he was too late

      Leaving money on the table is a common fear. No one wants to say “I sold too soon, had I waited another 8 months I would have made another 100K.”

      But as we know, it’s impossible to predict the peak.

  24. “The rally even prompted one prominent asset manager to warn the market had been gripped by hysteria.”

    Swedish real estate prices were out of control when I lived in Stockholm 20 years ago. It’s a long running bubble and even if it crashes people will refuse to learn from it. It’s worse than heroin.

    1. Unpossible! All Ukrainian refugees are absolutely innocent human beings. Where’s my blue/yellow flag?

  27. ‘A portion of billionaire tech entrepreneur Elon Musk’s call with Twitter employees was released Thursday, with the Tesla CEO saying that he believes “people should be allowed to say pretty outrageous things” as long as it’s legal.’

    “So I think people should be allowed to say pretty outrageous things that are in the bounds of the law but that don’t get amplified and don’t get a ton of reach,” he said in full, according to a video released by Project Veritas. Musk, who is attempting to purchase Twitter for $44 billion, was speaking during a Twitter all-hands meeting.’

    ‘Musk added, “I think an important goal for Twitter would really try to include as much of the country … as much of the world as possible,” allowing the social media platform to “really go to the next level.”

    “I think the potential is there for Twitter to have … to be accessible to an order of magnitude more people,” he added. “Let’s say the far-left 10 percent and the far-right 10 percent were equally upset on Twitter, then that would probably be a good outcome.”

    ‘Elaborating further in the short clip released by Veritas, Musk said Twitter should meet a “standard” to keep Twitter users “very entertained and informed” above all else, rather than merely employing policies to “not offend” certain people. Musk appeared to have been answering a series of questions from employees who work at the San Francisco-based tech firm.’

    ‘Musk, the world’s richest man, has often criticized Twitter’s policies around content moderation, recently saying that its staff holds biases against “half the country,” meaning conservatives.’

    “A platform cannot be considered inclusive or fair if it is biased against half the country,” he said in a June 13 Twitter post as popular Twitter account Libs of TikTok said it received numerous death threats in recent days.’

    “I have now received about a dozen death threats after radical leftists accused me of being a domestic terrorist extremist,” Twitter user Libs of TikTok wrote. “Twitter has not removed any of the accounts of those who sent the threats.” Musk responded with: “Why?”

    https://www.theepochtimes.com/elon-musk-tells-twitter-staff-hell-allow-pretty-outrageous-tweets-in-leaked-video_4538900.html

    1. But see, via ZH, SpaceX Fires Employees Who Circulated Letter Calling Musk An “Embarrassment” And Seeking “Inclusiveness”

  28. The Bank of Canada doesn’t care about the value of your house

    Jun 17, 2022 Steve DiGregorio, vice president and portfolio manager at Canoe Financial says that the Bank of Canada’s focus is to reduce inflation. He says interest rates are going to be higher for a prolonged period of time.

    https://www.youtube.com/watch?v=K-ZG7gmEGfg

    7 minutes.

    1. Realtors are clearly looking to YT to increase income as real estate sales drop off.

  30. people should be allowed to say pretty outrageous things” as long as it’s legal.’

    When billions of people are starving soon, dying from Vax shots, homeless, mad max will shoot you for food, since he is a cop, it will be legal to eat you. As Joe Biden said, how can ar15s stop f15s and nukes?

  33. Brandon says there is no recession, no inflation, no high gas prices. Everything is fine.

  34. Buyers waiting in the Arizona real estate market.
    Streamed live 38 minutes ago Many buyers got punched with the sudden spike in rates in Arizona so they are sitting back and waiting. How long is anybody’s guess.

    I am a realtor in the Greater Phoenix area serving all surrounding communities from New River south to the City of Maricopa.

    https://www.youtube.com/watch?v=3I9mdUQO0T4

    22 minutes. From 3:00 to 3:45 is interesting. 6:00 “sellers are the last to get the memo” 14:00 : on is good.

  35. Oh dear….

    Distressed Deals Pile Up in Canada’s Once-Booming Housing Market

    https://www.bloomberg.com/news/articles/2022-06-17/distressed-deals-pile-up-in-canada-s-once-booming-housing-market?sref=ibr3A0ff

    Zohal Habibi hadn’t even moved into her new home in the suburbs of Toronto when she started regretting the purchase. “We took a very bad decision,” she says.

    It’s not about the house itself. She and her husband are excited about the extra space it’ll give them and their two young kids. The problem is the price they agreed to pay for the three-bedroom home in March: C$920,000 ($711,000).

  37. Maybe Musk was right all along………..From July to December 2021, its automated defenses stopped 96% of all fake accounts — that includes 11.9 million that were stopped at registration and 4.4 million that were proactively restricted, the report said. Members reported 127,000 fake profiles that were also removed.

    LinkedIn said its automated defenses caught 99.1% of spam and scams, a total of 70.8 million,

    https://www.cnbc.com/2022/06/17/fbi-says-fraud-on-linkedin-a-significant-threat-to-platform-and-consumers.html

    1. If the Fed adopts the Blockchain to create a true dollar denominated stablecoin, where will that leave the hypers, hawkers, and hucksters in the cryptocurrency ecosystem? Seems like they might find themselves up shitz creek.

  40. Did you ever catch the cult classic, “Tales of the Crypt”?

    I’m thinking perhaps a remake is due: “Tales of the Crypto”.

    1. Bitcoin Plummets Below $20,000 for First Time Since November 2020

      Its fall was accelerated in recent weeks by the collapse of two major cryptocurrency projects while sowing doubts about the stability of the overall cryptocurrency market.

      The plunge follows several months of declines for Bitcoin, the most popular cryptocurrency.

      By Erin Griffith and David Yaffe-Bellany
      June 18, 2022Updated 4:44 a.m. ET

      SAN FRANCISCO — The price of Bitcoin fell below $20,000 for the first time since November 2020 on Saturday, amid a broader market meltdown driven by rising interest rates, inflation and economic uncertainty spurred by the war in Ukraine.

      The plunge — it sank below $19,000 at one point Saturday — took place over several months for Bitcoin, the most popular cryptocurrency. Its fall was accelerated in recent weeks by the collapse of two major cryptocurrency projects, Terra-Luna and Celsius, while sowing doubts about the stability of the overall cryptocurrency market. Bitcoin has erased some $900 billion of value since its peak in November.

      The drastic sell-offs show how intertwined and complex the crypto markets have become in recent years, said R.A. Farrokhnia, a professor at Columbia Business School who specializes in financial technology. As investors flee to less risky assets, “this creates a cascade effect on top of the contagion effect,” he said.

      Investing in Bitcoin and other cryptocurrencies surged in the pandemic alongside other risky bets on assets like “meme stocks,” collectibles including sneakers and trading cards, and digital art and media known as nonfungible tokens, or NFTs. The speculation was driven by free-flowing stimulus checks, low interest rates on other investments, a social media frenzy, pandemic boredom and a fear of missing out on the next big thing.

      Bitcoin was designed to transform the way people do transactions. The digital currency relies on a decentralized network of computers that log each transaction on a permanent record known as a blockchain. The record cannot be changed or controlled by anyone, including governments.

      From March 2020 to November 2021, the price of a single Bitcoin rose twelvefold to $64,000. It passed $20,000 in November 2020, which was a record.

      The excitement — and potential profits — generated by Bitcoin’s rise attracted newcomers to learn about, work on and invest in cryptocurrencies. Some investors saw Bitcoin as a safe place to park cash after central banks flooded the economy with money, creating fears of inflation. Bitcoin has a built-in limit to its supply; there will only ever be 21 million of the tokens. Around 19 million have been electronically mined so far.

      The run-up also pushed Wall Street and Fortune 500 companies to become more open to something they once dismissed. Goldman Sachs and Morgan Stanley announced plans to offer wealthy customers access to cryptocurrency funds. PayPal and its subsidiary, Venmo, created options for trading and shopping with cryptocurrency.

      Square, another payments company, bought $50 million of Bitcoin and changed its name to Block, in part to signify its work with blockchain technology. Tesla bought $1.5 billion of it. The venture capital firm Andreessen Horowitz raised $4.5 billion for a fourth cryptocurrency-focused fund, doubling its previous one.

      Excitement hit a peak in April last year when Coinbase, a cryptocurrency exchange, went public at an $85 billion valuation, a coming-out party for the industry. Bitcoin topped $60,000 for the first time.

      Last summer, El Salvador announced that it would become the first country to classify Bitcoin as legal tender, alongside the U.S. dollar. The country’s president updated his Twitter profile picture to include laser eyes, a calling card of Bitcoin believers. The value of El Salvador’s $105 million investment in Bitcoin has been slashed in half as the price has fallen.

      Senators and mayors around the United States began touting cryptocurrency, as the industry spent heavily on lobbying. Mayor Eric Adams of New York, who was elected in November, said he would take his first three paychecks in Bitcoin. Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, proposed legislation that would create a regulatory framework for the industry, giving more authority to the Commodity Futures Trading Commission, an agency that crypto companies have openly courted.

      Through the frenzy, celebrities fueled the fear of missing out, flogging their NFTs on talk shows and talking up blockchain projects on social media. This year, the Super Bowl featured four ads for crypto companies, including Matt Damon warning viewers that “fortune favors the brave.”

      That swaggering optimism faltered this spring as the stock market plummeted, inflation soared and layoffs hit the tech sector. Investors began losing confidence in their crypto investments, moving money to less risky assets. Several high-profile projects crashed amid withdrawals. TerraForm Labs, which created TerraUSD, a so-called stablecoin, and Celsius, an experimental crypto bank, both collapsed, wiping out billions in value and sending the broader market into a tailspin.

      “The circular flow of funds brings questions about whether this entire ecosystem always needs outsiders to come in and sustain it,” Mr. Farrokhnia said.

      Even as investing in cryptocurrencies became more mainstream, Bitcoin did not find much success as a means of everyday transaction. Its price swings are volatile, and its upward trajectory has made it more valuable to hold long term. Companies created elaborate ways to make loans or let people use their Bitcoin as collateral in a sector that is known as decentralized finance, or DeFi.

      At just over $20,000, around half of all Bitcoin wallets were still sitting on profits, according to an analysis by the Columbia Business School. Mr. Farrokhnia said 61 percent of the addresses had not sold in the last 12 months, showing that many people bought into it to hold it.

      Regulators have said cryptocurrencies enable tax evasion, risky behavior and fraud. Last year, China cracked down on cryptocurrency mining and trading, and regulators in Hong Kong, Canada and the United States have warned of regulatory actions. Britain has also banned Binance, the world’s largest cryptocurrency exchange.

      Bitcoin’s widespread use by criminals, including the hackers who attacked the Colonial Pipeline last year, has generated further scrutiny. But Bitcoin’s transparency — the ledger is public for anyone to see — has also helped prosecutors track down some criminals and even recover ransom payments.

      The recent sell-off has led to cutbacks at companies that were in hyper-growth just a few months ago. Coinbase laid off 18 percent of its employees in June after posting shrinking revenue and losing active users. Other crypto companies, including Gemini, BlockFi and Crypto.com, have also cut jobs.

      In past downturns, known in the industry as “crypto winters,” supporters encouraged their peers to invest more while prices were low, or “buy the dip.” But this time, analysts said, the message is not landing.

      “You have so much pessimism in the space,” said Ed Moya, a crypto analyst at OANDA. “There’s no confidence right now to buy the dip.”
      …

        1. “Investing in Bitcoin and other cryptocurrencies surged in the pandemic alongside other risky bets on assets like “meme stocks,” collectibles including sneakers and trading cards, and digital art and media known as nonfungible tokens, or NFTs. The speculation was driven by free-flowing stimulus checks, low interest rates on other investments, a social media frenzy, pandemic boredom and a fear of missing out on the next big thing.”

          Broke ãss losers borrowing to invest in a sure thing. What can possibly go wrong?

    2. The Financial Times
      Cryptocurrencies
      Bitcoin slumps below key $20,000 threshold
      Crisis in digital assets deepens as crypto market benchmark drops 9 per cent
      The price of Bitcoin dropped below $19,000 on Saturday, below the peak level of the previous bull run
      Joshua Oliver 3 hours ago

      Bitcoin’s price has broken below the key threshold of $20,000 for the first time since November 2020, risking triggering a fresh wave of selling and deepening the crisis gripping the digital asset sector.

      The largest cryptocurrency, which acts as a benchmark for the broader crypto market, plunged to under $19,000 on Saturday morning, a fall of around 9 per cent. That took it below the peak level of the previous bull run in crypto markets in 2017 and erased years of gains for long-term holders.

      Traditional financial markets were shaken this week after a trio of big central banks, led by the US Federal Reserve, boosted borrowing costs as part of an effort to tamp down intense inflation. Global equities posted their worst week since the darkest days of the pandemic in March 2020 as traders fretted that the aggressive action could snarl global growth or even trigger a recession.
      …

  41. Has the Everything Bubble popped?

    If so, you’d better batton down the hatches. What lies in store is Lehman Brothers X 10.

    1. Fortune
      Finance
      Economy
      Top economist Mohamed El-Erian says the everything bubble is over. It’s a paradigm shift away from a ‘silly’ artificial economic world
      By Colin Lodewick
      June 17, 2022 1:08 PM CDT

      Wednesday’s decision by the Federal Reserve to hike interest rates by 75 basis points was its biggest hike since 1994, and economists are starting to digest what a paradigm change it is.

      One of the world’s most prominent Fed watchers, Mohamed El-Erian, chief economic adviser of financial services firm Allianz and president of Queens’ College at Cambridge, says it’s part of a “great awakening” for central banks, as several others took action this week.

      For instance, the Swiss National Bank imposed a 50 bps increase, its first since 2007, and the Bank of England initiated a more modest hike of 25 bps. The European Central Bank (ECB) recently announced at an emergency monetary policy meeting that it would initiate its first rate hike in over a decade next month and continue with another in September.

      Before this spate of dramatic hikes, central banks had been significantly leading investors astray, he said on CNBC’s Squawk Box on Thursday.

      “It’s about time we exit this artificial world of predictable massive liquidity injections, where everybody gets used to zero interest rates, where we do silly things where there is investing in parts of the market we shouldn’t be investing in, or investing in the economy in ways that don’t make sense,” he said. “We are exiting that regime, and it’s going to be bumpy.”

      El-Erian is referring to the fact that for most of the past 14 years, monetary policy in the U.S. and internationally has been consistently loose, with the Fed and other central banks setting interest rates low and letting money flow to commercial banks by buying up assets and stocks. (Some critics argue that the 1990s were also extraordinarily loose.) That spurred economic growth in the face of several economic crises but also led to multiple economic bubbles—from housing to crypto to VC-backed subsidies for things like cheap Uber prices—existing at once. Now, all those bubbles are poised to dissipate as banks tighten their policies and stop the free flow of cash.

      The impetus for the shift was obvious. Last Friday, the Bureau of Labor Statistics revealed that the inflation rate for all consumer goods increased in May to 8.6%, after a slight decrease to 8.3% in April, following a peak of 8.5% in March.

      “8.6% is a day of reckoning,” said El-Erian. “You cannot ignore 8.6% inflation.” Wednesday’s 75 bps hike followed two previous increases this year, a 25 bps hike in March and a 50 bps hike in May.

      Thursday’s comments are not the first the economist has made about inflation this week. On Sunday, he appeared on CBS’s Face the Nation to explain that expert predictions had been too optimistic with regard to inflation. “And I fear that it’s still going to get worse,” he said. “We may well get to 9% at this rate.”

      On Squawk Box,” El-Erian said the Swiss National Bank’s interest rate hike was actually more significant than the Fed’s. “The Swiss National Bank always fights a strong currency,” he said. “For it to get ahead of the ECB and hike not 25, but 50, shows you that we are in the midst of a secular change.”
      …
      https://fortune.com/2022/06/17/economist-mohamed-el-erian-inflation-bubble-fed-paradigm-shift/

    2. The Wall Street Journal
      Streetwise
      The Fed Pricked the Everything Bubble
      It is hard for investors to escape. But not every investment is equally exposed to the Fed.
      What happens next in the stock market depends both on the Fed and on the unknown routes by which its moves hit the real economy.
      Photo: LEAH MILLIS/REUTERS
      By James Mackintosh
      Updated June 14, 2022 10:12 am ET

      Some investors pray to their god for financial success. For the rest of us, there’s the Federal Reserve. After more than a decade in which the Fed giveth, it hath taken away. The markets quite rightly fear that Jerome Powell is in a smiting mood.

      Monday brought the definitive evidence that the “Everything Bubble” is deflating, although it is better understood as the expected result of cheap money and low inflation rather than a true bubble. The S&P 500 finally closed more than 20% below its January high, the standard definition of a bear market, although on an intraday basis it was briefly there in May.

      The most extreme speculative stocks led the way down, but even assets that haven’t so far fallen much, such as housing, are highly likely to follow suit. One way to think about it: the Fed is increasing the yield on the dollar, pushing up its value against everything. The gain against the yen is easily understood as the Fed tightening while the Bank of Japan stays easy. The “gain” in the dollar against Amazon stock shows up as a falling share price, rather than an exchange rate.

      It isn’t just that investors are collateral damage in a campaign against inflation. Falling share, bond and other asset prices are actively helpful to the Fed. They make people poorer, encouraging them to save more and spend less.

      This is the opposite of the so-called “wealth effect” the Fed relied on to boost inflation during the past dozen years. The policy of superlow interest rates and trillions of dollars of bond purchases created the Everything Bubble, with prices of virtually every U.S. asset hitting new highs. As the Fed reverses course, the Everything Bubble is going away.
      …

    3. The New York Times
      The Stock Market Is Plummeting. Welcome to the End of the ‘Everything Bubble.’
      The financial journalist Rana Foroohar shares her long view on what’s going on with the economy.
      June 17, 2022
      Produced by ‘The Ezra Klein Show’

      This week, the S&P 500 entered what analysts refer to as a bear market. The index has plunged around 22 percent from its most recent peak in January. Many growth stocks and crypto assets have crashed double or triple that amount.

      New home sales declined 17 percent in April, causing some analysts to argue that the housing market has peaked. And in response to rising inflation, the Federal Reserve just approved its largest interest rate increase since 1994, meaning asset prices could dip even lower.

      To understand what’s happening in the stock market right now, you have to understand the era that preceded it. Rana Foroohar is a columnist at The Financial Times and the author of several books on the economy, including “Makers and Takers” and “Don’t Be Evil.” Her view is that a decade-plus of loose monetary policy has been the economic equivalent of a “sugar high,” which kept the prices of stocks, housing and other assets going up and up and up, even as the fundamentals of the economy have been eroding. This “everything bubble,” as she calls it, was bound to burst — and that’s exactly what she thinks is happening right now.
      …

    4. The Financial Times
      Opinion The Long View
      Stocks still have not reached capitulation point
      Market mood may be shifting from fear of missing out to fear of holding on
      Illustration of a bitcoin against a graph
      In the latest episode of the crypto drama, the platforms that offer trading in them are seizing up and struggling to hand back cash to the people who have gambled on the coins
      Katie Martin June 16 2022

      Heaven knows we’ve been through enough acronyms in this market cycle.

      FOMO — the Fear Of Missing Out, drove lots of investors, professional and amateur, in to spicy asset classes. No one wanted to be the last person to get in to the next big thing while excess money was sloshing around the global financial system.

      TINA — There Is No Alternative — went a little further. It encapsulated the notion that fund managers had no choice but to buy risky stocks because boring old bonds were yielding so little, or indeed were costing money to hold even before you take inflation in to account. It’s “the market made me buy this rubbish”, but with a slightly sassier name.

      But it seems we have not yet reached peak acronym. With bond yields now much higher, TINA is no more (RIP), and the market mood has turned. “We went from Fear of Missing Out to Fear Of Holding On,” as Peter Tchir, head of macro strategy at Academy Securities, put it this week. For my sins, I read a lot of research from banks and investors. But “from FOMO to FOHO” is a new one on me.

      Tchir is referring here to the dreaded bitcoin — an “asset” for want of a better word that is maturing like a fine glass of full-fat milk on a summer’s day. If you have managed to avoid this week’s crypto drama (well done you), then the bits you need to know are that its collapse in price has morphed from the stage where prices are falling, which began in November, to the point where they are dropping double-digit per cent a day and the platforms that offer trading in them start to seize up and struggle to hand back cash to the people who have gambled on the coins.
      …

    5. The Financial Times
      Ares Management Corporation
      Private equity chiefs fear waking up with ‘a terrible hangover’
      Financiers at SuperReturn conference face up to rising rates and a looming recession
      L-R: Cyrus Madon, Jan Stahlberg, Gabriel Caillaux, Philipp Freise, Matthew Kabaker
      From left to right, Cyrus Madon, Jan Stahlberg, Gabriel Caillaux, Philipp Freise and Matthew Kabaker
      Kaye Wiggins in Berlin 44 minutes ago

      A group of top financiers sat in Berlin seven months ago marvelling at how much money they had made during a global health emergency.

      As they gathered again this week at the latest instalment of the private equity industry’s SuperReturn conference, the backdrop was fundamentally different.

      The massive government stimulus packages and central bank crisis measures that had enabled them to keep companies afloat — and use cheap debt to strike new deals and pay themselves dividends — are a thing of the past.

      “This is a time of reckoning for our industry,” said Philipp Freise, the European private equity co-head at KKR, which went on an aggressive dealmaking spree during the pandemic-era boom.

      The Federal Reserve and Bank of England both raised rates while the dealmakers were gathering. Listed buyout groups’ share prices have tumbled this year. Investors are struggling to commit cash to new buyout funds after pouring money into the industry last year.

      The enormous flood of deals struck at high valuations during the boom of the past two years are at risk of turning into what at least four senior dealmakers privately referred to as a “bad vintage” — the private equity industry’s wine-driven euphemism of choice, which means pension funds and other investors would make less money than they hoped when they committed cash to buyout groups’ funds.

      Private equity struck deals worth more than $800bn last year, an estimate from Preqin shows.

      Those that paid high multiples for fast-growing companies in that period “are going to wake up with a terrible hangover,” said Gabriel Caillaux, co-president of growth investor General Atlantic.

      “In November the biggest question was, God, when does the music end — and in a way it’s healthy it has,” he said.
      …

    6. The Financial Times
      The Big Read Central banks
      Time for strong medicine: How central banks got tough on inflation
      In the US and Europe, policymakers are beginning to accept that dealing with rising prices will not be painless
      Tommy Stubbington, Colby Smith, Martin Arnold, Katie Martin yesterday

      The world’s most-watched central banks are finally stamping down on a surge in inflation. But this week it became clear that they know this comes at a cost.

      From the UK, where the Bank of England raised interest rates for the fifth time in as many meetings, to Switzerland, which bumped up rates for the first time since 2007, policymakers in almost every major economy are turning off the stimulus taps, spooked by inflation that many initially dismissed as fleeting.

      But for the big two in particular — the US Federal Reserve and the European Central Bank — the prospect of sharply higher rates brings awkward trade-offs. For the Fed, that is in employment, which is at risk as it pursues the most aggressive campaign to tighten monetary policy since the 1980s. The ECB, meanwhile, this week scrambled an emergency meeting and said it would speed up work on a new plan to avoid splintering in the eurozone — an acknowledgment of the risk that Southern Europe and Italy in particular could plunge in to crisis.

      Most central banks in developed countries have a mandate to keep inflation under 2 per cent. But the roaring consumer demand and supply-chain crunch stemming from the Covid reopening, combined with the energy price spiral generated by Russia’s invasion of Ukraine, has made this impossible.

      At first, policymakers considered inflation spikes to be transitory. But now, US inflation is running at an annual pace of 8.6 per cent, the fastest in more than 40 years. For the eurozone, it is 8.1 per cent and in the UK, 7.8 per cent. Central banks are being forced to act far more aggressively.

      Investors and economists think policymakers will struggle to avoid imposing pain, from rising unemployment to economic stagnation. Central banks have moved “from whatever it takes to whatever it breaks”, says Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.

      The Fed faces reality

      Above all, the US Federal Reserve this week dramatically scaled up its response. It has been raising rates since March, but on Wednesday it delivered its first 0.75 percentage point rate rise since 1994. It also set the stage for much tighter monetary policy in short order. Officials project rates to rise to 3.8 per cent in 2023, with most of the increases slated for this year. They now hover between 1.50 per cent and 1.75 per cent.

      The Fed knows this might hurt, judging from the statement accompanying its rate decision. Just last month, it said it thought that as it tightens monetary policy, inflation will fall back to its 2 per cent target and the labour market will “remain strong.” This time around, it scrubbed that line on jobs, affirming instead its commitment to succeeding on the inflation front.

      To those familiar with reading the runes of the Fed, this matters. “This was not unintentional,” says Tim Duy, chief US economist at SGH Macro Advisors. “The Fed knows that it is no longer possible in the near term to guarantee” both stable prices and maximum employment.
      …

    7. Have you ever been in the Midwest as a tornadic storm approaches? There is an eerie calm as the wind dies down to a slight breeze, the western horizon darkens, and towering greenish-black clouds block out all sunlight.

      This is where financial markets are presently: In the calm before the storm

      1. The Financial Times
        Markets volatility
        Rising rates, big losses but so far little sign of panic in the markets
        Gauges of share price volatility have been relatively subdued despite the sell-off
        The S&P 500 entered bear market territory and more than 3,500 US stocks fell to new 52-week lows this week
        Eric Platt, Nicholas Megaw and Kate Duguid in New York 53 minutes ago

        At the opening bell on Thursday, an unusually large wave of selling hit the New York Stock Exchange, with thousands of stocks sliding in tandem. The market was already nursing trillions of dollars in losses and yet few on Wall Street panicked.

        “Despite some of the volatility and the moves it is actually very calm,” said Todd Sandoz, the co-head of Barclays’ equities sales and trading business. “You can feel it walking across the trading floor. It’s quiet.”

        Even as the S&P 500 entered bear market territory and more than 3,500 US stocks fell to new 52-week lows this past week, gauges of volatility have not signalled the kinds of market distress registered during violent past episodes such as the start of the coronavirus pandemic in March 2020, the Chinese economic slowdown in 2015 or the US debt downgrade in 2011.

        Instead, investors seem to be adjusting quite calmly to a new world order in which central banks act aggressively to tame high inflation rates, with an uncertain impact on economic growth.

        The Federal Reserve, Swiss National Bank and Bank of England all raised interest rates this past week, with the Fed announcing its biggest hike in almost 30 years. Higher rates reduce the relative value of stocks that promise profits further into the future, encouraging a sell-off that many investors and traders expect to continue.

        The S&P 500 has fallen 23 per cent so far this year while the Nasdaq Composite — which is dominated by fast-growing technology companies that are particularly exposed to higher interest rates — is down more than 30 per cent.

        Still, Jurrien Timmer, head of global macro strategy at Fidelity, said: “We’re still not at a point where the market could be considered cheap.”

        “Any kind of recovery this year is a little bit of a hard sell,” added Peter Giacchi, who runs Citadel Securities’ floor trading team at the New York Stock Exchange. “It doesn’t mean that if the Fed . . . gets inflation under control that the market doesn’t stabilise, but to predict a sharp rally by the end of the year you’ve got to really be a bull.”

        Despite the punishing declines, the sell-off has not prompted the types of forced liquidations and margin calls that can feed on themselves and cause broader market turmoil.

        The relatively subdued readings in the Cboe’s Volatility Index, known as the Vix, have been catching the attention of traders all month. On Friday when the S&P 500 hit its lowest level since December 2020, the Vix climbed to 33.3. While above its long-term average of 20, it fell short of levels hit every other month this year.
        Line chart of Number of stocks trading on US exchanges that have hit a new 52-week low each day showing Shares of thousands of companies in the US have slumped to new lows

        “The Vix has bothered me for a while,” said George Catrambone, the head of trading in the Americas at DWS. “Investors would feel better if you had that Vix of 40, 45, 50 moment, where we know sellers become exhausted but it’s hard to have that moment until we know if inflation has peaked or not.”
        …

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