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Banks Are Now Open To Price Cuts Knowing That The Inventory Of Foreclosed Homes Will Only Increase

It’s Friday desk clearing time for this blogger. “Sellers dropped prices on more than a quarter of homes listed for sale in the Seattle area in September, slightly higher than the national average, according to Zillow. To entice buyers, Town home developer Erich Armbruster said his firm, Ashworth Homes, has tried rate buydowns, but buyers were more interested in price cuts. The company has lowered prices about 10% from a year ago. Some builders of new homes are slashing prices or advertising buyer credits and interest rate buydowns. Homes in one development near Northgate started this spring in the low $700,000 range, but after multiple price cuts are now listed in the low $600,000 range and are about half sold, Armbruster said. ‘There’s really not much more to give in terms of pricing,’ he said.”

“Greg Parker Jr. tells a story about hustling in his North Philly neighborhood as a teen, then buying his first Philly property in 2005 for about $5,000, and flipping rowhouses until he was making $150,000 a month. It’s a story the personal finance influencer told to get people to invest in properties and pay to attend his seminars. And hundreds of aspiring investors got swept up in the inspirational message. Now, many are saying Parker, known online as Big Bizzneesss, scammed them. Some of the people who say they were scammed by Parker and his wife, Danielle, include a recent Drexel University grad who gave Parker $20,000 to purchase a house. The sale never happened, and now he’s suing to try to get his money back. A South Jersey real estate agent who paid $7,000 for a share of what turned out to be a run-down property with more than $16,000 in back taxes. A Brooklyn man who borrowed money from his 401(k) to pay Parker for the purchase and rehab of a property. He’s out more than $100,000.”

“Bay Area workers who took advantage of remote work during the pandemic to move to far away, lower-cost cities now may find themselves in a painful predicament if called back to the office. Some of the hottest cities for those joining the Bay Area exodus are seeing home prices fall sharply from their pandemic peaks. August’s median home prices in Austin, Dallas and Boise, Idaho, are all down 18% from their peaks reached in May 2022, according to Redfin data. The pain is just starting to unfold in other destination cities. Florida, long derided by many Californians, became a popular choice for Bay Area residents favoring low taxes, affordable homes and few Covid restrictions. Miami’s median home price is off 4% and Orlando’s is down more than 6% since hitting a peak in June 2023.”

“So are these remote workers being called back to the office stuck with losses? ‘That’s the risk,’ said Scott Anderson, chief U.S. economist for BMO Economics. ‘There are a lot of folks that took out mortgages when rates were extremely low and bought houses during the pandemic — maybe even bigger houses than they probably needed — in markets they might not want to stay in now. There’s some buyer’s remorse we’re going to see. There are going to be some folks who are going to be stuck there.'”

“Kim Zolciak continues to purge her and her family’s closets in a desperate attempt to make some extra cash amid their ongoing financial woes. The former ‘Real Housewives of Atlanta’ star gave her 3.4 million Instagram followers the opportunity to purchase a couple of pairs of her and Kroy Biermann’s designer shoes Tuesday. While it’s unclear if anyone has actually purchased the items listed on her Story, Zolciak and Biermann’s financial problems seem to be never-ending. Not only is the ‘RHOA’ alum being sued by BMW for $400,000 and Capital One/Saks for an additional $100,000, but the pair’s shared Georgia mansion is also facing foreclosure.”

“The dearth of big-ticket deals and major office trades continues to hobble New York’s investment sales market, which is on pace for its worst year since the depths of the Great Recession. ‘This is the worst market I’ve seen in 37 years,’ Compass Vice Chair Adelaide Polsinelli said. ‘The good news is we’ll stay alive for ’25, and it’ll be heaven in ’27. You can only have so many bottoms.’ Last month, a portfolio of Inwood rent-stabilized apartment units sold at a 44% discount from the price the seller paid in 2016. In a deal that has yet to close, Clarion Partners agreed to sell a Fifth Avenue office building for $100M less than it paid a decade ago, The Real Deal reported. The per-square-foot price of office sales in the third quarter of $398 was 41% below the trailing four-quarter average, per Avison Young.”

“The summer pause in real estate activity in the local housing market extended through September, with prices, sales and listings all down compared to the previous month. The average sales price of a home in the area was down nearly $25,000, to $536,927 in September. The highest average monthly price this year was $602,591 in May. ‘There’s been a definite pullback in the market,’ said Windsor-Essex County Association of Realtors president Mark Lalovich. ‘September definitely was a disappointment.’ The most price sensitive sector of the market has been homes listed at $900,000 and above. Sales of homes in that price range dropped from 44 in August to 19 in September. ‘Interest rates definitely remain front and centre for buyers,’ Lalovich said. ‘People are looking but not acting and not acting in a way to create a sale.'”

“Property sellers are waiting over a month on average before dropping the asking price for their home, analysis shows – but they risk getting thousands of pounds less in doing so. On average this year, they are reducing the price by around 5.1 per cent, which equates to just over £14,000 on the typically priced home of £280,000. Richard Donnell, executive director at Zoopla, explained: ‘Over-pricing runs the risk of potentially getting less than you hoped as buyers can see the property sticking so this may encourage them to try it on more to get a bigger discount to the asking price, even if it’s been reduced. There are some people who won’t sell at the moment unless they get a certain price and life is tough for them at the moment, as they might be pricing too high.'”

“The value of real estate sales in Kuwait declined during the third quarter of 2023 to KD 800 million, the lowest levels recorded since the third quarter of 2020. The expatriate population continues to face challenges that limit their spending and even force some to leave. Additionally, restrictions on granting visit visas to expatriates have contributed to a surge in vacant apartments, with their numbers exceeding 50,000 uninhabited rental investment apartments by the end of the first half of this year.”

“Hundreds of thousands of Australians are flooding financial crisis hotlines in desperate need of help, on the brink of losing their homes as they struggle with sky high mortgage repayments. The majority of calls in the year to September came from New South Wales, Queensland and Victoria, while overall volumes were up almost 30 per cent compared to the same time last year. A number of financial crisis services news.com.au spoke to reported similarly high levels of need from those with mortgages. One said the number of calls related to mortgage stress ‘has never been so high.’ A source from one service described the scenario playing out as having reached a ‘critical mass.’ If a large enough proportion of mortgages fail – that is, a flood of Aussies lose their homes by defaulting on their home loans – the source said: ‘We’d all be screwed.'”

“Packed inside a small office in Hong Kong’s financial district, about 20 people wait for a property auction to start. Of the 24 properties up for sale, the majority are foreclosed homes. But in a display of the caution that has gripped Hong Kong’s market and is contributing to a price slump, the prospective buyers are wary. Only one of the properties sells, with the rest failing to meet the minimum price or attracting no bids. Other firms are also seeing a spike in distressed sales. The number of foreclosed properties handled by C S Auctioneers rose to almost 300 in September from about 100 at the beginning of 2023, according to Mr Alger Cheng, general manager of the firm’s auction department.”

“Banks are now open to price cuts in order to speed up sales, ‘knowing that the inventory of foreclosed homes will only increase given the down cycle,’ Mr Cheng said. Such properties can be 20 per cent lower than the market price. House prices may fall another 5 per cent in the second half of 2023, which will create a vicious circle as borrowers are discouraged to repay loans when their debt becomes higher than the property value, said Mr Louis Chan, the head of Centaline’s residential division. ‘The total number of foreclosed properties could increase to more than 1,000,’ he said.”

“China’s second-largest real estate developer is close to bankruptcy, leaving millions of property investors nursing heavy losses. To make matters worse, the country’s real estate crisis — which first unfolded two years ago — has become a slow-motion car wreck. Ordinary Chinese people, who for years believed that property was a safer bet than the country’s volatile stock market, have become increasingly scared of losing down payments on new properties that may never be built. as new projects continue to dry up, small businesses and workers are finding themselves owed hundreds of millions of dollars. The shadow banking system — a network of trusts outside of the main banking system — is also nursing huge losses.”

“A $35 billion restructuring plan for Evergrande, agreed in April, is now thought to be in doubt. ‘One still has to find a way to cover losses, so that’s why things are moving slower than what might be ideal,’ Antonio Fatas, a professor in economics at INSEAD Business School in Singapore, told DW. ‘You are now seeing the political struggle to allocate blame for this,’ he added, referring to the reported arrest of Evergrande’s CEO, who the company said later was being held on suspicion of ‘illegal crimes.'”

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This Post Has 93 Comments

  2. ‘There’s really not much more to give in terms of pricing,’ he said.”

    We’ll see about that, REIC dissembler.

    1. Well, your buyers don’t feel that way….
      “ Town home developer Erich Armbruster said his firm, Ashworth Homes, has tried rate buydowns, but buyers were more interested in price cuts”
      Sounds like your buyers aren’t interested in the incentive game anymore. Stick your rate buy down up your a$$.

      1. This is when the real pieces of cr@p start getting built. Once the cost cutting really gets going with these builders as prices continue to drop you’re gonna see some real doozies when it comes to product quality. As if it weren’t bad enough already.

  3. And hundreds of aspiring investors got swept up in the inspirational message. Now, many are saying Parker, known online as Big Bizzneesss, scammed them.

    Must.not.laugh.

    1. Russia Today — Americans souring on military aid to Ukraine (10/6/2023):

      “A growing number of Americans are opposed to supplying additional military aid to Ukraine, according to a new Reuters-Ipsos survey, with Democratic support taking a nosedive since the start of Kiev’s counteroffensive in June.

      Published on Thursday, the poll shows just 41% of respondents agreed that the US government “should provide weapons to Ukraine,” while 35% said they disagreed, and the rest stating they were “unsure.”

      The figures mark a sharp decline compared to a prior Reuters poll conducted in June, which showed 65% support for further arming Ukraine.

      While Democrats have been more vocal in backing arms shipments to Kiev, support appears to be waning within the party. A slim majority of 52% said they still supported military aid in the latest poll – a steep drop from the 81% recorded in June, around the time Ukrainian forces began a major counteroffensive.

      Some 35% of Republican respondents said they backed weapons transfers in the new survey, down from 56% in June.”

      https://www.rt.com/news/584136-americans-ukraine-aid-poll/

      Hey Zelensky, why don’t you eat sh*t and die?

      #AmericaFirst

  5. ‘September definitely was a disappointment.’

    I agree. The cratering should’ve been much more severe.

  6. ‘buyers can see the property sticking so this may encourage them to try it on more to get a bigger discount to the asking price, even if it’s been reduced’

    That’s the spirit!

    1. Happens every time once there’s blood in the water. And then all these sellers take it personally. It’s just business baby.

    1. That tweet, by Martin Shkreli:

      I’d do another seven years if I knew it would keep this agenda at bay.

      There is a DOJ-triggering level of patriotism, capitalism & libertarianism that tries to keep those pesky philosophies in check.

      Just remember, jail’s not that bad. Living in HRC’s USA would be far worse.

  8. ‘There are a lot of folks that took out mortgages when rates were extremely low and bought houses during the pandemic — maybe even bigger houses than they probably needed — in markets they might not want to stay in now. There’s some buyer’s remorse we’re going to see. There are going to be some folks who are going to be stuck there’

    Oh dear. This article has one bay aryan wondering why people in Boise leave their garage doors open all day.

    1. The only things appealing about Boise was the lack of traffic and lack of Californians. Once those are gone, what’s left? You’re in a crowded frozen tundra with a bunch of Karens.

  9. Only one of the properties sells, with the rest failing to meet the minimum price or attracting no bids.

    RE auctions going bidless? Oh dear…this brings the Wile E. Coyote moment much closer.

  10. Has the labor market cooled down sufficiently to allow the Fed some breathing room regarding further rate hikes?

    1. Yahoo
      Yahoo Finance
      Stocks plummet after jobs report blows past expectations: Stock market news today
      Karen Friar
      Fri, October 6, 2023 at 7:47 AM CDT·2 min read
      In this article:

      US stock futures took a nosedive Friday after the US jobs report blew by expectations, as investors considered the possibility that it could sway the Federal Reserve’s thinking on whether to hold or hike interest rates.

      Futures on the Dow Jones Industrial Average were down 0.7%, or about 200 points, after the major indexes recovered ground on Thursday. S&P 500 futures plummeted 0.9%, while tech-heavy Nasdaq 100 futures plunged 1.1%.

      The September jobs data did not show the signs of cooling in the labor market that were forecast. The US economy added 336,000 jobs in September, almost twice the number expected. That could give the Fed more evidence that the labor market remains strong, making the case for a more restrictive policy for longer.
      …
      https://finance.yahoo.com/news/stocks-plummet-after-jobs-report-blows-past-expectations-stock-market-news-today-124619267.html

    2. Investor’s Business Daily
      Stock Market Today
      Dow Jones Futures Tumble 225 Points On Strong Jobs Report; Tesla Slides On Price Cuts
      SCOTT LEHTONEN 08:58 AM ET 10/06/2023

      Dow Jones futures tumbled 225 points Friday morning after the Labor Department’s strong September jobs report. Meanwhile, Tesla stock fell after cutting U.S. prices of its Model 3 sedan and the Model Y SUV.

      The jobs report showed that nonfarm payrolls jumped 336,000 in September, far above Wall Street’s estimates for the addition of 150,000 new jobs. The jobless rate ticked up to 3.8% from 3.7%, in line with estimates.

      Tesla skidded 3% after the EV giant lowered the price on its Model 3 rear-wheel drive to $38,990 from $40,240, according to its website. Prices of the Model 3 long-range and performance cars were reduced to $45,990 and $50,990, respectively. Tesla also cut Model Y variants.
      …
      https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-jobs-report-tesla-stock-slides-on-price-cuts/

    3. Bonds
      U.S. 10-year yield jumps back near 16-year high after better-than-expected jobs report
      Published Fri, Oct 6 2023 4:39 AM EDT
      Updated 13 Min Ago
      Hakyung Kim
      Alex Harring
      Sophie Kiderlin

      U.S. Treasury yields rose Friday, with the 10-year nearing a 16-year high after the latest jobs data came in stronger than economists anticipated.

      The yield on the 10-year Treasury was up by nearly 13 basis points at 4.839%. It had hit a fresh 16-year high earlier in the week, rising as high as 4.884%. The yield on the 2-year Treasury was last trading at 5.14% after rising by more than 11 basis points.

      Yields and prices have an inverted relationship. One basis point is equivalent to 0.01%.
      …
      https://www.cnbc.com/2023/10/06/us-treasury-yields-investors-look-to-september-jobs-report.html

    4. Yahoo
      Yahoo Finance
      Housing expert: 8% mortgage rate ‘does not seem unlikely’ after rates remain at 23-year high
      Gabriella Cruz-Martinez
      Thu, October 5, 2023 at 11:00 AM CDT·4 min read
      In this article:

      Mortgage rates jumped again this week — remaining at a 23-year high and increasing the likelihood that rates could soon hit 8%.

      The rate on the average 30-year fixed mortgage increased to 7.49% from 7.31% the previous week, according to Freddie Mac, following the yield of the 10-year Treasury, which spiked to a 16-year high this week. Rates are at their highest point since December 2000 for a second week in a row, with few signs of softening.

      Steeper rates continue to smother homebuyer demand, forcing the price-conscious to the sidelines. Meanwhile, those still on the hunt leaned on lower-rate options, eager to lock in before rates surge higher.

      “At the beginning of the year, it was widely expected that mortgage rates would fall to around 6% by the end of 2023. However, now the question is whether rates will hit 8% this year,” Lisa Sturtevant, chief economist at Bright MLS, a real estate data provider, said in an emailed statement. “The gap between the yield on the 10-year Treasury and the rate on a 30-year fixed rate mortgage has been around 3 percentage points, so as the Treasury yield approaches 5%, an 8% mortgage rate does not seem unlikely.”
      …
      https://finance.yahoo.com/news/housing-expert-8-mortgage-rate-does-not-seem-unlikely-after-rates-remain-at-23-year-high-160009869.html

    5. Please correct me if I wrong, but it seems like fake job numbers are the only thing being used to determine whether or not we’re in a recession and the Fed’s course of interest rates.

          1. Which part is wrong:
            a) the job numbers are fake
            b) the Fed’s using these numbers as an indicator of recession
            c) the Fed’s using these numbers to justify interest rate hikes and cuts
            d) none of the above
            e) all of the above

          3. The National Bureau of Economic Research is the official recession dating authority, at least according to the professional economists’ tribe.

          4. All the data is complete BS. Just take a look around to see what’s going on. Dylan had it right when he wrote “you don’t need a weatherman to know which way the wind blows.”

          6. The National Bureau of Economic Research is the official recession dating authority, at least according to the professional economists’ tribe.

            So I’m 2/3 right.

          7. Also a common textbook definition is two successive quarters of declining national output, although the NBER considers other factors.

          8. two successive quarters of declining national output

            3Q2022’s GDP number was manipulated to avoid a declaration of recession before the 2022 midterm elections.

          11. “3Q2022’s GDP number was manipulated to avoid a declaration of recession”

            Not sure about that. What are you comparing to the number you assume is incorrect?

            However, I do have a historic example along those lines. In December 2007, an economist working under President George W. Bush came out in the press more or les stating that a recession was already underway. He was summarily sacked, and Treasury Secretary Henry Paulson came out with a strongly worded retraction, something to the effect of “no recession / soft landing / etc.”

            By some time in late 2008, after the wheels had fallen off the economic bus and it was in the process of burning to the ground, the NBER retroactively dated the onset of recession to December 2007.

      2. Interest rates may affect the timing of a recession, but the Fed does not decide when one happened.

        NBER based Recession Indicators for the United States from the Period following the Peak through the Trough (USREC)
        Sep 2023: 0 | +1 or 0 | Monthly | Updated: Oct 2, 2023

        https://fred.stlouisfed.org/series/USREC

    6. Financial Times
      US employment
      US jobs growth surges past expectations with 336,000 new posts
      Bond sell-off reignites after September figures fuel investor anxiety over higher for longer interest rates
      A contractor works on Pine Street in San Francisco
      The US added 336,000 new jobs in September from an upwardly revised 227,000 in August
      Harriet Clarfelt in New York and Colby Smith in Washington 39 minutes ago

      The US added 336,000 new jobs in September, far more than expected, pushing bond yields to a new 16-year high and fuelling investors’ anxieties that interest rates will stay higher for longer.

      The Bureau of Labor Statistics data, which easily surpassed expectations of 170,000 new jobs, reignited the bond sell-off that has swept global markets over the past two weeks.

      Ten-year US government borrowing costs reached their highest since 2007 after the publication of the 336,000 figure, which was also far more than August’s upwardly revised total of 227,000.

      In an indication of growing market expectations that interest rates will remain high over an extended period, stock futures dropped as bond yields rose.

      Futures tracking the S&P 500 fell 0.9 per cent ahead of the New York open, while futures tracking the Nasdaq 100 were down 1.2 per cent.

      The yield on the policy-sensitive two-year Treasury note jumped almost 0.13 percentage points to 5.15 per cent in the minutes after the report.

      The 10-year yield added 0.17 percentage points to reach almost 4.89 per cent, while the 30-year yield topped 5.05 per cent for the first time since August 2007.
      …

      1. “US jobs growth surges past expectations with 336,000 new posts
        Bond sell-off reignites after
        September figures fuel investor anxiety over higher for longer interest rates”

        We’ve seen the lightening bolt.

        I wonder how long it will take to hear the thunder?

        1. DOW 30. -0.63%
          S&P 500. -0.78%
          NASDAQ 100. -0.86%

          These 4 charts show how the bond meltdown stacks up against some of the worst-ever stock-market crashes
          George Glover
          Oct 6, 2023, 6:41 AM CDT
          Longer-term bond prices have cratered in one of the worst collapses in market history. Lewis Krauskopf/Reuters

          – Longer-duration Treasury prices have plunged in recent weeks, driving benchmark 10-year yields toward 5%.

          – The collapse now ranks among the worst in history.

          – These charts show how the meltdown compares to previous market crashes, including the 2008 financial crisis.
          …
          https://markets.businessinsider.com/news/bonds/treasury-bond-yields-crash-2008-financial-crisis-dot-com-bubble-2023-10

        2. Financial Times
          Opinion The FT View
          Adapting to a higher for longer world
          The shift from an era of cheap money will have significant economic implications
          The editorial board
          Traders work on the floor of the New York Stock Exchange
          Higher interest rates could return some discipline to markets as investors raise their due diligence standards
          The editorial board an hour ago

          Now that interest rates are at, or near, their peak, attention has turned to how long they will stay elevated. Central bankers, wary of being complacent on inflation, have united behind a mantra of “higher for longer”. Huw Pill, the Bank of England’s chief economist, even chose to compare the UK’s likely rate path to Cape Town’s Table Mountain, with its high, flat top. That reality — reinforced by Friday’s strong US jobs data — is unnerving investors. In recent weeks, stock markets have tumbled, and long-term bond yields have soared.

          Economies have, so far, demonstrated resilience in the face of higher rates. But as post-pandemic cash buffers wind down and loans locked in at low rates expire, businesses and households will be squeezed more in the coming months. Rising bond yields threaten deeper turmoil, while slowdowns are already expected across the US and Europe next year. Indeed, with inflation on its way down, having fallen from 40-year highs, rates will eventually need to be cut. Yet hoping that the cost of credit will plunge back to the lows experienced after the financial crisis is foolish.

          Structural economic changes could keep price pressures — and interest rates — higher in the long term. Rising protectionism means globalisation may not be the deflationary force it once was. Spending on the climate transition, ageing populations and defence means fiscal policy will continue to prop up demand. A greying workforce will add to existing labour shortages. For the coming years at least, policy rates are set to remain raised: Fitch Ratings forecasts the US Federal Reserve, European Central Bank and BoE to end 2025 with rates between 3 and 3.5 per cent. The shift away from a diet of cheap money will have significant economic implications.
          …

  12. Even if the job numbers are real, what good is full employment if you can’t afford anything? Employment is not the problem.

  14. Homes in one development near Northgate started this spring in the low $700,000 range, but after multiple price cuts are now listed in the low $600,000 range and are about half sold, Armbruster said. ‘There’s really not much more to give in terms of pricing,’ he said.”

    STOP IT! Yer giving it away!!! Yer threw yer old buyers under the bus

  16. “700 dollar a month sleeping pods.”

    Hate to tell you this , but The One World Order wants populations living in small spaces or pods in 15 minute cities, with no cars or means of escape.
    The UN 2020 and 2030 sustainable earth agenda talks about 5 population centers in US that people will be forced into. You will own nothing , eat bugs, mandated vaccines, hacked and altered, under 24/7 surveillance by the high tech control grid.
    Sorry, but this is the end game of the One World Order, which is enslavement and no doubt mass genocide is part of the agenda.
    They will use any ideology, any fraudulent narratives to achieve their pre- planned take over of humanity and the world.
    They are going to save you from Climate Change and Panademics, a total fraud.

    Once this enemy gets humans in the clutches of their control grid, than no escape is possible , with no alternative world to flee to. Thats why it has to be a One World Order control grid.
    Its about how to take all power from billions of people , and force the fraudulent power grab of a One World Order dictorship.
    The trick is never comply to their ridiculous
    fraudulent narratives moving forward .
    They have shown their true colors, and even their end game.

    1. 300+ million guns in the hands of U.S. citizens.

      There are some defeatist posters on this blog that always say the billionaires all have an escape plan, which I’m sure many likely do.

      But consider the vast number of “soft targets” and how almost all of them are essentially unprotected. This would include the majority of journalists.

      Everything that was ever written, published, tweeted, podcasted, streamed, etc, during the CCP Flu plandemic is archived.

      The internet is forever. If you ever made a public statement, in any format / platform, supporting lockdowns, school closures, business closures, vaccine mandates, you are on the record.

      4chan has your home address, and what happens with that information, nobody knows.

      1. But consider the vast number of “soft targets”

        The only time they ever get hit is randomly by a deranged vibrant.

        1. “The only time they ever get hit is randomly by a deranged vibrant.”

          That you are told about via the MSM.

          1. If it was by anyone other than a deranged vibrant, the MSM would be yelling “white supremacist!” from the rooftops.

  17. Financial Times
    Opinion The FT View
    Adapting to a higher-for-longer world
    The shift from an era of cheap money will have significant economic implications
    The editorial board
    Traders work on the floor of the New York Stock Exchange
    Higher interest rates could return some discipline to markets as investors raise their due diligence standards
    The editorial board
    3 hours ago

    Now that interest rates are at, or near, their peak, attention has turned to how long they will stay elevated. Central bankers, wary of being complacent on inflation, have united behind a mantra of “higher for longer”. Huw Pill, the Bank of England’s chief economist, even chose to compare the UK’s likely rate path to Cape Town’s Table Mountain, with its high, flat top. That reality — reinforced by Friday’s strong US jobs data — is unnerving investors. In recent weeks, stock markets have tumbled, and long-term bond yields have soared.

    Economies have, so far, demonstrated resilience in the face of higher rates. But as post-pandemic cash buffers wind down and loans locked in at low rates expire, businesses and households will be squeezed more in the coming months. Rising bond yields threaten deeper turmoil, while slowdowns are already expected across the US and Europe next year. Indeed, with inflation on its way down, having fallen from 40-year highs, rates will eventually need to be cut. Yet hoping that the cost of credit will plunge back to the lows experienced after the financial crisis is foolish.
    …

    1. “The shift from an era of cheap money will have significant economic implications

      The shift from an era of cheap money will have significant economic implications

      The shift from an era of cheap money will have significant economic implications
      …”

      Put that in your pipe and smoke it.

  18. The US housing market is so expensive that incomes would have to spike 55% for it to be considered affordable, industry exec says
    Phil Rosen
    Oct 6, 2023, 8:44 AM CDT
    Xsandra/Getty

    – The housing market is so unaffordable that only three extreme scenarios would return it to pre-pandemic affordability.

    – US incomes would have to spike 55% to consider the current market affordable, an industry executive said.

    – Other scenarios would have to see home prices crash 35% or mortgage rates drop four percentage points.
    …
    https://markets.businessinsider.com/news/commodities/housing-market-affordable-income-expensive-black-knight-mortgage-rates-fed-2023-10

      1. 1) 55% higher incomes?

        Bwahahahahahahahahahahahahaha!!!

        2) 30-year mortgage rate nack to early 2022 levels?

        Eventually…maybe again by 2323.

        3) Home prices crash 35%?

        Maybe not in nominal terms, given ongoing above-2% inflation. But probably so inflation-adjusted terms.

        However, if the past few housing busts are a guide, this will take another half decade to play out. So don’t hold your breath while waiting for affordable housing to return.

        1. Not considered is a return to Normal.

          I know, silly idea.

          Part of Normal would be a price correction to a 2.0 or slightly higher ratio of house price to household incomes. Were that to happen, you’d be stepping over a lot of (financial) bodies to even go look at a house.

          1. There’s gonna be bodies however this plays out. Both figuratively and literally. No way this doesn’t end with some serious carnage. I’m not the kinda guy to normally think things like this, but a bunker in the desert somewhere remote is sounding like a pretty good idea.

        2. Why not scenario #4? Our whole financial system finally collapses ending the way we’ve getting it wrong for the last 50 years. Why do we have to assume that this whole wash, rinse and repeat thing we’ve been doing has to continue? Let it burn I say. Better sooner than later because we all know it’s inevitable.

    1. Markets
      Bear steepening US yield curve dashes ‘soft landing’ hopes
      By Jamie McGeever
      October 6, 2023 1:30 AM CDT
      Updated 13 hours ago
      By Jamie McGeever
      Traders work on the floor of the NYSE in New York
      Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 11, 2023. REUTERS/Brendan McDermid/File Photo Acquire Licensing Rights

      ORLANDO, Florida, Oct 5 (Reuters) – The surge in long-dated U.S. bond yields currently underway and driving the so-called ‘bear steepening’ of the yield curve will dramatically reduce the economy’s chances of achieving the fabled ‘soft landing’ and avoiding recession.

      High and rising long-term borrowing costs tighten financial conditions by making it more expensive for businesses and consumers to roll over debt or get credit, and more expensive for companies to invest.

      A steepening yield curve is when the spread between long- and short-term bond yields widens. Either the long-term yield rises faster than the short-term yield – a bear steepener – or the short-term yield is falling more – a bull steepener.

      The curve is aggressively bear steepening now as investors dump long-term bonds. But what makes this situation even harder to navigate is the fact that the curve is still inverted – the two-year yield is still higher than the 10-year yield.
      …
      https://www.reuters.com/markets/bear-steepening-us-yield-curve-dashes-soft-landing-hopes-mcgeever-2023-10-05/

    2. MarketWatch
      This fund manager is holding 60% cash — and expecting a stock-market crash
      Provided by Dow Jones
      Oct 6, 2023 11:43 AM CDT
      By Brett Arends
      Ruffer’s main claim to fame is to have successfully sidestepped the 2000-2003 and 2007-2009 market collapses

      Yikes.

      There’s bearish, there’s really bearish, and then there’s Ruffer & Co.

      I don’t want to spook everyone managing their own retirement portfolio. But the London-based money managers, who successfully anticipated the dot-com collapse and the global financial crisis, are expecting an almighty stock-market crash — and are now holding nearly 60% of their flagship Total Return fund in cash and short-term bonds.

      Plus another 20% or so in longer-term inflation-linked bonds and gold. And holdings in safe-haven Japanese yen. And put options on the market, which will pay out if things fall apart.

      Total stock-market exposure? Er … 15%.

      The fund is now hiding even deeper in its bunker than it was in 2007, before the global financial crisis, co-manager Steve Russell says.

      Its exposure in “2007 was similar in terms of low equity exposure,” he tells me. “It was more like 20% to 25% then, compared with 15% now.” (I interviewed Russell for a Barron’s Live podcast late last year.)

      Russell laid out the case in more detail in a recent note to clients.

      “Markets still believe in a ‘soft landing’ — inflation dissipates without a recession. Yet we stick to our increasingly unfashionable belief that record monetary tightening’s full impact has yet to be felt,” he and his co-managers wrote. “Locked-in low rates and faster nominal GDP growth have likely deferred — but not defanged — the biting point.”

      And cracks are starting to show in the U.S. economy, as well as economies elsewhere, they wrote. “COVID-era excess savings have been spent; consumer confidence is slowing; Q2 GDP growth and recent payrolls were revised lower; U.S. department stores are reporting rising credit-card delinquencies.”

      Notably, this was written weeks ago — before the latest market rout. What is likely to happen next?
      …
      https://www.morningstar.com/news/marketwatch/20231006413/this-fund-manager-is-holding-60-cash-and-expecting-a-stock-market-crash

    3. Morningstar
      MarketWatch
      Investors are hiding out in cash, putting 20.4% aside, as volatility erupts, State Street says
      Provided by Dow Jones
      Oct 6, 2023 2:01 PM CDT
      By Joy Wiltermuth

      Forget 60/40 — for now

      Long-term institutional investors kept more of their portfolios in cash in September as volatility struck the roughly $25 trillion Treasury market, spurring a sharp selloff in stocks and bonds, according to State Street Global Markets.

      Instead of the traditional 60/40 portfolio construction, which dedicates a bigger share to stocks and a smaller portion to bonds, investors increasingly were keeping a significant pot of cash at the ready, according to a new State Street report.

      It showed cash allocations rose 0.3% to 20.4% in September, while the slice for fixed-income rose 0.2% to 28.5% and equities dropped 0.5% to 51.1%.

      “Investors are hiding in cash once again in the face of combined equity and fixed income market weakness,” said Michael Metcalfe, head of macro strategy at State Street. “While cash holdings are now above average, we would caution they remain a few percentage points below their normal crises peaks.”

      State Street’s holdings report is based on the share of investor portfolios allocated toward equity, fixed income and cash going back to 1998.

      The 10-year Treasury yield jumped 7 basis points on Friday to 4.78%, while the 30-year Treasury yield advanced 5 basis points to 4.94%.

      The surge in short-term Treasury yields since the Federal Reserve began ratcheting up its policy rate to a 22-year high has given ordinary investors in Treasury bills, or T-bills, a shot at 5% yields for the first time in more than a decade.

      Until recently, however, longer-dated Treasury yields used to finance much of the economy, namely the 10-year and 30-year rate, were slower to approach the 5% level. The sharp recent repricing creates price pressures on older bonds issued at lower coupons.
      …
      https://www.morningstar.com/news/marketwatch/20231006458/investors-are-hiding-out-in-cash-putting-204-aside-as-volatility-erupts-state-street-says

    4. Financial Times
      US Treasury bonds
      Huge US government borrowing adds to bond market pain
      Big increase in issuance and stagnant demand has exacerbated drop in Treasury bond prices, say analysts
      The Treasury Building is seen in Washington, DC
      The scale of borrowing has not come as a surprise to bond investors; the Treasury department released its latest plans in August
      Kate Duguid in New York and Mary McDougall in London yesterday

      A step-up in borrowing by the US government has deepened a decline in bond markets that has sent yields to their highest point since 2007, analysts and investors say.

      Much of the recent bond rout reflects a shift in expectations about the future path of interest rates and economic expansion. Friday’s data showing strong US jobs growth heaped further pressure on bond prices, as it added to the anxiety that interest rates will need to stick at high levels to defeat inflation.

      But investors and analysts say a recent deluge of new debt hitting the market has also pushed yields higher, particularly on longer-dated bonds that have been hit hardest. Demand from big Treasury buyers such as foreign investors, foreign central banks and US banks has meanwhile remained stagnant.

      Changes in the supply of Treasuries have not historically been major drivers of bonds. Yields sank to historic lows despite vast fiscal spending programmes in the coronavirus pandemic, for instance. However, the current surge is happening as the biggest buyer of Treasury bonds — the US Federal Reserve — continues to step back from the market.

      “We’ve seen this extraordinary level of issuance and little sign that there will be any fiscal reining in as we look ahead,” said Andrew McCaffery, chief investment officer at Fidelity International. “The markets have been saying that the US cost for borrowing needs to be higher.”
      …

      1. “Friday’s data showing strong US jobs growth heaped further pressure on bond prices, as it added to the anxiety that interest rates will need to stick at high levels to defeat inflation.”

        And yet the stock market had a tremendous rally…go figure!

    5. Buckle up for more ‘turbulence’ in the housing market, BofA says—it’s a housing recession, 1980s-style
      “Looking back at previous housing recessions, we think the 1980s are a better analogy for today’s market than the 2008 housing crash,” BofA economists said.
      BY WILL DANIEL
      October 06, 2023 4:05 PM EDT
      The housing market is primed for turbulence, BofA economists said.
      Joe Raedle—Getty Images

      Housing market pessimists have been sounding the alarm for years about a pending crash in the U.S. residential real estate market. Even before the Federal Reserve began hiking interest rates to fight inflation last year, pushing mortgage rates to a 23-year high this month, years of surging home prices left some experts warning that the housing market was a massive bubble ready to pop.

      However, despite a widely bearish outlook in the industry, most real estate veterans have avoided arguing that home prices will drop like they did during the 2008 crash that kicked off the Global Financial Crisis (GFC). And so far, that’s been a wise decision.

      It took until June 2022 for national home prices to peak, even as mortgage rates soared and purchase applications plummeted amid the Fed’s first interest rate hikes. And while prices fell more than 5% from that peak by January of this year, they returned to a record high in July.

      Still, a Bank of America team led by U.S. economist Jeseo Park warned this week that there’s more “turbulence” coming for the housing market due to high mortgage rates. They explained that they’re getting an eerie feeling of “déjà vu,” but it’s not 2008 that is coming to mind, it’s the 1980s.

      “Looking back at previous housing recessions, we think the 1980s are a better analogy for today’s market than the 2008 housing crash,” they wrote in a Thursday note.

      This isn’t 2008

      While the housing crash of 2008—fueled by the collapse of subprime mortgages—haunts the memories of many Americans, the real estate market of that era was very different from what Bank of America’s experts see today.

      Park and his team noted that there are no “noticeable signs” of excess housing development today like there were back then, and households aren’t nearly as burdened by mortgage debt. Household mortgage debt represented roughly 65% of U.S. consumers’ disposable income in the second quarter, compared to 100% before the GFC. And the ratio of Americans’ mortgage debt to their real estate assets—also called loan-to-value—was just 27% in the second quarter, compared to over 40% in 2008 and roughly 50% in 2010, Bank of America’s data shows.

      New legislation was also enacted since the GFC to help prevent worst-case scenarios in the housing market. One of the most obvious effects of these new laws is that there are far fewer risky adjustable-rate mortgages today. Adjustable-rate mortgages can lead to higher default rates when interest rates rise, but they now represent less than 5% of total purchase and refinance loans, compared with over 35% at the peak of the pre-GFC housing cycle.

      “We reiterate that we do not expect another housing crash like 2008,” Park and his team concluded after presenting this evidence.

      Is it a repeat of the ‘turbulence’ of the 1980s?

      According to Bank of America, today’s housing market looks a lot more like the early 1980s than it does 2008. Back then, just like today, home prices had boomed for years before Fed officials were ultimately forced to hike interest rates aggressively in an attempt to fight inflation.

      The rise in the consumer price index peaked at around 14% in 1980 before then–Fed Chair Paul Volcker’s hawkish policies sent mortgage rates to 18% in a year’s time, cooling inflation, but sparking a recession. This caused a serious downturn in the housing market in which home sales and building levels cratered. However, national home prices actually remained stable.

      At the start of Volcker’s term as Fed chair in August 1979, the median U.S. home sales price was $64,700. And even after a near doubling of mortgage rates, that figure rose to $69,400 by the second quarter of 1981.

      Over the past 18 months, the Fed’s current chair, Jerome Powell, has been following a very similar game plan to Volcker’s, raising interest rates aggressively to quash inflation. The average 30-year fixed mortgage rate, the most common type of mortgage in the U.S., has soared from 3.8% in March 2022 to over 7.5% today as a result. This, in turn, has slowed mortgage purchase applications and caused home sales to plummet, just as it did in the ’80s; but home prices, echoing the dynamic of that era, have yet to collapse.

      One of the key reasons for the resilience of the housing market in both of these periods is demographics. “Noticeably, demographics were favorable back then, with baby boomers having entered the prime homebuying age,” Park and his team wrote Thursday, arguing millennials are in a similar position today. “Some sales activity should be supported by millennials reaching the prime homebuying age, and single-family building permits have steadily held up. This can help the housing market retain some of its momentum without falling apart.”

      Bank of America economists believe that low inventory of existing homes for sale combined with solid home sales to millennials could help put a “floor beneath home prices,” but that doesn’t mean there won’t be some near-term pain due to higher mortgage rates.

      “With rates likely staying higher for longer, we are cautious of potential turbulence ahead,” the group warned. Bank of America has previously forecast 0% home price growth and falling home sales for the full year 2023, but it didn’t offer a new prediction in its latest note.
      …
      https://fortune.com/crypto/2023/10/05/binance-ceo-changpeng-zhao-trapped-bankman-fried-ftx/

      1. The Wall Street experts missed calling the collapse of the longterm Treasury bond market, and they will miss anticipating the price collapse in the next housing bust as well.

        The two events are interconnected: Mortgage rates move in lockstep with longterm Treasury yields, and crushingly high mortgage rates have driven willingness to pay for homes to a fairly small fraction of pandemic peak prices. Lower home sales prices will follow, as the night the day.

        1. U.S. Markets
          Soaring Treasury yields ignite turbulence throughout markets
          By Saqib Iqbal Ahmed
          October 5, 2023 11:59 PM CDT
          Updated a day ago
          The United States Department of the Treasury is seen in Washington, D.C., U.S., August 30, 2020. REUTERS/Andrew Kelly/File Photo Acquire Licensing Rights

          NEW YORK, Oct 5 (Reuters) – A selloff in U.S. government bonds is jolting everything from stocks to the real estate market, as investors recalibrate their portfolios amid a surge in Treasury yields to their highest levels in more than a decade and a half.

          Yields on the benchmark 10-year US Treasury, which move inversely to prices, stand near levels last seen in 2007 following a selloff fueled by a hawkish outlook from the Federal Reserve and mounting fiscal concerns. Treasuries are on track to post their third straight annual loss, an event without precedence in U.S. history, according to Bank of America Global Research.

          Because the $25-trillion Treasury market is considered the bedrock of the global financial system, soaring yields on U.S. government bonds have had wide-ranging effects. The S&P 500 is down about 8% from its highs of the year, as the promise of guaranteed yields on U.S. government debt draws investors away from equities. Mortgage rates, meanwhile, stand at more than 20-year highs, weighing on real estate prices.

          Here’s a look at some of the ways rising yields have reverberated throughout markets.

          Higher Treasury yields can curb investors’ appetite for stocks and other risky assets by tightening financial conditions as they raise the cost of credit for companies and individuals.

          With some Treasury maturities offering far above 5% to investors holding the bonds to term, rising yields have also dulled the allure of equities. High-dividend paying stocks in sectors such as utilities and real estate have been among the worst hit, as investors gravitate toward government debt.

          Shares of tech and growth companies, whose future profits are discounted more sharply against higher yields, have also suffered.

          Another upshot of the surge in yields has been a rebound in the dollar, which has advanced an average of about 7% against its G10 peers since the rise in Treasury yields accelerated in mid-July. The dollar index, which measures the buck’s strength against six major currencies, stands near 10-month highs.

          A stronger dollar helps tighten financial conditions and can hurt the balance sheets of U.S. exporters and multinationals. Globally, it complicates the efforts of central banks to tamp down inflation by pushing down other currencies.

          Traders have been on watch for weeks for a possible intervention by Japanese officials to combat a sustained depreciation in the yen, which is down 12% against the dollar this year.

          The interest rate on the 30-year fixed-rate mortgage – the most popular U.S. home loan – has shot to the highest since 2000.

          That’s hurt homebuilder confidence and pressured mortgage applications.

          In an otherwise resilient economy featuring a strong job market and robust consumer spending, the housing market has stood out as the sector most afflicted by the Fed’s aggressive actions to cool demand and undercut inflation.
          …
          https://www.reuters.com/markets/us/soaring-treasury-yields-ignite-turbulence-throughout-markets-2023-10-05/

  21. The 2020 election was stolen.

    Joe Biden will NEVER be the legitimate president, and Merrick Garland will NEVER be the legitimate attorney general, and he has ZERO legitimate authority to prosecute anyone or anything. The FBI is jackboot thug Gestapo of Democrat Party, and are in fact, an illegitimate, domestic terrorist organization.

    Have a nice day 😻

  23. Portland residents told not to call police for help

    https://www.americanthinker.com/blog/2023/10/portland_residents_told_not_to_call_police_for_help.html

    Portland officials were proud of themselves in 2020 when they defunded the Police Bureau by $15 million instead of increasing it by $3 million as planned. One commissioner was even upset that the council didn’t remove more from the budget.

    “Please take a moment to celebrate this victory, and let it fuel your fire, because we’re not done,” Commissioner Chloe Eudaly said at the time.

    Along with the $15 million, another $12 million was cut because of pandemic-caused economic shortfalls. “As a result, school resource officers, transit police and a gun violence reduction team — which was found to disproportionately target Black Portland residents during traffic stops, according to an audit in March 2018 — were disbanded,” PBS reported.

    A year later, the council was trying to add funding and retain the city’s police officers. “The added police spending is occurring amid a year of a record number of homicides, the city’s greatest police staffing shortage in decades and reform recommendations made by the U.S. Department of Justice,” PBS reported.

    It was too little, too late. The damage was done, and the city has yet to recover. In fact, the city government is telling residents not to call police unless their lives are at risk. Given how dangerous Portland has become, it might not affect the volume of calls to police because more residents’ lives are at risk from criminal activity than ever before.

    Commissioner Rene Gonzalez told residents that the city’s 911 system is overwhelmed with people calling about addicts on the streets suffering fentanyl overdoses. This is not a Portland-only problem. The state of Oregon decriminalized drug use three years ago. Gonzalez urged people on X (formerly Twitter), “Our 911 system is getting hammered this morning with a multiple person incident — multiple overdoses in northwest park blocks. Please do not call 911 except in event of life/death emergency or crime in progress (or change of apprehending suspect).”

    Over the past year, the city has experienced 104 homicides and 529 arrests were made for drug offenses, according to Portland Police. The city’s homeless population has also grown by 50 percent since 2019, topping more than 5,000 people.

    “Portland’s neighborhoods have been overrun with crime, homelessness, and drugs since the pandemic — and despite pouring funds into relief initiatives, little change is occurring on the streets of the city,” the Daily Mail reported.

    The people of Portland are understandably upset that crime is out of control, leaving their property and lives at risk. I really want to feel sorry for those residents being forced to live under those conditions. However, this is what those people voted for.

    They continue to elect the same types of progressive politicians who believe the same failed policies will somehow work if they try them enough. They are the same people who, even if they didn’t participate in the 2020 riots, supported them.

    If they truly want things to change for the better for the city, they need to vote for change and change their way of thinking. Change will bring change.

  25. Mayorkas Furiously Backpedals After Claiming ‘Acute & Immediate Need’ For Border Wall

    (Say it ain’t so.)

    https://www.zerohedge.com/political/too-freaking-late-mayorkas-finally-admits-acute-immediate-need-build-border-wall-texas

    (Two paragraphs imbedded in this article require special scrutiny.)

    (Observe: Paragraph Number One:)

    “‘From day one, this Administration has made clear that a border wall is not the answer. That remains our position and our position has never wavered. The language in the Federal Register notice is being taken out of context and it does not signify any change in policy whatsoever,’ the statement continues.”

    (Now for Paragraph Number Two:)

    “‘The Secretary of Homeland Security has determined, pursuant to law, that it is necessary to waive certain laws, regulations, and other legal requirements in order to ensure the expeditious construction of barriers and roads in the vicinity of the international land border in Starr County, Texas,’ reads a notice posted to the U.S. Federal Registry that Fox News obtained.”

    (Nobody can say that this administration does not have a sense of humor.)

    1. Be wary of any privately held companies run by a bunch of kids that are supposedly geniuses worth billions of dollars.

      1. Shouldn’t the suckers who bought into the SBF crypto Ponzi scheme at least accept a tiny bit of personal responsibility for their folly?

    2. How Binance’s CEO outwitted Bankman-Fried, and helped topple FTX
      BY Jeff John Roberts
      October 5, 2023 at 8:29 AM CDT
      Changpeng “CZ” Zhao is the CEO of Binance.
      Stephen McCarthy—Sportsfile for Web Summit/Getty Images

      In November of 2022, Sam Bankman-Fried’s FTX was teetering on the brink. The final collapse came at the hands of Changpeng Zhao—“CZ” to everyone in the industry—who tweeted that his company Binance was dumping its entire position in FTX’s house token, FTT. The fire sale, along with a ham-fisted attempt by Bankman-Fried to defend the token, triggered a panic and FTX was bankrupt days later.

      This storyline is familiar to anyone who has followed the harrowing events of the crypto industry in the past year. Michael Lewis’s new book, Going Infinite, however, reveals new details about the bitter rivalry between the two crypto kingpins, including how Zhao laid a trap for Bankman-Fried more than a year earlier that would let him deliver the coup de grâce last fall.

      Before describing the trap, it’s worth noting some of the gossipy details that Lewis unearthed about relations between the two men. This includes a revelation that Bankman-Fried, hoping to convey legitimacy on FTX, paid Binance $150,000 to appear onstage at a 2019 conference hosted by the company in Singapore; he “effectively paid CZ to be his friend” in Lewis’s words. Zhao would later buy 20% of FTX for $80 million but only after rejecting an earlier overture to invest, leading Bankman-Fried to complain to the author, “He’s kind of a douche, but not worse than a douche.” The FTX founder would also complain during another spat that the Canadian-raised transnational Zhao had behaved “very Chinese” (another instance in the book of Lewis appearing to carry water for his protagonist).

      As the uneasy alliance between Bankman-Fried and Zhao devolved into bitterness (and more cattiness), Zhao extracted a hefty premium in 2021 when the former sought to buy out his stake: “CZ demanded $2.2 billion. Just before they signed the deal, CZ insisted, for no particular reason, on an extra $75 million. Sam paid that too.”

      The most interesting part of that deal, though, is the currency in which Zhao demanded payment: mostly cash and Bitcoin, but also $500 million in FTT tokens and—critically—$400 million worth of a token called BNB held by FTX. That token, which Zhao had used to buy his stake in FTX in the first place, is Binance’s own native currency.
      …
      https://fortune.com/crypto/2023/10/05/binance-ceo-changpeng-zhao-trapped-bankman-fried-ftx/

  27. ‘Utterly Incompetent’: Glenn Grothman Rips Into The New York Times Over Coverage Of Republicans
    Forbes Breaking News
    14 minutes ago

    In remarks on the House floor Tuesday, Rep. Glenn Grothman (R-WI) spoke about the NY Times’ coverage of the near-shutdown.

    https://www.youtube.com/watch?v=qAAbbvFeUk8

    5:32.

  29. Bond yields could hit 6% as the Fed is going to keep hiking rates until something breaks, research firm says
    Jennifer Sor
    Oct 6, 2023, 1:31 PM CDT
    Trader at NYSE
    A trader works at the New York Stock Exchange NYSE in New York, the United States, on March 9, 2022. Michael Nagle/Xinhua via Getty

    – Key bond yields are likely headed to 6% as the Fed will keep hiking interest rates, TS Lombard said.

    – The research firm pointed to the hot labor market, which could stoke inflation.

    – Yields on the 10-year US Treasury have notched a 16-year-high in recent weeks

    The 10-year US Treasury yield is headed to 6%, as the Federal Reserve is likely to raise rates until something breaks in the economy, according to research firm TS Lombard.

    “Is a 6.5% funds rate and a 6% on the 10Y on its way? Very likely,” the firm’s chief US economist Steven Blitz wrote in a note on Friday, implying a more than 100 basis-point increase in the Fed’s benchmark rate and the 10-year Treasury yield.

    That’s due to recent robust economic data, which could influence the Fed to take interest rates higher. US production remains strong, with the ISM’s Production Index surging 2.5 percentage points through the month of September. The labor market is also still burning hot, with the US adding a staggering 336,000 new jobs last month, above the expected 170,000.

    That’s the opposite of what markets have been hoping for. Investors have been looking for the economy soften, which would likely influence the Fed to pull back on rate hikes. Officials raised rates 525 basis-points over the last year to lower inflation and cool economic growth, a move that has weighed heavily on stocks.

    Markets see a 29% chance Fed officials hikes rates another 25 basis-points in November, up from 20% on Thursday, according to the CME FedWatch tool.

    Higher rates risk sparking a recession, especially considering interest rates are already higher than Fed officials think, Blitz said. Using the Taylor Index – an economic formula that calculates interest rates based on target inflation, the neutral rate of the economy, and other factors — Blitz estimated that interest rates in the economy could actually be around 5.75%-6.75%, above the official target range of 5.25%-5.5%.

    “Is the Fed convinced on this point? Probably not, so they will do what they always do, hike until something breaks – and rates are finally at the point where something can be broken,” he warned.
    …
    https://markets.businessinsider.com/news/bonds/bond-yields-fed-interest-rate-hikes-recession-us-economic-outlook-2023-10

    1. Financial Times
      Israeli-Palestinian conflict
      Netanyahu says Israel is at war after Hamas launches multi-front assault
      Militant group calls on Palestinians and other Arab states to join the fighting
      A rocket is launched from the Gaza Strip towards Israel. Hamas fired more than 5,000 rockets on Saturday
      James Shotter in Jerusalem an hour ago

      Benjamin Netanyahu said on Saturday that Israel was “at war” after Hamas launched its biggest attack on the country in years, firing a barrage of rockets and sending militants across the border from the Gaza Strip.

      In a televised address as Palestinian militants waged gun battles with Israeli forces in multiple locations in southern Israel, the prime minister said he had ordered “an extensive mobilisation of reserves” and that Israel would “return fire of a magnitude that the enemy has not known”.

      “The enemy will pay an unprecedented price,” he added.
      …

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