There are alarming signs of distortion and excess throughout the US economy. This is the lingering effects of two decades of excessive money printing and low interest rates- particularly during the Covid scamdemic.
For starters even after normalizing interest rates and draining token amounts of excess liquidity, the inflation threat is still in place. The Fed seems trapped into higher for longer.
Credit card debt is surging. I believe this is inflationary pressure not confidence. There are red flags among consumer names like Newell that demand is soft.
Ugly read on the consumer from Newell Brands, shares getting slammed pic.twitter.com/EJ3qt36Zsl
— Newsquawk (@Newsquawk) February 10, 2023
The younger 18-29 population in particular is pressured. They have been priced out of the housing market so don’t have the home as a piggy bank to rely on. That leaves usury as the choice for them.
But there is a reason why credit card delinquencies aren’t worse. The second chart shows it. There has been an ongoing abatement on student debt servicing and paydowns. There have also been scamdemic rent abatement actions.
But the student debt still lingers in the background. Student loan balances now stand at $1.60 trillion.
Furthermore some key props are being removed. The GOP House isn’t friendly to these emergency Covid measures.
Welfare State Weakens… 30 Million Americans Are About To Lose ‘COVID’ Food Stamp Handouts https://t.co/9pd0X6Ybz3
— zerohedge (@zerohedge) February 16, 2023
One of the drivers in the cheap money scamdemic period were commercial hedge funds getting into the single family home renting business. $32 billion was raised for this purpose from q3, 2020 to mid-2022. Now that spigot for these Ponzi units has been shut off. MBS loans tend to be ARMs that reset to higher rates.
“Sales of CMBS Plunge 85% as Commercial Property Markets Freeze” | Can’t hedge new deals in this market. Higher rates mean a lot of defaults.
— Richard Christopher Whalen (@rcwhalen) February 17, 2023
In the hot markets like Vegas and Phoenix rental vacancy rates are rising. Who do the funds flip to?
In California scamdemic easy money bubbles are unravelling.
Also reported last week;
One of the biggest landlords in Los Angeles just defaulted on $755 million in loans for two skyscrapers as remote work keeps offices vacant – Fortune
— Markets & Mayhem (@Mayhem4Markets) February 17, 2023
Rather than curtailing excesses, meanwhile the stonk market has turned into a casino of punters gambling on one day options (ODTE). This also allows for manipulation.
Visualizing the rise of $SPX 0DTEs pic.twitter.com/ffrDntiZRs
— Markets & Mayhem (@Mayhem4Markets) February 16, 2023
There is a myth that this is retail trading, but the reality is that they are institutions, fund whales, and 27 year old ne’er-do-well with algos. When this blows up there will be systemic risk a la Long Term Capital Management.
“These flows could particularly impact markets given the current low liquidity environment,” Kolanovic, who estimates that a large market move would cause these options positions to spark buying or selling to the tune of $30 billion. That kind of shock would be similar to the one experienced by markets in February 2018, when a sudden rise in market volatility derailed several volatility-linked products that banked on low market gyrations, dealing investors billions of dollars in losses, an event that was eventually dubbed “Volmageddon.”
For those looking into what this is all about I recommend-
I continue to monitor dementia Joe’s manipulation of the oil market. But running out of barrels.
6.5 trillion in low interest Treasuries maturing in 2023, and currently refinanced at 5% for t-bills and 1 year bonds. Fed is reducing their portfolio at $95 billion per month.
Love the “Bear vs. Bull” pix at the end. Thanks!
There can only be one winner in ‘Monopoly’
Then the game is over.
Neel Kashkari says that the fed will do whatever is necessary to achieve it’s 2% inflation target. With energy prices running at 60% inflation and being the major component of everything else – I wonder if killing off 95% of the population is included in the ‘whatever it takes’ category….