All about risk
Graphic:
Excerpt:
A month ago I expected a 50 basis point cut by the Fed based on weakening data.
The data weakened alright, but following the the CPI report last Wednesday, I checked the odds at 15 percent.
Late Sunday, I decided to check the probabilities again and captured the above chart.
There was a huge rally in the odds on Thursday and Friday as noted by the Wall Street Journal in the chart below.
Author(s): Mike Shedlock
Publication Date: 16 Sept 2024
Publication Site: Mish Talk
Link: https://mishtalk.com/economics/big-changes-in-fed-interest-rate-cut-expectations-this-year-and-next/
Graphic:
Excerpt:
I captured rate cut expectations before and after the Friday jobs reports. Let’s take a look.
The current rate is 5.25%-5.50% effectively 5.37%.
Those odds were smack in the middle of volatility.
The CME website now shows data as of August 1 (no change on Friday), so they have something messed up.
The chart above reflects the huge volatility we saw in bond yields on Friday.
….
Are too many cuts priced in or not enough?
That’s the question. I expect two cuts in September. Looking out to next year, I think too many cuts are priced in.
Author(s): Mike Shedlock
Publication Date: 3 Aug 2024
Publication Site: Mish Talk
Graphic:
Excerpt:
Housing affordability continues to soar out of reach of most buyers. Not only are prices at a new record level, mortgage rates remain close to 7.0 percent.
Chart Notes
Author(s): Mike Shedlock (Mish)
Publication Date: 30 July 2024
Publication Site: MishTalk
Link: https://mishtalk.com/economics/bonds-yields-jump-again-wiping-out-the-may-treasury-rally/
Graphic:
Excerpt:
Yield on the 10-year treasury is 4.59 percent on May 29, right where it started the month. A quarter-point rally on hopes of rate cuts vanished today.
Yields are still lower than the 2024 intraday peak of 4.74 percent, but they are nearly 70 basis points higher than the start of the year as rate cut after rate cut hopes keep getting priced out.
Minneapolis Federal Reserve President Neel Kashkari says he wants to see “many more months” of positive inflation numbers before interest rates start to come down — and refused to rule out a rate hike if needed.
Author(s): Mike Shedlock
Publication Date: 29 May 2024
Publication Site: Mish Talk
Link: https://mishtalk.com/economics/quotes-of-the-day-on-rent-inflation-by-the-fed-and-property-managers/
Graphic:
Excerpt:
According to data from the U.S. Census Bureau, moving rates for Americans declined from 12.8% in 2021 to 12.6% in 2022.
But what is it for 2024?
My guess has been 9 percent in a range of 8 to 11 percent or so. But we will not know that for two more years.
Author(s): Mike Shedlock
Publication Date: 13 May 2024
Publication Site: Mish Talk
Link:https://mishtalk.com/economics/ominous-technical-trends-for-us-treasury-bulls-three-durations/
Graphic:
Excerpt:
Technical patterns on 2-year, 10-year, and 30-year US treasuries all suggest yields are heading higher. Let’s also discuss the supporting fundamental case.
Centerpoint explains “An ascending triangle chart pattern is a bullish technical pattern that typically signals the continuation of an uptrend. They can signal a coming bullish breakout above an area of resistance after it has been tested several times.”
Many people do not believe in technical patterns, others believe in nothing else. Certainly, technical patterns fail often enough.
My take is they work best as entry and exit point strategies, especially when fundamentals align.
Author(s): Mike Shedlock
Publication Date: 3 Apr 2024
Publication Site: MishTalk
Link:https://mishtalk.com/economics/fed-rate-cut-expectations-drop-on-unexpectedly-strong-cpi-data/
Graphic:
Excerpt:
Author(s): Mike Shedlock
Publication Date: 13 Feb 2024
Publication Site: Mish Talk
Graphic:
Excerpt:
Author(s): Mike Shedlock
Publication Date: 12 Feb 2024
Publication Site: Mish Talk
Graphic:
Excerpt:
Everyone knows, or at least should know, that the “Big 3” rating agencies that rate about 98 percent of all debt all issue trash ratings. Here’s the background on how that happened.
Rating agencies used to get paid by investors on the basis of how well they did at estimating the likelihood of default. The better your ratings, the more sought out your opinions.
In the mid 1970s, the SEC created nationally recognized statistical ratings organizations (NRSROs). Following that idiotic regulation, the rating agencies got paid on the basis of how much debt they rated, not how accurate their ratings were. Fees come from corporations issuing debt, not investors seeking true default risk.
The more stuff you rate AAA, the more business you get from companies who want their debt rated. The new model is ass backward, and why ratings are trash. A genuine fiasco happened with ratings during the Great Financial Crisis with tons of garbage rated AAA went to zero.
There should not be NRSROs. The SEC made matters much worse, except of course for the Big 3 who have a a captured, mandated audience, coupled with massive conflicts of interest.
Author(s): Mike Shedlock
Publication Date: 5 Aug 2023
Publication Site: Mish Talk
Link:https://mishtalk.com/economics/real-personal-spending-rises-twice-as-much-as-income-in-june/
Graphic:
Excerpt:
Real (inflation-adjusted) consumer spending rose 0.4 percent in June. Real disposable income rose 0.2 percent.
….
Real PCE goods peaked in March of 2021. All of the growth in consumer spending for 27 months is due to an increase in demand for services.
Author(s): Mike Shedlock
Publication Date: 28 July 2023
Publication Site: Mish Talk
Graphic:
Excerpt:
Two things on the Fed’s mind are the core rate of inflation (all items excluding food and energy) and rent. Both have proven stubborn.
Despite constant talk of falling rent prices please note that Rent of primary residence has gone up at least 0.4 percent, every month for 23 straight months!
The falling rent meme has been wrong for at least a full year.
Author(s): Mike Shedlock
Publication Date: 12 July 2023
Publication Site: Mish Talk
Excerpt:
Biden’s efforts to produce more inflation are nonstop, 24×7. His latest move is a set of regulations to force people into Obamacare despite the fact a District Court already ruled against his proposed regulations.
Biden Attempts to Make Healthcare Even More Expensive
To understand what Biden wants to do, and why the Supreme Court is likely to smack it down, we need to review a District Court ruling from 2020.
On July 24, 2020, CATO reported In a Win for Consumers, a Court Ruling Affirms the Legality of Short‐Term Health Insurance Plans
….
Jam City, Dateline July 7, 2023
The Wall Street Journal comments on Biden’s Short-Sighted New Health Rule
Behold the President’s plan to limit short-term health insurance plans in order to jam more consumers into the heavily subsidized and regulated ObamaCare exchanges. The Health and Human Services, Labor and Treasury Departments on Friday proposed rules to roll back the Trump Administration’s expansion of short-term, limited-duration insurance (STLDI) plans. Since 2018 these plans have been available in 12-month increments, and consumers have been able to renew them for up to 36 months.
These plans are especially attractive to young people whose employers don’t provide coverage. Why would a healthy 26-year-old want to pay for maternity, pediatric and other services he probably won’t use in the near future?
The Inflation Reduction Act sweetened ObamaCare’s insurance premium tax credits that are tied to income. As a result, a 60-year-old making just above four times the poverty level has to pay only 8.5% of his income toward his insurance premium while the government picks up the rest. If premiums increase, government is on the hook for more.
Author(s): Mike Shedlock
Publication Date: 9 July 2023
Publication Site: Mish Talk