Vital Statistics:
| Last | Change | |
| S&P futures | 3,938 | 40.25 |
| Oil (WTI) | 112.28 | 0.69 |
| 10 year government bond yield | 2.85% | |
| 30 year fixed rate mortgage | 5.42% |
Stocks are higher this morning after China cut interest rates overnight. Bonds and MBS are flat.
The Chinese economic situation will be something to watch as that will probably stick a fork in a lot of the commodity inflation we have been seeing. China has a real estate bubble comparable to the one the US experienced in the 1920s and Japan experience in the 1980s. I suspect that countries which experience decades of supernormal growth often create real estate bubbles, which cause epic slowdowns – the Great Depression in the US, the lost decade in Japan.
Risks for a US recession in late 2022 and early 2023 are building, and we are starting to see some strategists become more pessimistic on the economy. “Recession risks are high — uncomfortably high — and rising,” said Mark Zandi, chief economist at Moody’s Analytics. “For the economy to navigate through without suffering a downturn, we need some very deft policymaking from the Fed and a bit of luck.” Senior executives from Wells Fargo and Goldman Sachs have echoed this sentiment.
Further evidence is coming from retailer earnings. “While we anticipated a post-stimulus slowdown in these categories … we didn’t anticipate the magnitude of that shift,” Brian Cornell,Target’s chief executive, said in a Wednesday earnings call. “When we talk to our guests, they often express their concerns about a host of rapidly changing conditions, ranging from geopolitics to the high and persistent inflation they’ve been experiencing.”
Recessionary risks will put a ceiling on interest rates, which is why we may have seen the peaks of interest rates already in this tightening cycle. That said, the Fed Funds futures have yet to reflect this changing sentiment.
Lower-credit borrowers are beginning to fall behind in auto loans and credit cards. Delinquencies are rising in these sectors, which should at some point filter through to FHA loans, I suspect. We are still in a historically strong credit environment (stimulus checks plus a healthy labor market) but if we do see a recession credit quality will deteriorate. 30 day mortgage delinquency rates are at 2.8%, which is down 40% from last year.
Filed under: Economy |
All Things in Moderation 
Scott, you may find this of interest:
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jnc:
Thanks, it was interesting, and a relatively rare, serious look at the issue, devoid of the usual euphemisms and disingenuousness that usually accompanies the topic. I would take issue with a few things in the analysis, but it was a refreshingly reasoned and non-emotional look at the issue.
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I was very surprised it was in the NYT.
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This could be interesting:
“A wild new court decision would blow up much of the government’s ability to operate
The US Court of Appeals for the Fifth Circuit’s decision in Jarkesy v. SEC would dismantle much of the system the federal government uses to enforce longstanding laws.
By Ian Millhiser
May 19, 2022, 4:10pm EDT
…
Their opinion in Jarkesy is primarily an attack on administrative law judges (ALJs). About 30 different federal agencies employ such officials to resolve disputes ranging from whether an investment fund defrauded its investors to whether an impoverished American is entitled to federal benefits.”
https://www.vox.com/2022/5/19/23130569/jarkesy-fifth-circuit-sec
Related:
https://slate.com/news-and-politics/2022/05/5th-circuit-sec-securities-fraud-civil-service.html
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It’s a start. Now on to Chevron Deference
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This is legit funny so I’m assuming a hired writer contributed it.
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Good piece:
“The Sinister Symmetry Of CRT And GRT
The extremes of right and left on immigration are fueling each other.
Andrew Sullivan
May 20”
https://andrewsullivan.substack.com/p/the-sinister-symmetry-of-crt-and-d76?s=w
He does however take Kennedy at his word on the Immigration Act of 1965 vs digging into it.
And the truth comes out:
https://edition.cnn.com/2022/05/20/politics/hillary-clinton-robby-mook-fbi/index.html
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Taibbi’s latest:
“Bush is Biden is Bush
George W. Bush returns to the news with a tad too much honesty, lifting a veil on Washington’s dirtiest open secret: the Biden Democrats have become the Bush Republicans
Matt Taibbi”
https://taibbi.substack.com/p/bush-is-biden-is-bush
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See, it’s different when we do it.
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Of course. This time the reason is because with Republicans it’s part of a “long standing theme”. Unlike the Democrats, who merely claimed the 2000 and 2004 elections were stolen, and then that the 2016 election was stolen and that Stacey Abrams election was stolen and that 2020 was going to be stolen by Trump and that the next election will be stolen by Republicans if all election laws aren’t changed and federalized immediately. Definitely no long-standing theme there.
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