by Michael

Typically I feel that we really live in Bizarro World.  We simply witnessed one of the horrible monetary disasters in years, and financial exercise is dramatically slowing down throughout us, however Wall Road is celebrating.  Actually, the Dow Jones Industrial Common rose greater than 1,200 factors on Thursday.  Regardless of every little thing else that’s going flawed, buyers had been completely giddy as a result of the inflation quantity that was simply launched was barely decrease than what most consultants had been anticipating.  Lots of people appear to suppose that this might imply that the Federal Reserve will quickly cease mountaineering rates of interest, however that isn’t going to occur.  Jerome Powell continues to insist that charges will preserve going larger till the official inflation charge is again all the way down to about 2 %, and we’re a protracted, good distance from there.

So I actually don’t perceive why there was such a shopping for frenzy on Wall Road on Thursday.

It simply doesn’t make any sense.

Simply 24 hours earlier, the collapse of FTX was freaking everybody out.  Proper now, Zero Hedge has an article up that does a very good job of breaking down precisely what precipitated this disaster…

Alameda Analysis – Sam Bankman-Fried’s (SBF) FTX-affiliated crypto hedge fund – “owed” FTX $10 billion after the alternate “lent” billions of {dollars} of sacrosanct buyer property to fund dangerous bets, simply as we suspected… solely much more!

That, as The Wall Road Journal stories, citing an individual acquainted with the matter, is what set the stage for the carnage and chaos throughout the crypto house that has occurred up to now few days as the fact of FTX’s alleged commingling of funds and big shortfall grew to become public because of Binance’s CZ’s due diligence and CoinDesk’s reporting.

FTX prolonged loans to Alameda utilizing cash that clients had deposited on the alternate for buying and selling functions, a choice that Bankman-Fried described as a “poor judgment name.”

All in all, FTX had $16 billion in buyer property, in line with the particular person, so FTX lent greater than half of its buyer funds to its sister firm Alameda.

So long as the crypto bubble was increasing, no one obtained harm.

However as soon as crypto values crashed, it was inevitable that the entire rip-off would come crashing down actually laborious.

Yesterday, I said that FTX can be going to zero.  Nicely, lower than 24 hours later Sequoia really “marked its personal funding all the way down to $0”…

FTX now faces chapter and one in every of its early backers, Sequoia, has basically declared the agency nugatory after it marked its personal funding all the way down to $0.

Heavy hitters throughout Wall Road are going through billions upon billions of {dollars} in losses.

You’d suppose that will be sufficient to set off a wave of panic on Wall Road, however what we obtained was a senseless shopping for frenzy as an alternative.

In the meantime, we proceed to get extra numbers about our new housing crash which are completely jaw-dropping.

For instance, we simply discovered that U.S. householders misplaced a whopping 1.3 trillion {dollars} in dwelling fairness final quarter…

U.S. householders misplaced $1.3 trillion, or 7.6 %, in dwelling fairness within the third quarter, the biggest quarterly decline on file, in line with the mortgage software program and analytics firm Black Knight.

Following the unprecedented actual property increase of the previous two years, indicators of a slowing housing market are starting to emerge.

We haven’t seen something like this since 2008, and it’s as a result of the Federal Reserve has been dramatically elevating rates of interest.

For those who can consider it, mortgage charges have now been above 7 % for 3 weeks in a row…

The common contract rate of interest for 30-year fixed-rate mortgages with conforming mortgage balances ($647,200 or much less) elevated to 7.14% from 7.06%, with factors growing to 0.77 from 0.73 (together with the origination price) for loans with a 20% down cost.

“Mortgage charges edged larger final week following information that the Federal Reserve will proceed elevating short-term charges to fight excessive inflation. The 30-year mounted charge remained above 7 % for the third consecutive week, with will increase for many mortgage varieties,” stated Joel Kan, MBA’s deputy chief economist.

The auto trade can be being hit actually laborious.

At this level, auto mortgage delinquencies are already the very best that they’ve been “in additional than a decade”, and it’s most likely inevitable that they’ll proceed to go a lot larger…

Auto mortgage delinquencies have risen to the very best stage in over 10 years, in line with TransUnion.

TransUnion tracks greater than 81 million auto loans in the US. In response to the patron credit score reporting company, 1.65% of auto loans had been not less than 60 days delinquent within the third quarter. That’s the highest charge for 60-day-plus delinquencies in additional than a decade.

For much more numbers that present that the U.S. financial system is quickly heading within the flawed path, please see my earlier article entitled “11 Indicators That Financial Exercise Is Plunging Off A Cliff”.

However the entire troubling figures that I simply shared with you didn’t actually matter on Thursday.

As an alternative, what mattered was the truth that the brand new inflation quantity was simply barely decrease than anticipated…

The buyer worth index rose lower than anticipated in October, a sign that whereas inflation remains to be a risk to the U.S. financial system, pressures may very well be beginning to cool.

The index, a broad-based measure of products and providers prices, elevated 0.4% for the month and seven.7% from a yr in the past, in line with a Bureau of Labor Statistics launch Thursday. Respective estimates from Dow Jones had been for rises of 0.6% and seven.9%.

Satirically, nothing has actually modified.

Inflation remains to be wildly uncontrolled, and the general financial system remains to be plunging into a serious downturn.

We’re doubtlessly going through a “stagflation” disaster that will likely be far worse than something that we skilled again within the Nineteen Seventies, however Wall Road doesn’t appear to care.

On Thursday, everybody was shopping for, and inventory costs shot via the roof…

The Dow Jones Industrial Common jumped 1,201.43 factors, or 3.7%, to 33,715.37 for its largest one-day acquire since shares had been rising from the depths of the pandemic bear market. The S&P 500 jumped 5.54% to three,956.37 in its largest rally since April 2020. The Nasdaq Composite surged 7.35%, its finest since March 2020, closing at 11,114.15.

So what’s it going to take to lastly finish this totally absurd bubble?

A significant struggle within the Center East?

A struggle with China?

Sadly, each of these wars are undoubtedly coming.

However when extra struggle does escape, buyers might interpret it as actually excellent news since it’d imply that the Fed will quickly begin decreasing rates of interest.

That’s how loopy issues have change into.

Apparently, nothing actually issues apart from the Fed, and each piece of unhealthy information goes to be interpreted as an indication that the Fed might change course on elevating charges.

So for now we’re caught in Bizarro World, and for the second ignorance is bliss.