ECONOMIC UPDATE: It's All About Inflation
The CPI for January came in at 0.3 percent rather than an expected 0.2 percent and it was up 3.1 percent on an annual basis rather than The Street’s guess of 2.9 percent… and that crashed the markets?
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The big news today in the USA is all about inflation.
This is what CNBC reported when the markets closed today:
Stocks dropped on Tuesday after hotter-than-expected inflation data for January spiked Treasury yields and raised doubts that the Federal Reserve would be able to cut rates several times this year, a key part of the bull case for the equity market.
The Dow Jones Industrial Average lost 524.63 points, or 1.35 percent, for its worst session since March 2023 on a percentage basis. At its lows, the 30-stock index sunk 757.52 points, or 1.95 percent. The S&P 500 slid 1.37 percent, while the Nasdaq Composite fell 1.8 percent.
The Russell 2000 also suffered, tumbling nearly 4% for its worst session since June 2022.The consumer price index rose 0.3 percent in January from December. CPI was up 3.1 percent on an annual basis.
Economists polled by Dow Jones expected CPI to have increased by 0.2 percent month over month in January and 2.9 percent from a year earlier.
So the CPI for January came in at 0.3 percent rather than an expected 0.2 percent and it was up 3.1 percent on an annual basis rather than The Street’s guess of 2.9 percent… and that crashed the markets?
In the Bronx we used to say, “Bullshit has its own sound.”
The CPI went up in a month 0.1 percent higher than expected and the yearly CPI up 0.2 percent higher and that crashed the markets?
How about with the Nasdaq PE ratio at nearly 32 and the Dow Jones Industrial Average PE at nearly 26, the stocks are overvalued and this is the beginning of a correction?
Worst is Yet to Come
Absent the mainstream review of equities is the coming Office Building Bust that will ignite one of our Top Trends for 2024, Banks Go Bust.
As reported in the Financial Times, U.S. banking sector profits tumbled nearly 45 percent in 2023. According to BankRegData, the $38 billion fall was the sharpest decline since the second quarter of 2020… that’s when politicians launched the COVID War and locked down the world.
Besides losing profits, last year U.S. banks fired some 45,000 workers.
Again, and again, but barely reported and mostly denied by the mainstream media is that many banks, especially medium and small ones, holding commercial office building loans are on the brink of collapse.
According to data provider MSCI Real Assets, commercial-property distress, including financially troubled assets and those taken over by lenders, totaled $85.8 billion in 2023, which is from $56.9 billion at the end of 2022 and the highest level since the third quarter of 2013, as reported by The Wall Street Journal.
And it’s global.
Here are just a few of the headlines in recent days that report what is going on in the banking world, but yet to not forecast “danger ahead”:
Germany’s Office Property Slump Accelerates With Record Drop
Prices for office buildings tumbled 13% in the fourth quarter – Bloomberg 12 February 2024
Aozora’s property woes sound alarm in Japan
Tokyo Lender’s profit warning sends investors racing to assess peers’ exposure to US offices –
Financial Times, 12 February 2024
Real estate pain for US regional banks is piling up, say investors – Reuters, 12 February 2024
S&P 500 Sets a Record on Wednesday as Banks Continue Tanking – Wall Street on Parade, 8 February 2024
UBS to deepen cost cuts after second straight quarterly loss – Financial Times, 7 February 2024
And as we note, the mainstream business media keeps playing down the coming banking crisis. In Monday’s Wall Street Journal, its article Bank Went From Crisis Winner to Next Worry reported on the problems facing New York Community Bancorp, but said no need to worry because the shills said there is no danger ahead:
Still, analysts and bankers say there is little evidence an acute crisis is brewing. The economy is strong and interest-rate pressure is easing on banks. NYCB and a few other real-estate lenders face losses, but the issues aren’t systemic.
It’s a sizable problem,’ Federal Reserve Chair Jerome Powell said on “60 Minutes” this month. ‘It doesn’t appear to have the makings of the kind of crisis things that we’ve seen sometimes in the past, for example, with the global financial crisis.’
According to Fitch commercial mortgage-backed securities delinquency rates will jump to 8.1 percent this year. Making a bad situation much worse, since commercial office loans are interest rate based, as a result of the high interest rates, Goldman Sachs reports that there are some $1.2 trillion in commercial mortgages that will mature this year.
TREND FORECAST: What is barely, if ever, mentioned in these mainstream media reports is that the Office Building Bust is a result of the draconian COVID War lockdowns that prohibited people from going to work.
And as we had forecast, when people were forced to stay home week after week, month after month, year after year, they realized how they were wasting their lives away by commuting back-and-forth to work, how expensive it was for them… and how they would resist going back to work full time.
On the employer side, having employees come in a few days a week would save them money because they would need less office space. The “bosses” also faced the reality that they rarely came face-to-face with their hundreds of employees working in their tiny cubicles. So having them work remotely made little difference.
As we have noted, this is a global trend. NordLayer reports that “European countries lead the rest of the world in terms of remote work.”
Indeed, as reported by Bloomberg, last year alone, office building prices in Germany fell by more than 10 percent. Therefore, as the prices decline and tenants move out, the rate of defaults will rise… as will the Banks Go Bust crisis.
And when reality hits The Street, Wall Street will go down with the banks.
Add New Zealand. NZ's largest property construction company.
https://www.interest.co.nz/business/126361/fletcher-building-has-announced-after-tax-loss-120-million-half-year-and-wont-pay