02192021 :: Friday finance

A partial digest

Philip Valenta, MSF
Feb 20 · 5 min read

It’s day 31 of the Biden-Harris administration. The nation has returned to the now familiar holding pattern of awaiting a stimulus package.

All EIP 2 payments have been issued, says the IRS.¹ The steps to follow if we didn’t receive ours are here. They include using the GMP tool to check payment status, requesting a payment trace with the IRS, and claiming a tax credit on our federal returns.

Discussions around inflation are frequently fear-based. They are also often launched by individuals motivated by selling others on the ownership of inflation assets.

Gold — one of those [in]famous inflation assets that, according to hard data, has basically never lived up to the hype to reliably hedge real inflation — is falling, as forecasted multiple times here in past issues. Even the so-called “experts” and “professionals” and “smart money” are indirectly admitting gold is [still] turning out to be good for nothing, and they are acquiescing.

It isn’t shocking.

In turn, crypto has become the asset being trumpeted in the face of stimulus-driven inflation [expectations], and it has inflated greatly itself. One may say there could be a self-fulfilling prophecy inside of a crypto-Treasuries loop. Everyone continues to pile in.

Meanwhile, stocks have likewise continued to inflate, as well as oil. For some who have the luxury of doing so, money goes where it can make more money. However, everything could cease to rise from here, unless more stimulus is passed.

When it is widely understood later that there is no real systemic inflation occurring beyond what the Fed is deliberately trying to stoke, or that there is no more stimulus on tap, or that the labor picture in this country is still an utter disaster, or that yet more businesses have gone bankrupt, or all of the above, asset valuations may just unravel. They are obviously disconnected from the fundamentals.

In the meantime:

  • the DXY is still above 90, meaning our purchasing power is holding steady.
  • the IMF perceives little risk of inflation from a $1.9 trillion stimulus plan in the US.
  • the Fed doesn’t seem worried about any overheating, either; quite the opposite.

Canada has launched the first Bitcoin ETF in North America [BTCC]. The country is also home to one of the most popular crypto brokerages around, Voyager Digital [VYGVF :: VYGR].

Total crypto market cap is nearing $1.7 trillion as of publication. ETH, the crypto of the most heavily used blockchain, has finally crossed $2k/coin.

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Initial jobless claims rose to 861k (SA) for the week ending February 13 from an upwardly revised 848k for the week prior. One year ago, we saw 215k.²

To add to this, over 516k on an unadjusted basis applied for PUA, up from the previous week’s upwardly revised near 342k.

As of January 30, over 18 million people (UA) were still claiming unemployment benefits of some kind, down a little over 1.3 million from the week prior. In the comparable week one year ago, the US witnessed more than 2.1 million people claiming unemployment insurance from all programs together. Most UI programs saw a decrease in claims from January 23 to January 30.³

The persistently high jobless numbers are responsible in large part for yet another decline in the WEI for the week ending February 13.

Mortgage applications decreased again, and more steeply this time, at a blended 5.1% for the week ending February 12, due to a decrease of 5% in refis and 6% in homebuyer applications. The 30Y fixed came in at 2.93%.

The expectation here is still for incoming housing market weakness. Some 2.6 million households remain in a state of mortgage forbearance, we have worked our way through much of the qualified pools of buyers and refi borrowers, and the labor market is nothing to write home about.

Now under Biden, the FHFA has extended forbearance measures through June of this year, as well as a moratorium on foreclosures and evictions. That’s just proving the point.

Commercial real estate, well…let’s say the Fed is concerned.

Used car trends: The latest Carvana car count as of February 19 increased 3.73% to 36,703 vehicles from 35,383 the week prior, while the CarGurus average price index rose 0.19% to $22,416 from $22,373. This is the highest car count reported since the start of data gathering for this newsletter in November of last year.

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Sovereign matters:

  • S&P Global downgraded Ethiopia, placing the nation on CreditWatch with negative implications as the country might be seeking to restructure its debt, under the G20 Common Framework plan and/or perhaps even with commercial creditors. The potential for further armed conflict and ethnic violence in relation to Tigray is not helping matters.
  • Fitch revised upward Turkey’s outlook to stable, citing tighter monetary policy, an appreciating currency, and stable forex reserves, among other things.
  • Fitch revised upward Bulgaria’s outlook to positive, on account of the country’s progress towards eurozone membership and the political establishment’s apparent embrace of the attendant commitments, structural, fiscal, and otherwise. Furthermore, EU funding is forthcoming, which should boost growth prospects.

The current state of equity: Housing vouchers no ticket into affluent neighborhoods.

“Housing providers keep coming up with ways to rent to who they want to rent and find ways around housing discrimination laws,” said Erin Kemple, executive director of the Connecticut Fair Housing Center, which investigates complaints. “There is a lot more discrimination going on than what we are investigating.”

As of the CDC’s February 19 update, the US has witnessed 182,432 fatalities strictly classified as “pneumonia” with no acknowledgement of COVID-19 on the death certificates, per excess deaths data. That’s an average of 439 people per day. As the CDC points out, many of these could be miscategorized COVID-19 fatalities going unrecognized in official tallies, meaning we’re undercounting. This, in addition to the official coronavirus death toll of 495,323 puts the probable COVID-19 death figure somewhere north of 590k. Across all causes of death, we suffered 118% of the deaths in 2020 that we would have expected in non-pandemic times given historical trends. Along with other situations where COVID-19 was not designated as a cause of death but where SARS-CoV-2 likely triggered a condition or exacerbated a preexisting one — heart disease, hypertension, diabetes, dementia — the “real” fatality count is probably much higher.

Footnotes

¹ EIP 2: second economic impact payment, i.e. the round two stimulus check.

² The data quality of these numbers may still compromised, as outlined in a prior issue and based on a GAO report.

³ “Unemployment Insurance Weekly Claims News Release.” Release Number: USDL 21–298-NAT. US Department of Labor (February 18, 2021).

⁴ Thomas, Jacqueline Rabe. “How Wealthy Towns Keep People with Housing Vouchers Out.” ProPublica (January 9, 2020).

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