Which Way Wednesday - Fed Up Edition
I don’t know what Fed minutes the market red yesterday but the ones I read scared me! As usual, I went through the minutes in Member Chat (and there’s a highlighted version in Seeking Alpha minus my color-coding) and the red (negative) statements are far outnumbering the green (shoots) in the minutes including little blow-offs like " the Federal Reserve’s total assets had risen to about $2.3 trillion " and " the Desk had been reinvesting all maturing Treasury securities by exchanging those holdings for newly issued Treasury securities " which, if you put them together in non-BS language, pretty much says: " Of the $1.3Tn in Treasuries sold in 2009, it’s hard to see how the Fed bought less than half of them, maybe closer to all of them since we rolled our short-term paper over each time, therefore buying much more than it seems ." Once again, the finger is pointed sqarely at Commercial Real Estate as, according to the minutes: " C onditions in the nonresidential construction sector generally remained poor. Real outlays on structures outside of the drilling and mining sector fell again in the fourth quarter, and nominal expenditures dropped further in January. The weakness was widespread across categories and likely reflected rising vacancy rates, falling property prices, and difficult financing conditions for new projects ."  In a real economy, that statement alone would send investors running for the exits but we also got these three - all in a row: The dollar value of commercial real estate sales remained very low in February, and the share of properties sold at a nominal loss inched higher. The delinquency rate on commercial mortgages in securitized pools increased in January, and the delinquency rate on commercial mortgages at commercial banks rose in the fourth quarter. The percentage of delinquent construction loans at banks also ticked higher in the fourth quarter.  Delinquency rates on credit card loans in securitized pools and on auto loans at captive finance companies remained elevated in January but were down a bit from their recent peaks. Total bank credit contracted substantially in January and February. Banks’ securities holdings declined at a modest pace after several months of steady growth, and total loans on banks’ books continued to drop. The Fed blows off this bad news by noting that CDS rates were ignoring the weakness in CRE (so we should too?) and, even worse is the way the Fed keeps pretending inflation is something that only happens in science fiction stories by saying: " Although increased oil prices…
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