Sorcerer’s Apprentice: Fed Excess Liquidity Overflowing To Foreign Banks (Not Helping Main Street USA)

According to the Wall Street Journal, banks based outside the U.S. have been unlikely beneficiaries of the Federal Reserve’s interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs.

Foreign firms have received nearly half of the $9.8 billion in interest the Fed has paid banks since the beginning of last year for the money, called reserves, they deposit at the U.S. central bank according to an analysis of Fed data by The Wall Street Journal. Those lenders control only about 17% of all bank assets in the U.S.

foreign banks WSJ


Of course, Fed policy has helped to stoke asset prices …


But not wages of anything else on Main Street.


At least The Fed is providing shelter for foreign banks. /sarc

This story reminds me of the Sorcerer’s Apprentice from the film Fantasia. Except that Ben Bernanke and Janet Yellen are Mickey Mouse.


Yellen trying to curtail quantitative easing.


Slowing: Home Prices in U.S. Rise at Slowest Pace in Almost Two Years (Back To 2006 Levels Of YoY Growth)

The S&P/Case-Shiller index of property values increased 6.75 percent from July 2013, the smallest 12-month gain since November 2012. And is now back to 2006 levels in terms of YoY growth.


Only San Francisco suffered a decline in home prices MoM. Las Vegas leads in terms of YoY growth.


Household income, wage growth, labor force participation, money velocity and mortgage purchase applications have all slowed since 2008, so why not housing prices (if investors pull out)?


Obama: “Are You Better Off Than 6 Years Ago?” Answer In Two Charts

In a 60 Minutes interview, President Barack Obama channeled President Ronald Reagan and asked “Are you better off than 6 years ago” referring to when President Obama was elected for the first time.

Here is the answer in two charts, Mr. President!

If you were able to take advantage of The Fed’s massive distortion of asset prices (such as the stock market and both residential and commercial real estate), you are better off!


But if you are one of the middle class, the answer is no.


If you are a minority, the answer is no.


But if you are in the top earner group, you are better off. All others? No.


OK, Rick Sharga noticed that it actually took me 4 charts, not two. So, just focus on the first two!!

And former Attorney General Eric Holder is far better off. He is now making $77 million with JPMorganChase.


Here is The March of The Federal Reserve!

Pending Home Sales Decline 1% In August And -4.1% Year-over-Year – Downward Trend Since Rate Surge in May 2013

According to the National Association of Realtors, pending home sales declined 1% in August and declined 4.1% YoY.


Since 2009, when the Federal government offered a tax credit for first time homebuyers and the resulting slump in the later half of 2010, pending home sales rose in 2011. But pending home sales growth has been on a downward trajectory since the upward surge in interest rates in May 2013.


New homes sales spiked in the last report while pending home sales growth has been down since May 2013 because of the interest rate increase. New home sales are experiencing a “no credit recovery.”


Declining labor force participation, real median household income and average wage growth isn’t helping matters.


So much for the argument that rising interest rates won’t harm real estate sales.

High Yield Credit Index Hit 2014 High, Yield Curve Flattens and Treasury 10Y Below 2.5% (Again) – Greece 10Y Yield Skyrockets!

I was reading someone’s forecast yesterday who said “Interest rates and inflation can only go up. There is no where to go on the downside.”

Credit yields can certainly rise along with Greek sovereign yields. The US Treasury still has room on the downside for movement.

First, the high yield option adjusted spread hit a new high for 2014.


Second, the 10Y-2Y Treasury curve flattened.


Third, the US Treasury 10Y yield is down below 2.5% … again.


Lastly, Greek 10Y sovereign yields exploded upwards by 38 basis points.


None of these indicators are pointing to a strong economic recovery. Either in the US or Greece.

Opa! (Greek for “Your cheese is on fire!”)


Residential Mortgage Growth Is Almost Back To Zero! (Worst Loan Growth Since Before 1960)

Year-over-year growth in residential mortgages is almost back to zero growth, as real median household slowly begins to recover.


The massive expansion of The Fed’s balance sheet, however, has not been very successful in righting the mortgage ship.


The Great Recession really hammered the residential mortgage market causing the worst loan growth since … before 1960.