Expectations For Lower Home Prices In PCE Report

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

Blaming Bank Examiners

The Congressional hearings about the failure of Silicon Valley Bank essentially blamed the banking examiners as the primary scapegoat. An inverted Treasury yield curve is what ultimately caused Silicon Valley Bank to fail, but this bank held much more long-term Treasury bonds than most other banks.

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The other culprit that took out Silicon Valley Bank was a spike in Treasury yields in February in the wake of the unexpectedly strong January payroll report, which was grossly exaggerated by seasonal adjustments as the WSJ, MarketWatch, Bain Capital and I have cited.

Had the Labor Department not exaggerated January payroll growth, Treasury yields might not have spiked and Silicon Valley Bank might still be solvent, so the federal government in the end aided and abetted the stresses that are now impacting the banking system. The solution to un-stressing the banking system is simple, the Fed has to un-invert the Treasury yield curve with its open market action.

Spring Surge

The American Petroleum Institute on Tuesday reported that crude oil inventories declined by 6.1 million barrels in the latest week, which is the largest weekly drop since November. Further putting upward pressure on crude oil is that Turkey is blocking Iraqi crude oil exports due to a dispute with Kurdish authorities.

The bottom line is that worldwide crude oil demand is now in the midst of a seasonal spring surge, so crude oil prices are expected steadily rise until demand peaks in the summer months. Complicating matters further, Russia said that it is close to fully implementing its March announcement of a 500,000 per barrel per day cut in crude oil production.

The Conference Board on Tuesday announced that its consumer confidence index rose to 104.2 in March, up from 103.4 in February. This increase was led by the expectations component, which rose to 73 in March, up from a revised 70.4 in February.

Unfortunately, the present situations component slipped to 151.1 in March, down from 153 in February. Overall, the increase in consumer confidence was encouraging and bodes well for an increase in March retail sales.

Home Prices In PCE

S&P CoreLogic Case-Shiller on Tuesday announced that its National Home Price index declined 0.2% in January, which represents the seventh straight month of declining home prices. Over the past 12 months, median home prices have risen 3.8%. However, mortgage rates have risen from 4.42% a year ago to 6.42% in the past year, so higher mortgage rates are constraining home price appreciation.

Formerly hot housing markets in the West are experiencing the fastest home price declines. Median home prices are now $363,000 according to the National Association of Realtors. Hopefully, lower home prices will show up on Friday in the Personal Consumption Expenditure (PCE) report, which is the Fed’s favorite inflation indicator.

Coffee Beans

A North Carolina animal shelter is trying to find a new home for an unusual pair of bonded animals -- a dog and a goat. "Best friends" Cinnamon the goat and Felix the dog are so attached that Cinnamon will cry when the two animals are separated, so the shelter is determined to find the duo a home together. Source: UPI. See the full story here.