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    Mortgage applications plummet 14% as higher interest rates and Hurricane Ian crush demand

    Total mortgage application volume fell 14.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
    Refinance volume, which is most sensitive to weekly interest rate moves, dropped 18% for the week and was 86% lower than the same week one year ago.
    Mortgage applications to purchase a home fell 13% for the week and were a steep 37% lower year over year.

    A sign points toward an Open House in Alhambra, California on May 4, 2022.
    Frederic J. Brown | AFP | Getty Images

    The highest mortgage rates in more than 20 years coincided with one of the deadliest hurricanes on record in the United States, both contributing to a steep drop in mortgage demand.
    Total mortgage application volume fell 14.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, to the lowest level since 1997.

    The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.75% from 6.52%, with points decreasing to 0.95 from 1.15 (including the origination fee) for loans with a 20% down payment.
    “The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone,” noted Joel Kan, an MBA economist.
    Refinance volume, which is most sensitive to weekly interest rate moves, dropped 18% for the week and was 86% lower than the same week one year ago. The refinance share of mortgage activity decreased to 29% of total applications from 30.2% the previous week.

    Mortgage applications to purchase a home dropped 13% for the week and were a steep 37% lower year over year.
    “There was also an impact from Hurricane Ian’s arrival in Florida last week, which prompted widespread closings and evacuations. Applications in Florida fell 31%, compared to 14% overall, on a non-seasonally adjusted basis,” Kan added.

    With higher interest rates making an already pricey housing market even more expensive, homebuyers turned more to adjustable-rate mortgages, which offer a lower interest rate. That share of activity increased to 11.8%, up from 8.5% a month ago and around 3% at the start of this year, when mortgage rates were less than half what they are now.
    Mortgage rates came down slightly this week, according to another survey from Mortgage News Daily, but all bets are off at the end of the week when the important monthly employment report is released. Depending on how investors view the results — and how the Federal Reserve might react to those results — mortgage rates could move decisively in either direction.

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    UK’s Liz Truss pledges tax-cutting future in landmark speech plagued by protest and political infighting

    British Prime Minister Liz Truss on Wednesday that cutting taxes was “the right thing to do morally and economically.”
    Speaking at the Conservative Party Conference, Truss doubled down on a series of debt-funded economic reforms that have sparked in-party fighting and market turmoil.
    “We must level up our country in a Conservative way,” she said.

    Prime Minister Liz Truss is seeking to rally MPs around her her tax-cutting policies following political infighting and market turmoil.
    Jacob King | Pa Images | Getty Images

    LONDON — British Prime Minister Liz Truss insisted Wednesday that cutting taxes was “the right thing to do morally and economically,” doubling down on a series of debt-funded economic reforms that have sparked in-party fighting and market turmoil.
    Speaking at the Conservative Party Conference, Truss said she was determined to “level up our country in a Conservative way” in an effort to unite MPs around her tax-cutting plans and shore up her dwindling authority.

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    “Cutting taxes is the right thing to do morally and economically,” Truss said, adding that the Conservative Party “will always be the party of low taxes.”
    “Cutting taxes helps up face the global economic crisis, putting up a sign that Britain is open for business,” she said in her first conference speech as Conservative Party leader.
    “For too long, our economy hasn’t grown as strongly as it should have done,” she continued. “We must level up our country in a Conservative way.”
    “We will keep an iron grip on the country’s finances,” she said, in an apparent nod to her political idol, Margaret Thatcher, otherwise known as the Iron Lady. “I have three priorities for our economy: growth, growth and growth.”

    Party infighting and dwindling support

    The four-day conference, hosted in Birmingham, England, has been beset by cabinet infighting and animosity as long-time Tory lawmakers have spoken out against newly-installed Truss’s “growth-focused” economic policies.

    The latest rebellion has centered on Truss’ resistance to raising welfare benefits in line with inflation — currently running around 9.9% in the U.K. — reneging on a promise laid out by her predecessor Boris Johnson.
    Instead, she reportedly plans to increase support in line with average earnings growth, which, including bonuses, was around 5.5%, according to the latest figures.
    Truss has said the proposals would save billions of pounds for the government while “helping more people into work.” But fellow party members, including rightwing supporters, have cautioned the PM against cutting the incomes of Britain’s poorest as the country faces its worst cost-of-living crisis in a generation.

    Protesters have taken to the streets of the U.K. to demonstrate their anger at the new Conservative government headed by Prime Minister Liz Truss.
    Mike Kemp | In Pictures | Getty Images

    The leader of the House of Commons, Penny Mordaunt, who ran against Truss during this summer’s Tory leadership contest, said Tuesday that she supported benefits “keeping pace with inflation,” joining a chorus of MPs who have warned that cuts could spur a party rebellion.
    Indeed, some Tories have warned that the prime minister — less than a month into the job — is now fighting for her survival amid plunging poll ratings.
    Grant Shapps, former transport secretary, said Tuesday that it was possible the Conservatives could change leader again if Truss “does badly.”
    Britain’s opposition Labour Party was seen as having a 33-point lead over the Conservative Party on Thursday, days before the Conservative Party Conference, according to a YouGov poll.
    Still, Truss remained committed to her policies Wednesday, saying: “Not everyone will be in favor of change, but everyone will benefit from the result.”
    The prime minister’s speech was disrupted by shouts from environmental protesters, who were escorted from the audience after Truss requested: “Let’s get them removed.”
    It follows a series of protests in Birmingham over the past week, with members of the public taking to the streets to demonstrate their anger toward the government.

    Backlash over tax cuts

    Truss’s government has been plagued by controversy over the announcement last month of a string of debt-funded tax cuts — estimated to total £43 billion ($49 billion) — which critics say disproportionately benefit the wealthy and businesses.
    The prime minister herself has argued the cuts will spur growth at the top end of the economy, with knock-on effects across society.
    Amid the backlash, the government on Monday was forced to abandon its plan to abolish the 45% top rate of income tax, in an effort to quell financial markets after the proposals unleashed chaos on U.K. assets.

    Britain’s Prime Minister Liz Truss has admitted she should have laid the groundwork better for recent “growth-focused” tax cuts that roiled financial markets.
    Oli Scarff | Afp | Getty Images

    Announcing the decision in a tweet, Finance Minister Kwasi Kwarteng said “we get it, and we have listened,” adding that the plans had become a “distraction” following rising backlash from both sides of the political aisle.
    The tax cuts — one of several supply side reforms introduced in a Sept. 23 “mini budget” — sparked turmoil in financial markets, causing the British pound to hit a record low of $1.0382 and U.K. 10-year government bond yields to soar as high as 4.6%.
    As a result, the Bank of England was forced to step in with a £65 billion bond-buying plan to support U.K. pension funds.
    Sterling has since recovered marginally and was seen trading at $1.1371 at 11.50 a.m. local time, shortly after the prime minister’s speech.

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    Ford to end production of $500,000 GT supercar with special edition

    Ford will end production of its $500,000 GT supercar later this year with a special edition model paying tribute to the vehicle’s racing heritage.
    The 2022 Ford GT LM (Le Mans) will be the last model of the third-generation car, which was resurrected in 2016 after being a decade out of the market.

    2022 Ford GT LM Edition

    DETROIT — Ford Motor will end production of its $500,000 GT supercar later this year with a special edition model paying tribute to the vehicle’s racing heritage.
    The Detroit automaker on Wednesday said the 2022 Ford GT LM Edition will be the last model of the third-generation car, which was resurrected in 2016 after being a decade out of the market.

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    Ford said only 20 of the GT LM Edition cars will be produced. Deliveries are scheduled to begin this fall with production wrapping up later this year, according to the automaker.
    “As we close this chapter of the road-going Ford GT, the GT LM Edition gave us a chance to inject even more heart and soul from a podium-finishing racecar, furthering the tribute to our 2016 Le Mans win,” Mark Rushbrook, global director of Ford Performance Motorsports, said in a release.

    2022 Ford GT LM Edition

    The GT is a collector’s car steeped in racing history. This GT LM Edition pays tribute to the third-generation supercar’s overall win at the 2016 Le Mans 24 Hours as well as Ford sweeping the podium to beat Ferrari — as portrayed in “Ford v. Ferrari” in 2019 — at the famous French race in 1966.
    The current-generation GT was a surprise reveal at the 2015 North American International Auto Show in Detroit. Ford kept the car a secret even within the company, only allowing select executives and employees to work on it in a nondescript basement room in a building near its headquarters in Dearborn, Michigan.
    Only 1,350 of the third-generation GTs — powered by a twin-turbocharged, 3.5-liter EcoBoost V-6 engine with 660-horsepower and 216 mph top speed — were produced by supplier and contract manufacturer Multimatic Inc. of Markham, Ontario, in Canada.
    A Ford spokesman declined to comment on the possibility of a fourth-generation GT in the future. He also declined to comment on pricing of the latest limited edition model, saying GT pricing has started around $500,000.

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    The U.S. is not harvesting as many fish as it could, driving up imports

    In 2020, the global fishing industry reached an all-time record of production worth an estimated $406 billion, according to the Food and Agriculture Organization (FAO) of the United Nations.
    Fish is a key source of protein, making it essential in feeding the growing world population.

    In the United States, New Bedford, Massachusetts, is the country’s most valuable fishing port, bringing in a whopping $376.6 million worth of seafood in 2020.
    “Fishing stocks did have a collapse in the ’90s. It changed the species that we were offering. It changed the availability. It changed the pricing,” Laura Foley Ramsden, fourth generation “fish mongress” of Foley Fish in New Bedford, told CNBC.
    The collapse led to an amendment to the Magnusson-Stevens act of 1976, which is the primary law governing marine systems, and it ultimately made the U.S. into a world leader of fisheries management, outlawing overfishing and demanding population rebuilding.
    Overfishing occurs when the fish harvest outweighs the maximum sustainable yield.
    “You’re fishing harder than would maximize yield, but it doesn’t mean declining. It doesn’t mean going extinct. It doesn’t mean collapsing. It simply means fishing too hard,” Ray Hilborn, professor of aquatic and fishery services at University of Washington, told CNBC.

    In the U.S., the National Oceanic and Atmospheric Administration estimates that 90% of fisheries are now sustainably managed. As of June 2020, 47 fish stocks have been rebuilt like the chinook salmon and Atlantic sea scallops.
    “There are some issues … that have led to underfishing of annual catch limits in New England on certain species as a result of trying to protect other species. So, it’s complex,” Ramsden said. 
    Underfishing, which has become common in the U.S., occurs when fish are harvested at a rate lower than would produce maximum sustainable yield.
    Hilborn said as much as 20 to 30% of potential yield is lost by cautious management.
    For example, when NOAA reported catch numbers for the greater Atlantic groundfish, only about 15% of potential catch, measured in pounds, was harvested between May 2021 and April 2022.
    America imports anywhere from 70% to 85% of its seafood, according to NOAA. In 2020, the U.S. imported over 6 billion pounds of seafood worth over $21 billion, making for a national seafood trade deficit of $17 billion.
    Some supply chains are murky. Many countries don’t have data on trends and stocks because they don’t have management systems in place, according to the FAO.
    “Everything we do know suggests that, on average, they are fishing too hard,” Hilborn said, adding that those dominant countries include China, Korea, Vietnam, Indonesia, Thailand, India.”
    The U.S. imported $2.4 billion worth of seafood from illegal, unreported and unregulated fishing in 2019, accounting for about 11% of total U.S. seafood imports, according to the U.S. International Trade Commission.
    Not only would eliminating imports of so-called IUU seafood result in less imports overall, it would increase U.S. prices and increase total operating income of the U.S. commercial fishing industry by an estimated $60.8 million.
    Watch the video to learn more about the U.S. fishing industry, market forces at play, the difference between overfishing and overfished, the role of climate and crime in global supply chains of seafood and what solutions may be on the table.

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    Climate reparations may be ethical, but they aren't the best fix, climatologist says

    Calls for climate reparations for poorer countries hit hard by climate change are growing louder after catastrophic floods in Pakistan. But though they may be ethical, they aren’t the best solution to a complex problem, one climatologist said.
    “[Climate reparations are] the ethical thing to do,” said Friederike Otto of the University of Oxford, “but a more equitable world is much better able to solve the complex crises we deal with. If all parts of society are involved in decision-making, ultimately everyone will be better off.”
    She added that “the most important preparation” is for vulnerable countries to invest in social security, health care and education. 

    Displaced people in floodwater after heavy monsoon rain at Usta Mohammad city, in the Jaffarabad district of Balochistan province, on Sept. 18, 2022. Thirty-three million people have been affected by the floods in Pakistan, which started with the arrival of the monsoon in late June.
    Fida Hussain | Afp | Getty Images

    Calls for climate reparations for poorer countries hit hard by climate change are growing louder after catastrophic floods in Pakistan. But though they may be ethical, they aren’t the best solution to a complex problem, one climatologist said.
    “[Climate reparations are] the ethical thing to do,” said Friederike Otto, a climatologist at the University of Oxford, “but a more equitable world is much better able to solve the complex crises we deal with. If all parts of society are involved in decision-making, ultimately everyone will be better off.”

    Pakistan’s floods have killed nearly 1,700 so far. They’ve also resulted in at least $30 billion in economic losses, according to government estimates.
    Thirty-three million people have been affected by the floods, which started with the arrival of the monsoon in late June, and were caused in part by melting glaciers. More than a third of the country is under water.
    Pakistan was among the 10 countries in the world that are most affected by climate change in the past two decades, according to data by Germanwatch’s Climate Risk Index. Yet, the South Asian country is responsible for less than 1% of global emissions, its government said. 
    The top contributors of carbon dioxide emissions are China, the United States and India, data from the United States Environmental Protection Agency showed.

    Not a straightforward solution

    Climate reparations refer to the monetary compensation the world’s largest emitters give to developing countries bearing the brunt of climate change.

    However, though climate reparations appear to be a relatively straightforward solution, their implementation isn’t, Otto said.
    There needs to be assurance that the funds will directly benefit those that suffered losses, she said. At the same time, for climate reparations to be successful, there needs to be an official classification of weather and climate events and natural hazards, she added. 

    “An IPCC task force on emission metrics exists. We could do the same for identifying metrics to measure climate impacts. The more difficult aspect for reparations to be successful would be to ensure that victims will benefit,” Otto said, referring to the Intergovernmental Panel on Climate Change, and adding that this will depend on good governance. 
    Her comments come amid mounting pressure on wealthier countries to remedy the damage that the climate crisis has inflicted on developing nations.
    Knut Ostby, the United Nations Development Programme’s resident representative in Pakistan, said rich countries should ramp up climate financing for countries like Pakistan which are reeling from climate disasters.
    “Promises have been made about financing for climate adaptation for countries hit by climate impact like Pakistan,” Ostby told CNBC’s “Squawk Box Asia” in mid-September.
    “I think this financing has to increase,” he added.

    The U.N. representative urged rich countries to consider debt relief and debt swaps as one of the tools to alleviate the financial costs incurred by affected countries. “Countries with debts to countries impacted by climate change can give relief on this debt in exchange for the countries investing in climate adaptation actions,” he said.
    Andrew King, a senior lecturer at the University of Melbourne, is another proponent of climate reparations. It is “unfair” for nations who have contributed little to the problems of climate change to bear the brunt of its impact, he said. 
    Such countries have less “adaptive capacity” to climate change and less resilience to current extremes, so support is needed to ease the burden they face, he told CNBC.  

    ‘There will be more Pakistans’

    And climate disasters are likely to take place with greater frequency across the world.
    “Many tropical nations such as India are at increased risk of coastal flooding,” said King. “These nations face risks from dangerous humid heat that can be harmful to health,” he added, acknowledging that heat waves across the globe have been increasing in intensity and frequency. On top of that, extreme rainfall is on the rise and droughts have been worsening, he said.
    India’s average maximum temperature in March was the highest average maximum in 122 years.
    “There will be more Pakistans,” Ostby said. “There are already more Pakistans.”

    A better way forward?

    Otto, however, said “the most important preparation” is for vulnerable countries to invest in social security, health care and education. 
    While developed countries are partly responsible for climate change, local authorities in vulnerable countries also have a responsibility to provide proper planning and education on the appropriate responses to early warnings to climate events, she said.

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    High mortgage rates, tight supply and economic uncertainty: Here's what's happening with home prices

    Black Knight, a real estate software, data and analytics firm, reported the second straight month of declines in August, with prices down 0.98% from July.
    CoreLogic also released a home price report this week that showed home prices in August still 13.5% higher than August 2021.
    Prices are off their peaks in 97 of the 100 largest U.S. markets, but they’re still roughly 40% higher than they were in 2019, before the pandemic, Black Knight says.

    Daniel Acker | Bloomberg | Getty Images

    Home prices are softening in most markets across the nation.
    Yet home prices are still higher compared with a year ago, and it’s unlikely they will fall too steeply.

    The sharp rise in mortgage rates over the past several months has made housing more expensive for anyone needing a loan. While that has some buyers pulling back, and some sellers lowering what they’re asking for, strong demand and tight supplies are supporting prices.
    Recent reports are using monthly comparisons because of the sharp turnaround in the once-hot, pandemic-driven housing boom. So the changes can appear dramatic.
    Black Knight, a real estate software, data and analytics firm, reported the second straight month of declines in August, with prices down 0.98% from July. It reported an upwardly revised 1.05% monthly decline in July. Put together, these mark the largest monthly declines in more than 13 years and the eighth largest since at least the early 1990s, Black Knight said.
    “Either one of them would have been the largest single-month price decline since January 2009 – together they represent two straight months of significant pullbacks after more than two years of record-breaking growth,” Ben Graboske, Black Knight’s president of data and analytics, wrote in the report.
    “The only months with materially higher single-month price declines than we’ve seen in July and August were in the winter of 2008, following the Lehman Brothers bankruptcy and subsequent financial crisis,” he added.

    Despite all of these factors, it’s important to remember that real estate is also heavily influenced by local economic forces. It’s seasonal, too. Families tend to buy larger, pricier homes in the spring and summer, so they can move during between school years. That skews prices higher. Smaller, less-expensive homes tend to sell in the fall and winter, skewing prices lower. This is why home prices are usually compared year over year, to get the most accurate reading.

    Cooling off

    The average home price is now about 2%, or $8,800, off its June peak of $438,000. Black Knight reports prices are off their peaks in 97 of the 100 largest U.S. markets, but they’re still roughly 40% higher than they were in 2019, before the pandemic.
    But the rate of growth is cooling. This week, CoreLogic reported that home prices were 13.5% higher in August than in the same month a year earlier. That is the lowest annual rate of appreciation since April 2021, according to the report. It partially reflects cooling buyer demand due to higher mortgage rates. CoreLogic expects these annual increases will continue to shrink, but will still show a gain of 3.2% by August of next year.
    The National Association of Realtors, in its August home sales report, showed the median price of an existing home was up 7.7% year over year. Compare that to a 15% year over year gain just last May. The median is often skewed by the types of homes selling. After a boom in luxury home sales during the pandemic, sales of higher-priced homes dropped in August. That may account for at least some of the smaller annual gain.
    The Realtors did, however, note that while home prices traditionally fall from July to August, this year they fell at three times the normal pace.
    Certain markets are softening faster than others. Some of the markets seeing the biggest declines are some of the formerly priciest, such as San Jose, San Francisco and Seattle, according to Black Knight. These markets are being hit hardest by rising mortgage rates because they were so unaffordable to begin with.
    Other markets seeing big declines are those that saw the biggest jump in demand during the pandemic, such as Phoenix and Las Vegas. With the ability to work from anywhere, people flocked to these comparably more affordable markets where the climate may have been more friendly. That surge in demand fueled prices.
    Big price gains are holding up in Florida markets, which continue to see strong demand because of the shift in many tech workers from Silicon Valley to the Sun Belt during the pandemic.

    Tight supply buoys prices

    It’s unlikely home prices will fall dramatically the way they did during the Great Recession caused by the financial crisis because there is much more demand than there is supply.
    Before the pandemic, supplies were low due to a decade of underbuilding following the Great Recession. The furious homebuying during the pandemic only exacerbated that shortage. That supply demand imbalance was what pushed home prices more than 40% higher in just two years.
    There are fewer sellers, too. They see the market weakening and some don’t want to get less for their home than they feel it deserves.
    “Right now, prospective sellers are not only coming to grips with falling demand and declining prices due to sharply higher interest rates, but they also have a growing disincentive to give up their own historically low-rate mortgages in this environment. Some may be waiting out the market to see if demand – and prices – return in the spring,” said Graboske.
    There is about three months of supply in the existing home market, which is about half of what is considered a balanced market. There is more supply in the new home market, but new construction comes at a price premium, and buyers today are contending with higher mortgage rates. Affordability is still at one of the worst levels in history, despite prices softening slightly.
    What most experts seem to agree upon is that this is not a “normal” housing market or even a normal correction in prices. Inflation, global economic uncertainty, rising mortgage rates and a still tight supply of homes for sale are all weighing on potential buyers. It remains to be seen how far they will pull back and how much that pullback will cool prices.

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    Trump SPAC shares slide after Elon Musk revives deal to buy Twitter

    Shares of the SPAC set to take Trump Media public fell after Elon Musk revived his deal to buy Twitter.
    Former President Donald Trump launched the Truth Social platform after he was banned from Twitter following the events of Jan. 6, 2021.
    Musk has previously said he would lift Twitter’s ban on Trump if he bought the company.

    Shares of Digital World Acquisition Corp., the special-purpose acquisition company seeking to take Trump Media and Technology Group public, slid Tuesday after Elon Musk reversed course and proposed going through with his deal to buy Twitter.
    Shares of DWAC fell more than 5% Tuesday to $17.10. The stock’s 2022 peak was about $97 in March.

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    Trump Media and Technology Group owns Truth Social, the platform founded by former President Donald Trump after he was banned from Twitter following the Jan. 6, 2021 Capitol insurrection.

    The Truth social network logo is seen on a smartphone in front of a display of former U.S. President Donald Trump in this picture illustration taken February 21, 2022.
    Dado Ruvic | Reuters

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    Cramer's lightning round: Cisco is going to snap back big

    Monday – Friday, 6:00 – 7:00 PM ET

    It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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    Cisco Systems Inc: “I like the stock. … When it snaps back, it’s going to snap back big.”

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    Plug Power Inc: “If you’re willing to lose money, then I give it my blessing.”

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    SoFi Technologies Inc: “I think the fact that the stock is at $5 is actually ridiculous. .. I want people in SoFi.”
    Disclaimer: Cramer’s Charitable Trust owns shares of Cisco.

    Jim Cramer’s Guide to Investing

    Click here to download Jim Cramer’s Guide to Investing at no cost to help you build long-term wealth and invest smarter.

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