July 29, 2009
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RELATED TICKERS: GS
NEOCON Legacy Media WSJ Front Page: Home Prices Rise Across U.S.
Home prices in major U.S. cities registered the first monthly gain in nearly three years, the latest sign the housing slump could be easing. (WSJ Referenced the latest Case Shiller Report)
Really? Fooldom please tell me the there is hope / a bottom in these charts?
If the base line is 70 during a recession / depression and we areat 150...well, I am no analyst / chartist / technician....
Fooldom what do you say?
Marc Faber says the US will go into hyper-inflation. What does Fooldom say?
Inflation or Deflation or Stagflation?
MerleHazard Newest Hit Bail Out
Correction: My poll left out Inflation:
Ha ha ha, I laughed my a** this morning when I read that WSJ article. The title is all fine and dandy, but once you read the text and look at the pretty pictures, it's not as glorious as they claim.
Out of the 20 cities, 5 actually declined and 2 remained unchanged. You don't get that from the title...
Good post Abitare!
My jaw dropped when I saw that headline this morning.
The 20 city index is obviously still dropping like a rock. And the 10 city index looks like someone drew the real graph, then decided to erase the last month and pencil in a nice happy little uptick instead.
Lets not forget that I think alot of these numbers aren't seasonally adjusted. Of course more people are going to buy more homes in the spring and summer than in the fall and winter. Duh
There will be inflation but it will take some time to build. Some sectors have inflationary pressures now but that is offset with deflationary pressures in other sectors like housing and auto's.
The velocity of the money supply has not picked up enough to cause inflation yet. Further, the idea that there is too much slack in the economy actually is deflationary in the short run. It is not slack in manufacturing or labor. It is slack in purchasing power caused by unemployment.
The deficits are by nature inflationary as they weaken the $. That increases the price of imports (we are an importing nation of oil, a necessity, and many consumer goods, some necessities).
In the long run it depends on how the fed manages the money supply. Who is the next Fed chairman? However, I do not see strong inflationary pressures until global demand raises oil prices and/or the US economy's demand for goods and services starts to increase via improved purshasing power.
If interest rates rise much that will choke off both the economy and in the longer run, the inflation. Interest rates can rise merely because of increased default risk and reduced demand for US debt as the deficits are financed with more debt. In other words issuing more debt to pay for pernament widening deficits and the interest on the existing debt.
It mainly depends on the strength of the $ in the longer run. A weaker $ means more expensive imports like oil which tends to raise the cost of everything purchased and produced within the US.
Obama's overt plan to raise the price of energy is inflationary at the same time it kills jobs and decreases purchasing power. It automatically increases the price of domestically produced goods and services by raising the costs of production and transportation. Our economy is based on cheap energy. It will take decades to change to an efficient high cost energy society like Europe.
The Obama policies of a weakened $ (massive deficits) coupled with high energy costs are inflationary. However, they also tend to create unemployment indirectly which reduces purchasing power.
For the most part the Obama policies are stagflationary. They create both inflationary and deflationary (high unemployment low purchasing power) effects. The weak $ policy will increase prices of oil, gold etc. but the unemployment and purchasing power effects will decrease domestic demand.
The idea that shifting to a high cost energy economy will create jobs is basically bogus. Yes, massive new infrastructure would have to be created to make that switch but it violates the first law of finance.
Investing in less productive or negative ROI projects does not increase GDP it will lower it. If you borrow at 6 % and invest it at -10% you lose money. That law applies to governments not just corporations or individuals. If you borrow for short run consumption instead of productive assests you go bankrupt or at least lose future purchasing power. That law also applies to governments and countries in the long run.
One more thought. Bolton reports (stratfor) that Israel wants to bomb Iran's nukes. It that happens the oil prices are going to go straight up and stay up. That is inflationary.
If Iran gets to the point where they have enough warheads to launch a massive strike that will overwhelm the Israeli missle defense and wipe out any retaliation by Israel, then Israel will have no choice but to launch a premeptive strike with or with out US approval.
However, the strike will probably not be that effective without US approval and help. Obama is in over his head on this one and not likely to do anything until Israel is a puff of smoke.
It's going to be interesting to see what happens in terms of homes bought, homes built, etc. in the off-seasons. That factoring in with a prolonged bout of unemployment I'm almost guaranteed to make a killing off my current positions leading into next quarter.
All we're seeing is a 3 month effect of exceptionally low interest rates on mortgages and herd mentality from sellers that lower interest rates will spur buying and thus the subsequent selling of their property. Rates soared the past 25 days in comparison, I'll be in 2 months the "rise" will be over!
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