The "You Are Here" point is October's data point.
There's a ton of oil out there right now. Oil prices have more than doubled since the bottom and the $80 line in the sand appears to be holding. If oil can't rise further, then energy's contribution to the CPI will be severely limited going forward.
The "You Are Here" point is October's data point.
All things being equal, look what flat housing costs would do to the CPI. It's probably worth two looks. Based on this chart, we might expect the overall CPI to be roughly negative 1%.
Q3: Record Rental Vacancy Rate, Homeownership Rate Increases Slightly
These excess units will keep pressure on rents and house prices for some time.
So will this.
Slow Growth and High Unemployment for U.S. in 2010: Report
"With such sluggish growth, the unemployment rate will likely peak at 10.5 percent in the first quarter and remain at or above 10 percent for almost all of next year," the closely watched report added.
And this.
Lending Squeeze Drags On
"The idea that we will reset to where we came from is false," Mr. El-Erian says. "It is a bumpy journey to a new destination with significant long-term effects."
Source Data:
St. Louis Fed: CPI-U: All Items
St. Louis Fed: CPI-U: Energy
St. Louis Fed: CPI-U: Housing
Stag,
ReplyDeleteI think the CPI will actually over-state rents for a period. OER is the biggest component of shelter and it is based on a goofy methodology. Actual rental rates are going to get old yellered given the glut of housing units.
Regardless, I share your outlook on near term inflation.
I use a propri
mab,
ReplyDeleteIn the past, the CPI ran hotter in housing slumps as owners became renters. This pushed up rents. Further, rents are also sticky and need time to adjust.
One "goofy" aspect is how an empty house is treated. It's not $0 rent. It's simply ignored. No deflation. Put someone in it and charge them a dollar and there's massive deflation though.
I'm not sure where we go from here but I think negative household formation is a distinct possibility if jobs aren't created soon. Adult children can and are moving back in with parents. If I was struggling, I'd be looking for roommates at the very least.
Old yellered rents will trickle into the CPI eventually, assuming they are coming. In any event, check out the CPI: Housing index I offered as a link. It's flat at best.
Democrats prepare to raise the federal debt ceiling by as much as $1.8T before New Year's.
ReplyDeletehttp://www.politico.com/news/stories/1209/30417.html
Not sure how many time they have raised the ceiling this year but the way it's going this may become a weekly event.
Word verification
SAYAW
Kevin
Kevin,
ReplyDeleteIt's like an Amish barn raising. Nothing to worry about.
http://www.dallasnews.com/sharedcontent/dws/bus/stories/120509dnbusdubaitower.3a79461.html
Oops! Wrong link! ;)
Yield Curve Steepest Since 1980; Hard Times Ahead in 2010
ReplyDeleteBY MIKE SHEDLOCK | december 10, 2009
"In the absence of a war outbreak in the Middle East or Pakistan -- and/or Congress going completely insane with more stimulus efforts -- I think oil prices are likely to drop, the dollar will strengthen or at least hold its own, and the best opportunities are likely to be on the short side,"
http://tinyurl.com/1w56
This article had some cool graphs too.
Nice find Watchtower.
ReplyDeleteThe 30 year sale today was not so great, any ideas? I have a few but I hate bonds!
watchtower,
ReplyDeleteThere should be too kinds of investors in the world.
1. Those who think the popped balloon can't be fully reflated.
2. Those who don't think the popped balloon can be fully reflated.
Just an opinion of course. ;)
Stag,
ReplyDeleteThere should be too kinds of investors in the world.
Of the two types of investors that you listed, which one believes that we're going to work really hard, pay down our excessive private debts, find that elusive & lasting non-bubble prosperity and leave billions of Asians wondering why we are so darned globally competitive even though our workers make 10X as much.
I'm just wondering because I'm the other kind of investor.
GYSC,
ReplyDelete"The 30 year sale today was not so great, any ideas?"
Free budgies!
http://www.youtube.com/watch?v=WU5htlNC4to
http://www.youtube.com/watch?v=6aA55gcc5nM
All,
ReplyDeleteI will link it tonight, but Accrued Interest has a great debate post up about debt in various forms and whether they are "good" or "bad". Agree or not with the writer, it is a great thinking exercise:
http://tinyurl.com/y8c43hl
"The 30 year sale today was not so great, any ideas?"
ReplyDeleteNot any that would be coherent on my part but KD had this to say:
"You dished out over $1.4 trillion in trash last year, and are $300 billion in the hole in two months this year - already. For the math-challenged that's $1.8 trillion for this fiscal year, if your profligacy continues.
Go ahead, boyz, try to bail everyone out that's a Wall Street bigwig. Keep it up - the bond market will take care of you soon enough, and America will go "bang" - literally."
http://tinyurl.com/ytn8ru
Oh yeah, KD had this from Australia's Barnaby Joyce too:
"THE OPPOSITION finance spokesman, Barnaby Joyce, believes the United States government could default on its debt, triggering an ''economic Armageddon'' which will make the recent global financial crisis pale into insignificance.
Senator Joyce told the Herald yesterday he did not mean to alarm the public but there needed to be a debate about Australia's ''contingency plan'' for a sovereign debt default by the US or even by a local state government."
mab,
ReplyDeleteVery amusing and true. Sigh.
Did I really type "too"? Good grief. There should be TWO types of bloggers.
1. Those who double check their comments for grammatical errors before posting.
2. Those who don't comment without first double checking for grammatical errors.
I'm just wondering because I'm the other kind of blogger today, lol. ;)
Do not be mean Mark!!!
ReplyDeleteI am usually pressed for time with about 6 windows open, so spelling takes a hit, but I think you all get what I mean.
Sorry, I wuz not un englush majur in callage.
I was watching the results of the bond auction on CNBC today and Rick Santelli was a treat.
ReplyDeletehttp://247wallst.com/2009/12/10/no-one-wants-treasury-long-bonds/
He did say something encouraging and/or deeply sarcastic to say towards the end of his rant.
He upgraded the auction from an F to an F+, lol.
My sale of TIP in November is looking better every day. I listed off quite a few things that could go wrong in various places on this blog and I'll be darned if many of them aren't happening right now.
The euro started going down. Thanks Greece.
Oil is going down. Thanks glut.
Deflationary forces are appearing again.
Too much treasury supply is meeting too little demand. Yields are rising. Real yields are rising too.
Continued stock market euphoria (either real or imagined, makes no difference).
Productivity miracles (fewer workers).
GYSC,
ReplyDeleteI was heckling myself, not you.
I'm the one who said...
"There should be too kinds of investors in the world."
How did that "too" get in there? Shame on me.
No problem Mark, I know my comments lack grammar, but they are deep in content! HAHA
ReplyDeleteSorry for another,
ReplyDeleteI will post soon about todays bond sale, but I am lost on the whole inflation angle as well. I will need help thinking this through.
17 comments! I could not get 17 comments on contest post!
ReplyDeleteGYSC said:
ReplyDelete"17 comments! I could not get 17 comments on contest post!"
Don't beat yourself up GYSC, these posters at Mark's site are mostly Halo groupies disguised as financial wizards.
You guys are feeding my "comment" beast. I'm the multiplier in this leveraged system, lol.
ReplyDeleteYou post, I post, we all post as GYSC screams. ;)
I never scream, only whimper.
ReplyDeleteGYSC,
ReplyDeletehttp://www.youtube.com/watch?v=qgEzGs6xn5k
Stag,
ReplyDeleteIn any event, check out the CPI: Housing index I offered as a link. It's flat at best.
I've looked at that chart many times in the past. I find looking at it from this angle much more telling:
http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=CPIHOSNS&s[1][transformation]=pc1
I hesitated to bring this up, knowing how we have beat this cpi ex-housing horse up many times already. I just couldn't resist. ;)
Stag,
ReplyDeleteOops, I meant to give you this CPI link from the BLS.
http://www.bls.gov/cpi/cpifact6.htm
Per the above link (and as discussed before), rental equivalence (OER) was instituted in 1983. Since then, the CPI has become very smooth and predictable. Looking at the post 1983 CPI, one might think that our central bankers had really mastered their craft.
http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=CPIAUCNS&s[1][transformation]=pc1
No wild CPI swings what-so-ever. For certain, banks could leverage the stability like crazy.
Bernanke called it the age of moderation. Looks to me like we just ignored some inCONvenient facts. I don't think history will give the period such a benign name.
Going forward, I doubt the Fed will ever make the same mistake regarding housing again. I just hope they don't go full idiot and try to paper over their mistakes. We've had enough financial fraud. Prudent people have suffered enough.
One more thought. Volcker is a phoney. It's largely a myth that he was an inflation fighter.
mab,
ReplyDelete"No wild CPI swings what-so-ever. For certain, banks could leverage the stability like crazy."
Indeed. People do like to push the limits. If your deepest darkest desire is a 10% swing in your investments and the safety valves only allow 0.001% swings, then extreme leverage can still get you there! ;)
It's like going to the race track and betting on the favorite to show. Generally speaking, you can't win or lose much money doing that if you do it every race. It's a very boring bet. However, if you use tens of thousands of dollars of borrowed money (say from your credit card) then you can turn that very same bet into quite the thrill ride.