Final Look at Local Housing Markets in October and a Look Ahead to November
Sales
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Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local
Housing Markets in October and a Look Ahead to November Sales
A brief excerpt:
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2 hours ago
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16 comments:
Kroger slammed on earnings miss
http://articles.moneycentral.msn.com/Investing/Dispatch/market-dispatches.aspx?post=1417428
Cautious consumer spending, food deflation and heightened price competition, especially from Wal-Mart Stores (WMT), all hurt sales.
We're all eating at home more these days and the largest traditional U.S. supermarket operator (by sales) still doesn't have any pricing power?
Will we someday need a wheelbarrow of bread to buy money? I joke of course.
More...
The Kroger Company F3Q09 (Qtr End 11/7/09) Earnings Call Transcript
http://seekingalpha.com/article/177191-the-kroger-company-f3q09-qtr-end-11-7-09-earnings-call-transcript
For the second consecutive quarter, deflation accelerated in most grocery categories. Last year at this time, we had estimated inflation of 6%. This year we estimate deflation to be minus 0.8% -- a nearly 700 basis point swing year-over-year. More important, deflation was particularly acute in categories like milk, produce, meat and grocery. We certainly sold more units, as any associate who stocked dairy or produce departments can attest, but at much lower retail prices. Based solely on our tonnage, we had a solid quarter. In fact, our tonnage during the quarter would have generated identical supermarket sales above our original annual guidance were it not for the continued deflation.
"In fact, our tonnage during the quarter would have generated identical supermarket sales above our original annual guidance were it not for the continued deflation."
Striking passage. I cannot believe the guy was using the term "deflation". Maybe Ben Bernanke should call him and tell him that is one of the FED's "dirty words", along with "transparency".
Things are getting very strange indeed.
Stag,
All I'm going to say about the Kroger earning miss is:
We're all WalMart now.
Our old friend Andy Xie is at it again:
http://www.bloomberg.com/apps/news?pid=20601083&sid=aYVuIVpuwo4I
This time I don't fully agree with his outlook though. The wage/price spiral prediction seems off the reservation - in the U.S. and in China.
GYSC,
Transparency! Please don't say that word on my blog.
I've worked out a special deal with the Fed behind closed doors. I'm allowed to say deflation all I want as long as I keep a sarcastic tone so that people don't really know if I am joking or not.
I am NEVER allowed to use the word transparency though.
Oh crap. I said the word twice. I hear the black helicopters again. You know the drill. There will be gunshots and you'll be asked to disperse. ;)
Stag,
I am NEVER allowed to use the word transparency though.
Blasphemy! You're only making it worse for yourself.
http://www.youtube.com/watch?v=MIaORknS1Dk
mab,
I agree with you. I think his success may have gone to his head. Perhaps he saw the movie 2012 and liked its tagline ("We were warned").
“The whole world is drinking poison to quench the thirst,” Xie said. “It may feel like relief now. The sickness will strike in 2012.”
Andy Xie has measured the future position of the economy and found it lacking. Let's say Andy Xie is all knowing. Now let's say there are enough people out there who believe he is. He's no doubt got quite a following now. I wonder if Andy Xie's public prediction was factored into Andy Xie's public prediction?
The measurement of position necessarily disturbs a particle's momentum, and vice versa. - Uncertainty Principle
In other words, if you were warned that the pain will come in 2012 then when would you sell in order to avoid the pain?
2012?
2011?
Today?
He who panics first, panics best?
http://en.wikipedia.org/wiki/Butterfly_effect
Small variations of the initial condition of a dynamical system may produce large variations in the long term behavior of the system.
Of course, if people sell now based on Andy Xie's prediction then the pain will come sooner. That would mean his prediction wasn't valid. Dizzying.
Blasphemy! You're only making it worse for yourself.
LOL!
2012? It's going to take that long? I need a new hobby!
GYSC,
"I need a new hobby!"
http://www.youtube.com/view_play_list?p=26A72EE008263027
That should keep you busy for a while, lol. ;)
Stag,
“The whole world is drinking poison to quench the thirst,” Xie said. “It may feel like relief now. The sickness will strike in 2012.”
The above statement is rubbish. When Greenspan crashed rates, CONsumption debt soared. People quadrupled down on asset inflation and high yielding granite counter tops. That's not happening today. Private debt is declining as it should. Sure, people are refinancing into lower rates, but that only makes sense.
What Xie is missing is that today consumers are not abusing the low rates with reckless abandon on idiotic speculation. Rather, they are using the lower rates to improve their financial situations.
I seriously doubt those that are refinancing today are doing cash out refinancings. The refi's make economic sense and are not being wasted on CONsumption debt. Huge diffference.
I just got a huge break on my monthly housing nut. Am I drinking poison? Hardly. The money is going in to the kids's college funds.
I have no doubt speculators are using the lower interest rates to bet big on inflation. They'll get what they deserve soon enough. And not only won't Bernanke help them, he'll cherish their demise.
mab,
Bernanke will cherish their demise as long as they aren't too big to fail.
Bernanke ‘Angry’ About AIG
http://blogs.wsj.com/economics/2009/03/03/bernanke-angry-about-aig/
“If there’s a single episode in this entire 18 months that has made me more angry, I can’t think of one, than AIG,” he said. “AIG exploited a huge gap in the regulatory system. There was no oversight of the financial products division. This was a hedge fund, basically, that was attached to a large and stable insurance company, made huge numbers of irresponsible bets, took huge losses. There was no regulatory oversight because there was a gap in the system.”
I do think he was genuinely angry.
Unlike most, I do think Bernanke would pull a Volcker if the speculators can manage to get the price of canned soup to rise quickly though. He already did it once and I don't think people understand that. Bernanke pushed on the jenga tower just hard enough and it collapsed under its own weight. He clearly doesn't want hyperinflation any more than he wants deflation.
$140 oil and speculation
June 26, 2008
http://www.energybulletin.net/node/45594
This is just denial
There are A LOT of reasons why oil prices are going up. Let me show you just a few.
...
Altogether, it appears that there are a number of factors explain oil price increases perfectly well, with no need to go into conspiracy theories or market manipulations.
All the king's charts and all the king's graphs could not prop up the price of oil for long.
Fed Fund's Rate on June 26, 2008: A mere 2% and falling!
Just look at the carnage. The Fed Funds Rate had been falling for a full year and continued to fall!
This time it is different though. The Fed Funds Rate is stuck. It can't fall any longer. What if it needs to fall though just to keep things moving. It's been falling since 1981 and now it is done? Hello Japan?
http://illusionofprosperity.blogspot.com/2007/09/let-them-eat-cake.html
In 2000, then-BOJ Governor Masaru Hayami was widely derided for raising rates from zero to 0.25 percent. Pundits called him Japan's answer to Herbert Hoover. Yet Hayami was trying to force Japan Inc. to implement structural reforms. It didn't work and rates returned to zero in March 2001.
"What Xie is missing is that today consumers are not abusing the low rates with reckless abandon on idiotic speculation. Rather, they are using the lower rates to improve their financial situations."
Abusing low rates and FED money printing is our governments job now and I doubt that got past Andy.
If we ever do get a recovery and they raise try to raise taxes the whole thing collapses again just like it did in Japan.
With a zombie banking system and the lack of political will to clean it up there isn't any way out. It's going to be a slow long death.
Kevin
Kevin,
Japan Considers to raise cigarette taxes to European levels
http://www.tobacco-facts.net/2009/11/japan-considers-to-raise-cigarette-taxes-to-european-levels
For the Japanese government, a cigarette tax increase is a tricky proposition. While it has an incentive to reduce smoking to curb national health-care expenses, it also owns a 50% stake in Japan tobacco. The government also could hurt tax revenue if consumption drops sharply.
It's tough for government to tax itself. Talk about diminishing returns.
Japan Tobacco Rises After Report on Cigarette Taxes (Update1)
http://www.bloomberg.com/apps/news?pid=20601101&sid=as_UoZklJ68U
“We’ve come to the conclusion that it wouldn’t be possible to quickly raise the tax by a large amount, say a few hundred yen” per box, Watanabe, who is also a vice minister of internal affairs, said.
Death and taxes. It's a tradeoff!
Japan Can Contain World’s Largest Debt, Morgan Stanley Says
http://www.bloomberg.com/apps/news?pid=20601101&sid=aWqcqCDzVHTU
Japan’s public debt can be managed because it is mostly in yen, a high ratio is owned by the public sector and the government has the option of raising taxes including the sales tax to contain the deficit, Sato wrote.
Morgan Stanley knows all about debt containment problems and Japan.
Behold: The $9 Billion Check That Rescued Morgan Stanley
http://www.businessinsider.com/the-9-billion-check-to-rescued-morgan-stanley-2009-11
Note who paid.
Stag, Kevin,
I think our future is Japan but with more austerity. Debt levels are way too high compared to current output and likely future growth. That said, I also think that Xie is off base and that today's low rates are being used more sensibly by CONsumers than under Greensham. I think that is an enormous distintion that Xie is ignoring. He's assuming that because low rates were poisonous in the recent past that they are poisonous today. Long rates were lower than today's long rates for more than a decade after the Great Depression!
When Greensham crashed rates, CONsumers went on an unsustainable debt binge and impoverished themselves with unaffordable and financially ruinous CONsumption debt. I just don't see that today. And the flow of funds data bears my observation out. People are shedding debt. Wall St. debt pushers don't like it, but decreasing the debt burden is necessary imo.
As for the Government filling the debt void left by the private economy, I'm as frustrated as anyone. The frustration applies to the TBTF CONcept too. I think we'd all be better off deflating the system back to the level of a decade ago. That's politics as much as eCONomics. The faux wealth does far more damage than good - politically, socially and economically. Nobody wants to see the Wall St. skimming operation and faux wealth destroyed more than me.
If you ignore housing, it's easy to be amazed at how little actual inflation resulted from all the senseless credit creation and financial specualtion over the past two decades. Bernanke wants us to believe that what happens in Vegas really does stay in Vegas. But the truth is more likely that prices should have been falling by 5% per annum and the financial rip-off is bigger than any one ever imagined.
Just thoughts. As always, comments and criticisms are welcomed and appreciated.
Regards,
mab
mab,
The inflation trade has worked since 2000. Anyone who bought gold, silver, oil, TIPS (at 3.5% over inflation), or I-Bonds (at 3.5% over inflation) and held until today has been rewarded. Big time.
The deflation trade has also worked since 2000. Anyone who bought 30 Year Treasuries (at 6%) and held until today has also been rewarded. Big time.
That's what easily amazes me, for what it is worth. They are supposed to be opposites. Instead, they have become linked sure things.
What hasn't worked since 2000 is the prosperity trade. I'm not a believer that we'll ever truly be able to restart that engine.
I'm not at all sure where we go from here. I doubt that both the inflation trade and the deflation trade are going to be "big time" winners over the next 10 years though. I'd be surprised if either were. There's a part of me that thinks the low hanging fruit off both trees has already been picked.
If I am right, then in order to make "big time" money in the casino now, we either need to be much smarter or luckier than those around us. I don't feel up to the task.
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