Housing Bubble Bursting?

[Big ole Boy]

Movie Title story lines

Yea,

..... the ....... "As Good as it Gets" story line ........ and ignoring the .....

..... "Somethings Gotta Give" .......... story line ......

 

[Big ole Boy]

Excess liquidity over last 4 years

Increasing concern that inflation has been fueled by excees liquidity over the past 4 years .... will take time to slow down inflation .........

... rate hikes looking more and more likely .......

.... inflation takes time to cool off ..... remember how long it took Volker?

.....they waited too long and it took years to catch up with it .......

 

[Pamela Crowley (Florida)]

Anybody else notice the increase in Stock Market trading TV ads?

 

[Big ole Boy]

I noticed the "Inventor" ads and more and more Bosley Hair treatment ads ....

"Inventor" ads were popular around 1982 .... when the economy was in the tank and people were vulnerable to so called markting companies that would present your ideas to corporations ... total rip off ......

....Bosley hair commercials make money when people feel the stress of a management weed out ......

 

[Randolph Kinney]

Eyes wide shut?

Eyes wide shut?

Commentary: Interest rates are already falling again

By Dr. Irwin Kellner, MarketWatch
Last Update: 12:01 AM ET Aug 1, 2006

HEMPSTEAD, N.Y. (MarketWatch) -- Are the bond market vigilantes sleeping or do they know something that the rest of us don't?

While long-term rates have bounced higher since reaching multi-decade lows back in 2003, they are still well below rates seen during the earlier years of this decade -- not to mention during the 1990s and 1980s. On Monday, the benchmark 10-year note closed with a yield of 4.986%, down from 5.138% a month earlier. See related story.

Yields are even lower, when you consider the rate of inflation. Except for a couple of brief periods in 2005, "real," or inflation-adjusted yields haven't been as low as they are today in at least a quarter of a century.

How low are real rates today? Would you believe 0.7%? That's right, fans, less than one percentage point. It's a far cry from the 3% real rate of return that the literature says investors in Treasury notes should get to compensate them for doing without their funds over such a long period of time.

How do we come up with such a low real interest rate? There are any number of price indexes you can use and periods of time in which to measure their rate of change, but to simplify matters I used the most recent 12-month change in the consumer price index. As of June, the CPI was 4.3% above its year-ago levels, so subtracting this from the current 10-year note's 5% yield produces 0.7%.

If you think that the last 12 months were an aberration and would prefer 24 months, instead, the inflation rate averages 3.4%. Subtract that from 5% and you get 1.6% -- about half the real rate of return investors should be looking for.

Since inflation, if anything, is accelerating, and Washington's burgeoning budget deficit is boosting the supply of Treasuries, you would think that buyers of this bellwether would be demanding a higher yield. You would be wrong.

Investors, it seems, can't get enough of these securities, especially if they reside abroad. Latest figures show that net capital flows into the U.S. rose to $69.6 billion in May from $51.1 billion in April. See related story.

Some of this may reflect the fact that interest rates are higher here than they are in most other countries. Some no doubt also traces to a flight to quality as investors shift money into safe Treasuries during times of uncertainty. See my column of July 18.

But a whole lot appears to be due to a growing feeling that economic growth is fading so fast that the Federal Reserve will have no choice but to end its 25-month regimen of raising short-term interest rates as soon as next week.

Now those of you who look at our forecast page know that not everyone thinks this way, myself included. You will also note from this page that there are the always-volatile labor force statistics that will be released between now and August 8th, when the Fed's rate-setting Open Market Committee holds its next confab. See Economic Forecast page.

Even if July turned out to be another weak month of job growth, the current inflation stats plus new Fed chief Ben Bernanke's need to prove his mettle as an inflation fighter suggests at least one more hike, to 5.50%. And if the labor data surprise on the upside, as they have been known to do, the bond market vigilantes may open their eyes to inflation and adjust rates accordingly.

Dr. Irwin Kellner is chief economist for MarketWatch. He also is the Weller professor of economics at Hofstra University and chief economist for North Fork Bank.

 

[Big ole Boy]

Iran Centrifuge Clock on Global Inflation

What can not be priced in to the economy outlook and bond rates is the known quantity of time it will take in terms of time for Iran to be able to produce its first nuclear bomb.

$200 a barrel oil is something business models are beginning to sketch out with the "Iranian Centrifuge" time table ..... I thinks its near the end of the year ....of 2006 .....

.... pricing this into the equation is untenable ......

....lets not forget that the FED can become a part of the "War Machine" ..... for the pentagon ......

.... strategic investing may need to include ...... a "Militarized FED" .......

......

 

[Randolph Kinney]

The U.S. Consumer and the Dollar

The U.S. Consumer and the Dollar

Richard Bernstein, Merrill Lynch Chief Investment Strategist, made the following comments regarding the correlation between the U.S. consumer and the U.S. dollar:

• The global imbalances are largely caused by U.S. over-consumption. Because the U.S. does not export enough to compensate for the huge deficits in energy and consumer goods, the global imbalances will correct by somehow restraining domestic U.S. consumption. One needs to remember that the primary reason these imbalances have not corrected, as many have predicted, is that monetary and fiscal policies in 2001, 2002 and 2003 were explicitly designed to exacerbate the global imbalances.
• There are three main methods to constrain domestic U.S. consumption: 1) raise taxes, 2) raise interest rates, 3) weaken the U.S. dollar. In the absence of fiscal and monetary responsibility of No. 1 and No. 2, the global market mechanism will weaken the U.S. dollar so that non-U.S. goods are increasingly unaffordable to U.S. consumers (i.e., inflation eats away at purchasing power).
• Accordingly, the dollar weakened considerably in 2002, 2003 and 2004 because of the huge monetary and fiscal stimulus during that period. However, we did not think that the dollar's strength in 2005 was surprising because the fiscal stimulus was wearing off and the Fed was tightening. In the old days, investors would say that the Fed was defending the dollar.

So, with talk of tax cuts lingering in Washington, it is solely up to the Fed to support the dollar. Hints of the Fed pausing or easing will, therefore, cause the dollar to weaken. (Anything good for the consumer is bad for the dollar.)

 

[Big ole Boy]

Interesting comments, but

Those are interesting comments about the future of the dollar; however, it ignores one significant factor or makes the implicit assumption about the price of oil.

As with all commentators they speak about things as if they have already been "priced in".

I would contend the in a world where "Peak Oil" occurs due to T. Boone Pickens assumption that oil can not be pulled out the ground at a faster rate than 85 million gallons per day ....

and that the Iranian Centrifuge clock towards nuclear arsenal are not reflected .....

.... with these two above senarios .... the FED will be forced to raise rates from these external affects rather than concern itself with US consumer consumption .....

...its always about what trumps what ......

...to buy oil and to slow the vicious cycle of hyper-dollar deflation the FED will be forced to contract consumer spending that feeds on the OIL/CONSUMPTION METRIC.

OIL/US CONSUMPTION relies on 2/3 rds (14 million barrels per day) to be imported to turn our economy ........

raising the rates and draconian contraction is the best defense for "the most stable" monetary policy ...... it may seem unstable in any historical sense ....

....but a weak dollar in the face of soaring oil prices is "an unsustainable" situation that would feed on itself ......

... our 6 months supply of national oil reserves may be "a weapon" the president can use to aid the FED.

 

[JSmith43]

.. our 6 months supply of national oil reserves may be "a weapon" the president can use to aid the FED.

Is that all we've got stored in Venezuela?? :new_2gunsfiring_v1:

 

[Big ole Boy]

Is that all we've got stored in Venezuela?? :new_2gunsfiring_v1:

As always Roger, your sense of Global theater illuminates .....

I would contend that Chavez would burn his supply first ..... by the way Venezuela is now importing more than it is exporting (hording) ......

..... Vene in latin is "vein" in english ......

..... the US could use a good oil fix ..... from Dr. Chavez who by the way just finish shaking hands with Mr. Iran