Reason to Worry? Most economists are unconcerned about surge in wholesale prices

[sharon sanders]

Maybe they should study the concept of inflationary depression....


AP

Published: December 16, 2009


WASHINGTON


Evidence that the economic rebound could eventually raise inflationary pressures emerged in a report yesterday that wholesale prices surged last month.


Most economists aren't worried, though. They think that the economy remains too weak for the price increases to last

more ....


http://www2.journalnow.com/content/2009/dec/16/reason-to-worry/

 

[Laidback Al]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

I am not worried, yet. With unemployment hovering around 10% with little foreseeable decline in the future, there will not be much inflationary pressure. Consumers without jobs are not in a position to spend and start driving up prices. Consumers have always been the engine that drives the economy. Until the unemployment rate starts to fall, we will continue to have a fragile economy.

 

[sharon sanders]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

What about demand from overseas driving up selected asset prices in the U.S.?

 

[sharon sanders]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

• <small>DECEMBER 16, 2009, 11:30 A.M. ET</small>

<!-- ID: SB10001424052748704541004574599981338400104 --> <!-- TYPE: Markets Main --> <!-- DISPLAY-NAME: --> <!-- PUBLICATION: The Wall Street Journal Interactive Edition --> <!-- DATE: 2009-12-16 11:30 --> <!-- COPYRIGHT: Dow Jones & Company, Inc. --> <!-- ORIGINAL-ID: --> <!-- article start --> <!-- CODE=DJII-COMPANY SYMBOL=ccred CODE=DJII-REGION SYMBOL=usa CODE=DJII-SUBJECT SYMBOL=m13 CODE=DJII-SUBJECT SYMBOL=mcat CODE=DJII-SUBJECT SYMBOL=e52 CODE=DJII-SUBJECT SYMBOL=ecat CODE=DJII-SUBJECT SYMBOL=ncat CODE=DJII-SUBJECT SYMBOL=nfact CODE=DJII-SUBJECT SYMBOL=nfce CODE=DJII-REGION SYMBOL=namz CODE=SUBJECT SYMBOL=OCUR CODE=SUBJECT SYMBOL=OMKM --> Dollar's Future Looks Brighter Than the Euro's



By MICHAEL CASEY

NEW YORK -- How quickly the tables turn.



Two weeks ago, after the euro had broken back through the $1.50 barrier, the consensus seemed to be that it would continue the upward track it had maintained against the dollar since March. Yet here we are on Tuesday, testing a floor at $1.45.



The about-face is no accident. While it's perhaps too early to call a definitive end to the dollar's slide, there are fundamental reasons why it has outperformed its European counterpart this month. These get down to the relative capacity of the two central banks involved to confront their particular financial and economic challenges. And for now, the Federal Reserve is getting higher marks than the European Central Bank.



http://online.wsj.com/article/SB10001424052748704541004574599981338400104.html

 

[sharon sanders]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

With sales of newly built homes jumping to the highest level this year, the Southern California housing market continued to show slow but steady improvement in November. Total sales of new and resale homes sold in November 2009 were down from the prior month due to typical seasonality, but results were up nearly 15 percent from November 2008 and represented the 17th consecutive month of year-over-year improvement.


snip


Absentee buyers purchased 19.1 percent of all homes sold last month, while buyers who appeared to have paid all cash ? meaning there was no corresponding purchase loan ? accounted for 24.4 percent of sales, based on an analysis of public records.


http://www.nuwireinvestor.com/artic...-shows-slow-and-steady-improvement-54253.aspx

 

[AlaskaDenise]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

...while buyers who appeared to have paid all cash ? meaning there was no corresponding purchase loan ? accounted for 24.4 percent of sales...

Is that saying some people feel the housing market, with deflated (but uncertain) prices, is a better investment than the traditional institutional instruments?

We've seen something similar in our very rural community. The lumber/hardware store where my son works has seen a shift in building supply customers, as more people build a "weekend" home merely as a means of "storing value". The pay cash for the lumber, etc., which has helped to smooth out any economy-related downswings for the business.

.

 

[Laidback Al]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

What about demand from overseas driving up selected asset prices in the U.S.?

Only tangible assets (e.g. real estate) have a chance for succumbing to inflationary pressures from overseas demand. But only to the extent that that there are other investors on the horizon waiting to pay an inflated price to buy your asset in the future. Given the large number of individuals and institutions that were burned in the last real estate bubble, I don't believe there are deep pockets standing in line to over inflate the current real estate market any time in the near future.

 

[Laidback Al]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

Quote:
<table border="0" cellpadding="6" cellspacing="0" width="100%"> <tbody><tr> <td class="alt2" style="border: 1px inset ;"> ...while buyers who appeared to have paid all cash ? meaning there was no corresponding purchase loan ? accounted for 24.4 percent of sales... </td> </tr> </tbody></table>
Is that saying some people feel the housing market, with deflated (but uncertain) prices, is a better investment than the traditional institutional instruments?

We've seen something similar in our very rural community. The lumber/hardware store where my son works has seen a shift in building supply customers, as more people build a "weekend" home merely as a means of "storing value". The pay cash for the lumber, etc., which has helped to smooth out any economy-related downswings for the business.

AlaskaDenise - I don't know about your local community, but my interpretation is different. Now that the real estate market has retreated from stratospheric levels, the smart money (i.e. the people who still have cash) can pick and choose among the good values in the current real estate market, (i.e. desperate sellers, short sales, foreclosures, etc.).

 

[AlaskaDenise]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

AlaskaDenise - I don't know about your local community, but my interpretation is different. Now that the real estate market has retreated from stratospheric levels, the smart money (i.e. the people who still have cash) can pick and choose among the good values in the current real estate market, (i.e. desperate sellers, short sales, foreclosures, etc.).

What would people do with these properties - rent them out? The rental business could be trickier than ever, with so many desperate people.

Regarding foreign investors - how much US business was being sustained by foreign capital - either directly or indirectly? Are there any percentages available? I'm wondering how many investment dollars may have to be supplied by domestic investors.

.

 

[Missouriwatcher]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

VICE PRESIDENT BIDEN KICKS OFF $7.2 BILLION RECOVERY ACT BROADBAND PROGRAM
"December 17, 2009 - Vice President Biden today kicked off $7.2 billion in Recovery Act broadband grant and loan programs, of which $2 billion will be made available on a rolling basis over the next 75 days to bring high-speed Internet to communities that currently have little or no access to the technology...The awards are not only expected to provide initial job opportunities in infrastructure and manufacturing, but help bridge the digital divide and boost economic development for communities held back by limited or no access to the technology."
http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2009/12/0621.xml

USDA Announces New Dairy Economic Loss Assistance Payment Program to Provide Financial Relief to Struggling Dairy Producers:
"Dec. 17, 2009 - Agriculture Secretary Tom Vilsack today announced the implementation of the new Dairy Economic Loss Assistance Payment (DELAP) program. The 2010 Agricultural Appropriations Bill authorized $290 million for loss assistance payments to eligible dairy producers.

"Through this program, eligible dairy producers will receive economic assistance that will help stabilize their operations during these tough economic times," said Vilsack. "I have personally heard from hundreds of struggling dairy farmers from all across our country who have been hit hard by declining prices over the past year, and now, we'll be able to offer them help."

Milk prices declined substantially through early-to-mid-2009, with the national price for milk averaging $16.80 per hundredweight (cwt.) in the fourth quarter of 2008 and averaging $12.23 per cwt. in the first quarter of 2009, a 27-percent decline. On average, the price U.S. dairy producers received for milk marketed in the summer of 2009 was about half of what it cost them to produce milk."
http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2009/12/0619.xml

AGRICULTURE DEPUTY SECRETARY MERRIGAN ANNOUNCES OVER 84,000 RURAL FAMILIES HAVE ACHIEVED HOME OWNERSHIP THROUGH RECOVERY ACT FUNDING
"Dec. 11, 2009 -Agriculture Deputy Secretary Kathleen Merrigan today announced that 84,021 rural families from throughout the country have become homeowners so far as a result of USDA funding provided by the American Recovery and Reinvestment Act (ARRA)."
http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2009/12/0608.xml

USDA's State Offices Seek Ideas on Creating Jobs Throughout the Country
"December 15, 2009 - Agriculture Secretary Tom Vilsack announced today that USDA will begin a series of roundtables and community forums on job creation and economic growth in states throughout the country. The roundtables follow the Forum on Jobs and Economic Growth that President Obama hosted at the White House on December 3.

The primary focus will be on ideas to accelerate job growth in rural America. Some of the topics to be discussed are:

* Exploring ways to rejuvenate and promote local businesses;
* Creating jobs by rebuilding America's infrastructure;
* Creating new opportunities from existing ones, such as with value-added agricultural products;
* Supporting job growth among small businesses; and
* Preparing workers for 21st century jobs."

Jobs forums scheduled included on website.
http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2009/12/0614.xml

 

[sharon sanders]

Re: Reason to Worry? Most economists are unconcerned about surge in wholesale prices

There is also "Shadow Demand".....

Thursday, December 17, 2009

Report on Housing: 'Shadow Inventory? Increases Sharply

[SIZE=-1]by CalculatedRisk on <abbr class="published" title="2009-12-17T18:48:00-05:00">12/17/2009 06:48:00 PM</abbr>[/SIZE]

From Bloomberg: ?Shadow Inventory? of U.S. Homes Climbs, Report Says

The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.
...
?While the visible month?s supply has decreased and is beginning to approach more normal levels, adding in the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years,? First American said.​

A few points:

First American CoreLogic is counting the number of homes seriously delinquent or in the foreclosure process.

The 55% increase is from last year (1.1 million to 1.7 million in this category)

The comment at the end about "beginning to approach more normal levels" is about months-of-supply, not total inventory. Obviously months-of-supply is impacted by the surge in sales due to the expected expiration of the homebuyer tax credit.

The term "shadow inventory" is used in different ways. I consider all of the following to be "shadow inventory":

REOs. There are bank owned properties that have not been put on the market yet.

Foreclosures in process and seriously delinquent loans (although some of these may be in the modification process).

New high rise condos. These properties are not included in the new home inventory report from the Census Bureau, and do not show up anywhere unless they are listed.

Homeowners waiting for a better market. These are homeowners waiting for better market conditions to sell.
​

On high rise, condos from the WSJ (ht William):

In the downtown Miami and neighboring Brickell areas, more than 22,000 condos have been built in the past four years, or more than twice the number added over the previous four decades, says Holliday Fenoglio Fowler LP, which advises real-estate developers and investors.​