San Diego Housing Bubble News and Analysis

ill leave the buisness climate on accepting inflation for those who know more than me.

I just wanted to put out there that it seems that rates are also going up due to inflation, even if it isnt so obvious in the CPI. ( a 33 point jump in a week, plus I think points are alittle higher now too!) I think the inflation genie is making a run for it.

"Application volume declined as interest rates rose. The average rate for traditional, 30-year fixed-rate mortgages rose to 6.57% during the week ended June 13, from 6.24% the previous week.

Rates for 15-year fixed-rate mortgages, a popular option for refinancing a home, rose to 6.14% from 5.78%.

The average rate for one-year adjustable-rate mortgages jumped to 7.22% from 6.87%"

http://money.cnn.com/2008/06/18/news/eco...

The government has plenty of reasons to skew the inflations statistics, and from everything I've ever seen, they darn sure do. If you want a conservative view of how badly things are skewed, you might read Bill Gross June newsletter over at pimco:

http://www.pimco.com/LeftNav/Featured+Ma...

Not as conservative, but backed by data is John William's site, Shadow Government Statistics. He calculates that if we were still calculating CPI the way the government did before Clinton, we would currently be just under 8%.

http://www.shadowstats.com/

And if you go to the store, you might not know how to calculate inflation, but you sure do know that prices sure are going up fast. And might I add, pretty much everyone knows. Which is why I shake my head when I hear the fed officials talking about how "if" inflation expectations were to become unmoored..... Yeah, right, like what planet do you guys live on? Inflation expectations in the general public have been unmoored for a long time and are only getting worse.

XBoxBoy

There's also stealth inflation; when a product's quantity/size is reduced and the price remains the same (or higher) per unit.

General Mills did this last year. They cut the cost of their cereal, modified the box depth (so the box appears the same size on the shelf) and put less cereal in it, but the reduction in price was not as great as the reduction in product, so the cost per unit actually increased...

Has anyone picked up a std. Hershey chocolate bar recently? Those things are almost paper thin!

Just to confirm my anecdotal above, here's a direct quote from a buyer at a very large retail chain:

"As a [retailer name] buyer I normally deal with 20 price increases a year, total. I have exceeded that number during last three weeks alone."

Inflation is coming guys, this can't be prevented from impacting the overall numbers forever.

And when this becomes more baked into the overall interest rates, and as mortgage rates increase as a result, I am expecting incremental softening of the housing market, and overall prices.

Just a thought, but doesnt all the CPI numbers and such get seasonally adjusted. So the feds have been hiding alittle of the inflation in this "seasonality" buisness. What happens when the season says it should fall?

Do we suddenly get a month when inflation is 10%? Or does it all get bled out over years of unusually "high" inflation. I dont know the answer to this, but somehow the numbers have to tell the story that inflation in prices is higher than the Gov is reporting. Anybody have an idea?

Hey guys, just saw an official statement by Lowe's Companies, who also happen to be a large customer of mine. According to their statement today, Lowe's "is seeing unprecedented levels of price increases from suppliers, and are passing that along to consumers as (they) can."

I also have a couple friends in the food industry, and they are doing exactly the same thing.

In my opinion, stagflation is not coming, it's here. Fed is in a pickle, as any rate increase will further explode the housing market, but failure to do so will lead to spiraling inflation.

I'm typically a glass half full kind of guy, but I think the underlying fundamentals of our economy are facing some serious short and medium-term pressures.

What do you guys see, or what am I missing? The best opportunity for short-term easing of pain appears to be in the commodities area, especially oil. It seems that many people are more leaning toward the realization that there is a significant element of speculation in the commodities market. This has always been the case, but it does appear to be impacting the pricing more than in years past (e.g., oil demand has surged, but not sufficiently in the last 12 months to justify the price premium over that period).

Thoughts?

http://www.pimco.com/LeftNav/Featured+Ma...

Great article. Also, I think the only people even partially fooled are many in the American public. The stock market and commodities market doesn't appear fooled by the low-ball inflationary reports. I've read several commodities analysts that believe the a part of the oil pricing is a built-in inflationary hedge against the "real" underlying numbers.

Here's an article @ thestreet.com:
http://tinyurl.com/6p8ajo

"The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year."

deduction of mileage expenses was 44.5 cents in 2006; this deduction increases to 58.5 cents in July.