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April 25, 2007 at 7:17 AM in reply to: That crack some folks In Carmel Valley are smoking must be really good… #51059
Cow_tipping
Participant16% over 7 years (its actually 8) is under 2% annually.
Inflation is always an annual figure. I would like to see the region wise numbers and I can find it, I am not asking you to, and the margin of error even in a national number is how much. I know they claim its accurate, but 2% even if it is that, is very low inflation. Extremely low. That explains the 6% long term interest rates a bit though. I’d think 6% interest means under 1% cos I think they like to pad it 5 point atleast, but maybe the bond market had become less risk averse from 00-07.
The discussion is waaaay of course though, I was trying to just point out that 6% ineterst implies 1% or less or I did say nearly 0 cos for a while interests were flirting with 5.5% on a 30yr fixed.
That was all.
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Cow_tipping.ParticipantFood and energy (gas included) does not figure in inflation.
Sorry that is just the fact, I didnt exclude it, the government does.
No_such_reality – ~2% Maybe I’d say mostly under 2% but you in SD probably have 2%.
If inflation is 6-7% interest rates on long term loans will be 10-12% and interests paid on savings accounts will be 3-5%.
Eating out and rent and whatever in your area might have the classic wealth effect inflation. It bears very little resemblence to reality much like the housing prices in your area.
National level inflation does not count food and energy and it may have been 2% across the last 6 years. I anticipate much of that to get wiped out when the crash fully mobilises, cos it will create a lack of wealth effect deflation which it already has.
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Cow_tipping.ParticipantI was talking about inflation on a national scale with its relation to interest rates.
Local inflation is influenced by several things, but interest rates are set on national numbers because the bond market is national. Also I believe excluding food and energy is what they use for most other CPI calculations.
Not just excluding energy.
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Cow_tipping.ParticipantPercentage change 12 months SAAR 3
ended in December mos. ended
in March
2000 2001 2002 2003 2004 2005 2006 2007All items 3.4 1.6 2.4 1.9 3.3 3.4 2.5 4.7
Food and beverages 2.8 2.8 1.5 3.5 2.6 2.3 2.2 7.4
Housing 4.3 2.9 2.4 2.2 3.0 4.0 3.3 3.5
Apparel -1.8 -3.2 -1.8 -2.1 -.2 -1.1 .9 -.9
Transportation 4.1 -3.8 3.8 .3 6.5 4.8 1.6 8.3
Medical care 4.2 4.7 5.0 3.7 4.2 4.3 3.6 5.6
Recreation 1.7 1.5 1.1 1.1 .7 1.1 1.0 .1
Education and
communication 1.3 3.2 2.2 1.6 1.5 2.4 2.3 2.7
Other goods
and services 4.2 4.5 3.3 1.5 2.5 3.1 3.0 4.7Special indexes
Energy 14.2 -13.0 10.7 6.9 16.6 17.1 2.9 22.9
Energy
commodities 15.7 -24.5 23.7 6.9 26.7 16.7 6.1 30.9
Energy
services 12.7 -1.5 .4 6.9 6.8 17.6 -.6 13.8
All items less
energy 2.6 2.8 1.8 1.5 2.2 2.2 2.5 2.9
Food 2.8 2.8 1.5 3.6 2.7 2.3 2.1 7.3
All items less
food and energy 2.6 2.7 1.9 1.1 2.2 2.2 2.6 2.3I got that from http://www.bls.gov/news.release/cpi.nr0.htm
The items less energy is what is used for most statistics.
I would like to see what component of the rest was transportation because it damn well costs more to ship the VCR from Chineese port to US port and then truck it to your house. But no one keeps track of that. In any case I expect it to be significant and I expect the inflation in the past few years to be wiped out.
BTW, you are comparing a rental in SD in 2000 to possibly some thing in 2005 when the McMansion number has skyrocketed and those are rentals now. The real comparison is on idential items. Your old apartment in 2000 vs that same one in 2006. Its like the NAR’s median home price claim. Median price can sit right there but be totally different houses. one may be shack built in the 60’s and another may be a McMansion built 2006.
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Cow_tipping.ParticipantThese graphs are all too small to read the numbers on the axis.
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Cow_tipping.ParticipantSD may be … In 2002 I paid 650 for an apartment in Charlotte NC. By 2005 it was under 500.
Houses have gone up and I dont know why from 2000 to 05 your rents have gone up. Maybe you had the same thing that happened in Charlotte ~2000. What we refer to as the .com migration at BofA where I work. They lost 1000’s of people to .coms in CA and other cities that had lots of them. Maybe SD lost population through end 2000 driving down rents. That return of population will have pushed rents back up sharply till the house boom reversed that trend.
In charlotte 98-2002 rents and house prices went down. 02 rents recovered rapidly followed by a construction boom that saw house prices roughly stagnate but they sucked the wind out of the rents and by 05 rents were pathetic.
You may have somehting locally going on there. Here is the true measure as used by financial institutions. Inflation + 5% is interest on long term loans. The last 5 years that long term interest has been ~6%. Inflation is well well well under 2%. Inflation is a count of a lot of things. Rent in your town does not make inflation if the rest of the country is losing population to your town. Like what happened in the .com era. The SF area saw rents sky rocket while many other areas saw rents crash and burn. That will figure in national inflation statistic as a 0 event or a very very minimal amount. Ironically the cost of china made electronic junk is a bigger factor than rents in SD rising. Cos a VCR dropping to 1/2 its price followed by tapes and all other electronic nic nac’s definetly counts for the whole country and it might account for 5% of a family’s monthly expense and that has dropped in 1/2. Again national average is what counts in CPI.
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Cow_tipping.Participant01 to now wages are not up. In fact they are down.
But yea those extra pesky 40 lbs … I get that analogy.
You also are dealing with a sticky on the way down scenario for most of industrial raw materials. wood, steel etc. Corn has a new demand situation with ethanol as its driving force.
We also are in a housing market that isn’t certain the gig is up. So we will have to wait and see truly where it ends up.
That house buiders labor force and REIT has gotten fat and we’ll soon see that disappear with the wage levels taking another hit. Inflation may have been a factor 01-02-03 but after that its not only down, its pretty much wiped out the gains from 01-02. Look at rents and look and costs of essentials and always they exclude energy because that is influenced by too many externals. I will also exclude the part of energy that is added on to transportation costs of those essentials. And wait for 06 or better yet 07 numbers to come out after housing has taken the hit we all know is comming. Like I said, we have built needless houses spent fuel dragging things here to there and heloced those houses out the wazoo, and bought needless hummers and and pumped up the market for everything. Wait and see how it unfurls.
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Cow_tipping.ParticipantNo_such_reality on April 23, 2007 – 11:09pm. Wrote:-
At $1.3M sale today, is basically a wash with inflation to the 2002 sale.At $1.3M today, it represents about a less than 1% above inflation from 2001. At $1.4M represents about 2% above inflation from either 2001 or 2002.
Inflation from 01 is nearly 0. That is reflected in the interest rates for loans at 5-6. Interest rates are essentially Inflation + 5% really. That is one reason why mortgage companies push adjustables and what not. If the rate of inflation goes up a fixed rate lender is shafted. An ARM lender will just pass on that extra cost to the owner … ha … owner … borrower.
Inflation is negative without oil and utilities and construction materials taken into count. Rememeber what things used to cost in 01-02. What did a VCR or a DVD player cost. What did food and essentials cost.
basically we have used a lot of fuel, a lot of wood and a lot of other building supplies to drive up cost of living from 01 to now. The rest of the things you need for life are lower than 01.
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Cow_tipping.Participant6% on 750K will not be 3750 a month unless you got some sorta neg am or IO option types. Those loans run closer to 9% if you can even find it, and that will be about 6K a month. Of course you are now an owner, you can deduct that in your taxes but you’d have to pay mello roos, property taxes maintenance, insurance, HOA dues and other BS. Count on 5K a month on average for buying.
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Cow_tipping.ParticipantWe will ahve to see second and third rounds of repo’s.
Like this … FB defaults cos he’s upside down, the bank repos it and sells it for market value, the new FB buys it, and realises its further down from his purchase price and he dumps it, and the bank repeats the process. Maybe that will be the bottom. 3rd or 4th iteration can be OK.
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Cow_tipping.ParticipantRising income = inflation = Higher interest. Yes we can inflate ourselves out with our printing press, and china will stay indexed to the dollar for a while and they will go down with the ship, but we can save our economy while controlling inflation from being a runaway freight train. But housing is doomed in the bubblicious areas, and general population wise its going to be tought times on the house sales front. however eventually rents will rise, make houses rentable for payments if you bought at low fixed rates and will be near impossible to sell cos no one will want to borrow at 15% interest.
Now about short positions to back their equity … evidently a well known secret in the industry is the 9/11 situation where a few brokers who had a good amount of shorts made like bandits in that 9/17 drop of 1100 points. That has now lead the market to believe short covering is a worth while position. They have tons of the equity. They anticipate a fall on bad news from the sector. They dont sell the equity, they cover it with shorts. Now 3 months out they dump the equity at near today’srice, and their shots which will expire a few weeks later is also up now. Its a very insidious way of inside trading that is legal. You know the stock is going to drop. You hold it and leverage your way into the short, then dump it where you make money on both sides.
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Cow_tipping.April 21, 2007 at 5:58 PM in reply to: Fannie Mae, Freddie Mac Bailout in California – Maybe Not Much Help #50745ParticipantFM, FM and FM (Ha ha Farmer Mac) have implicit bail out clauses. Yee haw …
Of course CA and NYC and boston and NJ and other bubblicious places dont have any FM, FM or FM unless its in the 80’s.
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Cow_tipping.ParticipantYes … my house will have steel and concrete only … my new house.
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cow_tippingParticipantSubmitted by LA_Renter on April 20, 2007 – 7:43pm.
TOO MANY SHORTSCorrect.
This is the first instance of wide spread options use coupled with a market that is likely to tank. Fund managers are hedging their firm’s bets by buying puts and not selling their equities. Presumably, they will buy shorts 6 months out and dump their equity after 3 months when its still close to the price today there by creating a crash and as that crash cascades and other holders sell at ever reducing prices … and when the individual investor realises its crashing its going to be too late … they have now got puts that are worth serious $$$.
You see, bad news from a company, sends its put prices soaring, but does nothing for the equity price. 3 months from now, large sell orders will trigger the equity price drop and the put values will go up.
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Cow_tipping. -
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