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powayseller
ParticipantRecession is coming in Q1 07. Inflation is here, too. High oil prices are here to stay. Oil started rising 2 years ago; it has NOTHING to do with Israel. So yes, we have a sustained increase in prices, namely oil (and copper and other building supplies). Inflation is at 2.9% annual rate, yet the Fed paused. They are afraid of the recession, why else would they pause in the face of ever-rising oil prices and ever rising consumer spending? Consumer credit rose in June/July ? to the highest level. I don’t know if the Fed is light years ahead; they are better at fooling us, that’s for sure. They stopped publishing M3, so now we don’t know how much money they are printing.
The dollar keeps losing its value against other currencies. When we went to Germany in July 2001, 1 dollar was 1 euro. Today, you need $1.27 to buy one euro. That’s a loss of almost 30% in the value of the dollar against the euro. More losses are coming, if the hints by foreign central banks to diversify (and today’s disappointing Treasury auction) are any indication.
I think if we didn’t have China competing for all these resources, the prices of oil, copper, steel, concrete, lumber would be lower.
As long as inflation is above 2% while the economy is slowing, that is stagflation in my book.
Schahrzad Berkland
ParticipantI just wrote this earlier: the market does not yet know about the recession, so while they have punished homebuilders and lenders due to earnings shortfalls, retailers/restaurants/ leisure and hospitality/ tourism, manufacturers are still spared. Thus, a better opportunity exists.
Think of car dealers (who buys cars in a recession), Home Depot, Lowe’s, carpet stores…anything that consumers buy will be punished next, and by mid-year start shorting manufacturers.
Participantno_such_reality, why wouldn’t the owner sell his own house for $550K, and pocket the difference, however small? If the owner has equity, he won’t let it get to foreclosure, or why would he?
Participantbarbaby and jepsd and theplayers:
when I tell people I want to buy other currencies, they say I should hold only dollars because that is the currency I will be using here. Isn’t it better to trade some euros back into dollars each month, as I need dollars? Comments?
ParticipantStagflation – isnt’ that inflation plus recession? We have rising prices and a slowing economy: stagflation. Or am I using the word wrong?
Inflation is at 2.9%, but the Fed paused. Inflation will keep rising, because oil prices are rising. Wages are not, but commodities are rising. A recession is coming up too.
Does it matter if inflation is caused by rising wages or rising oil? Isn’t it inflation either way?
Credit demand is still rising, if we look at last week’s report. People are using credit to make up for flat wages in the face of rising inflation, and to pay for gas.
ParticipantLendingbubbleco – Could you modify your idea to inform people of the mistake BEFORE they buy? ZipRealty has a Review feature now. Praise the home, and knock the price, i.e. this home is gorgeous, the neighborhood is wonderful, but the price is too high for this market.
August 11, 2006 at 2:25 PM in reply to: Puts on Homebuilders, Lenders, Retailers, Restaurants, etc. #31731ParticipantI am more versed on the economy than on companies. I have not followed any companies for 6 years. Before I buy stocks, I read most of the financial statements, annual report, and recent SEC filings. I have never bought a Short or Put.
Obvious ones to check are subprime lenders and home builders with concentrations in FL, CA, AZ, NV. Secondary, and probably a better buy now because the rest of the market has not yet figured out we’re going into a recession, are car and boat manufacturers, retailers (Home Depot, Lowe’s), high end food stores (Whole Foods), restaurants, travel (amusement parks, hotels).
ParticipantYou are right about rising rents causing the CPI to rise, because rents are 30 or 40% of CPI.
But rents cannot rise above wages. Despite what landlords ask… More people are moving out of SD, so I think rents will drop by next year. people in NOD will leave SD also.
I think the Fed has to give up on fighting inflation. They disappointed me by giving a pause. This shows they are NOT serious about inflation at all.
Perhaps, as someone else noted, this fact of being easy on inflation is to blame for the low interest in Treasuries this week. Who wants to keep buying dollars if their value is inflated away by a Fed not serious about fighting inflation and keeping the dollar strong?
I wouldn’t be surprised if they do all kinds of tricks to fool us into thinking inflation is lower. Removing rents from CPI, and replacing it with housing prices, seems like a very good way to do it. Any chance they can get away with that?
ParticipantDo you think anybody would listen to me? I don’t have a PhD in Economics from Harvard, just an MBA from ASU, and I haven’t ever worked in that field. I haven’t worked at all in a long time.
ParticipantThe Midwest is seeing high foreclosure rates because people got loans they couldn’t afford. As interest rates increased, their adjustable loans became unaffordable. Flat wages and higher living costs are keeping buyers on the sidelines. A seller in Omaha, NE was on that city’s TV news, lamenting that not a single showing had occured in several weeks. This was so noteworthy, it made the news. The problem in Omaha, as in most of the country EXCEPT So CA, is overbuilding. Buyers have more choice, builders are giving away incentives. This is happening in Omaha. One of the 2 big builders in Omaha committed suicide in March due to his financial problems – he had 2 sets of financing from 2 banks; the banks did not run a title search…
Overbuilding, higher living costs, flat wages, and exotic loans are causing foreclosures nationwide.
What I hope everybody here realizes is that every property in this country is vulnerable to price drops, EVEN THOSE THAT JUST ROSE WITH INFLATION.
Prices in Omaha, NE have been rising with inflation for decades, not more than that. Yet inventory and foreclosures are rising and sales are down. Price drops will be next.
Omaha’s economy is very healthy, so there is not a problem with job loss causing any of this. They do have a lot of jobs that were added in construction, lending, and real estate, but my recent post about their job sector shows they are much more healthy than our SD economy. Even in Omaha, there is “a mortgage lender on every corner”, according to my friend who is a bookkeeper for 33 builders and realtors in Omaha.
ParticipantThe problem is that 99% of economists are wrong. Dean Baker:
“Economists almost never forecast recessions. I happened to
get a copy of the “Blue Chip” top 50 forecasters rojections for 2001, dated Sept. 2000. Not one forecaster in this group projected a recession. In fact,the lowest growth projected by any of them for 2001 was 2.4 percent. Keep in mind, the stock market had already begun to unravel at that point, so it shouldn’t have been too hard to imagine that there would be some economic impact.” – Dean BakerBaker, Roubini, and a few others are more accurate. Even Thornberg has good data, but reaches poor conclusions; he tells people that prices in So CA will flatten for many years until wages catch up so nobody should sell their home! Nobody should cash out and rent! I am familiar with his work, and his conclusions.
Let the sheeple follow the advice of Thornberg, and hold on to their homes.
Economists cannot create a bubble, because they are sheeple too. They just follow the bubble like everyone else.
We have few competent economists. The people who are smart and insightful and courageous enough to go against trends are heroes. Only a few economists are heros; Most are sheeple.
So to answer your question, if a hero economist tells me where to put my money, I would do it. If Roubini said I should buy euros, I would do it. Because he knows MORE than I do on the current situation, so I believe he has a better vision of what will happen.
Someone like Alan Gin or Chris Thornberg, who can’t even see what is going on today, cannot be trusted to give advice. How can you give advice on a fiction reality?
I really need to become an economist. We need a good San Diego economist. We really do!
Participantjg, can you explain how fewer Treasuries purchased affects the dollar and the economy. Thanks for that very clear explanation. Also, where are you putting your money?
ParticipantDoesn’t liquidity mean there is a ready market for buyers and sellers? That is not the case for housing.
We’ve got sellers who are asking for above-market prices. So, not a ready market for most sellers.
We’ve got buyers worried about how much further prices could drop, so sales are dropping every day.
This market is getting more illiquid by the day.
Eventually, sellers will get real, and start pricing their homes correctly. But without buyers lining up, liquidity is low.
I was told in the 90’s, some people would go for a year without having one showing. That is illiquidity.
Participantanxvariety – I will risk a few grand. Can you tell me the list of options and puts you are buying? I won’t do shorts, but will consider the puts. Is there a professional service that gives us a list for homebuilders and retailers to short, sort of like Zeal does for commodities to buy?
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