Thursday, February 24, 2011
The Last Refuge
At this point in the game I begin to watch the YoY figures more intensely than the monthly, and shipments a little more closely than new orders for some categories. We need a few more months of data, but autos may be capping out and give us little surge the rest of the year:
Get a load of the YoY drops in motor vehicles.
I have been wandering through commodity prices. The hot money is in oil and out of other items like most grains, but it is difficult to conceive of stabilizing prices later in the year. The Bundesbank, in particular, seemed to have been placing a lot of weight on the theory that prices would return to a "disinflationary" trend in the second half. That was the common theory; it was really based upon the end of the Fed's QE2 program in June, although no one would admit that.
I have not agreed. Prices are up too much in India and China for that to happen. Nor can I see the ME region really stabilizing this year. Therefore I expect import prices for a lot of consumer goods to keep ratcheting up. There is a pulse of inflation in the system that is really restrained by reality and pricing.
What truly concerns me about commodity price movements in recent days is that they make little sense. If oil is going to be up, the prices of most of those commodities will increase, not decrease. So what the market is really saying is that oil prices are not stable over the long term. No kidding. But that is not a forecast for economic success and prosperity; this means many business horizons are shortening up. So Mr. Packaging Guy is going to remain on the sidelines managing his margins without new investment. Call it the Campbell Soup/Sears effect.
India's wholesale food inflation index this week was reported at 11.49% YoY.
The ability of western central banks to stimulate is very limited under these circumstances. UK Bubble explains why in an excellent post.
New Home Sales for January were markedly bad. There is too much competition from existing home sales. Oh, and despite recent history, despite common sense, despite the laws of gravity and all else, the Fed has once again timidly been pushing its foot into the "subsidize home purchases for those who can't afford them" waters. The problem with making down payments for people is that you aren't making them save which proves the financial discipline and commitment to home ownership that are necessary to keep a home. DAP programs have proved such a disaster that it is difficult not to lose one's eyeballs when reading stuff like this. But it isn't just this one researcher; the Fed governors have begun cautiously making comments about boosting homeownership and dropping underwriting standards.
Why should the Fed be any different than anyone else. There is no resolve in the populace to address any problems. When we run out of suckers we just turn to ransacking.
Actually, Obama's plan is for only the middle class to end up very poor. By transferring their wealth, and creating special economic privileges for " the have nots " the middle class will be brought low, so " the have nots" may " rise ". Obamacare is pure Alinskyism, a scheme designed to transfer $15k from every middle class household, to " the have nots ".
I agree, MOM, that his Machiavellian scheme will fall apart, and likely everyone will end up very poor, but Obama will be happy just to see redistributionist " justice " occur. He, personally ( and the rest of the ruling class ) intend to remain at the top of the food chain, and in control.
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