Send some of that house appreaciation up here to Idaho. They are over building so bad that prices are dropping like a rock. Construction labor is non union and we have a lot of fruit pickers from across the border here in the mild winter months with nothing to do so they build houses for minimum wage.
EDIT - Terry - Same here I wanted to move to Louisiana where there is a better Air base closer to where I plan on retiring but every other house on my block is for sale so I doubt I would get out of here and have gone through the double house payment drill before finding it no fun.
I hear all the inflation stories from you guys in the real world but don't see it here except at teh gas pumps ($1.48 ) and in the grocery stores. I heard a commentary on NPR yesterday about employment shortages. One of those being interviewed was in trucking and stated annual turnover was over 90%. Other than cinstruction and picking fruit, we are just now starting to see higher employment wages as everyone is fighting to get service help in stores for the holidays. EVERY single store I went to had a help wanted sign.
A few articles I ran across tonight
Alex,Merrill's chief strategist Bernstein:" Inflation will be the next story ".
"The fundamentals really are changing," says
Richard Bernstein, chief quantitative strategist at
Merrill Lynch. "The story in the financial markets
during the past several years was disinflation," or a
declining inflation rate, "then deflation," or falling
prices, he says. "We think the next story will be
inflation."
TA
=========================================
October 20, 1999
October Corrections Aren't a Novelty,
But the Specter of Inflation Raises Fears
By GREG IP
Staff Reporter of THE WALL STREET JOURNAL
In late 1997 and late 1998, investors stampeded
out of stocks, sending blue chips down 13% and
19%, respectively, and dealing the 1990s bull
market its worst setbacks to date. But, on both
occasions, share prices quickly rebounded and
went on to set records.
Once again it is October, and once again stocks
have skidded. But the correction is different this
time around -- different enough to cast doubt on
whether a quick return to new highs is in the cards.
The difference is that turmoil abroad and panic in
the debt markets at home fueled the pullbacks of
1997 and 1998. Both times, the U.S. Federal
Reserve stood ready to help. This time, plain,
old-fashioned worries about inflation ignited the
sell-off. And inflation's record as a killer of bull
markets is unmatched.
Even with Tuesday's benign
consumer-price report and the
accompanying relief rally,
investors have plenty of reasons to fret. Oil prices
have doubled in the past year, gold has leapt from
the doldrums to more than $300 an ounce,
wholesale prices for last month registered their
biggest gain in nine years, and to top it all off,
there is the perception -- right or wrong -- that the
Fed wants this correction to happen.
During the 1997 and 1998 crises, Bruce Kendall, a
Houston engineer and investor, either loaded up on
stocks or stood pat. But this year, after the Fed
twice raised rates, gold rallied and bond yields
climbed, he concluded, "We've got a problem
here." A few weeks ago, after consulting with
some fellow investors, he sold about 30% of his
$100,000-plus stock portfolio in just two days.
"The Asian and Russian crises were crises of
confidence," he says. "This is a little different:
inflation coming back up and the Fed raising rates
to combat it. It's a little more real this time."
Still a Fear, Not a Fact
Yet for all that intensity of feeling, rising inflation
remains just a fear, not a fact. Many of the forces
that have kept inflation in check -- from rising
productivity to muted pay gains -- remain in place.
Tuesday's closely watched consumer-price report,
in contrast to Friday's producer-price report, was
exactly as expected. Indeed, economists say it
showed that the "core" inflation rate -- which strips
out the most volatile components -- has actually
slowed in the past year to 1.9% from 2.4%
Though shares rose sharply Tuesday morning,
reflecting investors' relief that, as expected,
inflation wasn't out of control, stocks gave back
much of their gains in afternoon trading. The Dow
Jones Industrial Average, after rising 219.09
points, fell back to close at 10204.93, for a much
more modest advance of 88.65 points -- and is still
down 9.9% from its August peak. The industrial
average finished last week 11.5% off its peak, thus
handily meeting Wall Street's rule of thumb for a
correction -- a 10% or greater decline in value.
The Nasdaq Composite Index, meanwhile, fell 0.97
point on Tuesday to 2688.18, after rising 40.15
points in early 0trading; it is now off 7.8% from its
all-time high, reached last week.
Altering the Mix
The market's tepid response underscores the fact
that stocks respond to expectations, not just
reality. And if expectations of a resurgence in
inflation prove to be well-founded, price stability
-- one of a remarkable set of ingredients that have
lifted stock prices threefold since the end of 1994
-- would be removed from the mix.
"The fundamentals really are changing," says
Richard Bernstein, chief quantitative strategist at
Merrill Lynch. "The story in the financial markets
during the past several years was disinflation," or a
declining inflation rate, "then deflation," or falling
prices, he says. "We think the next story will be
inflation."
To many on Wall Street, the 1997 and 1998
retreats didn't feel like a bear market at the time
because the traditional bear-market factors weren't
in place. The economic crisis overseas, far from
hurting the U.S. economy, ultimately helped it by
driving down the cost of commodities and
imported goods, thereby suppressing inflation and
creating the climate for lower interest rates. By
contrast, almost every bear market in the past 50
years has begun with inflation pressure and a sharp
increase in interest rates by the Federal Reserve,
often tipping the economy into recession.
Even if inflation is on the way back, it wouldn't
necessarily bring on a bear market, generally
defined as a sustained drop of 20% or more in
blue-chip stocks. For example, in 1994, the Fed
raised interest rates sharply to head off potential
inflation, but stocks finished the year roughly flat.
Indeed, many investors now stand ready to buy
when they think the correction has run its course. "I
expect the decline will continue until early
November, and at that point I may purchase some
shares," says Herbert Madsen, a retired computer
programmer who lives near San Antonio. And Mr.
Kendall, the Houston investor, is preparing to buy
back some of the shares of Lucent Technologies
Inc. he sold just a few weeks ago.
Testing Assumptions
But a return of inflation would still test many of
the assumptions that have taken the market to
levels almost unimaginable five years ago. And, if
stocks are indeed a speculative bubble, an inflation
scare might be just what it takes to burst it.
From the end of 1994 to its peak of 11326 in
August, the Dow Jones Industrial Average rose
about 7,500 points, or 195%. Rising corporate
earnings accounted for roughly half of that gain.
The remainder reflected the rising price investors
were willing to pay for each dollar of earnings, that
is the price-earnings ratio. That rising ratio
reflected several factors: increased confidence that
earnings growth wouldn't be interrupted by
recession, a perception that stocks weren't as risky
as they used to be, and perhaps most important,
confidence that inflation wouldn't erode the value
of future profits.
Ironically, the stock market itself has emerged as a
candidate to undermine the foundation of its own
success. Members of the Federal Open Market
Committee, the Fed's policy-making body, fretted
at their August meeting that stocks' "sharp rise and
the associated increase in wealth over the course
of recent years [has] helped to foster a high level
of consumer confidence and willingness to spend,"
according to the minutes of that meeting.
Economists believe consumers usually spend some
portion of any new wealth, and some argue that's
just why the savings rate has turned negative and a
consumption binge now is threatening to drive up
wages and prices.
The Fed is thus in a position opposite to where it
stood during the previous corrections. By late
1997, as one Asian economy after another
succumbed to financial panic, the Fed dropped the
bias toward rate-tightening that it adopted earlier in
the year. In the fall of 1998, after Russia's default
provoked a crippling freeze in U.S. credit markets,
the Fed slashed interest rates 0.75 percentage
point. By contrast, this year it has raised rates 0.5
percentage point, in effect taking back most of last
fall's easing, and two weeks ago it said its bias
now was toward raising rates further, rather than
leaving them alone.
Far from fretting over the market's tumble, the Fed
is "secretly cheering," says Credit Suisse First
Boston economist Rosanne Cahn. "In order for the
economy to slow, stock prices have to go down
and stay down."
Ingrained Behavior
If an unfriendly Fed is viewed as putting a lid on
the Dow Jones industrials somewhere north of
11000, then it is also likely that investors'
ingrained "buy-the-dips" mentality forms a floor
somewhere, as well. In the middle of last year's
sell-off, the Dow industrials briefly were down
20% from their peak, but when they touched 7400,
a wave of buying brought them back. At present,
while mutual-fund managers are low on cash,
individual investors, who often have shown greater
faith in stocks than professionals, hold plentiful
money-market funds. But will they put that cash to
work?
Earlier this year, Don Nightingale, 65, a
mergers-and-acquisitions consultant in St. Paul,
Minn., shifted his portfolio to 60% stocks from
100%, putting the balance in money-market funds,
and he has resisted adding anew to his stock
holdings. The investor, who says he made the shift
because of his age, describes himself as "paranoid
about inflation. I lived through the late '70s and
'80s and watched the purchasing power of the
dollar evaporate so much. I'm getting ready to go
into my golden years and obviously that's a high
concern."
The perception that the Fed is
ready to knock the market back
every time the Dow Jones
industrials pop up is earning it
a great deal of enmity among
small investors. "Improper and arrogant" is how
Mark Longhi, an investor and former business
owner in Tucson, Ariz., describes Fed Chairman
Alan Greenspan's warnings about the stock market
in an online forum moderated by The Wall Street
Journal Interactive Edition.
In July he put 60% of his three children's college
money "into good quality blue-chip stocks, and
they're getting creamed." He doesn't see the
inflation threat. He says that when he went
shopping for a Chevrolet Camaro for his
college-age daughter the other day, he found it
priced $3,000 below a lesser-powered Nissan
Altima he leased three years ago.
But Mr. Longhi also doesn't believe you can "fight
the Fed."
"He's got me scared," says Mr. Longhi, speaking of
Mr. Greenspan. "You never know when he's going
to open his mouth again."
How Important a Factor?
Despite such sentiments, the Fed says it isn't trying
to pop a stock-market bubble. But it is concerned
about inflation -- in part stemming from the
elevated value of assets, such as stocks -- and
some economists say that the end result is similar:
higher interest rates that have the effect of damping
stock prices.
However, some Fed officials continue to sound
ebullient about the inflation outlook, despite the
central bank's "tightening bias." Last week, Edward
Boehne, president of the Federal Reserve Bank of
Philadelphia, said he expects "relatively low
inflation for the coming year at least, and probably
longer." And Jack Guynn, president of the Federal
Reserve Bank of Atlanta, said at a conference on
financial crises Monday that even though stocks
have more effect on the economy than they used
to, Wall Street is overstating their influence on Fed
thinking.
But Wall Street continues to perceive stocks as an
inflationary threat that could prompt Fed action.
"You have this weird circularity," says William
Dudley, head of U.S. economic research at
Goldman Sachs. "The stock market is going down
because they're worried about the Fed tightening,
but if the stock market goes down, the Fed won't
tighten, so the stock market will go up. There's no
sustainable equilibrium."
In its August minutes, FOMC members said, "The
absence of further large gains in stock prices,
should recent trends persist, would remove this
stimulus and probably induce some moderation in
the growth of consumer spending."
But there may be other reasons for the Fed to
tighten credit, such as rebounding prices of goods
and services in many previously beaten-down
sectors. A year ago, just 20% of the sectors
surveyed by Prudential Securities economists were
raising prices, while 47% were cutting them. By
the last quarter, 44% were raising prices, and 26%
were cutting them. Surveys by the National
Association of Purchasing Management also find
that for the first time in years, members find more
prices rising than falling
Echoes of the Past
But investors have seen such scares before, and
they came to nothing. The market underwent a
brief pullback in the first quarter of 1997 when the
Fed raised rates one-quarter of a percentage point
as a pre-emptive move on inflation. Stocks turned
course when those inflation fears came to naught
and went on to new highs.
Even now, signs of deflation still are evident. One
of the factors that has fueled the stock-market
correction was a disappointing profit report last
week from Intel Corp., partly the result of a price
war raging between it and rival Advanced Micro
Devices in low-priced microprocessor chips.
Many analysts such as Mr. Bernstein think the real
victims of the current inflation scare won't be
stocks in general, but rather the "Nifty 50"
blue-chip growth stocks in the Dow industrials and
Standard & Poor's 500 stock index that have led
the market for the last year and a half while the
average stock has struggled. Because inflation's
effect compounds over time, its retreat has been
most beneficial for growth stocks, whose biggest
profits are years away.
For his part, Mr. Kendall, the Houston investor,
sees the correction as simply "a readjustment to
the levels we were at before the Asia crisis. I still
believe we're in a bull market. I'm getting ready to
buy back in."
Even the inflation-phobic Mr. Nightingale calls
inflation "just one of another" set of things "you try
to look at. The stock market is always an irrational
beast. It's more irrational than normal."
-- Ruth Simon contributed to this article
Message 11650255
How about this one:
Shipping Line Cartel to Raise Cargo Rates to U.S. From Asia as Much as 15%
By Jennifer Thomas
Shipping Line Cartel to Raise Cargo Rates to U.S. From Asia
Washington, Oct. 18 (Bloomberg) -- The Transpacific
Stabilization Agreement, a group of shipping companies operating
in the U.S.-Asia trade, said it's seeking to raise rates as much
as 15 percent for Asia cargo bound for the U.S. to cover added
operating costs during next year's peak shipping season.
Cargo volume in the $200-billion-a-year Pacific trade is
expected to grow 8 percent in 2000, driven by continued U.S.
economic growth and demand in the U.S. for imported goods from
Asia, the group said. That increase comes on top of the 10 to 15
percent growth projected for this year.
``Trends suggest full sailings and an opportunity to further
recover previously lost ground on freight rates, which remain
below levels seen five years ago,' the group said in a
statement. The ship lines say they're currently faced with rising
labor and trucking costs and expenses associated with returning
empty containers to Asia.
The TSA, representing 14 ship companies including Evergreen
Marine Corp. of Taiwan, A.P. Moller-Maersk Line of Copenhagen and
American President Lines, a unit of Singapore's Neptune Orient
Lines Ltd., said members plan to increase rates by $400 per 40-
foot container effective May 1 and establish a $300 per container
surcharge for shipments between July 1 through Oct. 31, the
busiest part of the shipping season.
The rate increase, first reported in the Wall Street
Journal, comes as ship lines are adjusting to a new U.S. ocean
shipping law which took effect in May of this year. The law
freed ship lines from having to file tariffs and service
contracts with the federal government while still allowing them
in some instances to jointly set prices with rivals.
Shipping lines participating in the TSA are allowed to
discuss rates under the new U.S. law but they cannot enforce
group rates or prevent members from acting independently.
TSA lines imposed a similar $300 per container ``peak
season' surcharge this year that drew protests from some U.S.
and foreign shippers.
Message 11652253
Despite the narrower trade deficit, the department said imports continued to rise, hitting a record $106.12 billion. Imports have sharply increased this year, reflecting U.S. economic vigor and strong consumer demand compared to weakness in parts of Europe and Asia.
Aside from China, trade imbalances with Canada and major oil producing nations set new records.
August imports were up from $104.01 billion in July, as American companies and consumers continued to buy up a wide range of foreign-made goods, from high-powered computers to luxury cars.
The Commerce Department said the surge was fueled by shipments of cars and parts, consumer goods and oil.
These imports overshadowed record U.S. exports, which rose to $82.03 billion in August, led by sales of commercial aircraft and food products.
Daley attributed the recovery in exports to an economic rebound in much of Asia and increased U.S. shipments to Canada and Mexico.
In contrast to China, the trade imbalance with Japan narrowed to $6.39 billion in August, down from $6.78 billion. The deficit with Western Europe also dropped, to $4.44 billion in August from $6.82 billion in July.
But in his statement, Daley noted that exports to Japan were down from their levels of a year ago and have been in decline for three consecutive years.
infoseek.go.com.
Good Luck,
Lee |
