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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Terry Whitman who wrote (56937)	8/18/1999 9:10:00 AM
From: pater tenebrarum	Read Replies (2) \| Respond to of 86076

a rising yen is good for stocks, a falling yen is good for stocks and a static yen is good for stocks. what's to explain?

To: Terry Whitman who wrote (56937)	8/18/1999 9:10:00 AM
From: Cynic 2005	Read Replies (1) \| Respond to of 86076

The CPI In 1999 - A New Era In Shelter? The July aggregate CPI data came in right on consensus - all items up 0.3% and the core up 0.2%. (For other CPI and PPI data highlights, see the table below.) But one CPI element in particular did not behave as I expected in July or for the year so far, for that matter. That element is shelter - rents, explicit and implicit, and hotel/motel rates. The shelter component accounts for 39% of the core CPI. So, it is real heavyweight. For all of 1998, the shelter component was up 3.3%. But in July, it was up only 1.2% annualized (0.1% monthly). And for the first seven months of this year, shelter is up at an annual rate of 2.3% -- 100 basis points lower than last year. This slower growth in shelter costs has trimmed the annualized core CPI rate this year by about 0.4 of a percentage point. You would have to go back to 1965 to see a full year's percentage change in the shelter component as low as has been its annualized change over the first seven months of this year. What gives here? Why has there been such a sudden and large downshift in the rate of increase in shelter costs? After all, housing demand has remained strong in the first half of 1999 and house prices - both new and used - have gone through the roof. Why aren't explicit and implicit rents reflecting this excess demand for shelter? It must be computers. I guess suddenly this year landlords have been able to cut their advertising and administrative costs so much because of computerization and the Internet that competition is forcing them to pass on these cost savings in the form of smaller rent hikes. Or could it be that the BLS monkeyed around with this component, too, with its new and improved CPI? Regardless of whether or not there is a new era in shelter, the FOMC still is likely to raise its target fed funds rate by 25 basis points on August 24. The Board of Governors also is likely to hike the discount rate by 25 basis points that same day. There is too much "sub-surface" inflation to ignore. Both crude and intermediate core goods prices have reversed trend and are now moving higher. Non-petroleum import prices are now falling at a much slower rate than they were last year. Tight labor markets are starting to manifest themselves in the form of faster growth in labor compensation - in the second quarter, considerably faster than the growth in productivity. And the economy remains strong as evidenced on Tuesday by reports of a 5.7% rebound in July housing starts and a 0.6% increase in July manufacturing output. By the way, this super-sized increase in factory production came without the help of Detroit. I expect that once Detroit gets back in gear, export growth ramps up and inventories demand picks up for a variety of reasons, U.S. manufacturing is going start humming again. And that means further increases in industrial commodity prices. ntrs.com