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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lee who wrote (26887)	1/5/2003 5:25:06 PM
From: AC Flyer	Read Replies (1) \| Respond to of 74559

>>No inflation!!??<< Yes, Steve, no inflation. I can not speak to what is happening in the UK, where I assume you are located, but in the US: 1) prices of just about all manufactured products continue to fall, 2) food prices are generally stable, 3) agricultural commodity prices are generally close to or at long term lows, 4) industrial commodity prices (primary metals, oil, etc.) are robust but generally show no secular uptrend. These positive economic fundamentals are supporting solid gains in per capita income and really quite spectacular gains in purchasing power for US consumers. >>Have you seen US house price levels?<< Yes. The ongoing gains in US house prices reflect the underlying strength of the US economy and more importantly the exceedingly robust demand generated by the boomers for move-up housing and by the echo-boomers for starter homes. However, this robust market is not a cause of, a result of, or related to in any way, the generally accepted metrics for inflation which measure the cost of a representative basket of goods and basic services. What's more, the affordability of US housing, arguably a more useful metric for shelter costs, is currently at the higher end of its historical range. >>Oil prices are at a two yr high.<< Two points: 1) Not for long. 2) Inflation-adjusted oil prices are close to 40 year lows. >>Might not conform to govt/economist definition of consumer price index, but they sure suggest that the money supply is excessive.<< How exactly do housing and oil prices "suggest" that the money supply is excessive? To whom do they suggest this? >>OK, oil price has a lot of other factors, but at the end of the day the fuel buying public is still willing to drive round in large cars with V8 engines in. Not exactly a necessity.<< "Not exactly a necessity." Hmmm. What criteria are you applying to determine what is necessary and what is not? The problem, Steve, is that you have absorbed the values of a European socialist democracy. You are quite comfortable - perhaps you do not even think about it - with your socialist government putting its hand in your pocket and stealing from you 64 pence - more than 75% of the total cost - for each liter of petrol that you buy. You are so comfortable with this, in fact, that you have made a virtue out of your necessity - driving around in a tiny automobile because of the legal mugging you receive every time you pull up at the pump. Post script - US gasoline tax: 8.5 pence per liter.

To: Steve Lee who wrote (26887)	1/5/2003 8:18:54 PM
From: Maurice Winn	Respond to of 74559

Hi Steve. Yes, oil and US and Kiwi and Pommy house prices have been zooming, thanks to super-low interest rates, which will cause a shock to home buyers when interest rates inevitably rise again, probably sooner than later. House prices might not collapse, but they'll certainly go very soft for a few years while people readjust. But there's more to inflation than house price and oil if you want to ignore the official consumer price indices which are at least a set way of measuring inflation. For example, interest rates are part of the cost of living for borrowers, which are all those home buyers with loans. So, although they've got a higher house price, they've got lower payments, so the total cost of buying a house has declined. Which is deflation. Yes, oil is temporarily high in price, but that's just a blip on a long trend. Check the 30 year oil price graph and smooth it out to see what oil prices really are. They are highish, but Saudi Arabia, Russia, Kazakhstan, Iraq and others have got a LOT of oil waiting to be pumped. The cost of pumping is very low in Saudi Arabia and Iraq. So, once the political shenanigans have gone, you'll find oil prices decline to the long run cost of production of new oil, which is something like $1 a barrel in Iraq, so there's lots of scope for oil price cuts. Then, check out the price of the vast mountains of stuff coming out of China. It's cheap. Check out electronics prices; computers, cyberphones, minute charges, megabyte charges, minidisc players and all the other swarms of technological marvels. Air travel is cheap enough and not going up in price, despite oil prices being high. Food is so cheap that the global problem is now obesity, not starvation. Nowhere on earth is there famine now, outside war zones where thugs are fighting for control of the girls and goodies. What's a necessity? I agree that a big SUV with V8 engines are excessive for what I want, but in America, where they are rich and can afford it, and freeways are big and fast, they are nicer to travel in than little vehicles. Parking competition means I select small rental cars when in the USA. But people who don't have to compete for parking might as well have as comfortable as they want to have. I remain constantly amazed by how cheap things are and getting cheaper. I find myself buying things which used to cost me a week's work, just because they are so cheap and I might need it one day. 14 volt cordless drills/screwdrivers and cheaper than a screwdriver used to be [in how many hours I had to work to buy one]. My notebook computer is a supercomputer of the 1980s, let alone the 1970s. My slide rule of the 1960s and trigonometry tables were nightmares of archaic abacus-style calculation. Uncle Al and the USA have hit the jackpot with their currency. It's a bigger software business than Microsoft by a factor of [I guess] about 100, with margins at about 99.9%. It's churlish of the US government to moan about Microsoft when they are wielding a monopoly on they US$. Microsoft prints another copy of Windows XP at large profit, but it took them a lot of cost to develop it. Uncle Al pixelates another $1 billion and it costs him nothing [almost - just a fed meeting, office rent on a few buildings etc, though I suppose they have to pay for USS Enterprise etc to defend the system which produces the US$, so maybe it's not totally profit]. Mqurice