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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (7472)	2/9/2004 4:53:54 PM
From: mishedlo	Respond to of 110194

"If you are buying clothes and vehicles and going to movies, all is right with the world. If you are eating, paying medical bills ... and sending a child to college, you are stressed," said Joel Naroff, president of Naroff Economic Advisors. "As the saying goes, where you stand on inflation depends upon where you sit." centredaily.com

To: russwinter who wrote (7472)	2/9/2004 5:00:40 PM
From: Jim Willie CB	Read Replies (2) \| Respond to of 110194

a few forces upcoming to add to Chinese prices Jay Chen has often referred to indirect methods to slow things down inside CHina like removal of export subsidies I am concerned about capital subsidies on a massive scale which adds to Chinese mfg capacity that aint going away / jim

To: russwinter who wrote (7472)	2/9/2004 5:02:30 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

NEW YORK (CNN/Money) - Draw a nice long historical chart of commodity prices and the rate of inflation and you will find, unsurprisingly, that the two rise and fall together. Until now, that is. Now we're faced with the odd world where the prices of raw materials have risen sharply for two years, pushing the Commodity Research Bureau's index of commodity prices a smidgen short of its all time highs, and yet, inflation, as measured by the consumer price index, is remarkably muted. You can come up with all sorts of reasons for this odd divergence. There's growing demand for raw materials from China, which, thanks to its low production costs, turns them into cheap consumer goods that get shipped back here. There's a huge amount of excess production capacity sloshing around at U.S. companies making finished products, while manufacturers that work at the initial stages of processing are running remarkably tight. And then, there are U.S. consumers, who despite their enormous propensity to spend, simply refuse to pay higher prices for many goods. Whatever the root causes, however, the final effect is the same: Between rising commodity costs and consumer prices that are barely budging, many U.S. companies risk seeing their profit margins ground to a fine powder. Take the auto industry as an example. New car prices fell 2.1 percent over the past year, according to the most recent CPI report. But the base cost of many of the things that go into a car has risen, as has the cost of the energy it takes to build it. Or the clothing industry: apparel prices have fallen 1.9 percent, while cotton prices have surged. Some people reckon this isn't a problem, because such costs are minor compared with firm's major outlay -- wages and benefits. Many companies have been able to more than offset rising commodity costs, for instance, by shifting healthcare costs onto workers. But aren't workers who see their real earnings power decline eventually going to demand higher wages? And if their earnings power stays low, aren't they going to be less willing to buy stuff? We all remember the old story about how Henry Ford wanted the wages he paid high enough, and the cars he sold cheap enough, for his workers to drive around in Model As. If U.S. companies can't figure a way to raise prices soon, their earnings could get stuck between a rock and a hard place. mosler.org

To: russwinter who wrote (7472)	2/9/2004 5:09:08 PM
From: mishedlo	Respond to of 110194

money.cnn.com Over the past year vehicle prices have fallen 3.6 percent, thanks to tough competition. Part of that is due, again, to a kind interest-rate environment. Although zero-percent financing doesn't factor directly into the box score the way the BLS calculates inflation, it has brought the cost of buying down, prompting many consumers to trade in their almost-new car for a brand new one. "What you're seeing is a glut of gently used vehicles, and that's putting pressure on all vehicle prices," Lehman Brothers economist Joe Abate said. Could higher rates force car prices higher? It could certainly raise the cost of buying a car, since those generous financing deals would go away, and that might make used vehicles more attractive, lifting their prices. But competing with this, auto companies are intensely interested in selling everybody a new set of wheels, and the industry remains awash in excess capacity.

To: russwinter who wrote (7472)	2/9/2004 5:16:06 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Inflation. A rebound in the economy is generally accompanied by an increase in both inflation and interest rates, but not this time. In November the inflation rate fell to its lowest level in 40 years. Even with industrial production improving and housing markets strengthening, the consumer price index dropped 0.2 percent, bringing the annual rate of inflation to 1.8 percent for 2003. The core rate of inflation, excluding food and energy, dropped by 0.1 percent, the first decline seen in the core rate since 1982. One reason for this behavior could be that both ample capacity in manufacturing and unemployment are putting downward pressure on prices. Inflation may have bottomed out and it should remain subdued in the near term. Consumer prices could rise about 1.3 percent in the first half of 2004. Then as employment begins to improve in the second half of the year, we could see another increase in prices. cber.cba.ua.edu ========================================================= Russ I know you discard the CPI (as do I, but the first DROP since 1982!!). The problem I have with CPI is that it ignores food and energy and has other problems but let's be realistic, just what is going up other than commodities, housing, medical costs, food, and energy (of which NONE of those other than housing has much to do with FED interest rates).