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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: gpowell who wrote (47097)	1/14/2006 1:27:53 PM
From: shades	Respond to of 306849

Too bad net worth is still showing little to no deviation from past growth even when excluding housing and corporate equities. Interesting gpowell mosler.org How about competitive devaluations (continuing?) in 2006? "Yet, at the same time, there can be no mistaking the policy-induced buying of dollar-denominated assets by Chinese monetary authorities. No matter who did the buying, the outcome was clear: US Treasury TICS data revealed that $1.1 trillion of foreign capital flowed into long-term US securities in the 12 months ending October 2005 -- more than enough to fund a record US current account deficit that was running at about a $780 billion annual rate over that period" Roach morganstanley.com Mosler over at epicoalition.org : mosler.org The lower fiscal deficit means aggregate demand necessary for continued 3-4% real GDP growth can only be sustained by continued dissavings by the domestic sector and financial obligations continuing to head to new highs as a percent of income, what we consider to be the ultimate constraint. Of course, measured as a % of assets, these burdens don t look as bad, underscoring the importance of home prices to the consumer demand needed to sustain the economy and stretch debt service levels to the limit. · High rates of capacity use and healthy, though moderating, levels of corporate profits suggest that hiring may well remain strong for some time. But with energy and interest costs and some wage demands also likely to pick up as a result of high energy prices and a tight labor market, we have also seen the best of the profit cycle pass. · Pension funds continue to support energy prices and various other raw commodity prices. Storage costs remain high and could increase further. Once funds are near the end of shifting to this new asset class commodity prices collapse 50% or more to adjust to the fall off in demand and elevated production levels. However, we don t expect this to begin until the second half of the year at the earliest. Meanwhile, risk remains for supply shocks from Russia, Venezuela, the Middle East, and others. · Fed will see higher core cpi and keep raising rates. Higher rates contribute nearly directly to higher core cpi through housing (via lower home prices and higher rents) and increasing the cost of capital to be in business, as most pricing is cost + . Furthermore, the US govt. had a 3.1% cost of living pay increase in 2005 (yr/yr headline cpi growth) which redefined the currency downward that much. As this policy continues, it institutionalizes cpi increases over the long term in a manner Fed policy can't address, but will attempt to anyway with higher rates. · Dissension at the Fed will increase as splits are already apparent over the appropriate policy course-Greenspan had 18yrs to work on consensus-building; Bernanke has virtually no meaningful experience in this area. Japan will end quant easing by April and raise rates by Sept. Nikkei likely to reach 20,000+, with even the MoF likely to acquiesce on BoJ desire to normalize policy. Already there are concerns of a real estate bubble in some areas in Japan.