|
PureBytes Links
Trading Reference Links
|
Caroline Baum, the terrific journalist at Bloomberg News, had an interesting
story today called "'No Inflation' Argument Is Wearing Thin at Seams," about
the nonsense that goes on with the inflation statistics. I've excerpted a
bit of it below. It explains a lot. For those out there who think I've been
too harsh on people pretending there's no inflation, read this article and
see what you think:
Too bad Europeans haven't caught on to the technique of ex-ing out
everything that goes up. . .
Forget oil. Everything else is accelerating, too. Yet the perception
persists that there is no inflation in the U.S.
Indicator May 1999 November 1999 May 2000
CPI +1.5% +2.6% +3.1%
CPI ex-F&E +2.0% +2.1% +2.4%
CPI ex-shelter +1.7% +2.7% +3.2%
Commodities +1.6% +2.5% +3.3%
Cmdty ex-F +1.2% +3.0% +3.8%
Non-dur ex-F +3.0% +6.0% +6.6%
Services +2.4% +2.6% +3.0%
Services ex-E +2.7% +2.6% +3.0%
Serv ex-rent +1.9% +2.7% +3.2%
Serv ex-OER +2.2% +2.7% +3.3%
Medical Care +3.4% +3.5% +4.0%
Serv ex-medical +2.4% +2.6% +3.0%
The table above shows the year-over-year change in various CPI components
as of May 1999, November 1999 and May 2000.
You want services ex-energy? The Bureau of Labor Statistics has it.
Commodities less food? Services ex-rent, ex-medical? Non-durables ex-food?
They got 'em all.
As the table demonstrates, even if you exclude all of the components that
are rising faster than overall inflation -- medical care and energy, for
example -- inflation is still accelerating.
----- Original Message -----
From: "Gary Fritz" <fritz@xxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Thursday, June 22, 2000 9:50 AM
Subject: [RT] Re: Hyperinflation in Bay Area Housing Prices
> > For those who says that there are no signs of inflation, here are
> > a few examples of how rampant inflation is in the housing market.
>
> I feel I should point out that this is NOT an indicator of current or
> incipient inflation. This is an indicator of steady, sustained
> housing inflation over the last *decade*. Look at gas, food, medical
> costs, etc. if you want a read on the CURRENT inflation picture.
>
> > 4 BR/2 BA home in Dublin, CA sold for $225,000 in 1988,
> > now sells for $649,000
> > * an increase of $424,000 in 12 years, annual increase of $35,330.00
> > or 15.7%
> > * prices in this town have skyrocketed 188% in 12 years !!!
>
> Let's not make this look any worse than it already is.
>
> Yes, the prices have gone up 188% in 12 years. That is NOT equal to
> a 15.7% increase each year. 15.7% per year would take a $225k house
> to $1.3M in 12 years! $225k * 1.157^12 = $1.3M.
>
> Remember, traders, Compounded Growth Is Your Friend. :-)
>
> You don't divide by the number of years to get the annual rate, you
> take the 12th root. 188% in 12 years is 9.23% per year. Still a
> pretty impressive sustained growth rate, especially for a highly
> leveraged investment like a house. If you put down 10% on that house
> in 1988, you got a $424k return on your $22.5k investment. That's
> about 27.7% per year. Of course, you also had to make house payments
> &etc, but you'd have been paying rent if you hadn't.
>
> Leveraged investments like that work great when the market is going
> up, as any futures trader could tell you. Of course, any futures
> trader could also tell you they're a b**** when the market goes down.
> Especially since you can't bail from a house as quickly as from an
> S&P position. :-)
>
> > and the funny thing is, the banks are handing out $500,000
> > mortgages here like candy, when this mania ends, it will make the
> > S&L debacle pale in comparison.
>
> The thing that really scares me is the number of **125%** loans that
> banks are pushing. That's utterly irresponsible and borderline
> criminal, IMO. It's like selling more heroin to a junkie. When
> housing values start to drop, there are going to be some serious
> "margin calls" out there.
>
> Gary
>
>
>
|