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I agree with much of what you say, however there was a very well written
guest column on the WSJ editorial page a couple of weeks ago, setting forth
the case that Californians expect social, environmental, and economic
perfection without any trade-offs so it seems natural that costs there would
lead the rest of the country. It rang a bell when I read it, however I felt
that much of it was applicable to urbanized areas in the rest of the country
as well - remember those red and blue election maps? What I do know (living
in the Southwest), is that because Californians don't want energy facilities
built locally, California is draining off energy supplies (and water as
well) from surrounding areas thus driving scarcity and costs for the rest of
us. Unfortunately, too many Californians are now leaving their idealized
world and moving in with those of us who eschew urbanized America thereby
driving up housing costs along with water and energy consumption.
As for the huge annual hikes in my medical insurance premiums, I think this
is a national problem which is not going to go away any time soon. In short,
the medical system is running on the ideal of perfection in medical
treatment without accompanying self-responsibility for proper eating and
exercise because the later requires self-denial - a "no no" for my baby
boomer generation and those generations which have followed. Further,
consider that while tobacco has been identified as a major health risk, no
one is yet going after the soda companies which seem to have fueled near
epidemic numbers of diabetics.
So from a financial point of view, investors have a real conundrum ... short
term interest bearing instruments could easily go to near zero rates when
the credit bubble is gored -or- long term bonds will continue to tank if the
bubble persists and inflation rises. Personally, I think historians will
recognize Mr. Greenspan for what he has accomplished - trading off the long
term economic health of the country for short term "perfection".
Earl
----- Original Message -----
From: "Ira Tunik" <irat@xxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, April 22, 2001 10:14 AM
Subject: Re: [RT] Another Panic Cut Sets Stage for Rate Hikes Next Year
> They say (the talking heads) that they (the Fed) will continue to lower
> rates. Greenspan's thesis has been to stop inflation. The Fed numbers
say
> there is no inflation. Here are some numbers that might interest you on
the
> inflation front. Is this in California Only.
>
> Gasoline is over $2.00 a gallon in many places. What happened to the
outrage
> when it crossed $1.00 per gallon? Utility bills have doubled and in some
> cases tripled and they are projected to double again. Of course no one
> cooks, cleans, turns on their lights, heats or air conditions their homes.
> People in California don't have stoves, refrigerators, ovens, dishwashers,
> micro waves, furnaces, hot water heaters and air conditioners that use
> power. The products manufactured and agriculture produced in California
will
> effect everyone in the country sooner or later. Health care premiums up
20%
> again. Auto prices are higher. Soon the oil price hikes will effect the
cost
> of food, manufactured goods and about everything else we use. Gee, soy
bean
> prices are the low end, that sure impacts my cost of living.
>
> Last year was a bear market and boy did it effect the cost of housing in
this
> state. some facts. A record number of California homes sold for $1
million
> or more last year. That is up over 50% from 1999, the previous record
high.
>
> some highlights
> Total $1 million + homes sold 11,364
> Number newly built: 1,343
> Most expensive: $22 million (10,280 Sq. ft. home in Atherton)
> Over $10 million: 34
> $5 to $10 million range: 164
> Condos: 528
> Median price per Square Foot: $492 (up 16.2% from last year)
> Median down payment: $400,000
> Percent of buyers paying cash: about 24%
> median size : 2,961 Sq. Ft.
> Largest: 22,007 Sq. Ft. ( Coronado, $5.5 million)
> Highest million-dollar-to-overall-sales ratio: Atherton, Rancho Santa Fe.
>
> Even the billionaires are paying more for their new homes. Housing costs
in
> the wine country are up 50% in the last couple of years. I have no idea
what
> is happening in the rest of the country, but I will tell you this,
California
> has been the leader of trends for years and if that remains true, look out
> ahead the rest of the country. Ira.
> Me wrote:
>
> > Digging a deeper hole? I think so. Lower interets rates aren't the
> > solution to all problems (consider Japan). What will happen when we
> > find that lower rates don't fix the problems?
> >
> > JW
> >
> > --------------------------------
> > http://www.thestreet.com/p/comment/detox/1396002.html
> >
> > Another Panic Cut Sets Stage for Rate Hikes Next Year
> > By Peter Eavis
> > Senior Columnist
> > 4/18/01 3:06 PM ET
> >
> >
> > Go ahead, fight the Fed. Wednesday's half-point cut in the federal
> > funds target rate makes Alan Greenspan an even easier opponent.
> >
> > A cold, hard look at Greenspan's conduct of monetary policy shows
> > that the chairman of the Board of Governors of the Federal Reserve is
> > far from infallible. In fact, since he took over as Fed chief in
> > August 1987, Greenspan has spent much of his time cleaning up messes
> > that he himself is responsible for.
> >
> > The next mess is in the making, and it'll be even bigger after
> > Monday's rate reduction. If recent history is any guide, inflation,
> > already close to its five-year high, will rise to unstomachable
> > levels within the next 12 months as a result of the Fed's current
> > cheap-money policies. Detox's prediction: Greenspan will be hiking
> > rates in 2002, if not before. The market, when it gets wind that
> > tighter money is on the way, will tumble. And investors who chose not
> > to see Easy Al as a God will be rewarded -- richly.
> >
> > Deep Breaths
> > Evidence of the next leg up in price inflation can be seen
> > everywhere. Money supply figures are soaring, which, by definition,
> > means banks are churning out new loans. The mortgage market is on
> > fire. Consumer debt is growing at a rip-roaring pace, even though
> > people's debt burdens are at record levels. Hundreds of stocks still
> > trade at absurd bubble-type valuations, underlining how much hot
> > money still exists.
> >
> > For some unfathomable reason, most market mavens think inflation
> > automatically ceases to become an issue when the economy slows, as it
> > has in the U.S. The real lesson is that unwise attempts to boost
> > flagging economies or collapsing financial markets -- something the
> > Fed is guilty of now -- have been a chief cause of inflation through
> > the ages.
> >
> > Now, the Fed is redoubling efforts to reflate the bubble sectors.
> > Take the capital goods industries, particularly the tech sector,
> > which have been whacked over the past six months. In the release that
> > accompanied Wednesday's cut, the Fed showed its deep concern for
> > capital investment, saying that it "has continued to soften," adding
> > that the "persistent erosion in current and expected profitability,
> > in combination with rising uncertainty about the business outlook,
> > seems poised to dampen capital spending going forward."
> >
> > And the stock market, even though it has been rising recently, also
> > has the Fed worried. In the release, the central bank frets about the
> > effect that "reductions in equity wealth" will have on consumption.
> > Looking at that, it's hard not to conclude that the Fed's Wednesday
> > cut is also meant to help the market go back up.
> >
> > Hans Tietmeyer, the ex-head of Germany's Bundesbank, the only major
> > central bank with a record to be proud of in the postwar period, was
> > quoted as saying recently: "The U.S. central bank is dangerously
> > close to becoming a prisoner of the financial markets." After
> > Wednesday's Fed move, he'll surely be removing the words "dangerously
> > close to."
> >
> > Like all superaccommodative central banks, the Fed hates to see the
> > economy adjust to get rid of unhealthy areas. The fact is, the
> > capital goods industry, like the Nasdaq, was in a state of gross
> > excess. In 2000, private sector investment accounted for 19% of the
> > economy, the highest level in the series, which started in 1929. It
> > only got to that level through a massive boom in IT sales. Capital
> > investment, dominated by tech buying, accounted for 25% of U.S.
> > growth in the second part of the '90s, according to Dick Berner,
> > economist with Morgan Stanley. Now, there's a huge glut in tech gear,
> > something dramatically underlined by Cisco's (CSCO:Nasdaq - news -
> > boards) inventory writedown this week. Clearly, John Chambers' recent
> > squeals to the Fed to cut rates to help his business didn't fall on
> > deaf ears.
> >
> > Past as Prologue
> > So, what next? Greenspan is repeating past dysfunctional behavior. In
> > 1987, he slashed rates to bail out an overheated stock market, only
> > to raise them aggressively the following two years as inflation got
> > out of control. In 1994, he ratcheted up the cost of money,
> > contributing to Mexico's currency collapse. The Treasury bailed out
> > Mexico -- a move the Fed aided with lower rates -- and the emerging
> > markets bubble continued to balloon until the Asian crises of 1997-
> > 1998.
> >
> > In 1998, Greenspan brought down rates rapidly to ensure that
> > liquidity was pumped back into the financial markets after the near
> > collapse of Long Term Capital Management. Money supply soared.
> > Greenspan primed the pump some more ahead of the Y2K changeover, and,
> > almost like clockwork, inflation was moving up quickly by early 2000.
> > That led to the rate hikes of last year. And it was these that caused
> > the collapse in the Nasdaq and capital spending. A bold pattern
> > emerges: panic-cut-hike-panic-cut-hike-panic-cut-hike. Whatever
> > medical term one might use to label this type of behavior, it's
> > clearly no way to run a central bank.
> >
> > Where are the excesses now? Well, the stock market is back in
> > fashion. A no-hoper like Yahoo! (YHOO:Nasdaq - news - boards) is
> > trading at a cool 500 times expected 2001 earnings, for example.
> >
> > Heating Up
> > But look at what's happening in the consumer and housing debt
> > markets -- it belies belief. Consumer debt is growing at over 10%.
> > This is happening at a time when delinquency data show that consumers
> > should be cutting back on their debt. In the fourth quarter of 2000,
> > consumer debt payments as a percentage of disposable income grew to
> > 14.3% from 14.1% in the previous quarter -- levels that haven't been
> > seen since 1986. Meanwhile, Moody's figures show that an increasing
> > number of credit card loans are going bad. In February, the write-off
> > rate for credit card loans was 5.8%, while delinquencies were 5.26%.
> > Both numbers are well above year-earlier periods.
> >
> > The OFHEO House Price Index was up 8.13% in the last quarter of 2000,
> > the highest increase since 1987. Government-sponsored entities that
> > buy mortgages like Fannie Mae (FNM:NYSE - news - boards) and Freddie
> > Mac (FRE:NYSE - news - boards) are stuffing their balance sheets with
> > new loans. Fannie Mae's mortgage portfolio totaled $641 billion in
> > March, up 19% from March 2000. Fannie's portfolio grew at a 23% rate
> > in the first three months of the year, up from the 16% rate for all
> > of 2000. Despite the growth, mortgage delinquencies totaled 4.54% of
> > loans in the fourth quarter of 2000, the highest level in eight
> > years, according to the Mortgage Bankers Association. More loans
> > going bad even as loan totals soar -- this is a classic sign that the
> > credit bubble is entering very dangerous territory.
> >
> > With all these loans being advanced, is it any wonder that prices are
> > still buoyant? Inflation, as measured by the Cleveland Fed's index,
> > designed to strip out the "noise" in price data, measured 4.2% in
> > February and 4% in March. The last time it was at these levels was in
> > January 1996. Price indexes could go even higher when recent jumps in
> > gasoline prices are added in. The Fed may know this and might've
> > wanted to get a rate cut in before the next inflation releases
> > undercut the case for one.
> >
> > However, given the strength of the above indicators -- and the fact
> > that other recent economic numbers have shown surprising strength,
> > like Tuesday's industrial production rise of 0.4% -- some independent-
> > minded commentators are deducing that the reason for the inter-
> > meeting cut was not to address softness in the economy at all. Sean
> > Corrigan, analyst at Capital Insight, of Rochester, England, wonders
> > whether the reduction could be to address a systemic problem we don't
> > know about yet. Could a bank or a large hedge fund be in trouble as a
> > result of a bad bet or extensive exposure to a large bankruptcy, he
> > asks? Perhaps Argentina is about to come off its dollar peg and
> > devalue and the Fed is softening up the market for that.
> >
> > But don't cry for Argentina. Shed your tears for Easy Al, and all
> > those lemmings who believe in him.
> >
> > ---------------------------------------------------------------------
> >
> > Know any companies that the market may be misvaluing? Detox would
> > like to hear about them. Please send all feedback to
> > peavis@xxxxxxxxxxxxxx
> >
> > To unsubscribe from this group, send an email to:
> > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
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http://docs.yahoo.com/info/terms/
>
>
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