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Post by archer on Aug 16, 2023 17:58:19 GMT
uncleharley, I think you have a point. People without jobs are not likely to be buying homes regardless of interest rates. My first home purchase was in the mid 80s. Interest rates were high, real estate was in high demand with an abundance of buyers and sellers. unemployment was low. The interest rates didn't seem to be a deterrent at the time, but we were not coming off of the low rates the market has become used to over the past decade. I think my first mortgage was around 13%
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Post by steelpony10 on Aug 16, 2023 18:55:04 GMT
Housing starts are up 6.7% YOY according to the latest report from the Dept of Commerce. Pundits and some economists are saying that high interest rates will soon cool the housing market. My thought is that employment/unemployment has more effect on the housing market than Interest rates do. Especially when first home buyers cannot find existing homes to buy. Thoughts anybody??? The unemployment rate needs to be higher before inflation cools. But sure high mortgage rates should cool that market leaving more cash to spend on something else. You need to squeeze discretionary cash by cutting the source. Don’t forget the affects of the underground tax free cash economy worldwide.
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Post by Chahta on Aug 17, 2023 0:48:16 GMT
Housing starts are up 6.7% YOY according to the latest report from the Dept of Commerce. Pundits and some economists are saying that high interest rates will soon cool the housing market. My thought is that employment/unemployment has more effect on the housing market than Interest rates do. Especially when first home buyers cannot find existing homes to buy. Thoughts anybody??? The unemployment rate needs to be higher before inflation cools. But sure high mortgage rates should cool that market leaving more cash to spend on something else. You need to squeeze discretionary cash by cutting the source. Don’t forget the affects of the underground tax free cash economy worldwide. I doubt we will see a high unemployment percentage this time around. There is such rampant underemployment at businesses currently. This is not "textbook" inflation in my mind.
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Post by Chahta on Aug 17, 2023 0:52:12 GMT
newtecher ,...OTOH oil/gasoline prices now back to rising/strong uptrend! R48 ...and food is still killing the family budgets. Families are maxing out credit cards. If a box of whatever has a price that has not gone up, it is because they are putting less of whatever in the box. So consumers must buy nore boxes of whatever. Not always a visible "inflation".
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Post by steelpony10 on Aug 17, 2023 1:21:02 GMT
Chahta , Maybe low unemployment is code for “upside risks”. I’ve only seen inflation go down when consumers stop spending since they’re 70% of the cause. A shock to the system, a scare. I’m leery of the term “this time is different”. I’ll just say inflation isn’t going away any time soon then following the Feds lead and watch my old world figures.
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Post by newtecher on Aug 17, 2023 2:37:04 GMT
Housing starts are up 6.7% YOY according to the latest report from the Dept of Commerce. Pundits and some economists are saying that high interest rates will soon cool the housing market. My thought is that employment/unemployment has more effect on the housing market than Interest rates do. Especially when first home buyers cannot find existing homes to buy. Thoughts anybody??? This just a fluke due to low base effect. Take a look at the graph of housing starts. It is only up >5% because of the very low read in July 2022. The housing start are way down from early 2022 and actually down about 5% from Aug 2022 number so the housing starts YoY in August will most likely be very negative. The rising interest rates will definitely choke the economy. Recent home buyers are paying about $1000 more per month due to >7% mortgages than in the previous decade. That will hurt more an more as the existing low-rate mortgages roll off.
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Post by uncleharley on Aug 17, 2023 13:57:26 GMT
Housing starts are up 6.7% YOY according to the latest report from the Dept of Commerce. Pundits and some economists are saying that high interest rates will soon cool the housing market. My thought is that employment/unemployment has more effect on the housing market than Interest rates do. Especially when first home buyers cannot find existing homes to buy. Thoughts anybody??? This just a fluke due to low base effect. Take a look at the graph of housing starts. It is only up >5% because of the very low read in July 2022. The housing start are way down from early 2022 and actually down about 5% from Aug 2022 number so the housing starts YoY in August will most likely be very negative. The rising interest rates will definitely choke the economy. Recent home buyers are paying about $1000 more per month due to >7% mortgages than in the previous decade. That will hurt more an more as the existing low-rate mortgages roll off. You make a valid point. Are the employment/unemployment stats an aberration also?
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Post by newtecher on Aug 17, 2023 15:11:26 GMT
This just a fluke due to low base effect. Take a look at the graph of housing starts. It is only up >5% because of the very low read in July 2022. The housing start are way down from early 2022 and actually down about 5% from Aug 2022 number so the housing starts YoY in August will most likely be very negative. The rising interest rates will definitely choke the economy. Recent home buyers are paying about $1000 more per month due to >7% mortgages than in the previous decade. That will hurt more an more as the existing low-rate mortgages roll off. You make a valid point. Are the employment/unemployment stats an aberration also? No, employment data is much less noisy that housing starts. But the gains in total private payrolls are declining and also getting revised down retroactively every month. The most likely explanation is that the economy is still being propped up by excess pandemic savings, but they will end in a couple of months.
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Post by uncleharley on Aug 17, 2023 15:37:41 GMT
That sounds like a hope. Meanwhile wages are going up and housing supply is in a catch-up mode. That sounds like more inflation and higher interest rates, but that is all speculation. We shall see.
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Post by newtecher on Aug 17, 2023 16:02:20 GMT
That sounds like a hope. Meanwhile wages are going up and housing supply is in a catch-up mode. That sounds like more inflation and higher interest rates, but that is all speculation. We shall see. Sure, I've been expecting data to be weaker by now but I remain fairly convinced. The lags of monetary policy tools are long and variable, as the adage goes. Wages often keep on rising long after the recession starts so it definitely not a leading indicator. The Fed may hike rates one more time but that would be a mistake.
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Post by mnfish on Sept 1, 2023 12:07:08 GMT
Core PCE for July remained sticky. Consumer spending rose but was without an increase in incomes signaling growing consumer debt.
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Post by archer on Sept 1, 2023 15:36:22 GMT
Core PCE rose .2 in July, .2 in June, and .1 in May. multiplied by 12 and you have 2.4, 2.4, and 1.2 annually. We are not at 2 but pretty close. My point is that while averaging monthly inflation over the past 12 months, the early months are boosting the reported annual level. This weighting from the early months of the past year skew the annual inflation rate, and will create a lag in bringing the annual rate down to 2%. The Fed seems to acknowledge the possible lag but is ignoring it with policy. Inflation could very easily become too low, lower than optimum for several months to bring down the annual rate. Or, if month over month inflation stays at .2 (and remember there is nothing between .1 and .2 due to rounding) the annualized rate will take a much longer to return to 2%.
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Post by uncleharley on Sept 13, 2023 13:12:42 GMT
OOPS!!!! Latest CPI report puts the headline inflation rate at a 14 month high of 3.7%.
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Post by newtecher on Sept 13, 2023 13:18:09 GMT
OOPS!!!! Latest CPI report puts the headline inflation rate at a 14 month high of 3.7%. 14 month high??? 3.7% is the YoY inflation, which is at a 3 month high (it was 4.1% in May 2023). I will post details later.
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Post by yogibearbull on Sept 13, 2023 13:33:24 GMT
Rolling 6-mo #UnadjustedCPI change is +2.0562%; simple sum of past 6 monthly changes is +2.0392%. We are 1 month away from 6-mo Mar-Sep unadjusted CPI change that will be used as #InflationRate for the #IBonds on Nov 1.
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Post by Chahta on Sept 13, 2023 13:43:02 GMT
Rolling 6-mo #UnadjustedCPI change is +2.0562%; simple sum of past 6 monthly changes is +2.0392%. We are 1 month away from 6-mo Mar-Sep unadjusted CPI change that will be used as #InflationRate for the #IBonds on Nov 1. How far away from the SS COLA announcement?
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Post by yogibearbull on Sept 13, 2023 13:52:28 GMT
Chahta, SSA COLA would be known on 10/12/23 too, but a different CPI-W is used and the data from Q3 (only) are used. Actual SSA announcement may come LATER.
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Post by retiredat48 on Sept 13, 2023 15:00:30 GMT
Interesting discussion on cnbc today re price of oil, and inflation.
The elephant in the room seems that the price of oil (going up) will derail the inflation fighting...energy costs are perhaps the chief component of rising prices.
However a gentleman pointed out the following offset: In the past, the DOLLAR typically fell in unison with rising oil prices. That is, when the USA was an oil importer. Now that the country is an exporter (or breaks even), notice the DOLLAR IS RISING IN PRICE, positive correlation with oil prices. This stronger dollar means the products we are buying from abroad, are less in cost...relative costs come down. This helps offset the rise in energy prices.
Interesting take. We shall see.
But if one traces back the current higher inflation, the curve shows it started exactly the day Biden was sworn in as president, and he halted leases of oil land for drilling, and thwarted pipelines, etc. Anti-energy. This was the signal energy prices would be increasing. Businesses were smart, learning from the 1970's, and increased prices quickly as well.
Given the auto industry wage settlement coming, and things like California setting the min wage for fast food workers at $20/hour, and Florida citizens passed a constitutional amendment raising the min wage by about 50% over four years, hard to see inflation getting to 2% goals...or even a 3% goal. Further, inflation is traditionally UNDERSTATED by the gvt stats.
I am strategically investing (and encouraging my kids) to plan for a decade of high inflation. What to do?...that is another thread story.
R48
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Post by archer on Sept 13, 2023 15:15:42 GMT
Numbers from Seeking Alpha this morning:
Market expectations: Headline inflation is expected to rise 3.6% Y/Y in August, accelerating from 3.2% in July. However, the core number - excluding volatile food and energy prices - is expected to increase 4.4% Y/Y, easing from 4.7% in July. The Cleveland Fed Inflation Nowcast estimates an even bigger increase in headline inflation, to 3.8%, while core inflation is estimated to ramp up to 4.5%. On a month-over-month basis, CPI is widely expected to rise 0.6% in August from 0.2% in July, and core CPI is anticipated to scale 0.2% higher, the same increase it saw in the prior month.
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Post by archer on Sept 13, 2023 16:39:13 GMT
Based on the current inflation data and the Fed being hellbent on their 2% target, I wouldn't be surprised if we end up with another hike at the next meeting. I don't think the market is at a place where it is likely to blow off another hike like it has at times in the past.
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Post by newtecher on Sept 13, 2023 17:04:59 GMT
The inflation in July was 0.17% (rounded up to 0.2 in the press release), again mostly shelter. The used car data contributed negatively (-1.3%, deflationary), as expected in my previous post. Based on private (less lagged) data, it will likely be even more negative next month. The CPI-U inflation over the last 12 months (since July 2022) now averages 3.2% annualized. The increase from last YoY data point (3.0) is due to no inflation in July 2022 vs 0.2 inflation in July 2023. The inflation in August was 0.63% (rounded down to 0.6 in the press release). About 0.4% of that 0.6% is due to the ~11% change in gas prices. Shelter contributed the rest. The used car data contributed negatively (-1.2%, deflationary), as expected in my previous post, though I expected it to be much more negative based on private data. The big drop in used car component of CPI-U will probably happen next month. The CPI-U inflation over the last 12 months (since August 2022) now averages 3.7% annualized. Based on TIPS pricing, the expected (breakeven) inflation is approximately 1.9% annualized over the next 6 months and 2.5% over the next year. I still believe it will be lower, in part because I am expecting a recession within the next 6 months or so. I believe the student loan repayment restarting in October is a big and sudden drag on the economy, equivalent to fiscal tightening by 0.5-1% of GDP, exacerbating the slowdown that has been going on for several months now. My guess is that economic data will turn very negative in Oct-Dec 2023. As I mentioned in another thread, long-term treasuries are a great value right now. I am certainly buying them in all my accounts myself (before the economic data turns negative and the yield drop).
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Post by uncleharley on Sept 13, 2023 17:05:54 GMT
I thought the most recent thinking at the Fad was that while 2% remains the target, anything under 4% can be acceptable. If that is still true then the CME data which suggests a 90 something % chance of a pass on hikes at the next meeting remains valid.
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Post by newtecher on Sept 13, 2023 17:44:17 GMT
I thought the most recent thinking at the Fad was that while 2% remains the target, anything under 4% can be acceptable. If that is still true then the CME data which suggests a 90 something % chance of a pass on hikes at the next meeting remains valid. Do you have any quotes to support this? From my understanding, the Fed is still aiming for 2% PCE inflation (unless a recession intervenes).
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Post by uncleharley on Sept 13, 2023 19:47:21 GMT
I thought the most recent thinking at the Fad was that while 2% remains the target, anything under 4% can be acceptable. If that is still true then the CME data which suggests a 90 something % chance of a pass on hikes at the next meeting remains valid. Do you have any quotes to support this? From my understanding, the Fed is still aiming for 2% PCE inflation (unless a recession intervenes). Isn't that what I said?
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Post by steadyeddy on Sept 13, 2023 20:18:09 GMT
There are pockets of weakness in the economy and I think the Fed will be patient i.e., hold the current rate for longer and only act if sudden acceleration of inflation occurs in the coming months.
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Post by newtecher on Sept 13, 2023 20:41:03 GMT
Do you have any quotes to support this? From my understanding, the Fed is still aiming for 2% PCE inflation (unless a recession intervenes). Isn't that what I said? I thought you said anything under 4 is acceptable not just this month but going forward. I do not think 3 to 4% is acceptable to the Fed. They will keep the rates high or increase them further to make inflation go down to 2%.
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Post by archer on Sept 13, 2023 20:54:41 GMT
Here's a snippet from Barchart this morning regarding inflation and the Fed's focus on its 2% target:
"Well, the latest Consumer Price Index shows U.S. inflation cooled from a peak of 9.1% in June 2022 to 3.2% last month. Yet unemployment fell from 3.6% in June 2022 to 3.5% in July 2023. The current rate is around 3.8, which leads some economists to believe that “immaculate disinflation” might be underway.
However, Fed Chief Jerome Powell has repeatedly said there’s nothing to celebrate until inflation hits the central bank’s 2% target and stays there for a sustained period. Getting there without a significant spike in unemployment would be close to a miracle, as stated by Powell in his recent speech."
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pn
Ensign
Posts: 5
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Post by pn on Sept 14, 2023 0:15:12 GMT
2% is the fed goal, but how fast do they need to get there?
The fed pushing rates up right away increases the risk of breaking something which would trigger a quicker need to reduce rates.
On the other hand, the fed being patient with increasing short term rates will mean that longer term rates will become more of a tool and longer term rates will gradually adjust higher – un-inverting the curve.
Add: My two cents - partly influenced by reading of a couple of posts here, I was just checking to see if Uncle Harley had any thoughts on where interest rates are going.
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Post by Chahta on Sept 14, 2023 0:42:40 GMT
Based on the current inflation data and the Fed being hellbent on their 2% target, I wouldn't be surprised if we end up with another hike at the next meeting. I don't think the market is at a place where it is likely to blow off another hike like it has at times in the past. Seems like the 10 year priced it in already. It zoomed up past 4% and has stayed there. Maybe equities can blow off another hike because the economy is still moving ahead. No recession in sight it seems.
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Post by uncleharley on Sept 14, 2023 1:33:44 GMT
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