Five Things You Need to Know: Housing is Stabili... Oops, The Worldwide Conquest of Inflation, But Wait, There's More!, Speaking of Secular Deflation..., Crowds and WikiPower
What you need to know (and what it means)!
Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Housing is Stabili... Oops
Home builder confidence in November spiked higher for the second consecutive month, surging two points to 33.
- Last month the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) exploded by one point from 30 to 31.
- This back-to-back explosion in the NAHB HMI prompted NAHB President David Pressly to note that "we look for sales to stabilize and gradually move up in the coming months."
- Prior to the staggering two-month surge in the HMI, the index had "flattened out a bit," from 72 in June 2005 to 30 in August of this year.
- Meanwhile, before the "Housing Stability" party could even tap the kegs, the stupid Housing Starts data this morning plunged 14.6% last month to a six-year low.
- Also, the tee-totaling Building Permits data had the temerity to tell the Housing Stability party to turn the music down, falling 6.3% to the lowest level in nine years.
2. The Worldwide Conquest of Inflation
Speaking at the Cato Institute Monetary Policy conference in Washington D.C. yesterday Fed Governor Randall Kroszner took a victory lap in the war against inflation, declaring a "conquest of worldwide inflation."
- In the United States and in virtually every country around the world, inflation has declined over the past 25 years, and in most countries dramatically so.
- As Kroszner notes in his speech, the volatility of inflation and expectations of future inflation have also fallen significantly.
- What do you call this turn of events? Inflation falling worldwide. Volatility of inflation falling globally. Volatility of inflation expectations falling globally.
- If you are Kroszner, you call it, "the conquest of worldwide inflation."
- And who or what is responsible for this worldwide conquest of inflation? Why, central banks, of course!
- "[G]lobalization, deregulation, and financial innovation, in part spurred by experiences of high inflation in the 1980s, have fostered currency competition that has led to improved central bank performance and, hence, the recent conquest of worldwide inflation," Kroszner asserts.
3. But Wait, There's More!
Much more. According to Fed Governor Randall Kroszner during yesterday's endzone dance over whipping inflation, "When governments resort to printing money to finance their spending, inflation rises and nominal assets lose their value. This loss of value is also known as the inflation tax."
- Whoa, easy there fella, you'll hurt your arm reaching around to pat yourself on the back so vigorously.
- We'll grant you this: the transparent and fully outlined 17 consecutive 25 basis point Fed funds rate increases that were recently concluded allows that statement to fly over the heads of most... without question.
- Hey, look everybody, the Fed isn't printing money and they're not resorting to the inflation tax!
- True enough, they're not printing money.
- But during the 17-consecutive rate increases credit expansion didn't pause for one moment.
- So while it's true on the face of things to say the Fed isn't resorting to the inflation tax by "printing money," Fed policies have done little if anything to slow credit expansion.
4. Speaking of Secular Deflation....
General Motors (GM) announced it will offer discounts of up to $2,000 on many vehicles in its latest campaign to boost sales, according to the Financial Times.
5. Crowds and WikiPower
In a move that could shake up the book industry, publishing giant Pearson PLC is joining with two top business schools to create a business book authored and edited by a "wiki," according to the Wall Street Journal.
WikiSalem Witch Trials
WikiAstronomers: "The world is flat, so careful where you sail that thing."
Spanish Wikinquisitioners: "Just spreading the good word."
Wikinvestors: "Stock market has reached permanently high plateau."
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter