Five Things You Need to Know: Parsing the PPI; China Raises the Lending Bar; Largest Home Price Drop Ever!; 2006: Year of the Contraction; 2007: Year of the Pig
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. Parsing the PPI
The Producer Price Index for Finished Goods declined a seasonally adjusted 0.6% in January, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.
- Overall, the so-called "core rate" decelerated to a 1.8% increase year-on-year, compared with 2% a month ago.
- Meanwhile, the core PPI for Intermediate Goods was flat for the second consecutive month, after December was revised upward from -0.1%.
- Noteworthy, again - the core PPI for Intermediate Goods was flat despite the third consecutive monthly gain for the core PPI for Crude Goods, which rose 1.6%.
- That, again, is indicative of a lack of pricing power as goods move through the production chain.
2. China Raises the Lending Bar
China ordered banks to set aside more money as reserves for the fifth time in eight months to cool inflation and investment, according to Bloomberg.
- China's central bank today boosted banks' reserve requirements by 50 basis points, marking the fifth hike in reserve requirements since June.
- This takes the reserve requirements for China's large, state-owned banks to 10%, and 10.5% for smaller banks.
- The move comes as China tries to stem surging liquidity and credit growth.
- Central bank Governor Zhou Xiaochuan is concerned that cash from a record trade surplus is stoking excess investment, raising the risk that inflation will accelerate from 2.2 percent in January, Bloomberg said.
- In a statement posted on its Web site, the PBOC said it will continue to "utilize a comprehensive set of monetary policy tools to soak up excessive liquidity in the banking system."
- Today the yuan rose to its highest level since the link to the dollar ended in July 2005.
3. Largest Home Price Drop Ever!
Good news! The National Association of Realtors yesterday afternoon reported that, for the first time ever, more than half the national metro areas it surveys reported deflating home prices on a year-over-year basis.
- The fourth-quarter report from National Association of Realtors showed largest price decline on record as markets with price declines now outpace those with gains.
- We could pick apart the data more, but Minyan Mish (Mike Shedlock) has already published a piece looking at the data, so we refer you here.
- Rather, we're more interested in this: "This information confirms 2006 was the year of contraction," according to NAR chief economist David Lereah, author of the 2006 book, "Why the Real Estate Boom Will Not Bust - And How You Can Profit from It: How to Build Wealth in Today's Expanding Real Estate Market," and the 2000 book (seriously), "The Rules for Growing Rich : Making Money in the New Information Economy."
- Did you get that? 2006 is now confirmed as the year of the contraction, says NAR "chief economist."
- There's only one problem with saying that 2006 is "confirmed as the year of the contraction."
- It implies that you might have - AT ANY POINT LAST YEAR - previously suggested that 2006 was the "year of the contraction."
4. 2006: Year of the Contraction
According to NAR "chief economist" David Lereah, the housing data released yesterday afternoon "confirms 2006 was the year of contraction."
- Now that implies Lereah might have, at any point last year, actually suggested that 2006 might be the year of the contraction, which the data now apparently confirms.
- Let's take a look:
5. 2007: Year of the Pig
It's the Year of the Pig, according to the Chinese Astrological Calendar, and you know what that means: a roller-coaster ride of conflict and unrest, natural disasters and a plunge in global stock markets.
- The lunar calendar is based on the cycles of the moon and associates each of the 12 years forming a partial cycle with that of an animal.
- The pig is the last in the zodiac sequence that begins with the rat, followed by the ox, tiger, rabbit, dragon, snake, horse, goat, monkey, rooster and dog, according to Breitbart News.
- Feng shui expert Raymond Lo said that according to ancient Chinese belief, the Year of the Pig is symbolized by two elements -- fire sitting on top of water.
- "Fire sitting on water is a symbol of conflict and skirmish, and this may bring a relatively less peaceful year with more international conflicts and struggles," he said, according to Breitbart News.
- So at least we have that going for us.
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