when home price drops, inflation can not happen Indeed it can, will, and is happening! 'It', of course, inflation, that is, may depend entirely upon your definition of 'it'. For the sake of definition, I define inflation as the cost of goods (and services) across a broad landscape of those goods and services, and, applied to the population 'as a whole'. This, again, may need defintion, the population as a whole, that is. Generally speaking, I define the population as a whole, to be weighted heavily towards the least afluent among us, (which as you might guess, is recently (and swiftly) a growing percentage of the populace. Taken in sum, if, that majority, is in the aggregate, experiencing increases in the costs of those goods and services, which I would and do propose they are, and / or, they are recieving less, or 'less value', in those sasme goods and services, which again I would propse they (we) are, which in effect equates to an increase in those same goods and services, then inflation does indeed exist, even in what appears to be a deflationary market. When coupled with, and especially in the face of, significant decreases in 'percieved and actual wealth', as in market values of holdings, and marketable 'securities (what a misnomer!) (in our persent case, to include virtually every asset class, real estate, bonds, muni's, stocks, homes, autos, etc), I would again propose that actual inflation is far greater than is presently accounted for, (hey, waht else is new!). The irony, of course, is that on the face of it, as the OP wonders, it would seem that inflation should be abating, when in fact it is not only not abating, but actually incresing on a relative basis, even as we experience deflation, of our holdings. It's a cruel world. I expect 'it' to get worse, before it gets better, particualarly for the less well-prepared. Those fortunate in possessing large or ample stores of wealth, will of course, stand to benefit in actual and relative terms, as they are and will be in position to capitalize on improving values and opportunities, at the expense of their less fortunate countrymen. The ability to transition those great values to realized gains, in my opinion, will over time depend upon being able to (once again) lift up the population as a whole, which in my view also depends upon this nation effectively transitioning swiftly, and decidedly, towards energy independence, and away from stripping vast oceans of wealth and blindly sending them to eagerly-awaiting foreign powers. I think we can, and will do it!
Inflation in my opinion consists mainly of 2 things. 1) 33% food costs + oil/energy/heating 2) 33% home costs. 3) 33% etc.... From this we can realize: food/energy costs + home costs = 66% food costs= commodities /corn/etc. homecosts = home prices. Commodities and home prices are BOTH falling.
for the worst case scenario to unfold all that needs to happen is for the deflationary threat to be taken seriously by farmers for a season or two with less planting. then food will start to spiral up in cost when we can least afford it.
Just a question ... If we're in the midst of a major deflation, how come the 10 year note still yields 3.70%? This is higher than the lows reached in March (around 3.20%) and higher than the lows reached in 2003 (around 3.10%). From a technical perspective, the fact that the 10 year yield has been unable to take out these major multi-year lows tells me that inflation, not deflation is going to be the problem in the future.
USD pricing patterns. This is EUR/USD So USD in the inverse. Few things to point out 1) When something falls breaking all support, it doesn't fall for 3 bars, and rally back to the high. 2) When something falls and breaks support, it will continue falling for at least , at least 20 more bars with 3-4 rally bars in between. How drops and rallies work like this. Drops: fall 3-4 bars consoliditate or rally 2-3 bars fall 3-4 bars consiolidate or rally 2-3 bars finally bottom 3-4 bars (doesn't make new lows. consolidate or rally 2-3 bars. falls another 3 bars. (doesn't make new low) Now we are on the uptrend. each bar = 1 month. we are on the first 3 months. We have 17-24 more months to go for any "real" USD inflation. -------------- Enjoy the charts, the USD rally is just getting started!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
current price of EURUSD= 1.26 a. 2-3 months of minor BEAR rallies of EUR/USD to the range of 1.28 <-> 1.30 MAX b. Then continue downtrend of weak EUR against the STRONG USD. ------------ <b>The Supermodel Herd.</b> Then straight down once again, Everybodys short the dollar right? EVEN GISELLE BUNDCHEN? The market never allows the herd to recoup their losses quickly. The herd = USD short sellers.
Previous speculation in the last 10 years+ in real estate drove those prices up when inflation/deflation had ZERO to do with the prices. Because houses are coming down from a speculative bubble does not mean that inflation is not happening, it is just masked from the previous years of that speculation. For instance. Median NEW home prices in 2001 were 136,150. During the bubble they were up to around the 350k range. Today its around 212K (from what I read a few months ago so it might be plus or minus a few k now) Now average inflation since 1913 has been around 3.43% per year. So that means that a new home in 2001 in todays dollars should cost 172k for the same new home. But its not. Its right around the 212k range. This means that inflation since 2001 has run at about an average of 6.5% It only LOOKs like deflation because we are coming down from so many speculative bubbles such as housing, oil, gold, corn, rice, ect.. But really our inflation is running right now at just a little less than double normal levels. But the public cant really complain that inflation is running rampant right now when they see gas prices drop 2 dollars per gallon, or when they see gold prices drop from 1,000 to 700. Gold looks cheap to people at 700 per ounce now. They dont see the inflation, but its there. I also believe that fear is driving a "reverse bubble" in housing prices, gold, silver, other commodities and whatever else. It will only make the sting of inflation hurt worse later, but right now...inflation is invisible
Yes, Heres the thing, everybodys forecasting for commodities to come back up, if anybody trades with price action, knows price doesn't dive and break all support and jump back up again like nothings happened, its going to sit down there for awhile, hell at least 2-3x the timelength we fell. then take another 1x to start a rally. Its going to take awhile, but watch for a lot lower prices, Short on ALL rallies, BEAR markets aren't over in 3 months!!.