Tag: news

Looks like he’s still got it… (or the NY Fed Trading desk wanted to send him off with a smile on his face…)

Here is the wordcloud of his speech:

… and the market response:

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Ben Bernanke will momentarily speak at the American Economic Association symposium in Philadelphia. His speech is titled “Looking Back, Looking Forward” and can be found at the end of this post.  Watch what may be his last speech live.

Full Bernanke speech below:

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Ben Bernanke will momentarily speak at the American Economic Association symposium in Philadelphia. His speech is titled “Looking Back, Looking Forward” and can be found at the end of this post.  Watch what may be his last speech live.

Full Bernanke speech below:

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Qxr1ALM8bUY/story01.htm Tyler Durden

Submitted by Ramsey Su via Acting-Man blog,

Real estate bubble, sub-prime mortgages, securitized products and their derivatives were largely responsible for the ultimate collapse, leading us to the economic conditions of today. Policy makers and investors alike were, and still are, basing their actions on a false set of commonly accepted myths.

The first example is provided by the many different House Price Indexes. Borrowing a table from my cyber-friend Calculated Risk, here are the most recent changes in the indexes put together by various different sources:

 

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House price increases according to a variety of sources

 

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Depending on who one prefers to believe, house prices have appreciated between 5.2% to 13.2% year over year. Case-Shiller is probably the most commonly referenced index today. Their fancy model with a nice interactive chart can be found on the S&P/Case Shiller website. Those who want to engage in a bit of intellectual exercise can read the 48 page explanation of the Case Shiller methodology. A much better read however, is this simple one page overview by FNC that debunks all the house price indexes, including their own. I would like to add that no index takes into account the prevailing interest rate and lending practices, and no-one has figured out a method to make appropriate adjustments. For example, how does one compare a house that sold for $100,000 in 2005 utilizing sub-prime financing, vs. the same house that sold for $70,000 cash in 2013, with a few foreclosures and flips in between? Was $100,000 a meaningful indication of value? Did it really depreciate by 30% in 8 years? Here is the well-known Case-Shiller chart:

 

 

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Case Shiller house price indexes – click to enlarge.

 

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Everyone is somewhat familiar with the chart. About the only conclusion I can draw is that easy monetary policy and irresponsible lending practices may lead to a bubble, and bubbles do always burst. It has no predictive value nor does it really tell one much about the past. Gurus may compare today's prices to the sub-prime peak or some imaginary "norm", as if that could offer guidance to policy and investment decisions.

Looking at the Case-Shiller 20 cities composite index simply makes no sense.

 

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The 20 cities disaggregated

 

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These twenty cities all have different demographics that change independently from one another over time. What would be the purpose of contemplating these peaks and troughs, especially when combined in an index?

It is baffling that the FOMC supposedly looks at data such as the various House Price Indexes and somehow decides on that basis that buying agency MBS is a good policy. They even figured out that $600 billion was the right amount for QE1 in 2008, and an additional $600 billion was appropriate for QE2 in 2010. Of course with QE3, the Fed determined that $40 billion per month was good for 2013, but $35 billion is better for 2014.

The wisdom of the Fed escapes me at the moment. Maybe it has other, unrelated objectives in mind.

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Since 2007, the world’s Central Banks have collectively put more than $10 trillion into the financial system since 2008. To put that number into perspective, it’s equal to roughly 15% of global GDP.

 

This kind of money printing is literally unheard of in modern history. And it has set the stage for a roaring wave of inflation to hit the financial system. Indeed, the first signs are already showing up… not in the “official” Government data (which is bogus) but in how those who run businesses around the globe are acting.

 

Most people believe that when inflation hits, prices have to go higher. This is true, but higher prices can be manifested in multiple ways. Firms usually do not simply raise prices in nominal terms as price elasticity can kill revenues because it would hurt sales.

 

Instead, companies resort to a number of strategies to maintain profit margins without hurting their sales. One of them is to simply leave part of a package EMPTY, thereby selling LESS product for the SAME price (a hidden price hike).

 

Food manufacturers, like the politicians currently debating health reform, may have a solution to the obesity crisis: Feed Americans a lot of hot air. But this heated air is not just a figure of speech for packaged goods companies including Ralcorp Holdings' (RAH) Post Foods and PepsiCo (PEP) subsidiaries Frito-Lay and Quaker.

 

In many packaged products, as much as 50% of the contents is just empty space, an investigation by Consumer Reports reveals. And we consumers are buying that nothingness every day.

 

http://www.dailyfinance.com/2009/12/08/how-much-for-the-air-as-much-as-half-of-food-packaging-is-empty/

 

Another tactic corporation use is to simply sell smaller packages for the SAME price (another means of selling less for MORE= a price hike).

 

U.S. Companies Shrink Packages as Food Prices Rise

           

Large food companies have recently announced that they will raise the prices they charge grocery retailers for commodities-based products. For example, a chocolate bar will cost more soon: Hershey last week announced a 10% increase for most of its confectionery goods.

 

Of course, straightforward price hikes could cause consumers to buy less of those products or to choose less costly store brands. So in many cases, food companies are trying a different tactic: Keeping the price of an item the same while decreasing the amount of food in the package. The company recoups the costs of the rise in commodities and hopes consumers don't notice that they're getting less of the product for the same price.

 

http://www.dailyfinance.com/2011/04/04/u-s-companies-shrink-packages-as-food-prices-rise/

 

However, perhaps the most scandalous policy employed by companies looking to engage in stealth price hikes is to swap out higher quality ingredients for lower quality/ lower cost alternatives. One bigname coffee maker was caught doing this just a few years ago.

 

Reuters is reporting that many of America's major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they're now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee…

 

At least one coffee roaster has admitted it. In November, Massimo Zanetti USA, which roasts for both Chock full o'Nuts and Hills Bros., publicly confirmed upping its Robusta usage by 25% this year.

 

Why the switcheroo? Prepare to not be shocked. The answer is: price.

 

Last year, a shortage of Arabica caused prices of the premium bean to spike as high as $3 a pound — $2 more than what a pound of Robusta would cost. This compares to a five-year historical trend of Arabica costing closer to 70 cents more than Robusta. In recent weeks, the trend has reversed, with Arabica prices falling to just a 62-cent premium over Robusta.

 

http://www.dailyfinance.com/2012/06/19/noticed-that-your-coffee-tastes-funny-heres-why/?a_dgi=aolshare_twitter

 

In simple terms, inflation is already around us, though it’s not yet showing up in LITERAL price hikes. Instead, we’re all paying MORE for LESS. And it’s only a matter of time before the situation really gets out of control.

 

For a FREE Special Report on an uniquely profitable inflation hedge, swing by….

http://phoenixcapitalmarketing.com/goldmountain.html

 

Best Regards

Graham Summers

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