The Mess That Greenspan Made - Part 21

Thursday Morning Links

MUST READS
Eurozone economic growth loses momentum – BBC
Wal-Mart profit falls 5%, bad weather cited – USA Today
Tepper: ‘Don’t Be Too Fricking Long Right Now – Barron’s
Stocks are telling you a bear market is coming – MarketWatch
Stocks Hit New Highs, But Lack of Confirmation Concerning – See It Market
How to predict when the Bank of England will hike interest rates – Quartz
Why monetary policy matters: New UK narrative evidence – voxeu
BOE succumbs to “spurious precision under pretence of knowledge” – Telegraph
Big Increases in Obamacare Costs Coming in November – Fiscal Times
Geithner’s Most Candid Crisis Moments as Told to Jim Cramer – The Street
The Politics of Income Inequality – NY Times
Inequality disaster prevention – Shiller, CNBC
The Inequality Puzzle – Democracy Now

MARKETS/INVESTING
Markets muted after soft European growth – AP
Ten Year Treasury Yield Plunges – Trader Dan
Bonds are quietly outperforming stocks – LA Times
Is a Major Correction and Bear Market Around the Corner? – Financial Sense
Do Alternative Investments Belong in Most Individuals’ Portfolios? – WSJ
Volatility Index Yawns, Stretches, Hits Snooze, Heads for Sub-12 – Barron’s
Treasury Yield Approaches 6-Month Low as CPI Seen Below Average – Bloomberg
Gold Below One-Week High as U.S. Outlook, Ukraine Weighed – Bloomberg
Gold ETF lets retail investors swap shares for bars – MarketWatch
U.S. Mint Silver Eagles Sales Surge – SRSrocco Report
Near $50 silver in 2011 not a bubble – Mineweb

ECONOMY/WORLD/HOUSING/BANKING
How Inflation Picks Your Pocket – Mises
How Student Debt May Be Stunting the Economy – NY Times
Frugal Consumers Make it Tough for Companies to Raise Prices – Money News
Japan GDP growth hits 5.9% amid massive shopping spree – CNN/Money
German economic expansion doubles in first quarter – MarketWatch
Most local govt debt ‘controllable’, says banker – China Daily
Goodbye Crisis as Bankers Start Lending in Portugal – Bloomberg
Are Student Loans Really Killing the Housing Market? – The Atlantic
Lawler on RealtyTrac and Cash Buyers – Calculated Risk
Fooled by Reverse Mortgages – NY Times No Better – Mandelman Matters
GSE’s Gearing Up Again For Another Ride – Alhambra Partners
Pondering QE – macroblog

 

The Fed’s Not-So-Hot Growth Forecasts

Via Deutsche Bank and this item from Pawel Morski’s Twitter feed comes a rather embarrassing summary in chart form of the Federal Reserve’s dismal record at predicting growth for the U.S. economy in recent years. About the only nice thing one could say about this is that they’re at least moving in the right direction.

Let’s just hope that central bank economists don’t underestimate future inflation as badly as they overestimated growth, something we may get a first hint at with tomorrow’s inflation report following today’s big upside surprise for wholesale prices as detailed here earlier.

Today’s report on producer prices from the Labor Department has certainly heightened the anticipation for tomorrow’s reading on consumer prices, but, in some ways, that’s a lot like saying “one is greater than zero” as few seem worried about inflation these days.

After rising 0.5 percent in March, wholesale prices were expected to increase just 0.2 percent in April but, instead, they jumped 0.6 percent, the most since September 2012. Gains were paced by a surge of 2.7 percent in food prices and the second straight increase of 1.4 percent for trade services. The so-called “core rate”, excluding food and energy prices, rose 0.5 percent  following an increase of 0.6 percent in March.

Recent history is replete with examples of producer prices surging, but having little effect on consumer prices as retailers have found ways to deal with the increases without having to pass them along to their customers. But, with the general view that the U.S. economy is improving, that could be changing and, if so, the first signs of that could be seen tomorrow.

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Here’s the data on student loans and home ownership that’s been getting a lot of attention in the last day or so in chart form from its original source at the New York Federal Reserve.

Just in case it isn’t already obvious, many of those youngsters aged 27  to 30 who should be most able to buy property because they went to college and are making more money than they would otherwise are not doing so, in part at least, due to their student loan debt.

What’s really surprising about this is that, over the last few years, the implied home ownership rate of those with student loans has actually fallen below those who have no student loans, a group that, presumably, includes lots of college graduates who got through college with little or no debt along with those who never felt the need for higher education.

Of course, the bigger picture here is that overall home ownership amongst the younger set has fallen precipitously since the financial crisis, dropping by nearly a third, from over 30 percent to just over 20 percent.

© 2010-2011 The Mess That Greenspan Made