Posts filed under “Federal Reserve”

Ben Bernanke’s Inflation Targeting and Forecasting

I made my displeasure known last week about the Pause/Resume scenario. A friend takes a slightly different tack, explaining that Fed Chair Bernanke’s inflation targeting is even worse than my criticism implies.

Why? As I explained in the Folly of Forecasting, predicting the future is something we Humans are particularly bad at.  And that’s what inflation targeting requires:  getting the projected inflation rate right. 

Which raises the question as to whether "Gentle Ben" might be better at it than "Easy Al." Don’t bet on it; here’s what Beranke said in January 2004 about Oil and Gold: 

"Two specific commodity prices that often command attention are the prices of
gold and crude petroleum. The price of gold has increased roughly 60 percent
since its low in April 2001, from about $255 per ounce to about $410 per ounce.
A portion of that increase simply reflects dollar depreciation, which I will
discuss momentarily. Gold also represents a safe haven investment, however, and
I agree that there have been periods in the past when the fear that drove
investors into gold was the fear of inflation. But gold prices also respond to
geopolitical tensions; these tensions have certainly heightened since 2001 and,
in my view, can account for the bulk of the recent increase in the real price of
gold.

Oil prices are relatively high, in the range of $33/barrel, but they have
been elevated for most of the past four years, despite a broadly disinflationary
environment.
According to futures markets, oil prices are expected to decline
gradually over the next two years, despite accelerating economic activity, as
new supplies are brought on line. Of course, there is considerable uncertainty
about what the price of oil will do, given the possibility of supply
disruptions. But if it follows the course projected by the futures market, the
price of oil should have a modest disinflationary effect on overall consumer
prices in the next couple of years."   (emphasis added)
   
-Ben Bernanke, January 4, 2004

Remind again about the advantages of inflation targetting . . .

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Source:
Remarks by Governor Ben S. Bernanke
At the Meetings of the American Economic Association, San Diego, California
January 4, 2004
Monetary Policy and the Economic Outlook: 2004
http://www.federalreserve.gov/boarddocs/speeches/2004/20040104/default.htm

Category: Commodities, Federal Reserve

Inflation Watch

Category: Commodities, Federal Reserve, Inflation

Pause/Resume Scenario Increasingly Likely

Category: Commodities, Economy, Federal Reserve, Inflation

“Every Change of Rate”

“Every Change of Rate” is an utterly hysterical parody of the black & white Police video “Every Breath You Take,” as done by some Columbia Biz School students; Its an amusing take on the Ben Bernanke, the newly appointed Fed Chief. My favorite bit are the lyrics during the second verse: “First you move your…Read More

Category: Federal Reserve, Music

Existing Home Sales Data (California Real Estate: On Sale!)

Sales of existing homes surprised to the upside yesterday. But one data point does not make a trend. This is the first rise (sequential monthly change) after 5 straight months of falling Home Sales. And that’s before we examine the data.

Before you declare the end of the housing slow down, consider:

- Existing Home sales actually slipped vs. last year by -0.7%; The reported gain was over last month’s data;

- the Inventory of unsold homes soared 7 percent in March, hittting an all-time record; There are now 3.19 million existing homes for sale, or  5.5 months’ supply; That’s the largest inventory since July 1998

- Existing homes edged up 0.3% last month to a seasonally adjusted annual rate of
6.92 million units; (we know that seasonally adjusted data is not always accurate)

- Year over year, the Northeast and Midwest gained, while the previously hot housing markets in the South and the West slipped;

- median home prices are still rising, albeit nmore slowly — up 7.4% year over year, to $218,000.

Here’s a data point that has me scratching my head:  Why are there different numbers for the year-over-year changes for seasonally and not seasonally adjusted?  Was this March somehow in a different season than last year’s March? I am perplexed.

Note that data for existing home sales comes from National Association of Realtors, a group that is certainly an interested party; Of course, as a homeowner, investor, and someone with a public bearish tilt for the second half, I’m hardly objective myself (hey, I try). But this oddity — down -0.5% for the not seasonally adjusted year over year versus down -0.7% for the seasonally adjusted year over year — is beyond my comprehension.

So much for the hard data on existing sales; Today, we get New Home Sales. Recall our prior admonishments that monthly New Home Sales Data are unreliable; look instead to a moving average.

Let’s move onto some anecdotal evidence.  A friend writes:

"Flop! Wow, KB running blue light specials in California. Not surprising,
Chico area was rated one of the most overvalued markets in the country. Houses
in the $200k space.  When was the last time you saw that in California? "

 
Oak Knoll Place Live Oak, CA

Oak Knoll Place Slideshow

Here’s the sales pitch:

"Oak Knoll Place in Live Oak is located in a beautiful
community near the majestic Sutter Buttes. With easy access to Highway 99, it is
ideally located for easy access to Sacramento, Lake Tahoe, Reno and a wide
variety of recreational opportunities. Yuba City and Marysville are
approximately 10 minutes south, Chico is approximately 35 miles north and the
Gray Lodge Wildlife area is approximately 10 minutes west. Live Oak has a
quaint, small-town atmosphere with many nearby recreational water activities,
including the Feather River, Yuba River and Sacramento River. Prices starting
from the High $200′s.
"

I don’t know Live Oak, but houses like that in California are hard to imgaine . . .

More after the jump.

Sources:
Existing-Home Sales Rise Again in March
NATIONAL ASSOCIATION OF REALTORS
WASHINGTON (April 25, 2006)
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/MarchEHS06?OpenDocument

Existing Home Sales  data
NATIONAL ASSOCIATION OF REALTORS
http://www.realtor.org/Research.nsf/files/REL0603EHS.pdf/$FILE/REL0603EHS.pdf

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Category: Data Analysis, Federal Reserve, Fixed Income/Interest Rates, Real Estate

More evidence: Fed Pause Not Good For Stocks

Category: Data Analysis, Economy, Federal Reserve, Investing

Smackdown: Fleckenstein vs Yardeni

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation

After Final Discount Rate Hike

Category: Federal Reserve, Inflation, Investing, Markets

Fed Halt Now Baked into the Cake

Category: Federal Reserve, Investing, Markets, Psychology

Fed Minutes

Category: Federal Reserve