Wednesday, March 27, 2013

That's the news

The interesting thing about listening to interviews like this is that the news people tend to want to hear something that nobody wants to say.  So, we hear stuff like "it might be a recovery" and "it might be a bubble."  But, I did learn one thing from this interview.  I don't know why it never occurred to me before.  It's not actually a recovery until asset prices (in this case home prices) get back to the peak level.  In my opinion, that's just a stupid way of looking at it.  Home prices shouldn't have gotten that high, but they did, so now we want to know how long it will take to get back that high.  Well, I think the important thing to take away from this interview and remember when you're looking at stocks, or real estate, or any market is this:
"One thing that makes it very hard to forecast home prices right now is that we're living in a totally artificial real estate economy," said Shiller, co-creator of the Standard & Poor's/Case-Shiller Index, a widely followed measure of housing prices
It's artificial.  It's being manipulated.  Don't expect it to behave in a "normal" way.

Fed’s Unintended Consequences Are Hitting Everyday Life: Kenny 

While monthly headline inflation data continues to come in below the Fed's 2% target, Kenny and many other market watchers see it showing up elsewhere "in everything we assume is a part of our daily life."
I would argue that inflation is showing up in all kinds of places, from the real estate market to the stock market.  And while it is showing up in food and gas prices, it really isn't showing up much in other consumer prices, and consumer prices are what we talk about when we talk about inflation in a normally functioning economy.  Again, we don't have that.  It's artificial.  It's being manipulated.  Don't expect it to behave in a "normal" way.

Fed-Speak Freakout Shows Traders Aren’t Really Paying Attention
As markets sit near all-time highs, perhaps investors are looking for and are waiting for any reason to hit the sell button, Task notes.
And rightly so.  Unfortunately, there are all kinds of unintended consequences of QE going on, and anyone that thinks they know all about those is going to get blind-sided.  So, I think we can expect increasing intraday volatility, but at the end of the day, I don't see any major moves happening in either direction.  Just the gradual grind up for the most part.

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