Thursday, February 17, 2011

Today's links

1--Median List Price in U.S. Falls 13% in January as Compared to Prior Year,

Excerpt: According to a new report by real estate brokerage ZipRealty (NASDAQ:ZIPR), home sellers continue to discount their asking price in an attempt to entice buyers to move towards a purchase.

ZipRealty's monthly Price Reduction report, which is generated from a review of MLS-listed properties in 26 markets, shows that inventory is up a modest 2.81 percent from January 2010, but the total number of homes where sellers have cut the asking price at least once was up 17.6 percent. This double-digit growth in discounted homes may be another indicator of a sluggish market.

"In more than half of the surveyed markets, sellers are averaging at least two reductions in price," said John Oldham, Director of Marketing for ZipRealty. "Inventory has grown throughout much of the year; as sellers face the pressure of more buying options, they seem to be discounting to attract buyers resulting in list prices being cut for over 46 percent of the homes."

2--Consumer Price Index: Food Fuel, Prices Drive Up Costs For Consumers In January, Huffington Post

Excerpt: Higher food and energy prices pushed up the consumer price index for January according to government figures released today.

The index, the most closely watched measure of inflation, increased 0.4 percent in January, the Labor Department said. Over the past 12 months, prices increased 1.6 percent before seasonal adjustments.

Food prices increased by 0.5 percent in January, the biggest jump since high food prices sparked riots around the world in September 2008.

Energy prices increased for the seventh month in a row, rising by 2.1 percent over the past month, according to the figures released by the Bureau of Labor Statistics.

"The increase was stronger than expected," said Sal Guatieri, senior economist at BMO Capital Markets. Clothing prices, especially, jumped an unexpected 1 percent, he said. "The good news is it looks like we're reached bottom of inflation, which has abated deflation risks," said Guatieri. "The bad news is higher prices will drain purchasing power," with groceries and gas taking up cash that would otherwise be used for other purchases, he explained.

3--Fed’s Lacker Warns More Easing Would Lead to Inflation, Wall Street Journal

Excerpt: A top Federal Reserve official Tuesday warned that any move by the central bank to reduce unemployment could lead to inflation, indicating he would oppose any further policy easing by the Fed to try and boost U.S. economic growth.

Richmond Federal Reserve President Jeffrey Lacker told Bloomberg in an interview the central bank is keeping a close eye on inflation, especially now that the U.S. economy is gaining speed and global food and energy prices are surging.

“I am not sure we can push unemployment that much further down or more rapidly without risking inflation picking up,” Lacker said.

Economic growth is expected to accelerate this year, but the unemployment rate is seen remaining close to January’s high level of 9.0% for most of 2011. Despite the recent spike in commodity prices, inflation remains just above 1.0%, or close to where the central banks wants it to be.....

U.S. import prices rose 1.5% in January, much more than expected, as costs increased for energy, food, and industrial supplies. A separate report from the Federal Reserve Bank of Kansas City showed farmland values in its district are climbing at their fastest rates since the 2008 boom. Meanwhile, retail sales continued to grow across the U.S. last month despite snowstorms, indicating that consumer spending keeps supporting the economy.

4--Brazil Finance Chief Renews Attack on Fed, Wall Street Journal

Excerpt: Brazilian Finance Minister Guido Mantega on Tuesday renewed his attack on the Federal Reserve’s most recent program of quantitative easing, saying the policy had goosed global flows of hot capital and heightened the global problems of rising commodity prices and inflation.

Last year, Mr. Mantega warned that falling currencies — including the U.S. dollar, due to the Fed’s plan to buy up to $600 billion of Treasurys — had triggered a currency war. On Tuesday, the finance minister renewed his opposition to the Fed’s program — at one point correcting his interpreter to specify “quantitative easing” and not just “monetary policy.”

He said that strong capital flows will continue to pour into emerging markets unless central banks in developed countries shape monetary policies that allow “alternative investments” to attract new capital.

In a Tuesday conference call with reporters before the meeting of the Group of 20 finance ministers in Paris, Mr. Mantega said food inflation in Brazil had increased early this year but there are signs that “political and economic measures by the government to mitigate demand,” will have an effect on slowing the rise in prices.

“Commodity prices will fall naturally once the market restabilizes itself,” Mr. Mantega said, but for now, their rise represents a significant concern for the global economy.

5--Conference Board Changes Show Higher Consumer Confidence, Wall Street Journal

Excerpt: The Conference Board said Monday it has changed the methodology and polling company used to collect information for its closely watched consumer confidence survey.

The board said the data will now be collected by Nielsen Co., instead of the research company TNS Inc. TNS discontinued the program connected to the confidence survey, the board said.

The survey will also use a probability-design random sample and different demographic weights. The survey questions and collection method, however, remain unchanged.

The survey will continue to be conducted by mail. The board seeks to get responses from about 3,000 households. In the previous survey, about 5,000 households were contacted, but the new survey will probably contact more households to reach the 3,000 target.

The board said it tested the old and new methods for five months. To smooth the transition to the new data, the board designated November 2010 as the “effective changeover month.”

The new results show that the top-line consumer confidence reading is higher than originally published. The new index is listed as 57.8 in November, 63.4 in December, and 65.6 in January (the old index readings were 54.3, 53.3 and 60.6, respectively).

6--U.S. investors fear muni defaults, job losses, Reuters

Excerpt: ome of the United States' weakest local governments face a real risk of default in 2011 as well as waves of layoffs that could put upward pressure on the country's jobless rate, according to a Reuters poll.

The findings from the poll published on Sunday found a majority of Wall Street professionals including municipal bond traders and investors believe -- 14 out of 25 -- up to four multibillion-dollar municipal bond defaults will take place this year.

The tremors come at a time when financial markets are still fragile as the economy recovers from its deepest slump since the Great Depression, and the turbulent finances of states and municipalities have been cited by top Federal Reserve officials as a key downside risk to the expansion.

Among the investors polled, 19 of 23 thought job cuts aimed at bringing budgets into line would put noticeable upward pressure on the national unemployment rate, which over the past two months has fallen sharply to 9.0 percent from 9.8 percent.

7--This Is Now One Of The Most Expensive Markets Of All Time, John Hussman, Hussman Funds

Excerpt: Last week, the S&P 500 Index ascended to a Shiller P/E in excess of 24 (this "cyclically-adjusted P/E" or CAPE represents the ratio of the S&P 500 to 10-year average earnings, adjusted for inflation). Prior to the mid-1990's market bubble, a multiple in excess of 24 for the CAPE was briefly seen only once, between August and early-October 1929. Of course, we observe richer multiples at the heights of the late-1990's bubble, when investors got ahead of themselves in response to the introduction of transformative technologies such as the internet. After a market slide of more than 50%, investors again pushed the Shiller multiple beyond 24 during the housing bubble and cash-out financing free-for-all that ended in the recent mortgage collapse.

And here we are again. This is not to say that we can rule out yet higher valuations, but with no transformative technologies driving the economy, little expansion in capital investment, and ongoing retrenchment in consumer balance sheets, I can't help but think that the "virtuous cycle" rhetoric of Ben Bernanke is an awfully thin gruel by comparison. We should not deserve to be called "investors" if we fail to recognize that valuations are richer today than at any point in history, save for the few months before the 1929 crash, and a bubble period that has been rewarded by zero total return for the S&P 500 since 2000. Indeed, the stock market has lagged the return on low-yielding Treasury bills since August 1998. I am not sure that even members of my own profession have learned anything from this.

8--Putting the Inflation Report in Perspective, New York Times

Excerpt: A new report this morning shows that prices rose pretty significantly last month, mostly because of gasoline. But don’t make too much of the report.

Annual inflation has still been only 1.7 percent over the last year, seasonally adjusted. Core inflation — which excludes volatile food and energy prices and is therefore often a better predictor of where inflation is headed — has been only 0.9 percent over the past year.

The economy remains terribly weak. The notion that workers are on the verge of having the power to demand big pay increases, setting off a dreaded wage-price spiral, seems pretty unlikely....(Chart)

9--Egypt's Cauldron of Revolt, Foreign Policy

Excerpt: It was striking workers that first inspired the Egyptian uprising. And they're still at it....

"In the sprawling factories of El-Mahalla el-Kubra, a gritty, industrial town a few hours' drive north of Cairo, lies what many say is the heart of the Egyptian revolution. "This is our Sidi Bouzid," says Muhammad Marai, a labor activist, referring to the town in Tunisia where a frustrated street vendor set himself on fire, sparking the revolution there.

Indeed, the roots of the mass uprising that swept dictator Hosni Mubarak from power lie in the central role this dust-swept company town played years ago in sparking workers' strikes and grassroots movements countrywide. And it is the symbolic core of the latest shift in the revolution: a wave of strikes meant to tackle social and economic inequities, which has brought parts of Egypt to a standstill.

More than 24,000 workers at dozens of state-owned and private textile mills, in particular the mammoth Egypt Spinning and Weaving plant, went on strike and occupied factories for six days in 2006, winning a pay raise and some health benefits. Similar actions took place in 2007....

"After Mahalla in 2008, the first weaknesses in the regime appeared," says Gamal Eid of the Arabic Network for Human Rights Information. "Nothing was the same in Egypt after that."

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