This is absolutely horrible advice. Commodities are a hedge against inflation, not a recession. If global demand for commodities fall, then they would be absolutely clobbered. If you want to safeguard your portfolio against a recession, I'd move to fixed income securities or if you have the stones, short some high flying stocks. I personally don't think we are headed towards a prolonged downturn in the economy. I have a view that good economic performance follows a loose monetary policy, which we are seeing with the Fed continuing to lower fed funds and discount rates. Where is The_Conquistador's money? You'll have to pay me for me to tell you that.
Anybody else here concerned that $100 for a barrel of oil will eventually cause inflation? The Fed would then have to reverse its monetary policy and let the economy sort out the recession on its own. That's Stagflation, baby!!! I sure hope that that does not happen. But for inflation to be under control that must mean that producers must be eating fuel increases, hoping to ride out the storm. I see that as tightening the string and hoping it never gets sprung.
We'll see. The building and expansion of plants has just begun. The construction will keep the economies in manufacturing-heavy areas booming for several years. By then, who knows what demand will be. Income after inflation is down, but as labor becomes harder and harder to find, it's going to put pressure to bring wages up. I'd be really surprised if we see an actual recession in the next couple of years.
I think we need a recession to clean house and to a bring stronger public reaction towards financial transparency and accountability. The problem is that even controlled fires can break out into wildfires, and no one has a clue how the macroeconomy works. Fighting it is prolonging the inevitable, but if the Fed stops fighting it, it's going to be an unpopular career threatening measure no matter the outcome.
Stocks Fall on Startling Inflation Jump Friday December 14, 3:22 PM EST NEW YORK (AP) — Stocks sold off Friday after a jump in consumer inflation raised concerns about how much freedom the Federal Reserve has to continue cutting interest rates. The Dow Jones industrial average gave up more than 100 points. The Labor Department said the consumer price index rose 0.8 percent in November amid a spike in gasoline prices. The report also found large increases in the cost of clothing, airline tickets and prescription drugs. The report raises questions about the Fed's options for priming the economy. The Fed this week lowered interest rates and announced a plan to align with other key central banks and offer loans to pressed lenders around the world. But while it wants to stimulate the U.S. economy and make lending easier among banks wary of faltering debt, the Fed also has to keep a watchful eye on inflation. Robert Dye, senior economist at PNC Financial Services Group, said the economic readings this week painted a mixed picture for investors, spurring some of the market's volatility. "If you take the stronger-than-expected economic data we saw this week in the form of retail sales and add to that the inflation data and then combine that with a somewhat ambiguous statement from the Fed, you get a picture as clear as mud," he said. The uncertainty weighed on the markets Friday, a day after stocks finished mixed. In late afternoon trading, the Dow Jones industrial average fell 143.48, or 1.06 percent, to 13,374.48. Broader stock indicators also fell. The Standard & Poor's 500 index dropped 15.91, or 1.07 percent, to 1,472.50, and the Nasdaq composite index fell 24.06, or 0.90 percent, to 2,644.43. Bond prices fell for the third straight day. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.23 percent from 4.21 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell. Light, sweet crude dropped $1.02 to $91.23 per barrel on the New York Mercantile Exchange. Friday's report on inflation follows a reading Thursday that showed the biggest jump in inflation at the wholesale level in 34 years. The 0.8 percent increase in consumer prices topped the 0.6 percent rise economists had been expecting. The report also showed so-called core inflation, which excludes often-volatile food and energy prices, had its biggest increase in 10 months, rising 0.3 percent. Dye said the Fed could be proven wise for cutting interest rates by just a quarter of a percentage point Tuesday rather than by a half point as some investors had hoped. Stocks fell sharply Tuesday after the Fed's rate decision and staged a partial rebound Wednesday after the Fed announced its liquidity plan with other central banks. The uptick in core inflation is unnerving, Dye said, because it makes it harder for the Fed to justify further rate cuts. Also Friday, the Federal Reserve said industrial production rebounded in November, increasing 0.3 percent after a steep 0.7 percent decline in October. The increase came in slightly ahead of Wall Street's expectations. But beyond economic reports, investors faced more news from the troubled banking sector. Citigroup Inc. fell 2 cents to $30.99 after the bank announced late Thursday it plans to move assets from seven "structured investment vehicles" onto its books and put up $49 billion to help the SIVs repay their debts. The bank had said earlier it had no plans to bring the SIVs onto its books. Citigroup's Vikram Pandit, who on Tuesday became chief executive, said taking control of the SIVs was the best way to guard their credit ratings and help them sell their investments at decent prices. SIVs are complex investments set up by banks and sold to investors and have come under pressure in recent months because of their investment strategy, which involves the use of mortgage investments and other now-risky debt. The resulting drop in demand hurt the value of the SIVs. Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 806.4 million shares. The Russell 2000 index of smaller companies fell 12.45, or 1.62 percent, to 757.01. Overseas, Japan's Nikkei stock average slipped 0.14 percent. Britain's FTSE 100 rose 0.52 percent, Germany's DAX index rose 0.25 percent and France's CAC-40 rose 0.26 percent.
Gas Prices Spur Consumer Inflation Friday December 14, 4:19 PM EST WASHINGTON (AP) — Led by higher gasoline prices, consumer inflation shot up in November by the largest amount in more than two years. The rise in inflation is coming at a time when economic growth is slowing sharply. "We are in store for a period of very weak if not recessionary growth and uncomfortably high inflation," said Mark Zandi, chief economist at Moody's Economy.com. "People are going to get hit with both a weaker job market and having to pay more to fill their gas tanks and buy groceries." The Labor Department report Friday showed that its closely watched Consumer Price Index rose by 0.8 percent last month, the biggest gain since September 2005, as energy prices surged by 5.7 percent, reflecting a big gain in gasoline. Core inflation, which excludes energy and food, was also up last month, rising by 0.3 percent as the cost of clothing, airline tickets and prescription drugs all took big jumps. The bad news on inflation sent stock prices lower on Friday as investors worried that rising prices will keep the Federal Reserve from cutting interest rates quickly enough to keep the country out of a recession. The Fed uses lower interest rates to stimulate a weak economy and higher rates to slow growth and keep inflation in check. With the economy slowing at the same time that inflation is rising, the Fed could face a tough policy dilemma similar to the problems it faced in the 1970s when a series of oil shocks sent inflation soaring at the same time the country with struggling with weak economic growth. The combination of stagnant growth and inflation got branded as "stagflation." The bad report on consumer prices followed a report Thursday showing that inflation at the wholesale level jumped by an even larger 3.2 percent in November, the biggest increase in 34 years. The Fed cut a key interest rate by a quarter-point on Tuesday but failed to give a strong signal about future rate cuts, which sent the Dow Jones industrial average plunging by 294 points. However, investors were encouraged when the Fed on Wednesday joined with other central banks around the world to unveil new initiatives designed to combat a serious global credit crunch that is weighing on economic activity as banks cut back on their lending. Despite the higher inflation, many economists said they still believe the Fed will keep cutting interest rates because of the severity of the credit crunch. "The danger associated with what is playing out in the credit markets will dominate the Fed's attention in the coming year," said Jim Glassman, senior economist at JP Morgan Chase & Co. Lyle Gramley, a former Fed governor and now an economist with the Stanford Financial Group, said there was a danger the Fed could respond too slowly because of a split among policymakers. Federal Reserve Chairman Ben "Bernanke and others see an economy that is in danger of falling into a recession because of the credit crunch, but if you read the public speeches of some of the regional bank presidents, you would hardly feel there is anything wrong with the economy. They are very hawkish on inflation," Gramley said. Several bank presidents have delivered speeches recently emphasizing the need to fight inflation. With one month to go, inflation in 2007 is rising at an annual rate of 4.2 percent, far above the 2.5 percent increase in 2006. The acceleration has been driven by energy prices, which are rising at an annual rate of 18.1 percent this year, compared to an increase of 2.9 percent in 2006. The surge in inflation adds another risk to an economy that is already struggling under the weight of a meltdown in housing, a severe credit crunch and faltering consumer confidence. The worry is that the jump in energy costs will leave consumers with less money to spend on other items, worsening the slowdown in economic growth that is already happening. A separate report showed that average weekly wages fell for a second straight month in November, after adjusting for inflation, and are now 0.8 percent lower than a year ago as workers' paychecks are not keeping up with the rise in inflation, a development that is leading to rising voter unhappiness leading into the 2008 elections. "Today's data show that American workers' real earnings are down because the costs of gas, health care and food are rising faster than their wages," said Sen. Charles Schumer, D-N.Y. Former Federal Reserve Chairman Alan Greenspan said in National Public Radio interview broadcast Friday that the odds of a recession are "clearly rising" with economic growth "getting close to stall speed." Many economists believe that economic growth in the current October-December quarter could fall below 1 percent at an annual rate, sharply below the 4.9 percent rate of growth in the third quarter. Outside of food and energy, clothing prices, which have been falling most of this year, surged by 0.8 percent in November, the biggest rise since April 1999, while airline tickets jumped 2.6 percent and prescription drugs were up 0.8 percent. In a separate report, the Fed said industrial production rose by 0.3 percent in November, a modest rebound following a big 0.7 percent fall in October.
and how do you account for the fact that dollar investments become much less attractive to foreign sovereign funds/central banks which are so critical for us right now?
Maybe, maybe no. Here in Austin there are several condo towers being built, large ones. From 30 to 50 stories, which is huge for Austin. One, the Monarch, has already announced they are returning deposits to those who paid down on condos and they are instead converting the tower to apartments. I think we'll see some other projects do something similar, or get cancelled, a likely scenario for those who haven't begun construction. I know you are focusing on manufacturing plants, but I hope they can compete overseas. That will be vital to their success, because the American market is going to see a downturn, in my opinion. Huge credit card debt carried by consumers, and they "suddenly" can't manage it by refinancing their homes. That is going to have a real impact. Refinancing has been a significant part of our consumer spending, and consumer spending has been a large part of the engine of this economy. Of course, I'm no expert! Trim Bush!
i think this prime rate "crisis" is very overblown and over exaggerated. Yes, a lot of people will lose money but that's what happens when you participate in risky business. Housing will/is slowing but I don't see it as a crisis\ totally. You can already see signs. I wouldn't be surprised if its by late 08. I just don't understand what the fed is doing. Granted, they are professionals and they have a lot of great minds, but i really have to question their decisions lately. If they drop rates again...I will be flabergasted
There are two main reasons we are seeing this huge bull market in commodities right now. First is demand from China and India. As their domestic markets grow, they incrementally demand more commodities and resources. And second as the Federal Reserve cuts interest rates, it hurts the US dollar and thus causes foreigners to buy these dollar denominated commodities since they just became a little cheaper. I follow Jim Rogers view on commodities and think we are in a super bull cycle for commodities. We are in year 7 of a 15-20 year bull cycle, I believe. I have alot of my investments tied up in many futures/commodity funds and CTA's. Commodities typically have very low correlation to equities, and is a good investment for those who think a stock market downturn is coming.
http://www.nasdaq.com/aspxcontent/N....htm&selected=9999&selecteddisplaysymbol=9999 GDP grows at 4.9% Annual Rate in Q3.
Whether or not the economy is going into a recession or not, these last couple months have kicked the **** out of my savings.
Well, i don't have much money into stock market other than the IRAs and employer retirement funds, those I cann't touch for decades, so I am not too worried at this point.
