Eric Balkan

Why Inflation Is Lower Than You Think

The Leonhardt article is moronic. It simply confuses quality of life with inflation. If you buy an apple today, and it costs 10% more than an apple you bought last month, but tastes twice as good, your quality of life has increased, but your cost of living has not decreased. You're now spending more on apples than you did before. The only way inflation would not increase in this case is if you could go still back to the store and buy the same apples you bought last month at the same price.

Indian Outsourcers Fight Back Against Presidential Candidates

Reminds me of Hillary Clinton's going to Buffalo NY a couple of years ago to congratulate Tata on opening a new outsourcing office -- because they would have to hire local people to staff it. But nobody told Hillary that Tata only hires Indian nationals.
First the ads, then the layout, then the circulation office, then the editing, then when the actual printing goes electronic.... I guess the reporters are safe, though I imagine the investors are trying to figure out a way to replace them with H-1Bs.

A Look at the Phillips Curve

Core CPI has been accused of being politicized, and not worth much. Try the chart against your own basket of goods. Some analysts are saying that if we measured CPI the way it was measured during the Carter administration, it would be in double digits. Given the prices rises in grains, metals, foreign currencies, fuel... that wouldn't surprise me.

1970s Style Stagflation? I Don't Buy It

The Global Money Trends service reports that M3 has been rising in double digits, currently 18% over the past year. It should be obvious that inflation is a problem given that we've hit an all-time high in oil, soybeans, gold, Euros.... Haven't had we had something like a 70% rise in the price of corn, a staple for chicken and hog feed. How can that not be inflationary? Oh, maybe yacht prices will drop to make up for it.

A Housing Bubble Within a Bubble

I agree with many of the comments above, but want to add something I didn't see mentioned. There's a traditional rule to allocate 25% of your after-tax income to housing. With the increase in housing prices over the past 20 years, that percentage is now 40-50% for many. E.g., most Gen-Xers are priced out of the market. I expect that housing prices are likely to come down significantly, i.e., revert to the mean, to restore some balance.

America's Middle Class: Living Large

If you start with a conclusion and then hunt for data to support it, cherry-picking the data you like and discarding the rest, you can pretty much "prove" anything.

Want to have dueling stats? Here's a little one to chew on. The US has the highest rate of downward mobility among any developed country in the world.

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Learning from Dan Sullivan: Experience or Errors?

Jason, I think you misunderstood. Mark Hulbert didn't say that Dan Sullivan *went* to all-cash in Apr 2003, but that was the last time his portfolio was all-cash. Which means that Sullivan must have started buying in April 2003.

Do Rising Prices Indicate Inflation?

Jim, you've overlooked that the drop in housing prices is actually less than the increase in global stock prices. So that's a wash. The current credit squeeze is not a shortage of cash -- it's a shortage of trust. Banks won't lend to each other because they don't know how much toxic debt the other guy holds.
In any case, the money supply, which the Fed has been increasing by around 10-15% over the past couple of years -- estimating M3 -- does not include values of non-liquid assets. If we all owned a zillion dollars worth of land on the Moon, and the Moon was destroyed, wiping out our entire investment, that would still not be monetary deflation, i.e., a reduction in the money supply.
The Wash Post figured the cost of a Thanksgiving dinner this past Nov as being 11% higher than the previous year. Given, as Jim Rogers points out, a continued shortage of commodities, plus continued increases in Asian demand for fuel, that trend is unlikely to go away by itself.

Tax vs. Interest Rate Cuts

A tax cut is too broad a sword to use against an economic slowdown caused by rising oil prices, rising commodity prices, and a collapsing housing market.

The last time a major income tax cut was implemented, sales of Mercedes went through the roof. How does that help the US economy?

Increase taxes on the wealthy and pump that additional money directly into alternative energy companies (but not corn-ethanol), into helping people make mortgage payments, into providing health care for those who don't have it.... Stimulate the economy by increasing spending here in the US, not by giving money away to people who are going to send it overseas.

An Analysis of Ben Stein's Beef with Goldman Sachs

I've seen Stein often identified as an economist, but Wikipedia says he worked as a lawyer and political science instructor before becoming an actor and pundit. It was his father, Herbert Stein, who was the economist.

Credit Crisis + Mortgage Mess = Deflation?

Very good article, but hard to reconcile deflation with the continued devaluation of the dollar that's fueling -- no pun intended -- big price rises in commodities. And as the Fed continues trying to bail out investors by lowering interest rates, those overseas holders of some $2T of Treasury paper are getting antsy. What we may have here is neither deflation nor inflation, but a reallocation of wealth.

Flaws in the U.S. Economy

The global economy makes it more complicated than it used to be. Something like 40% of the revenue of the S&P 500 comes from foreign sources. So it's entirely reasonable that American wage-earners are increasingly falling into the Third World model of not participating in corporate profits.

Bill Gross On the Mortgage Mess

A few years back, Warren Buffett had a comment about derivatives, which applies as well to mortgage derivatives. He called them Weapons of Mass Financial Destruction.

Personally, I think Greenspan didn't see the housing bubble because he didn't want to see it. People overlook that Greenspan is a life-long libertarian. I.e., someone who believes that government intervention in the economy is wrong on principle. That's what got him the job in the first place. Libertarian economics specifically holds that the short term can be ignored because the free market will work everything out for itself in the long term. JM Keynes had a comment about that kind of thinking.

What Is Ben Stein Smoking?

Everything Felix stated is wrong? That's pretty harsh.
"Subprime mortgage rates can easily get into the double digits, and homeownership makes very little sense in that situation."

That sounds right to me. When these ARMs reset, they often do reset to rates that are in double-digits.

A lot of these refinancings only made sense in a world where real estate prices keep going up forever. Here on planet Earth, which I invite Ben Stein to visit sometime, there are a lot of homeowners who would indeed have been better off as renters, until they could have really afforded to buy a house.

Cramer's Meltdown Spills Into Print

Most sub-prime mortages are refinances of prior mortgages, many to people who needed the money to make credit card payments. The top 4 reasons for continual credit card debt are hospital bills, home repair, car repair, and job loss. See responsiblelending.org

The current problem has a lot to do with mortgage lending being based on the profit motive, a.k.a greed. The more loans the broker makes, regardless of quality, the more money he makes. The Fed used to regulate this -- which is why we didn't have this big a problem before -- but this is an anti-regulation era so the Fed doesn't do that any more.

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