<![CDATA[Hedgehogs.net: '' related content]]> http://www.hedgehogs.net/tag/economic+theories?view=rss http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11521551/2015045-inflation-expectations-and-monetary-policy-design-evidence-from-the-laboratory Thu, 02 Jul 2015 05:00:39 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11521551/2015045-inflation-expectations-and-monetary-policy-design-evidence-from-the-laboratory <![CDATA[2015-045: Inflation Expectations and Monetary Policy Design: Evidence from the Laboratory]]> 11521551 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11517922/keynes-the-great-depression-and-the-coming-great-default Mon, 29 Jun 2015 08:02:00 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11517922/keynes-the-great-depression-and-the-coming-great-default <![CDATA[Keynes, The Great Depression And The Coming Great Default]]> Submitted by Gary North via Gary North's Specific Answers,

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11516535/regression-to-trend-a-perspective-on-longterm-market-performance Wed, 24 Jun 2015 16:02:30 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11516535/regression-to-trend-a-perspective-on-longterm-market-performance <![CDATA[Regression to Trend: A Perspective on Long-Term Market Performance]]> Quick take: At the end of Maythe inflation-adjusted S&P 500 index price was 94% above its long-term trend, unchanged from the previous month.

About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.

read more...

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11516535
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11507041/regional-fed-manufacturing-surveys-for-may-and-the-ism-index Sat, 30 May 2015 11:00:18 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11507041/regional-fed-manufacturing-surveys-for-may-and-the-ism-index <![CDATA[Regional Fed Manufacturing Surveys for May and the ISM Index]]> Earlier today the last two regional Fed surveys for May were released. As expected, the Dallas Fed was especially weak due primarily to weakness in the oil sector.

From the Dallas Fed: Texas Manufacturing Activity Contracts Further
Texas factory activity declined again in May, according to business executives responding to the Texas Manufacturing Outlook Survey. ... The general business activity index fell to -20.8 in May, its lowest reading since June 2009.

Labor market indicators reflected employment declines and shorter workweeks. The May employment index declined 10 points to -8.2, after rebounding slightly above zero last month. Twelve percent of firms reported net hiring, compared with 21 percent reporting net layoffs. The hours worked index fell from -5 to -11.6.
emphasis added
And from the Richmond Fed: Manufacturing Sector Activity Remained Tepid; Employment Edged Up, Wage Growth Accelerated
Manufacturing activity remained soft this month, with several components flattening. The composite index for manufacturing moved to 1 following April's reading of −3, while the shipments index leveled off to −1 from −6. In addition, the index for new orders gained eight points, reaching a nearly flat reading of 2. ...

Manufacturing employment continued to grow at a modest pace in May. The index ended the survey period at 3 compared to last month's reading of 7. The average workweek increased; the index moved up two points to end at 6. Additionally, the index for average wages advanced 11 points to finish at a reading of 20.
Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through May), and five Fed surveys are averaged (blue, through May) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

It seems likely the ISM index will be weak again in May, and will probably be around the same level as in April.

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11507041
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11507040/real-prices-and-pricetorent-ratio-in-march Sat, 30 May 2015 11:00:17 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11507040/real-prices-and-pricetorent-ratio-in-march <![CDATA[Real Prices and Price-to-Rent Ratio in March]]> The expected slowdown in year-over-year price increases has occurred. In October 2013, the National index was up 10.9% year-over-year (YoY). In March 2015, the index was up 4.1% YoY.  However the YoY change has only declined slightly over the last six months.

As I've noted before, I think most of the slowdown on a YoY basis is now behind us (I don't expect price to go negative this year). This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.6% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through March) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to June 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to February 2005 levels, and the CoreLogic index (NSA) is back to March 2005.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to June 2003 levels, the Composite 20 index is back to May 2003, and the CoreLogic index back to July 2003.

In real terms, house prices are back to 2003 levels.

Note: CPI less Shelter is down 1.5% year-over-year, so this is pushing up real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to May 2003 levels, the Composite 20 index is back to March 2003 levels, and the CoreLogic index is back to June 2003.

In real terms, and as a price-to-rent ratio, prices are mostly back to 2003 levels - and the price-to-rent ratio maybe moving a little sideways now.

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11507040
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506978/regional-fed-manufacturing-surveys-for-may-and-the-ism-index Sat, 30 May 2015 10:33:14 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506978/regional-fed-manufacturing-surveys-for-may-and-the-ism-index <![CDATA[Regional Fed Manufacturing Surveys for May and the ISM Index]]> Earlier today the last two regional Fed surveys for May were released. As expected, the Dallas Fed was especially weak due primarily to weakness in the oil sector.

From the Dallas Fed: Texas Manufacturing Activity Contracts Further
Texas factory activity declined again in May, according to business executives responding to the Texas Manufacturing Outlook Survey. ... The general business activity index fell to -20.8 in May, its lowest reading since June 2009.

Labor market indicators reflected employment declines and shorter workweeks. The May employment index declined 10 points to -8.2, after rebounding slightly above zero last month. Twelve percent of firms reported net hiring, compared with 21 percent reporting net layoffs. The hours worked index fell from -5 to -11.6.
emphasis added
And from the Richmond Fed: Manufacturing Sector Activity Remained Tepid; Employment Edged Up, Wage Growth Accelerated
Manufacturing activity remained soft this month, with several components flattening. The composite index for manufacturing moved to 1 following April's reading of −3, while the shipments index leveled off to −1 from −6. In addition, the index for new orders gained eight points, reaching a nearly flat reading of 2. ...

Manufacturing employment continued to grow at a modest pace in May. The index ended the survey period at 3 compared to last month's reading of 7. The average workweek increased; the index moved up two points to end at 6. Additionally, the index for average wages advanced 11 points to finish at a reading of 20.
Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through May), and five Fed surveys are averaged (blue, through May) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

It seems likely the ISM index will be weak again in May, and will probably be around the same level as in April.

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11506978
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506977/real-prices-and-pricetorent-ratio-in-march Sat, 30 May 2015 10:33:13 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506977/real-prices-and-pricetorent-ratio-in-march <![CDATA[Real Prices and Price-to-Rent Ratio in March]]> The expected slowdown in year-over-year price increases has occurred. In October 2013, the National index was up 10.9% year-over-year (YoY). In March 2015, the index was up 4.1% YoY.  However the YoY change has only declined slightly over the last six months.

As I've noted before, I think most of the slowdown on a YoY basis is now behind us (I don't expect price to go negative this year). This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.6% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through March) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to June 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to February 2005 levels, and the CoreLogic index (NSA) is back to March 2005.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to June 2003 levels, the Composite 20 index is back to May 2003, and the CoreLogic index back to July 2003.

In real terms, house prices are back to 2003 levels.

Note: CPI less Shelter is down 1.5% year-over-year, so this is pushing up real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to May 2003 levels, the Composite 20 index is back to March 2003 levels, and the CoreLogic index is back to June 2003.

In real terms, and as a price-to-rent ratio, prices are mostly back to 2003 levels - and the price-to-rent ratio maybe moving a little sideways now.

]]>
11506977
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506950/richmond-fed-manufacturing-flattened-in-may Sat, 30 May 2015 10:32:43 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506950/richmond-fed-manufacturing-flattened-in-may <![CDATA[Richmond Fed: Manufacturing Flattened in May]]> Today the Richmond Fed Manufacturing Composite Index squeaked back above the flat line with a 4 point increase to 1 from last month's -3. Investing.com had forecast a rise to 0. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at -3.3, in modest contraction.

read more...

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11506950
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506910/regression-to-trend-a-perspective-on-longterm-market-performance Sat, 30 May 2015 10:32:10 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506910/regression-to-trend-a-perspective-on-longterm-market-performance <![CDATA[Regression to Trend: A Perspective on Long-Term Market Performance]]> Quick take: At the end of April the inflation-adjusted S&P 500 index price was 93% above its long-term trend, unchanged from the previous month.

About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.

read more...

]]>
11506910
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506577/eurosclerosis Sat, 30 May 2015 09:00:47 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11506577/eurosclerosis <![CDATA[Euro-sclerosis]]> There appears to be little or nothing in the monetarists' handbook to enable them to assess the risk of a loss of confidence in the purchasing power of a paper currency. Furthermore, since today's macroeconomists have chosen ...

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