Weekly Indicators for May 10 – 14 at Seeking Alpha
Weekly Indicators for May 10 – 14 at Seeking Alpha
by New Deal democrat
My Weekly Indicators post is up at Seeking Alpha.
The big news in this past week, even though it has been expected for several months, was on the inflation front. That doesn’t affect the nowcast, and hasn’t affected the short term forecast yet. The long term forecast continues to be buffetted by increased interest rates.
In my commentary this week, I make reference to supply constraints. I bring this up here because I read a tweet today by someone whose political analysis I respect, showing a graph of the spike in lumber prices, and stating that lumber was “in a bubble.”
No it’s not. The defining feature of a bubble is speculation on the continuing increase in prices. Fifteen+ years ago it was “everyone knows real estate only goes up!” In 1999 it was “everyone knows these internet companies are going to completely take over commerce!” In 1929 it was “stock prices have reached a permanently high level!” In the 1700s it was “the price of land in the Mississippi Valley is going to explode!” – which was sort of correct, but it took 200 years to happen. As they say, “being early” is a synonym for “being wrong.”
What is happening with lumber, and computer chips, is similar to what happened during the Oil Embargo of the 1970s. This is a supply constraint. Product cannot (in the 1970s, would not) be supplied fast enough to meet the demand. So the way the product gets rationed is to raise prices until enough buyers stop buying.Whether it is a significant problem or not depends upon how quickly the pace of supply can be increased, a question that I do not pretend to know the answer to.
In any event, as usual, clicking over and reading will bring you up to the virtual moment, and bring me my lunch money.
NDd
With regard to chips, you would think automotive would have learned from the 2008 crash when the market went south. The economy slowed down and demand disappear, production died as they had three months of stock. And then economy came back with a vengeance.
The wafers needed to make the chips take about six months to grow and sent to be packaged into various chips. We spent a lot of time coaxing suppliers such as Infineon for a greater supply. It was tight for about a year and then loosened up. That much you are correct.
My contract on a new house will maybe fulfilled in October, or maybe November, or then again December. I am told they will get the framing done quickly. It is the inside stuff (cabinetry shelves, faucets, door knobs, doors, etc.) which will slow it down.
Also plenty of money out there for used houses. We were out bid by not a few thousand; but by tens of thousands of dollars. These used homes are not worth what they are paying for them.
The home we bought, price on went up $10,000 a week later. Our price was locked by contract and consideration passed.
Supply is mostly the issue, taking advantage, rent taking, etc. is the rest of the issue. It will peak and then crash as the area did a decade ago. We intend to stay as liquid as possible.