Thank God We're Well-Anchored

Posted by: Tom Keene on September 23, 2010

Housing Chartapalooza

“The U.S. FHFA house price index fell to its lowest level since September 2004 suggesting, that price expectations need to be stabilised soon otherwise weak asset liability ratios will lead to a deflationary adjustment of household liabilities,” BNP Paribas Research, London.

Where are we? Housing is obviously not great, but the above sentence gets your attention. Deflationary adjustment? Say, what?

ecochat092310hpi.bmp


HPIMLEVL INDEX GPL Q ROLL Here is the House Price Index, 1991 - 2010. We are back to autumn 2004. Various and sundry moving averages (not shown) are concave down. The chart is semi-log with a slope ~2000 to 2005 that is different than 1993 to 2000.


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SPCS20 INDEX GPL Q ROLL Here is the 20 MSA Case-Shiller Index, 2000 - 2010. It’s back further, to 2003. Note the modest, and I mean modest recovery. Obviously, if the index rolls over in a manner like the above Housing Index that would lead to an “adjustment.”


ecochat092310networth.bmp


NWORVALU INDEX GPL Q ROLL Here and below are two views of our national net worth assumed to be a proxy for households (although it also includes non-profits and believe it or not “domestic hedge funds”). The above chart is semi-log 1949 - 2010. It is sobering. You can see a little blip in 1974, and that’s a big blip upper right where we go flat in the early 2000s and then rollover in unprecedented fashion in recent years. It’s so 19th century.


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NWORVALU INDEX GPL Q ROLL Here is a close-in view with a 20-year regression. We are 2-deviations below trend. We are $10 trillion off trend, roughly 69% of a year’s nominal GDP.

Larry Does ec10

I have been amazed at the fixation over Lawrence Summers leaving the White House. Is the news cycle that slow? Greg Mankiw provides definitive perspective here that suggests the human condition.

One of the memorable moments for Bloomberg on the Economy was Professor Summers and I packed into a tiny Davos room, interviewing him (delicately) on the language of economics. It is different than “normal” language and certainly the language of the non-mathy set. Here is a must-read walk-through of how economist’s think. Its a bit heavy lifting, but it’s Mark Blaug.

Take Nothing For Granted

Andre Meier provides a wonderful essay on inflation, disinflation and deflation. This is mathy, but we all survive as we are…well-anchored.

Discuss.

Reader Comments

Brian

September 23, 2010 6:32 PM

Great post Tom, thnx 4 the bloomberg charts (good for students like myself who will be using a terminal in the future); keep up the superb blog & podcasts (best podcast around: http://bloomberg.iamplify.com/product_details/Bloomberg/Keene-On-Demand-Subscription/product_id/7203/?cid=BB0025)

E Konig

September 25, 2010 8:24 PM

great finding this blog. it was mentioned on BBR, where I have been listening to all podcasts daily for 2 years, and learned quite a lot, and am an early subscriber to Tom Keene On Demand. but it took a while to get here. I appreciate the comments on Economists' language which I will follow up on. I was thinking of buying the Palgrave Dictionary of Economics, but after seeing a sample article, I concluded, with its mathematical models either trivial, obscure, and all of them irrelevant to investing, it was of basically no use, and rather expensive as well.

Tom Keene

September 27, 2010 5:05 AM

brian: thanks tk

Tom Keene

September 27, 2010 5:06 AM

EK: i'll be putting some books out on EconoChat in the future. tk

Lee Adler

September 29, 2010 9:59 AM

Tom- Don't know if you saw my email. Case Shiller was grossly misleading this month. It's bad every month, but this was the worst, giving a totally false impression that the market might be leveling off. Not true.
http://wallstreetexaminer.com/2010/09/28/the-trouble-with-case-shiller/

Nikhil Shah

December 3, 2010 6:28 PM

Lee,

Thanks for your post. Really put it into perspective... I appreciate the knowledge :)

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About

EconoChat captures Tom Keene's thoughts on economics, finance and investment. He is editor-at-large for Bloomberg News and hosts Bloomberg Surveillance and Bloomberg on the Economy on NYC1130, Sirius 129 and XM 130 and Surveillance Midday on Bloomberg Television. His complete interviews are at Tom Keene on Demand. Look for Tom on twitter @tomkeene

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