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Realistbear

Fed "hike" Has Had The Opposite Effect

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http://uk.biz.yahoo.com/30062006/94/commod...nals-pause.html

Friday June 30, 11:23 AM

Commodity prices up after Fed signals pause
Commodity prices rose firmly along with equity markets on Friday after the Federal Reserve hinted that it may pause further interest rate rises.
Gold rose
to $600 a troy ounce for the first time in more than two weeks, representing a rise of about $8 from the late quote in New York on Thur sday.
Copper prices rose
two per cent to $7,420 a tonne on the London Metal Exchange, its highest level in more than two weeks.
The London Metal Exchange (LME) said it had approved the Royal Bank of Canada Europe as an associate broker clearing member.
RBC will commence trading on July 6.
The LME has 25 associate members, who are the second tier of LME membership.
They have all the rights and privileges of LME membership, but cannot trade during the open-outcry trading sessions.
Oil extended its gains
from the previous session.
IPE Brent for August delivery gained 27 cents to $73.15 a barrel in early morning London trade.
August West Texas Intermediate added 19 cents to $73.71 a barrel in electronic trade.

Nice conundrum for Ben to work out. Hike the rates and inflation takes off in the form of higher oil and other commodities (which will filter down into the world economies for very obvious reasons). Must mean that 5.25% is still accomodative. Is it negative IR in real terms?

So, does this mean Ben sticks on 5.25% and fuel inflation or does he keep turning the screw until the antidote kicks in: recession.

Edited by Realistbear

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I wonder at what point IR will begin to pinch? 6.75% might not be out of the question at this rate for the US.

Bloody hell UK 4.5% US 6.75%, now that would be interesting me thinks :lol:

Interesting times ahead for the property guru's of the UK, man the lifeboats, there is one big hell of a wave coming :lol:

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Fed "hike" Has Had The Opposite Effect, Inflation in Commodity prices accelerating

I think the thing is, the markets were priced for a 0.5% hike and only having a 0.25% hike meant they were suddenly underpriced, hence why they soared. Suggestions that there may be a pause in the hikes next month added to the effect.

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http://uk.biz.yahoo.com/30062006/94/commod...nals-pause.html

Friday June 30, 11:23 AM

Commodity prices up after Fed signals pause
Commodity prices rose firmly along with equity markets on Friday after the Federal Reserve hinted that it may pause further interest rate rises.
Gold rose
to $600 a troy ounce for the first time in more than two weeks, representing a rise of about $8 from the late quote in New York on Thur sday.
Copper prices rose
two per cent to $7,420 a tonne on the London Metal Exchange, its highest level in more than two weeks.
The London Metal Exchange (LME) said it had approved the Royal Bank of Canada Europe as an associate broker clearing member.
RBC will commence trading on July 6.
The LME has 25 associate members, who are the second tier of LME membership.
They have all the rights and privileges of LME membership, but cannot trade during the open-outcry trading sessions.
Oil extended its gains
from the previous session.
IPE Brent for August delivery gained 27 cents to $73.15 a barrel in early morning London trade.
August West Texas Intermediate added 19 cents to $73.71 a barrel in electronic trade.

Nice conundrum for Ben to work out. Hike the rates and inflation takes off in the form of higher oil and other commodities (which will filter down into the world economies for very obvious reasons). Must mean that 5.25% is still accomodative. Is it negative IR in real terms?

So, does this mean Ben sticks on 5.25% and fuel inflation or does he keep turning the screw until the antidote kicks in: recession.

As usual, Realist Bear has his pulse on things.

I think RB, that both of us understand the American monetary system quite well having spent time there. (I'm still there for a while)

I had thought that the pound would dive against the dollar, but it's almost 1.84??

It seems BOE monetary policy is not influenced by US interest rates.

However, the US economy IS slowing, houses are taking longer to sell and in some cases the median price is dropping.

As the Fed says, there is a lag effect from the Fed's IR hikes - this one won't feed through until years end, by that time IR should be about 5.75-6%.

I think that central banks around the world are draining liquidity and this will take some time to complete.

When the Japs raise IRs, expect a few surprises.

Right now, there is a 0.75 carry trade between the US and UK, but no effect.

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Not sure if I agree with all of this, I've many friends who work in the building trade, with China finally starting to slow down (their interest rate rises are starting to bite) their is a glut of copper, lead & other metals as such lead is some 50% cheaper (wholesale) copper way down also.

In the next few months petrol & diesel will be back in the £0.80s per litre

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Cable just hit 1.845, Gold $611.

RB, could you make sure you predict plunging sterling / gold every single day? You seem to do wonders for my profit margin.

Keep it up, and we'll discuss commission. ;)

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As usual, Realist Bear has his pulse on things.

I think RB, that both of us understand the American monetary system quite well having spent time there. (I'm still there for a while)

I had thought that the pound would dive against the dollar, but it's almost 1.84??

It seems BOE monetary policy is not influenced by US interest rates.

However, the US economy IS slowing, houses are taking longer to sell and in some cases the median price is dropping.

As the Fed says, there is a lag effect from the Fed's IR hikes - this one won't feed through until years end, by that time IR should be about 5.75-6%.

I think that central banks around the world are draining liquidity and this will take some time to complete.

When the Japs raise IRs, expect a few surprises.

Right now, there is a 0.75 carry trade between the US and UK, but no effect.

Just a little too much time on my hands at the mo' as we await a possible move down to Gatwick in September!

Totally right on the housing market. I have been watching my old area, San Diego, closely as we may one day buy a small condo there to avoid the British winters. HPI is dead in most of the bubble markets and I don't think Ben is too concerned as the majority of the US has not seen the same level of hyperinflation. The UK and the bubble States in the US are in the same boat I think. The problem that Gordon faces which Ben doesn't is that higher rates will pop the entire market and a recession is guaranteed in its wake. If Ben keeps tightening the screw the coastal markets will be devastated but the "Red States" should remain relatively unscathed thereby keeping the US economy chugging along at a slightly lower pace. California is a bigger problem given their status as the world's 9th largest economy.

The bankers and real estate people I know in CA all believe the market is in for a large crash due to the level of creative financing of the past 3 years or so. Over 80% of the S Cal loans were IO in 2005! That is a recipe for negative equity already in place and a few bailers will set the rest in motion. Negative YoY median price data is due in a couple on month's time. To date it has still be showing small YoY increases. The psychological impact of red ink could be large.

Where are you in the US?

Cable just hit 1.845, Gold $611.

RB, could you make sure you predict plunging sterling / gold every single day? You seem to do wonders for my profit margin.

Keep it up, and we'll discuss commission. ;)

Give it time............................ :o

With the UK trading deficit already in the red a nicely overvalued pound should work wonders for the economy down the road. My bet is still on the pound crashing but only when the markets realise that Gordon's Miracle Econmy of HPI and MEW cannot be sustained in the light of wordwide hikes and a deteriorating internal economy as evidenced by slower grwoth, higher unemployment, raising debt levels and accompanying stress in the form of repos and bankruptcies.

Sterling is the most powerful and overvalued currency in the world today and has been rising for some time on the back of a worsening domestic siuation. It will not last. Exports will suffer and more jobs will be lost due to uncompetitiveness. I think Ireland is starting to see that problme play out.

Gold? With Ben's remarks I think it could soar again and then whipsaw back like it tends to do. Who knows Ben might release minutes in a few day time saying that "in time" means weeks not months. Knowing when to get out is key. It is highly unstable. $730 one week and down to almost $550 a few weeks later. Get your timing wrong and you suffer.

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On the other hand--things may be happening a little faster than we all may have thought. Recession, the antidote to spending and HPI, gets closer:

http://biz.yahoo.com/ap/060630/economy.html?.v=6

AP

Consumer Spending Slows in May

Friday June 30, 8:48 am ET

By Martin Crutsinger, AP Economics Writer

Consumer Spending Slows in May With Surging Gasoline Prices

WASHINGTON (AP) -- Consumer spending slowed sharply in May as rising gasoline prices left Americans with less to spend on other items, the government reported Friday.
The Commerce Department said that spending rose by just 0.4 percent last month after a 0.7 percent gain in April. Income growth also slowed to an advance of just 0.4 percent last month, reflecting weaker job growth.
The report on personal incomes and consumer spending provided further evidence that the economy, after growing strongly in the first three months of the year, slowed sharply in the spring as Americans were battered by rising gasoline prices, higher interest rates and a cooling housing market.
The government reported Thursday that the overall economy raced ahead at an annual rate of 5.6 percent in the January-March quarter, the fastest pace in 2 1/2 years. But analysts believe growth has slowed to just half that amount in the current April-June quarter reflecting a sharp slowdown in consumer spending, which accounts for two-thirds of total economic activity.

If the US economy is slowing it will impact the UK and Eurozone. Exports will fall and at a time when credit is tightening. Oil may prove to be the catalyst once agin for recession and the inevitable HPC. It has taken a long time to work through the system due to liquidity that is drying up. If Japan are going to move as the BBC suggest in today's bulletin we shall not have long to wait. When America sneezes...........................................

Euros may be safer than sterling but with their imbalances who knows. Canadian Dollars?

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http://uk.biz.yahoo.com/30062006/94/commod...nals-pause.html

Friday June 30, 11:23 AM

Commodity prices up after Fed signals pause
Commodity prices rose firmly along with equity markets on Friday after the Federal Reserve hinted that it may pause further interest rate rises.
Gold rose
to $600 a troy ounce for the first time in more than two weeks, representing a rise of about $8 from the late quote in New York on Thur sday.
Copper prices rose
two per cent to $7,420 a tonne on the London Metal Exchange, its highest level in more than two weeks.
The London Metal Exchange (LME) said it had approved the Royal Bank of Canada Europe as an associate broker clearing member.
RBC will commence trading on July 6.
The LME has 25 associate members, who are the second tier of LME membership.
They have all the rights and privileges of LME membership, but cannot trade during the open-outcry trading sessions.
Oil extended its gains
from the previous session.
IPE Brent for August delivery gained 27 cents to $73.15 a barrel in early morning London trade.
August West Texas Intermediate added 19 cents to $73.71 a barrel in electronic trade.

Nice conundrum for Ben to work out. Hike the rates and inflation takes off in the form of higher oil and other commodities (which will filter down into the world economies for very obvious reasons). Must mean that 5.25% is still accomodative. Is it negative IR in real terms?

So, does this mean Ben sticks on 5.25% and fuel inflation or does he keep turning the screw until the antidote kicks in: recession.

Another interesting point RB.

Cheap money had been around a long time now thanks to the Japs. In that time it has seeped into (and distorted) all financial sectors including businesses (especially those that have steep growth curves).

There's a lot of high gearing out there and producers are going to have to pass on the cost of their debt to customers or go out of business. (Many will probably try the former and then end up doing the latter.) In the meantime this will fuel inflation.

Gold has also had borrowed money in it. The tightening of money supply thus far has kept a lid on the Gold price as the borrowed money is pulled out. When that process stops its hard to see why it won't skyrocket. This may be a signal to look for, that tells us when the current reversal measures on money supply take effect.

Interest rates are a 'blunt instrument' but they do work eventually. The 'patient' tends to recover a few years later. This is only the the beginning of the treatment.

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Another interesting point RB.

Cheap money had been around a long time now thanks to the Japs. In that time it has seeped into (and distorted) all financial sectors including businesses (especially those that have steep growth curves).

There's a lot of high gearing out there and producers are going to have to pass on the cost of their debt to customers or go out of business. (Many will probably try the former and then end up doing the latter.) In the meantime this will fuel inflation.

Gold has also had borrowed money in it. The tightening of money supply thus far has kept a lid on the Gold price as the borrowed money is pulled out. When that process stops its hard to see why it won't skyrocket. This may be a signal to look for, that tells us when the current reversal measures on money supply take effect.

Interest rates are a 'blunt instrument' but they do work eventually. The 'patient' tends to recover a few years later. This is only the the beginning of the treatment.

Many seem to think so, especially as the creditor starts to tighen the credit tap:

http://www.iht.com/articles/2006/06/30/business/yen.php

Japan price and jobs data bolster case for a rate rise

Reuters

Published: June 30, 2006

TOKYO Core consumer prices in Japan rose firmly in May, official data showed Friday, while the jobless rate fell to an eight-year low, reinforcing expectations that the Bank of Japan would raise interest rates as early as next month despite a controversy over the central bank governor's personal finances. ....../
Edited by Realistbear

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Oh-oh :o

Ben knew what he was doing and probably had a heads up on the following which is why NY had a bad day:

http://personal.fidelity.com/research/stoc...ketsindex.shtml

U.S. stocks flatten on worrisome Chicago PMI report

12:35 p.m. 06/30/2006 By Leslie Wines Provided by

Fund managers make their final second-quarter adjustments
NEW YORK (MarketWatch) - U.S. stocks flickered near the flat line at midday Friday, after early gains evaporated when the Chicago purchasing managers' monthly report suggested a worst-case scenario of economic slowing alongside higher prices.

Stagflation rears it hideous head. Japan had that and their property market slipped into the worst bear market in memory. And after a spike in HPI. We cold be next.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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