The Price of Everything!

The prices of everything, everywhere, are going up.  A house in Phoenix is going up, a Ford F-150, a plane ticket to New York City, they are going up for as much as everything all over the country.   Well, maybe not San Francisco.  There the prices of homes are all down from 10-12%.  The only part of the country and the State of California that is not going up?  Down from 10-12% where the rest our metro areas are up over 12%. 

For pseudo-scientist, aka Economists, it is a dismal picture!  They, along with the people that brought you the last recession, aka Wall Street Banks, say it is only temporary.  "A transitory event that will disappear."  Mark Zandi, the chef Economist at Moody's...yes Moody's the people that gave AAA ratings to bonds supported by mortgages that went into default and put us on the verge of economic collapse WORLD-WIDE......“Inflation is one of the mysteries of economic study and thought. A difficult thing to gauge and forecast and get right. That’s why the risks are high.”    How can inflation be a mystery?  If people can charge more for products in short supply they will.  What is a mystery of one of Economists solid formulas, The Law of Supply and Demand?

The Federal Reserve is taking a pretty big risk with their calculations over a economic study that is "difficult thing to gauge and forecast".

Is this transitory, and does that mean prices will come down?  Will that include housing prices, since housing prices are part of the inflation index?  Oh yes, and when will inflation cease to become transitory?  Will it stop at 13.5% as when President Jerry (can't walk and chew gum at the same time) Ford launched "WIN", Whip Inflation Now?  Remember he had his training in running the Country as Speaker of the House...hint, hint, hint.

The Federal Reserve reported that the May rate of inflation was 5%.  That is the fastest rate in 13 years!.... which was when the economy over heated from the housing boom....Sound familiar....went off the cliff and sent us into the GREAT RECESSION.

Let us not leave the pointer on housing.  Used Car prices climbed 7.3% last month and 29.7% over the past year.  Did you take your old jalopy in to your dealer for some work?  I did, boy did they have deals for my car at Blue Book Wholesale to buy a new car for a premium.  They would make more money on my used car than selling a new car.

Not all things are being priced into the stratosphere.  Healthcare and education are flat, including smart-phones, technology and internet services have been relatively flat.

All eyes are on Houses and Cars.  Interest rates are low and the cost of buying them are low, so why not pay up??? Sure, good idea, you are making a rocket ship rise straight up to a technical blow off!  BLOWOFF? sure it happens in real estate and cars.  The Federal Reserve said they are not raising interest rates until 2023...THAT"S 2 YEARS FROM NOW...we all maybe be speaking Chinese, or North Korean, or Russian..Far better than in a corner reading the Koran and growing beards and long hair and having our women wearing tents with mesh for seeing through...Well at least we can listen to Yellow Brick Road, In a Gadda da Vida and getting high on great California MJ we bought at Safeway.  

Let's get serious here!  The Federal Reserve already began the rate increase.  The Federal Reserve tightened, the rate on which banks get paid for having money on deposit with the FED.  Not much, .37% if I am correct.  But that is not bad for a bank that does not have any clients to borrow money to: if they do, they want 100% certainty they will pay it back.  That means money is being drawn back from supply.  The FED can continue to do that without keeping a thumb on the interest rate we get paid.  Just slowly draw money out of supply.  Wait until inflation stops and then we can go back to normal.   WAIT ON THERE.  What if the "F" factor comes in and inflation rates do not decline.  What if we have not supplied enough lumber, what if there are not enough plants here in the US to produce semi-conductors....what if?  Well, then we sell some bonds and pull more money out of the system.  Interest rates go up from lack of supply of money.  Prices come down on houses and cars? Business slows down.  Stocks go down.  IPO's stop. Layoffs in the high tech industry.  Another Recession.  Foreclosures and defaults.  Sound familiar?  

Now that goes back to when I was about 50 years younger and I really believed they , the economist , knew what they were doing and I believed the Politicians.  Come on Gary, were you that gullible...sure was, and so were you, your parents, and grandparents.  Today you people are a bit more savvy, AREN'T YOU???  Screw it man, we're getting our advice from Reddit.  We're getting those hedge funds shorting companies that are going out of business.  We will make more money and just sit back "bragin" to our buds on Reddit.  

Now let's talk about this reasonably.  Trees don't grow to the sky.  Stock's prices don' go up forever.  If you can buy a 3000 square foot home for under $1 million and a 1350 sf home for $2 million wouldn't you look at how far away is the 3000 sf home?  Would you think twice about paying ridiculous prices for rent in a slum when you could own a home for the cost of the rent in a mortgage payment?  A home where there is no homeless, drugs on the street, trash in the gutter, gun fights and they have great schools in gated communities with pool and tennis courts.  Of course you would.  what's holding you back?

Hey, let's get serious here.  There is a time that prices of homes push reality to far and at other locations is wise.  There is a time when rent gets too high, and there is a look elsewhere.  It will come, so prepare.

I for one, like history to lead me.  Home prices are down some 10-12% in SF.  They are up 12% here.  I moved from SF originally and then my stock trader mind saw the prices in the peninsula, Woodside, collapse.  I bought a house in Woodside for the sale of my Flat in Pacific Heights, or at least upper Cow Hollow.  

If you are a home buyer, look around.  You're working from home with a jaunt to work once a month.  Hey..there are other places to live.  Friends...well once you left the last place the friends were farther away and apart.  You called, chatted, texted and soon...new friends came in.   All part of growing up and expanding our network.

If you are a seller, look around and get the best price now to get an underpriced property elsewhere.  Forget about waiting for the price to peak...there are no bells and whistles.  If you do, the price you pay will move up faster than your sale.  That's the way markets move.  

Not going to sell?  Going to live here until they carry you out in a box?   Sure heard that before.  When that day comes you won't know who is carrying you out and doubtful it is in a box, but your kids saying mom and pop need care.  Sell the house put them in a home.  I sure hope you enjoyed your life to the fullest, took you and your spouse on great vacations and tours before they give you boxing gloves to separate salt from sugar.

Bottom Line.  Inflation is not going away.  The FED or Wall Street and the Banks do not control the cost of living.  You do!  Start thinking about Living...Reddit does it right YOLO.