Friday Lite

Another consumer price report was released just a short time ago. It looks like it'll be smooth sailing from here on out, given the back-to-back deuces (actually, that would be point-deuces) rolled by core CPI as shown in the graphic below.
Recall that earlier in the year, the four consecutive readings of 0.3 caused quite a stir since it had previously been thought that all items that would ever go up in price had been removed from this index years ago.

Talk of modifying the index to counter rapidly rising rental costs, now that the housing market is swooning, will likely die down as core inflation appears headed back toward the hallowed level of two percent when measured on an annual basis.

Order has once again been restored and the inflation monster once again vanquished by the central bank. Whether or not there is any relationship between this event and the price that people actually pay for things is a separate issue.

Miranda Has A Blog

Miranda Edel heard that people were talking about the way of life she and her family have chosen to live as documented in Wednesday's post What Planet Are These People From? and she stopped by for a few minutes. She was kind enough to leave a comment with a few answers to some of the questions that others had asked.
Miranda also has a blog - Simple Living - that is well worth a few minutes of your time. The class exercise of counting the number of advertisements seen during 30 minutes of watching TV or while driving a car is instructive. Of course Tivo solves the problem of television commercials, but billboards are mostly just annoying.

They Shoot Central Bankers in Russia

In the news yesterday was this report of the gangland style killing of Andrei Kozlov, the Russian Central Bank's first deputy chairman. Also killing his driver, the two gunmen fled after the attack and are currently being sought.

While rarer than in the turbulent 1990s, contract killings of businessmen and bankers still regularly occur in Russia, where business conflicts often turn violent.

Vice Premier Alexander Zhukov said the shooting was likely linked to Kozlov's duties, and suggested the possibility of a connection with the Central Bank's revocation of licenses of unreliable commercial banks, the Interfax news agency reported.

They say that two-thirds of all U.S. hundred dollar bills are currently circulating in Russia. Aren't they going after the wrong central bankers?

They Ought to Shoot These Central Bankers

Or maybe some government officials, or maybe both. From a few weeks back in The Economist comes this report of the inability of some central bankers to solve the problem of inflation by removing zeros. If only it were that easy.

At the end of July the central bank devalued the Zimbabwean dollar (Z$) by more than half and then announced that the currency would also lose three zeros. This is the bank's latest idea to fight hyperinflation hovering around 1,000% a year—the highest in the world—and to attract cash into the banking system.
...
Spiralling inflation has forced Zimbabweans to use bags to carry cash: wallets are a distant memory. It takes time for cash machines to spit out the daily maximum of Z$250m—or Z$250,000 in new money—that people are allowed to withdraw, so queues have become common. Zimbabweans have become used to dealing in “bricks”, as piles of banknotes worth Z$10m are known. Businesses send their money by trucks to banks' special bulk-cash facilities.

It is unclear how the new money will compare with the old money when measured against toilet paper - a roll of toilet paper used to cost $1,500 (or maybe it was $15,000 or $1,500,000 - it's been a while), forcing the user to decide whether to actually purchase the more pliable grocery store item or just use the currency.

The Home of Inflation

It would probably be more accurate to say that the Federal Reserve Bank of Zimbabwe is Inflation Central, but, the Cleveland Fed has claimed that moniker for themselves. The irony of the screenshot below is probably completely lost on the web page designers at the Fed, similar to lost irony when phrases like "the Fed is fighting inflation" are heard.


Why would you ever have to fight something that you create? It's like a drug dealer who fights drug abuse but continues to peddle the stuff. Just don't cause inflation, then there will be no need to fight it, and certainly no need to have Inflation Central.

This site is actually chock-full of great economic data, it's just a little difficult to get past the main page in the inflation section.

Why Would Central Banks Not Sell their Gold?

From Reuters comes news that European Central Banks are indeed unloading their gold, partially explaining the recent plunge in the spot price of the barbarous relic. The surprising part of this story is that central banks on the continent will not meet their quota this year because the dufusses at the German and Swiss banks passed on their options to sell. Why would they pass?

Gold, which was trading around $580 an ounce on Wednesday XAU, had risen 25 percent a year for the last five years, boosting its attractiveness as an asset.

”The rise in price is a major factor” in explaining why central banks want to hold onto their gold, he said.

“One of the most important arguments (against holding gold) is that gold has no yield, but when the price doubles in three years you cannot say that it has no benefit.”

The German and the Swiss central bankers are clearly the brightest of the bunch, but you have to wonder how long this can go on. How long will it be before other central banks realize that maybe they should hang on to their gold bars. Taken to its logical conclusion, what happens when all the gold has left all the central banks and the gold price starts soaring? What do the central banks do then?

Time is Running Out

Mr. Market has presented commodity investors with a wonderful opportunity to buy up natural resources and related stocks at bargain prices. If you've grown suspicious of the job that central bankers have done in preserving the value of your money, maybe it's time to diversify your portfolio.
The lifetime rate guarantee offer over at Iacono Research expires this weekend. To begin a subscription, click here. For a free, no obligation two week trial, just send mail to tim-at-iaconoresearch-dot-com with the words FREE TWO WEEK TRIAL in the subject line.

New Charts at Yahoo! Finance

Have you seen the new charting software over at Yahoo! Finance? Here's a stock that's been in the IR Model Portfolio for some time now.


The new Yahoo! charts work great as long is they don't lock up your browser - they're still getting a few of the bugs worked out and have recently switched back to the old style charts, giving you the option to use the new ones, now labeled Beta.

Impressive Browser Share Statistics

With great pride it can be reported that the Firefox browser share at this blog is nearly three times the national average. If you haven't tried Firefox, give it a whirl - it has been known to raise IQs by twenty points within a single week.
Has Microsoft Internet Explorer figured out how to do tabbed browsing yet? Are they like three years behind on this one?

The Housing Bubble That Isn't

Did anyone else think it was odd that the Senate Banking Committee convened a hearing titled "The Housing Bubble and Its Implications for the Economy" and then the participants went on to explain that there is no bubble. According to this story, Thomas M. Stevens, president of the NAR (National Association of Realtors), set the record straight.

"Contrary to many reports, there is not a 'national housing bubble,'" said Stevens. "We were seeing home prices and mortgage debt servicing cost-to-income ratios increase to unhealthy levels in some housing markets, which precipitate an adjustment." Also contributing to the cooling housing market is an increase in mortgage rates of nearly one point, speculative investors pulling back and first-time buyers being priced out of the market.

This brings back memories of Alan Greenspan's testimony before Congress where he would deny the existence of a national housing bubble, instead citing areas of "froth". That is, many tiny bubbles, in places like Boston, San Diego, Florida, Los Angeles, San Diego, Phoenix, Las Vegas and a few other major metropolitan areas.

Next week the Senate Banking Committee will take up the much more interesting topic of wealth creation technology - Calculated Risk: Assessing Nontraditional Mortgage Products.

The Malthusian Institute on Preparedness

This story from The Onion paints a frightening picture of the nation's preparedness for various end-of-the-world scenarios, which actually seem more likely with each passing day (depending on who you talk to).

Over 87 percent of Americans are unprepared to protect themselves from even the most basic world-ending scenarios, according to a study released Monday by the nonpartisan doomsday think-tank The Malthusian Institute.

Despite "more than ample warning" for the most likely means of worldwide destruction, less than one million American households have taken even the simplest precautions against nuclear shockwaves, asteroid impact, or a host of angels bearing swords of fire, the study concluded.

"Our survey of households in seven U. S. regions demonstrated that few citizens have bothered to equip themselves with fireproof suits and extinguishers to deal with volcanic upheaval, solar flares, or the Lord's purifying flame," Malthusian Institute director James Olheiser said. "Almost no one is prepared for a sudden shift in the Earth's polarity or the eating of the Sun and moon by evil wolves Skol and Hati during Ragnarok."

It shouldn't be surprising to learn that Wikipedia has entries for Skoll, Hati, and Ragnarok. The editors at The Onion probably meant Skoll and not Skol, the fight song of the Minnesota Vikings of the National Football League. Oops, this is starting to look like a paragraph at Wikipedia.