Tag Archives: Brent crude oil prices

This Is Where America’s Runaway Inflation Is Hiding

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The Census Bureau released its quarterly update on residential vacancies and home ownership for Q1 which is closely watched for its update of how many Americans own versus rent. It shows that following a modest pickup in the home ownership rate in the prior two quarters, US homeowners once again posted a substantial decline, sliding from 63.8% to 63.5%, and just 0.1% higher than the 50 year low reported in Q2 2015.

And perhaps logically, while home ownership continues to stagnate, the number of renters has continued to soar. In fact, in the first quarter, the number of renter occupied houses rose by precisely double the amount, or 360,000, as the number of owner occupied houses, which was a modest increase of 180,000. This brings the total number of renter houses to 42.85 million while the number of homeowners is virtually unchanged at 74.66 million.

A stark representation of the divergence between renters and owners can be seen in the chart below. It shows that over the past decade, virtually all the housing growth has come thanks to renters while the number of homeowners hasn’t budged even a fraction and has in fact declined in absolute numbers. What is obvious is that around the time the housing bubble burst, many Americans appear to have lost faith in home ownership and decided to become renters instead.

An immediate consequence of the above is that as demand for rental units has soared, so have median asking rents, and sure enough, according to Census, in Q1  the median asking rent at the national level soared to an all time high $870.

Which brings us to the one chart showing where the “missing” runaway inflation in the US is hiding: if one shows the annual increase in asking rents, what one gets is the following stunning chart which shows that while rent inflation had been roughly in the 1-2% corridor for two decades, starting in 2013 something snapped, and rent inflation for some 43 million Americans has exploded and is currently printing at a blended four quarter average rate of just over 8%, the highest on record, and 4 times higher than Yellen’s inflationary target.

So the next time Janet Yellen laments the collapse of inflation, feel free to show her this chart which even she can easily recreate using the government’s own data (the sad reality is that rents are rising even faster than what the government reports) at the following link.

Source: ZeroHedge

GUNDLACH: If oil goes to $40 a barrel something is ‘very, very wrong with the world’

Jeffrey Gundlach

Jeff Gundlach – bond trader

West Texas Intermediate crude oil is at a 6-year low of $43 a barrel. 

And back in December 2014, “Bond King” Jeff Gundlach had a serious warning for the world if oil prices got to $40 a barrel.

“I hope it does not go to $40,” Gundlach said in a presentation, “because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be — to put it bluntly — terrifying.”

Writing in The Telegraph last week, Ambrose Evans-Pritchard noted that with Brent crude oil prices — the international benchmark — below $50 a barrel, only Norway’s government is bringing in enough revenue to balance their budget this year. 

And so in addition to the potential global instability created by low oil prices, Gundlach added that, “If oil falls to around $40 a barrel then I think the yield on ten year Treasury note is going to 1%.” The 10-year note, for its part, closed near 2.14% on Tuesday. 

On December 9, 2014, WTI was trading near $65 a barrel and Gundlach said oil looked like it was going lower, quipping that oil would find a bottom when it starts going up. 

WTI eventually bottomed at $43 in mid-March and spend most all of the spring and early summer trading near $60. 

On Tuesday, WTI hit a fresh 6-year low, plunging more than 4% and trading below $43 a barrel. 

WTI

In the last month, crude and the entire commodity complex have rolled over again as the market battles oversupply and a Chinese economy that is slowing.

And all this as the Federal Reserve makes noise about raising interest rates, having some in the market asking if these external factors — what the Fed would call “exogenous” factors — will stop the Fed from changing its interest rate policy for the first time in over almost 7 years. 

In an afternoon email, Russ Certo, a rate strategist at Brean Capital, highlighted Gundlach’s comments and said that the linkages between the run-up, and now collapse, in commodity prices since the financial crisis have made, quite simply, for an extremely complex market environment right now. 

“There is a global de-leveraging occurring in front of our eyes,” Certo wrote. “And, I suppose, the smart folks will determine the exact causes and translate what that means for FUTURE investment thesis. Today it may not matter other than accurately anticipating a myriad of global price movements in relation to each other.”

CRB commodity price index