3 replies to this topic

[Rogerdodger]

This statement was made by a letter writer in the New Market Analysis Area.
Do you agree?

The decline in stocks is likely to lead to economic slowing and this will reduce demand for most commodities (copper, steel, aluminum, oil etc…).

I would like to change the statement just a bit in my question.

Rather than considering the effect of the decline in stocks, I would like your opinion on the mortgage fiasco's effect.

Thanks
RD

Edited by Rogerdodger, 18 August 2007 - 11:27 AM.

[dasein]

it wont let me vote since my answer to question 3 is both, so I cant pick one of the 3 available.... yes, it will slow the economy, since we have a credit driven economy, and yes it will depress commodities for a while - later there will be a disconnect, as tangible assets (grain, water) move up and financial assets do not, well that has been my line, but when is the question I cant answer. klh

Edited by dasein, 19 August 2007 - 03:27 AM.

[Rogerdodger]

it wont let me vote since my answer to question 3 is both, so I cant pick one of the 3 available....

yes, it will slow the economy, since we have a credit driven economy, and yes it will depress commodities for a while - later there will be a disconnect, as tangible assets (grain, water) move up and financial assets do not, well that has been my line, but when is the question I cant answer.

klh

Good observation, Karen.
I had trouble getting a handle on it myself.
I guess that's why I wanted to see a poll.
I guess we will see opposing forces at work, as usual.
A slowing economy would have a deflationary influence, especially as we could see less demand for raw materials.

But it seems to me that inflation and lower interest rates might be the FED's target since lower rates may help some folks to refinance or even purchase new.
And inflation would help the dollar price of homes stay up.
So the $500,000 home of today would be a bargain in 5 to 10 years... if they can hold it all together.

So maybe the building material copper, would go down while the inflation hedge gold, goes up?

Edited by Rogerdodger, 19 August 2007 - 11:28 AM.

[OEXCHAOS]

I would have to say that we've already seen 10-30% deflation in home prices. The problem (?) is that it hasn't quite trickled through. There's still an expectation of appreciation. So, many homes worth, say $160K (there's a real bid there) are still on the market at $200K, or $195K after being on the market for 12 months. I'm guessing that if China's efforts at slowing bite, we'll see dramatically lower commodity prices. The trick is to get there without massive unemployment which would be a disaster in the current environment. Mark