|
|
|||
|
|||
|
|
Bernanke: U.S. Could Handle Dollar Decline MoneyNews
(Headlines - scroll down for full stories) 1. Bernanke: U.S. Could Handle Dollar Decline Fed chief Ben Bernanke has declared that he does not foresee a massive drop in the dollar as a result of the unprecedented U.S. trade deficit. But he also said that should one occur, he is confident the economy would simply absorb the impact and continue in stride. "Although U.S. trade deficits cannot continue to widen forever, these deficits need not engender a precipitous decline in the dollar," Bernanke wrote in a letter to a member of the House of Representatives, according to Reuters News.
Story Continues Below
"Nor should such a decline, were it to occur, necessarily disrupt financial markets, production or employment." The letter was Bernanke's response to questions from a February House Financial Services Committee hearing on monetary policy. Bernanke's opinion is in stark contrast to that of many analysts who have insisted that the ever-widening trade gap will likely lead to a harmful drop in the U.S. currency. "The shortfall in the U.S. current account, the broadest measure of the nation's overseas trade, widened to a record $804.9 billion last year, or 6.4% of U.S. gross domestic product," according to Reuters. Though Bernanke is less concerned about damage to the dollar, his letter did acknowledge that "the possibility of a future disruptive correction of the U.S. trade deficit cannot be ruled out" and that continued implementation of "policies designed to maintain the stability of the financial system and the flexibility and resilience of the economy" would be the best safeguard against any potential threats. The Fed chairman also reiterated that current U.S. policy dictates that government must allow markets themselves to establish the value of the dollar, with intervention coming only if absolutely necessary to "counter disorderly market conditions." According to one report, Bernanke said that short-term interest rates might need to be higher than usual if long-dated rates reflect small premiums. He also reportedly claimed that a flattened yield curve did not necessarily indicate an imminent recession in the United States but could just as easily be blamed on other factors, such as a lack of global savings. While the comments were slightly positive for the dollar, they were generally balanced. Much like his predecessor Alan Greenspan, Bernanke kept his comments relatively vague and noncommittal, but the letter was generally optimistic in tone. Editor's Note:
2.Mortgage Applications Tumble ... Again Mortgage applications fell 1.6% for the week ending March 17 - another sign of a cooling housing market. This was the largest decline in five weeks, according to Economy.com. Applications to purchase homes accounted for the majority of the decrease in demand, plunging 2.3%. Applications to refinance homes dropped 0.6%. A year ago, the number of mortgage applications was 14% higher than it is now. Purchases are down 12%, and refinances are down 17%. The Federal Reserve's 14 consecutive interest rate increases have taken the wind out of the sails of the housing market - and No. 15 is likely coming next week. During the near-record-low rate period, the housing market boomed. But now rising rates are diminishing buyer demand, threatening a bust. One-year adjustable-rate mortgages (ARMs) are up a whopping 156 basis points over the past year. The Fed is responsible for raising short-term rates, which are closely linked to ARMs. The 30-year fixed mortgage, in contrast, is up only 36 basis points over the past year. As home prices moved up over the past few years, more and more homebuyers chose the lower rate of the ARM so they could afford more home for the same money. Now, as adjustable rates climb, those homeowners are left holding the proverbial bag. As MoneyNews reported last week, nearly half of the adjustable-rate mortgagees could be in for a big shock as their payments increase, according to the Mortgage Bankers Association. Tomorrow, the report on existing home sales will provide another clue as to just how bad the housing crash will be. Editor's Note:
3. Howard Ruff Hits Airwaves Thursday For those of you who remember "Ruff Times" and the best-selling author and financial adviser Howard Ruff, there is some good news - he's back! One of America's most famous contrarian investment gurus, Ruff will be featured on George Noury's "Coast-to-Coast AM" from 10 p.m. to 1 a.m. PST Thursday night, March 23. The show's massive listening audience numbers in the millions, and those tuning in will no doubt be eager to hear what Ruff has to say. For years, the "Ruff Times" creator has been one of the most interesting and sought-after media guests in America. Among the various subjects he will discuss during his "Coast to Coast" interview are the bursting of the real-estate and housing-price bubbles, as well as the spectacular bull markets in gold and silver. This is a special event - so don't miss this informative interview. Check your local listings for more information.
4. Construction Costs Soar It's been a rocky start to the 2006 housing market, and while the latest PPI numbers might suggest a break in the clouds for construction costs, that isn't necessarily the case. "Construction materials costs are outpacing overall consumer and producer prices by a wide margin," said Ken Simonson, chief economist for The Associated General Contractors of America (AGC). "(Tuesday) the government reported that the producer price index (PPI) plunged 1.4% in February but the PPI for construction materials and components rose 0.3%."
The AGC has issued an updated analysis of construction materials costs in the latest version of its AGC Construction Inflation Alert, which shows that with a generally strong outlook for construction activity, materials prices are likely to rise faster than the overall rate of consumer or producer prices again in 2006. And that could make the price of building a home or a piece of commercial property significantly more expensive. In the report, Simonson says, "the rate of increase for construction materials and components prices could be closer to the 10.1% rate of 2004 than the 6.1% rate of 2005. Once again, however, prices are likely to vary greatly by type of material and project." Anticipated higher energy costs also factor into the equation. "Oil and natural gas prices have fallen sharply from their post-hurricane highs," Simonson noted. "However, production from the Gulf of Mexico is still down by more than 15%, keeping supplies tight. As of mid-March, the national average retail price of diesel fuel was around $2.55 per gallon, 60 cents below the record set after Rita but 35 cents (16%) higher than a year ago." "It appears diesel prices for 2006 as a whole will be up 10-30% over 2005, with wide month-to-month variation," said Simonson. Rising construction costs mean one of two things: Homebuyers need to prepare to pay higher prices for new construction, or homebuilders - who can't pass on higher prices to buyers because of slowing demand - will see a squeeze in profits. Our advice: If you have any homebuilder stocks in your portfolio - Lennar, Toll Brothers, Centex - it's probably time to sell.
5. Bear Stearns: 'Inoculate Portfolio' Against Bird Flu Bear Stearns yesterday advised investors to get rid of airline and retail stocks to guard their portfolio against the Avian flu. The investment bank told investors that they should favor blue-chip utilities instead. The bank warned that a worst-case scenario could send the stock market lower by 46% over the course of a year. The Telegraph quoted a Bear Stearns report as saying, "We believe the imminent arrival of bird flu in the United States will bring this potentially devastating disease back into the limelight. We believe investors should consider a basket of stocks to inoculate their portfolio from this source of risk," it said. The bank has "published a list of 40 worldwide stocks with weightings according to how they fared in Asia's SARS epidemic in 2003," says the Telegraph. Among its recommendations ... Buy:
Sell (or sell short):
Bear Stearns' report is the first of its kind for advising investors how to protect their wealth from the bird flu. Though the bird flu has not yet reached the U.S., scientists believe that the disease will enter first through Alaska. Human contractions of the bird flu have occurred in Cambodia, China, Indonesia, Thailand, Vietnam, Azerbaijan, Turkey and Iraq, according to the World Health Organization. Though humans have contracted and died from the disease, they have done so through contact with birds. The avian flu has not yet mutated into a human-to-human disease. If that happens, as the Bear Stearns report anticipates, it could result in a worldwide pandemic the likes of which has not been seen since the Spanish flu outbreak in 1918. Editor's Note:
Editor's Notes:
|
|
|||||||||||||||||||||||||
Print Page 
Forward Page 
|
| All Rights Reserved © 2008 NewsMax.Com |