What deflation? Rising prices and oversupply(in other words less demand)

[tsetsefly]

Two headlines that caught my attention today:

http://money.cnn.com/2010/09/23/news...ices/index.htm

What deflation? Prices are rising!
NEW YORK (CNNMoney.com) -- Deflation might be the economic buzzword right now, yet prices seem to be going up on everything from a cup of coffee to Dallas Cowboys tickets.
Nationwide, prices rose at a sluggish 1.1% pace over the last year, and economists say falling prices could be a concern going forward. But while deflation fears make headlines, prices for all sorts of consumer staples, luxury items and leisure activities are on the rise.

THis second one I find a bit more troubling, in the sense that you would think companies adjusted their production based on projected demand but apparently they where off...

http://money.cnn.com/2010/09/23/tech...ices/index.htm

NEW YORK (CNNMoney.com) -- An historically large oversupply of LCD TV panels is causing television prices to fall right in time for the holiday shopping season.
By the end of this month, LCD TV prices will be about 5% lower than they were at the same time last year, according research firm DisplaySearch. But a tailspin will start in October: In the last three months of the year, the firm forecasts that prices will keep falling until they bottom out at 12% below 2009 levels.

[GRG55]

Re: What deflation? Rising prices and oversupply(in other words less demand)

Two headlines that caught my attention today:

http://money.cnn.com/2010/09/23/news...ices/index.htm



THis second one I find a bit more troubling, in the sense that you would think companies adjusted their production based on projected demand but apparently they where off...

http://money.cnn.com/2010/09/23/tech...ices/index.htm

Everyone who makes LCD televisions has too much capacity. China is the low cost producer. The low cost producer will drive down the price to keep their capacity full and try to force the highest cost producers to permanently shutter capacity instead. Until the higher cost producers throw in towel, or manage to exercise enough political clout to protect their market share through tariffs and other trade barriers, they will fight back. Result: Lots of inventory build cycles, and falling prices to periodically clear it.

The global auto manufacturing industry is a good case study. For decades governments everywhere viewed a domestic auto industry as a national economic imperative and used trade barriers, subsidies and direct ownership stakes as a means to nurture their domestic companies. This promoted a chronic, decades long overcapacity in the global car industry since the high cost producers were never allowed to go out of business. The fairly regular appearance of "cash back" rebates for the purchase of a new car was a telling indicator of the inventory build and blowout cycles in North America. The height of this idiocy came when one of the most inefficient companies in the entire world, Chrysler, was bailed out. The global car industry still has too much capacity compared to market size. Cash for Clunkers is unlikely to be the last "cash back" rebate program we see...only difference is that it's now the taxpayer shareholders in GM and Chrysler funding it. Maybe the global LCD television industry will model itself after that...who knows...

People think the Yuan is a manipulated currency and "undervalued". The real threat from China is not the bloody currency exchange rate...it is that the Chinese state is going to subsidize each and every economic sector it decides it wants to dominate globally, and I defy any company in the USA or Europe to compete against that straight up. Trade wars are coming, and even a higher Yuan exchange rate isn't going to stop them...

[jpatter666]

Re: What deflation? Rising prices and oversupply(in other words less demand)

They blew it on the World Cup -- thought that would drive sales and it didn't.

[cjppjc]

Re: What deflation? Rising prices and oversupply(in other words less demand)

Black Friday will be a big tv day.

[doom&gloom]

Re: What deflation? Rising prices and oversupply(in other words less demand)

Black Friday will be a big tv day.

in "living color" no less...

[Munger]

Re: What deflation? Rising prices and oversupply(in other words less demand)

People think the Yuan is a manipulated currency and "undervalued". The real threat from China is not the bloody currency exchange rate...it is that the Chinese state is going to subsidize each and every economic sector it decides it wants to dominate globally, and I defy any company in the USA or Europe to compete against that straight up. Trade wars are coming, and even a higher Yuan exchange rate isn't going to stop them...

A subsidized currency is simply a subsidy to all Chinese export sectors.

[thriftyandboringinohio]

Re: What deflation? Rising prices and oversupply(in other words less demand)

A subsidized currency is simply a subsidy to all Chinese export sectors.

Yes, a blanket subsidy to all chineses industries layered on top of any specific subsidy for any particular industry.

One could argue we've been in a trade war with China for several years but thus far they are the only ones actively fighting for their side.

[GRG55]

Re: What deflation? Rising prices and oversupply(in other words less demand)

in "living color" no less...

and maybe 3D too?

[bill]

Re: What deflation? Rising prices and oversupply(in other words less demand)

Trade wars are coming, and even a higher Yuan exchange rate isn't going to stop them...

Its here ,,,are we next?
http://www.salon.com/technology/how_..._prius_hostage

Thursday, Sep 23, 2010 10:51 ET
China takes the Prius hostage

This is what a modern trade war looks like: Do what we say, or the hybrid car gets hurt

By Andrew Leonard

AP
A Prius hybrid vehicle in a showroom

Never mind all those panda-semen-extraction-gone-wrong conspiracy theories. If the New York Times' ace China correspondent Keith Bradsher is to be believed, China has has halted exports of rare earth elements to Japan, in protest of its neighbor's detention of a Chinese fishing boat captain.
A spokesman for China's Ministry of Foreign Trade and Economics is denying that any such trade embargo exists, but Bradsher's article makes a convincing case that some kind of message has come down from on high to restrict the flow of minerals. Regular readers of HTWW will understand the significance of the move. Rare earth elements play an extraordinarily important role in the high tech, clean energy economy -- as well as advanced military technology such as missile guidance systems.
The Prius, for example, depends heavily on the rare earth elements neodymium and lanthanum. Last year Reuters reported that each Prius motor "requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum." China controls 90 percent of the production and processing of neodymium.
Japan, Bradsher writes, is sensitive to blockades of key industrial resources, harking back to the U.S. oil embargo that played such a critical role in Japan's decision to attack Pearl Harbor. But the U.S. is also bound to pay close attention. At a time when the U.S. government is stepping up criticism of China for artificially depressing the value of the yuan, and concern about how the country may be flouting international trade rules to grab market share for its solar panel and windmill industries is growing, the indication that China is prepared to use its rare earth dominance as a diplomatic club is alarming. The panda is throwing its weight around.

[Fiat Currency]

Re: What deflation? Rising prices and oversupply(in other words less demand)

Forget trade wars ... this is the beginning of Economic/Currency warfare.

The Prius, for example, depends heavily on the rare earth elements neodymium and lanthanum. Last year Reuters reported that each Prius motor "requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum." China controls 90 percent of the production and processing of neodymium.

I guess we should have waited another year before selling the lanthanum.

It will be hard for many people to think of things like neodymium & lanthanum as currencies.

[bill]

Re: What deflation? Rising prices and oversupply(in other words less demand)

Forget trade wars ... this is the beginning of Economic/Currency warfare.

I guess we should have waited another year before selling the lanthanum.

It will be hard for many people to think of things like neodymium & lanthanum as currencies.

Started purchasing REE companies back in 2007.
Now terbium and dysprosium turning into a security concern.
http://www.raremetalblog.com/2010/09...-deposit-.html

September 2, 2010 (Source: Resource Investor) -- Executives of Ucore Rare Metals Inc. said Thursday that a team of scientists from the US Geological Survey had spent part of August studying the company’s Bokan Mountain heavy rare earth project site in southeast Alaska and is particularly interest in terbium and dysprosium deposits which are militarily important.

[flintlock]

Re: What deflation? Rising prices and oversupply(in other words less demand)

Side note, LED tv is the way to go if you can afford one. Unbelievable picture. My guess is we'll see those for around $1000 by Christmas.