Worried About Inflation? At Least It’s Cheaper to Drown Your Sorrows

CNBC reports that alcohol sales and prices are down this year.

Some key points about this past year’s champagne business from the video:

  1. Sales to the UK fell 33% and sales to the US fell 43%.
  2. Imports into the US fell to 1998 levels.

In related news, Craig Wolf, President and CEO of the Wine & Spirits Wholesalers of America (WSWA), tells attendees at the first State of the Alcohol Industry conference that the industry is not recession proof.

UK Housing Prices Up 9% from Low But Remain 12% Below 2007 Peak

Housing prices in the United Kingdom continue their recovery with a 0.5% monthly rise in November and 2.7% year-over-year increase. Overall, UK housing prices are now up 9% from the lows set earlier this year, but 12% below the 2007 peak. UK housing prices have fared better than those in the U.S.

Recall that housing prices in London already set fresh all-time highs this year.

(See Marketwatch article for more details)

Great news for deflationists: health care costs continue to skyrocket

This story will come as a surprise to no one except maybe the increasingly small handful of pundits who lie awake at night worrying about the perils of deflation:

Last month was open-enrollment season, and my wife and I got an unpleasant surprise. For 2010 we’re looking at an annual health-insurance premium that’s $1,600 higher than it is now, plus higher deductibles. Instead of flat co-pays, we’ll pay co-insurance, a share of the total costs. And this is with a plan provided by a Fortune 500 company that still spends big bucks on relatively generous benefits.

You may well be in the same boat. According to human-resources consultant Hewitt Associates, the average large-company employee will pay $4,023 in premiums and out-of-pocket costs next year — 10% more than in 2009 and more than three times the level in 2001.

Housing bears see signs of calamity in boring Case Shiller report

Yesterday’s release of the latest S&P/Case-Shiller Home Price Index showed that house prices are holding up reasonably well:

Data through October 2009, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the annual rate of decline of the 10-City and 20-City Composites improved compared to last month’s reading. This marks approximately nine months of improved readings in these statistics, beginning in early 2009.

On a non-adjusted basis housing prices were flat. On a seasonally adjusted basis, which is probably the better measure, home prices increased by 0.4%. Some large post-bubble cities continued to show month-over-month home price increases, even on a non-adjusted basis:

San Francisco has reported seven consecutive months of positive returns, San Diego has reported six and Los Angeles and Phoenix are close behind with five.

In short, the latest Case-Shiller report shows that after a big run-up over the last five months, housing prices are now essentially flat. They are rising a bit in some markets and falling a bit in others, but this report was mostly a yawner, showing neither a big decline nor a big increase in prices nationally.

But that didn’t stop various commentators from trying to put a strong negative spin on the numbers. At Seeking Alpha, Cliff Wachtel saw evidence of a brewing calamity:  “Latest Case-Shiller Housing Report and its Ramifications: Seeds of a 2010 Crisis?”

Wachtel’s Seeking Alpha colleague Markos Kaminis had misgivings too: “S&P Case Shiller’s Home Price Index Concerns Me.”

At the Seattle Post-Intelligencer, Gerry Spratt wrote, “Report: Housing prices up, but for how long?” I wonder if Ms. Spratt was equally skeptical of housing price increases when prices were soaring a few years ago.

The Wall Street Journal’s Real Time Economics ran this re-assuring headline in response to the Case-Shiller report: “Economists React: ‘Prices Have Further to Fall.'”

At Public Radio’s Marketplace, the headline-writer managed to write this headline: “Signs of instability in housing prices.” Um, prices rose 0.0 percent. Instability?!?

When I wrote a post last month arguing that housing prices had bottomed, the response I received from our readers was uniformly negative. Clearly a large swathe of the public (including the Inflation Watch readership) does not think the recovery in housing prices is for real. Since markets often surprise the majority of people, the prevalence of bearish sentiment makes me more bullish about the housing recovery.

The last time I saw sentiment on housing prices running so strongly in one direction was 2004-05, when almost everyone seemed convinced that prices in bubble markets would continue to rise at 10-15 percent per year in perpetuity.

Chicago drivers will pay more to park

WLS-TV in Chicago reports that the cost of parking on the streets of Chicago is going to increase in 2010:

In the span of just one year, the price to park at a downtown meter will have gone up more than 41 percent…

Beginning January 4th, rates at meters in the Loop will go up 75 cents, to $4.25 for an hour.

If you’re outside the Loop but park between North Avenue, Halsted and Roosevelt Road, you’ll pay an extra 50 cents, bringing the hourly price to park to $2.50.

Rates throughout the rest of the city will increase a quarter.

The Mayor and City Council agreed to the annual rate hikes when they signed over control of the parking meters to a private firm in exchange for just under $1.2 billion in upfront cash.

Fidelity Investments urges its investors to protect against inflation

Fidelity Investments is encouraging its retail investors to position their portfolios for inflation. Received via e-mail this morning:

Inflation is important to every investor because it erodes the purchasing power of your savings. While we’re not experiencing rising inflation today, many economists see it as a very real threat in the future. Now may be the time to adjust your portfolio to help protect yourself from its effects, before it arrives.

See how inflation affects you

One way to help lessen the impact of inflation is by investing in asset categories that historically have held up better in times of high or rising inflation — including commodities, real estate, and inflation-protected debt securities. Fidelity offers several funds you may want to consider:

  • Fidelity Inflation-Protected Bond Fund1 (FINPX) – Seeks a total return that exceeds the rate of inflation over the long term by investing in inflation-protected debt securities of all types, including Treasury Inflation-Protected Securities.
  • Fidelity Strategic Real Return Fund2 (FSRRX) – Seeks real return consistent with risk by investing in a mix of inflation-protected debt securities, floating-rate loans, commodity-linked notes and related investments, REITs and real estate related investments.
  • Fidelity Global Commodity Stock Fund3 (FFGCX) – Seeks capital appreciation by investing in stocks of commodity-producing companies across the energy, metals, and agriculture sectors.

Diversify your portfolio

Now is a good time to evaluate your portfolio to see if you have the appropriate investments to help you deal with the threat of inflation. Fidelity can help. Go to Fidelity.com/fightinflation. Or call 800.FIDELITY.

Exit question: Does this mean retail investors will give “reflation” investments a boost or is this e-mail a sign of a top in those investments?

U.S. Imposes Anti-Dumping Duties on Chinese Steel Grating

The Commerce Department’s International Trade Association issued a preliminary finding determining that Chinese companies are dumping steel grating into the U.S. market. Four companies will be charged with an anti-dumping duty of 14.36% while all other Chinese producers/exporters of steel grating will be charged 145.18%.

The U.S. imported $90.7M of steel grating in 2008. Alabama Metal Industries Corp (AL) and Fisher & Ludlow petitioned in this case.

Commerce reports the products covered under this preliminary finding as follows:

“…certain steel grating, consisting of two or more pieces of steel, including load-bearing pieces and cross pieces, joined by any assembly process, regardless of: (1) size or shape; (2) method of manufacture; (3) metallurgy (carbon, alloy, or stainless); (4) the profile of the bars; and (5) whether or not they are galvanized, painted, coated, clad or plated.”