Mish's Global Economic Trend Analysis |
- RoboTrucks from Mercedes-Benz to Hit US Highways Within 10 Years; Mish Supply Chain Proposal
- New Home Prices: Are they Really Up this Year? Homebuilder Freebies: Reduced Closing Costs, Free Pools; Housing Has Peaked This Cycle
- IMF Warns of Financial Crisis, Admits Low Interest Rates Spurred Asset Speculation Not Investment
| RoboTrucks from Mercedes-Benz to Hit US Highways Within 10 Years; Mish Supply Chain Proposal Posted: 08 Oct 2014 06:55 PM PDT Mercedes-Benz has announced "Future Truck 2025″, a self-driving truck that it expects to be on the streets by that date. I expect sooner and will give my reasons in just a bit. First, please consider Mercedes Is Making a Self-Driving Semi to Change the Future of Shipping by Wired.Com. The latest truck concept from Mercedes-Benz doesn't look like anything crazy. Its design is a bit unusual, and it's loaded up with LEDs instead of headlights and cameras instead of side mirrors. But those modest tweaks to conventional design hide the fact that this is a serious bid to revolutionize the trucking industry. That's because the "Future Truck 2025″ drives itself. And while it's a prototype, Mercedes is serious about spending the next decade getting it—and us—ready for commercial use.Time Flies Faster Than Expected Mercedes-Benz calls the project "Future Truck 2025″. I confidently predict much sooner. Wired states "Autonomous driving is nothing new for trucks in agricultural and military applications, and should be available for passenger cars by 2020." The primary benefit to autonomous cars is elimination of the taxi driver. Otherwise, who wants to pay the cost of all the radar, mirrors, etc.? I am sure such costs will come down over time because price of technology is the one thing the Fed and governments have the least influence over. But where's the payback? The primary payback is cost elimination. And where is that? It's in delivery. Delivery of pizzas, transporting people, and transporting trucks. When it comes to pizza, costs dictate that mini-drone helicopters will win out over autonomous cars. For delivering people to destinations, autonomous taxis are in order. But the biggest cost efficiency is in trucks. Truck drivers make $40,000 to $80,000 a year. You can buy a lot of radar, cameras, and other driving technology for that price. Wired says the driver will get the truck onto the highway , then at 50 mph, activate the "Highway Pilot" and relax. I suggest not quite. Mish Supply Chain Proposal
The advantages of the above scheme are obvious as well as bullet-proof. All the miles truck drivers drive on expressways will soon vanish. Truck hubs will form near every major city and every major roadway. At most, trucking jobs will consist of driving trucks from hubs to final destinations and from final destinations back to the hubs. Eventually, but it may take a lot more time, technology will be good enough to eliminate drivers altogether. Regardless, truck driver jobs, as we know them now, will soon vanish . For pizza delivery and bank services, please consider What Will Your Bank Look Like 5 Years From Now? How Will Pizzas Be Delivered? Do You Tip a Drone? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Posted: 08 Oct 2014 01:30 PM PDT Thanks to ultra-low interest rates, massive all-cash purchases by private equity funds, and Fed-sponsored financial speculation, home prices are now back in bubble territory. Yet, builders that had an easy time of things for a few years now offer Freebies as U.S. Housing Markets Cool. Joseph Beben wasn't in the market for a house until he heard about a year-old community in suburban Phoenix where 10 homebuilders are offering buyers incentives such as swimming pools, built-in barbecues and subsidized mortgage rates.Not a Business Decision at All It may, or may not turn out to be a good speculative move, but Beben is seriously misguided if he equates personal decisions as "business decisions" unless asset speculation is his business (which it clearly isn't). Major City Sales Slowdown "Phoenix is very slow, Sacramento is spotty," said John Burns, a housing consultant based in Irvine, California. "The investors came in and pushed prices a little too high. And then FHA rocked the new-home market really hard."FHA Reduced Limits In January, the federal government, which is reducing its share of the mortgage market to lure back private capital, cut FHA loan sizes in 652 high-cost U.S. counties. In Phoenix, the limit dropped to $271,050 -- about $24,000 below the median prices of a new home -- from the previous maximum of $346,250. The limit shrunk by 28 percent in the Las Vegas region, and 18 percent in the Sacramento area.Housing Has Peaked This Cycle Supposedly, prices are up 4.4% from a year ago in Phoenix and over 6% nationally. I have a question: Does that include reduced closing costs, free barbecues, and free $20,000 pools? Downturns start with rising building inventory, competition, and freebies that do not immediately show up as price reductions. I think this rebound in new home prices has peaked nationally even if prices purportedly show nominal price increases for a while. In Beben's case, he got $10,000 off on closing costs and $22,000 towards a swimming pool pool according to Re/Max Solutions agent Tim Ehlen. That's $32,000 off a home that would have sold last year for $364,000, a decline of 8.8%. Taking freebees into consideration, it's safe to conclude new home prices in Phoenix are not up 4.4% on the year as reported. I suggest prices are likely down somewhere between 5% and 10%. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| IMF Warns of Financial Crisis, Admits Low Interest Rates Spurred Asset Speculation Not Investment Posted: 08 Oct 2014 12:19 PM PDT The IMF finally had a "duh" moment in what should have been obvious years ago. The IMF finally realizes that almost zero borrowing costs has encouraged speculation rather than a hoped-for pick up in investment. Now, the IMF warns period of ultra-low interest rates poses fresh financial crisis threat. The Washington-based IMF said that more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.IMF Wants More Regulation Amusingly, the IMF concludes "The best way to safeguard financial stability and improve the balance between economic and financial risk taking is to put in place policies that enhance the transmission of monetary policy to the real economy – thus promoting economic risk taking – and address financial excesses through well-designed macroprudential measures." The IMF wants tougher supervision of banks, requirements on them to hold more capital, and curbs on lending to specific sectors such as housing. Curiously, low interest rates were the problem but the solution is low interest rates and more macro controls including "policies that enhance the transmission of monetary policy to the real economy – thus promoting economic risk taking". It's a financial axiom that central banks can make money available and set the rates, but they cannot dictate were it goes. Yet, the IMF just now seems to be figuring that out. As for central bank sponsored "risk taking", haven't we seen enough already? Where the Money Went
Where the Money Didn't Go
What Now? Not only was the IMF late in figuring out central banks did little but encourage asset speculation, it remains clueless in regards to what to do about it. Curiously, the IMF argues for raising the VAT in Europe which will take money out of the hands of people who will spend it. The IMF also has concerns about price deflation when the whole world could use lower prices. The IMF still has not figured out it is asset deflation and speculative loans made on assets that is the problem, not price deflation on consumer goods. To get money to flow where it perceives best, the IMF wants more regulation over what projects banks can or cannot lend to. Want efficient allocation of capital? Then how about trying a free market in goods and services with a free market in interest rates as well? Instead, the IMF proposes more central intervention as the solution. The IMF's proposal is economic stupidity at its finest. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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