Inflation Observations

[W2R]

Some expenditures, such as cable TV/internet, gasoline, and medical care, seem very hard hit, and over the past decade have increased faster than the overall CPI would suggest. Of course one could argue that we are getting higher value, too, as medical care improves and the average total downloads from the internet skyrocket.

The impact of increasing prices depends on one's individual situation in life. For example: older folks need more medical care than others, on average, so that particular soaring expense is very easily noticed by those of us who are older. The increase in medical expenditures for me has been staggering, and (knock on wood) so far I am healthier than many other 66-year-olds.

On the other hand, I don't happen to drink or smoke, so the rising costs of beer and cigarettes do not impact my budget at all. Reading on my Kindle has been much cheaper for me than buying paperback books was, ten years ago.

All in all, true inflation vs the CPI falls into the category of "Things I can do Nothing About". Worrying about this excessively would decrease my own overall level of joie de vivre. So, I just invest part of my portfolio in equities and try to use whatever income I have from a number of sources to enjoy my retirement as much as possible.

[rbmrtn]

Quote:

Originally Posted by NanoSour Definitely true about the cost of a quart of oil. However, I remember 20 years ago I religiously changed my oil every 3000 miles. In todays vehicles you can literally go 10,000 miles between oil changes. I know some will think this is crazy, but we have two 9 year old vehicles, each with 80K miles on them. Only change oil every 8-10K miles.

Engines and oil specification have changed a lot since 3K mile oil changes and straight weight oil with no additives.

Stop Changing Your Oil! - Edmunds.com

Get a used oil analysis done. It will help determine how your oil/engine are performing with your driving habits. Gas Engine

I do one year intervals on oil changes now.

[Chuckanut]

Quote:

Originally Posted by rbmrtn Engines and oil specification have changed a lot since 3K mile oil changes and straight weight oil with no additives. Stop Changing Your Oil! - Edmunds.com Get a used oil analysis done. It will help determine how your oil/engine are performing with your driving habits. Gas Engine I do one year intervals on oil changes now.

Good article. Thanks for posting the link.

My understanding is that most big rig trucks, aircraft, watercraft, etc. do maintenance based upon hours of operation, not mileage. This makes more sense to me. With modern computers I think this could be integrated into most card rather easily.

[38Chevy454]

Lot of good comments. I deliberately did not include oil as example, because we all know how much gas and other energy related items have gone up. My main observation was the oven cleaner really shocked me, nearly doubling in a few years time.

I do agree the gov't has vested interest to keep the official number low and make it seem better. I should have specified the core inflation rate that excludes energy and food, not total rate. Sure technology provides improvements and can offset some. It is the products we buy regularly that have the most impact on my life. So when I fill up with fuel, or buy groceries that is right now. Not down the road when I need a new big screen TV or new washing machine. A lower rate is beneficial to reduce SS and other increases in gov't spending. Like was said, it is fox watching the hen house.

I especially feel the price of motor oil, my motorhome takes 19 quarts per change ( and it is recommended to use synthetic!), my two diesel pickups are 11 or 12 qts each. Add in all of my other vehicles and older hot rods and I should be investing in oil company stocks

Am I suffering, as in not able to do the things I want? Not in the least, but it is costing me more to do the same things.

[brewer12345]

Quote:

Originally Posted by 38Chevy454 I do agree the gov't has vested interest to keep the official number low and make it seem better. I should have specified the core inflation rate that excludes energy and food, not total rate. Sure technology provides improvements and can offset some. It is the products we buy regularly that have the most impact on my life. So when I fill up with fuel, or buy groceries that is right now. Not down the road when I need a new big screen TV or new washing machine. A lower rate is beneficial to reduce SS and other increases in gov't spending. Like was said, it is fox watching the hen house.

You have no clue how these things work, do you?

I spent 5 years as a regulator, working for a semi-gubinmental organization. I worked cheek by jowl with regulators who were employees of the state and federal gubmints. There is enormous turnover in all of these organizations. Do you think all the people who worked in these agencies and then go elsewhere are sworn to silence? Ridiculous. Certain things become fairly common (almost public) knowledge, other things become an open secret among practitioners in a specific field. This is stuff that is supposedly top secret and not subject to discovery in lawsuits, etc. If there were a massive effort on the part of BLS economists and workers to fraudulently reduce reported CPI (insert image of evil gubmint bureaucrat here), do you really think it is even possible that this would not quickly become fairly common knowledge, at least among economists who traffic in this stuff?

If you really think that none of these people talk after they leave their agency, I would like to talk to you about some excellent real estate opportunities in Brooklyn, swampy sunny Florida, and the Moon (America's next frontier).

[Amethyst]

Could the oven cleaner be petroleum-based? (Our ovens are self-cleaning, so I have no bottle labels to check). So many household chemicals seem to be oil-based. With the emphasis on "greener" products, that may change, but it's hard to imagine a really effective oven cleaner that is also "green"!

W2R wisely observes that we can do nothing about inflation except hedge our investments the best we can. Still, something honest and stubborn in me rebels against "not seeing" things - e.g., pretending I don't notice I am paying the same $1.75 for a packet of maybe 12 zinnia seeds, that I paid a few years ago for a packet containing dozens of seeds. Or that ice cream containers not only have less ice cream, but were also deliberately redesigned to be proportional - and thus look similar - to the larger containers.

A.

Quote:

Originally Posted by 38Chevy454 Lot of good comments. I deliberately did not include oil as example, because we all know how much gas and other energy related items have gone up. My main observation was the oven cleaner really shocked me, nearly doubling in a few years time. .

[Independent]

Quote:

Originally Posted by scrabbler1 Besides the price rising on common items, don't forget how companies simply reduce the quantity of the item while keeping the price the same. One item wich has undergone not one but two downsizes in the last 3 years are Keebler cookies. The package used to be around a pound and contained 2 long rows of 15 cookies, or 30 in all. Then they repackaged it (along with all the "new and improved" on the labeling grrrrrrr) to 3 short rows with 9 cookies, or 27 in all. Then they shrunk the package again, reducing the quantity to 3 short rows of 8 cookies, or 24 in all. That's a 17% reduction from the 30 cookies per package only 3 years ago. It now costs over $5 per pound (gotta look for those unit pricing stickers) to buy these cookies, more than chopped meat! Even when they are on "sale" they still cost at least $4 per pound. I have switched to another brand which is not as good but keep an eye on significant sales for any brand.

This frustrates me, too. I recently opened a box of something (crackers?) and it didn't seem full. I dug the old box out of the recycle. Sure enough, the new box was 14oz, the old was 16ox, but the boxes were the same size. Arrgh.

But, note that the BLS watches package sizes, so at least my SS benefit adjusts for this.

Quote:

To take the most straightforward example of quality adjustment, which the CPI handles automatically, suppose the maker of a 1.5-ounce candy bar selling for 75 cents replaces it by the same brand of candy bar, still selling for 75 cents, but weighing only 1.0 ounce. If the shrunken size is ignored, it looks like the price hasn’t changed. The CPI, however, prices candy and most other food items on a per-ounce basis and would automatically record a 50-percent increase in the quality-adjusted price of the item,

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf

[38Chevy454]

Quote:

Originally Posted by brewer12345 You have no clue how these things work, do you? I spent 5 years as a regulator, working for a semi-gubinmental organization. I worked cheek by jowl with regulators who were employees of the state and federal gubmints. There is enormous turnover in all of these organizations. Do you think all the people who worked in these agencies and then go elsewhere are sworn to silence? Ridiculous. Certain things become fairly common (almost public) knowledge, other things become an open secret among practitioners in a specific field. This is stuff that is supposedly top secret and not subject to discovery in lawsuits, etc. If there were a massive effort on the part of BLS economists and workers to fraudulently reduce reported CPI (insert image of evil gubmint bureaucrat here), do you really think it is even possible that this would not quickly become fairly common knowledge, at least among economists who traffic in this stuff? If you really think that none of these people talk after they leave their agency, I would like to talk to you about some excellent real estate opportunities in Brooklyn, swampy sunny Florida, and the Moon (America's next frontier).

No, I do believe that gov't has interest in keeping the inflation rate at a lower level. It is not a secret closed group of people in some closed gov't agency. Gov't does have an ability to hear what it wants, or stated another way, the people reporting do have bias in coming up with the answer that top level administrators want to hear. I will not say the gov't is conspiracy to control everything. Just that as it is getting bigger and has greater interest in keeping the money where it has the best benefit for the gov't itself. Gov't (all levels: fed, state, local) makes the laws that we all have to adhere to. Gov't can also make policy and laws that have benefit to gov't.

It is not my tin foil hat, or me being a conspiracy nut. It is based on my observations. I also work at my job that is paid nearly 100% on gov't funding, so I see how policy and laws can have a drastic effect on the outcome. I have to go to work to do the Top Secret stuff

Back to my original post, I only was making an observation that the price of many items has gone up considerably more than the inflation rate. I was not inferring gov't conspiracy to control prices

I have no desire to buy real estate more than my current house. Did the rental property thing in the past, decided it is not my preference for this point in my life.

[38Chevy454]

Quote:

Originally Posted by Amethyst Could the oven cleaner be petroleum-based? (Our ovens are self-cleaning, so I have no bottle labels to check). So many household chemicals seem to be oil-based. With the emphasis on "greener" products, that may change, but it's hard to imagine a really effective oven cleaner that is also "green"! W2R wisely observes that we can do nothing about inflation except hedge our investments the best we can. Still, something honest and stubborn in me rebels against "not seeing" things - e.g., pretending I don't notice I am paying the same $1.75 for a packet of maybe 12 zinnia seeds, that I paid a few years ago for a packet containing dozens of seeds. Or that ice cream containers not only have less ice cream, but were also deliberately redesigned to be proportional - and thus look similar - to the larger containers. A.

Oven cleaner is sodium hydroxide, or the more common name many know it by is lye. To my knowledge this is not a by-product or produced from oil-based raw materials.

The less product, or in smaller packaging is very frustrating, as several have pointed out. I like the term used earlier calling it stealth inflation. You do have to look at the unit cost.

[longranger]

Almost anything related to the government immediately puts me in a totally cynical mood. On almost any issue or parameter you can imagine the data is skewed and massaged to create the impressions our politicians want. Why should government generated CPI data be any different?

[Animorph]

I've been using a budget based on my 2004 expenses and increased by CPI (the Social Security version) each year, except I skipped the 2009 5.8% adjustment. So roughly 10 years. I've had no problems staying within the budget, and it seems more generous now than it did in 2004.

Even the car oil thing works out fine. Sure the price may have gone up, but I hardly use it any more. The newer cars just don't burn oil like they used to.

[brewer12345]

Quote:

Originally Posted by 38Chevy454 Oven cleaner is sodium hydroxide, or the more common name many know it by is lye. To my knowledge this is not a by-product or produced from oil-based raw materials.

I believe this is produced by a very simple process (take a look at OLN's chlor alkali business, as this is central to their business). The biggest drivers to cost are electricity and transportation, both of which would be tied to oil and other forms of energy.

[aja8888]

Quote:

Originally Posted by 38Chevy454 The less product, or in smaller packaging is very frustrating, as several have pointed out. I like the term used earlier calling it stealth inflation. You do have to look at the unit cost.

You can buy bulk motor oil in 55-gallon drum size (about $2550.00 for Mobil1 synthetic):

Amazon.com: Mobil 1 98E682 5W-30 Synthetic Motor Oil - 55 Gallon Drum: Automotive

Seems like it is no deal, however.

[David1961]

I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

[youbet]

Quote:

Originally Posted by David1961 I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

Most restaurants have relatively low profit margins. We see restaurants come and go around here all the time. They charge what customers will bear and still be customers. There is lots of competition among restaurants and, obviously, if they become too expensive folks just eat at home.

I think it's expensive to rent/own the building, buy and prepare the food and pay the help. Unless I had some gimmick or special differentiating product, the restaurant business isn't one I'd want to be in.

I agree though, if you isolate the price of a glass of soft drink vs the cost, the profit margin is probably quite high.

[target2019]

Quote:

Originally Posted by David1961 I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

I purchased a Subway sandwich for $5, and skipped the meal deal. The soda and bag of air would have increased my cost by 50%. I think there was not much profit for Subway at this part of the sales process. The server gave me a large wad of napkins, and I was living large courtesy of megacorp.

[Walt34]

Quote:

Originally Posted by David1961 I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

Last time out we noticed the price of a glass of iced tea was $2.25, and it wasn't even a high-end place. I long ago stopped ordering anything with alcohol in it at restaurants but this makes me want to stick to water.

Eventually they're probably start charging for that. If they do that's just gonna make me mad and I won't go there at all.

And yes I know that the restaurant business is highly competitive but there has to be a reasonable relationship between the prices charged and the value received.

[Hamlet]

How long has McDonald's McChicken sandwitch been a dollar?

I've been eating those things at the same price for like 12 years now. They've raised the double cheeseburger to a crazy $1.50, but that McChicken keeps chugging along at a buck.

People think inflation is overstated for the same reason they don't realize how much they actually lose at the casino-- they remember wins and not the losses. Ask anyone gambles a lot without keeping track and you get the same answer "I mostly break even." Memory is not a reliable way to track these things.

If you sit down and actually track everything, you generally find that the various CPI indexes are in the ballpark.

Take gas. People think that gas has been going up like crazy, but it is the same price it was right before the financial crisis. There was a lot of inflation in gas from 2000-2008, but there hasn't been any since. It dropped really low and recovered, for a net increase of about nothing--

Historical Gas Price Charts - GasBuddy.com

While the price of grill cleaner may have recently gone up a lot, it doesn't really impact inflation because it is a completely negligible part of the average person's budget. I've literally never bought it.

Rent is the biggest part of most peoples' budget, and it goes up slow.

[ejman]

My very own totally unscientific take on inflation is my overall cost of living for the two of us since ER has been surprisingly level. Once I take our hobbies out of the equation, our annual expenditures have remained remarkably constant, pretty much consistent with a 1-2% annual increase. Sure, individual items go crazy but just as often seem to go crazy in the opposite direction at some other time. I don't know if a substitution effect is taking place or what but when I look at the annual expenditures in Quicken that's what I find. I might add that our standard of living feels about the same throughout.

[ziggy29]

Quote:

Originally Posted by youbet Most restaurants have relatively low profit margins. We see restaurants come and go around here all the time. They charge what customers will bear and still be customers. There is lots of competition among restaurants and, obviously, if they become too expensive folks just eat at home.

Clark Howard once noted that the "Bermuda Triangle" of restaurant bills are appetizers, desserts and alcohol, because that's where the profit margin is.