With Deflation Possibly Near, This Economist Is All Abuzz

[ziggy29]

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Originally Posted by Cruising2022 I do see a lot more generic brands sprouting up for food and necessities. Was in 7-11 yesterday and they're doing a huge 7-11 branded generic push in their stores. Surprised the heck out of me.

The problem is, this isn't real "deflation" -- it's "substitution" which the government uses to claim deflation (or less inflation).

A box of store-brand mac and cheese is NOT the same item as a box of Kraft mac and cheese, but if consumers substitute the 20% cheaper store-brand product, the government will claim the cost of mac and cheese is 20% lower than last month even though the price of the store brand stuff was unchanged from the previous month. I think this is pretty slimy, personally.

[Cruising2022]

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Originally Posted by ziggy29 The problem is, this isn't real "deflation" -- it's "substitution" which the government uses to claim deflation (or less inflation). A box of store-brand mac and cheese is NOT the same item as a box of Kraft mac and cheese, but if consumers substitute the 20% cheaper store-brand product, the government will claim the cost of mac and cheese is 20% lower than last month even though the price of the store brand stuff was unchanged from the previous month. I think this is pretty slimy, personally.

While I see your point, isn't competition a valid mechanism for judging downward price pressure from consumers? SBUX sailed for years on brand loyalty and expensive gourmet coffee-flavored drinks; no one was able to succeed in underpricing them. McDonald's didn't step in the cheap gourmet coffee market until they saw an opening for it (the recession) -- and now McDonald's is eating SBUX's lunch. I doubt McDonald's would've been successful if they attempted to enter the gourmet coffee market, say, 3 years ago. Doesn't the increased demand for cheaper prices, and the rise of new competitors to meet that, have any say at all?

[ziggy29]

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Originally Posted by Cruising2022 WFMI and SBUX might've been easy targets, but I think KFT, CHD, PG, etc will be the surprise losers of this recession. Not to mention some of these generics are downright nummier... gimme the Wal-Mart branded lucky charms any day... 3 times the marshmallows...

For what it's worth, Wall Street didn't like the results General Mills just posted -- missed by a whopping 2 cents per share (0.85 versus expected 0.87). All the big name brand food stocks are selling off viciously today -- Kraft, Campbell, Kellogg, Heinz, et cetera.

I suspect investors may be getting on your bandwagon here.

[Cruising2022]

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Originally Posted by ziggy29 For what it's worth, Wall Street didn't like the results General Mills just posted -- missed by a whopping 2 cents per share (0.85 versus expected 0.87). All the big name brand food stocks are selling off viciously today -- Kraft, Campbell, Kellogg, Heinz, et cetera. I suspect investors may be getting on your bandwagon here.

The problem is that only the predictions I don't bet actual money on come true.

[Hamlet]

What about the bubble in Treasuries?

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Originally Posted by Architect One way to look at it (I think) is that, as a group, the boomers have tried to create retirements for themselves via these bubbles, first the dot.com, then when that went bust - housing. Now they are stuck up a creek without a bubble in sight.

[Gone4Good]

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Originally Posted by ziggy29 The problem is, this isn't real "deflation" -- it's "substitution" which the government uses to claim deflation (or less inflation).

According to the BLS:

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The Consumer Price Program (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. . . . The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought.

.

CPI isn't static (good thing too, because it wouldn't be a good gauge of anything if it still included prices of buggy whips and coal hods). If consumers consistently choose cheaper products, than the cost of living declines. I'm not sure what value CPI would be if it measured the prices of things people don't actually buy. Or things that people bought some time ago, but no longer do.

And besides, it works both ways. I don't recall anyone complaining that CPI overstated inflation because it included more cups of designer coffee and fewer cups of Nescafe.

[Dennis]

Well I'm watching this Deflation issue as well, as to when to be buying TIPS.. It won't be a long run with Deflation so have to be ready to act quickly.. me thinks

[TromboneAl]

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Originally Posted by FIRE'd@51 Actually, CPI-U was up 0.4% in January. It will be interesting to see February's number (released this Wednesday).

.4% rise according to this article:

Stock Market Update, IPO profiles, Earnings Call Transcripts, Economic news, company news, Mutual funds profile,Earnings News, Mutual Fund Managers,Industry sectors, Oil and Natural Gas stocks - 123Jump

[ziggy29]

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Originally Posted by Dennis Well I'm watching this Deflation issue as well, as to when to be buying TIPS.. It won't be a long run with Deflation so have to be ready to act quickly.. me thinks

I think the time to buy TIPS was about 7 hours ago...

[FIRE'd@51]

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Originally Posted by TromboneAl .4% rise according to this article: Stock Market Update, IPO profiles, Earnings Call Transcripts, Economic news, company news, Mutual funds profile,Earnings News, Mutual Fund Managers,Industry sectors, Oil and Natural Gas stocks - 123Jump

Yep, that's the seasonally adjusted number. Headline CPI-U was actually up 0.5%, and that's what affects TIPS, and, for the more venturesome among us, ISM/OSM.