Latest Inflation Numbers and Discussion

[Koolau]

This seems like a great time to load up on Tulips, before they rebound !!!

I think I'd rather have a Beanie Baby.

 

[Chuckanut]

This seems like a great time to load up on Tulips, before they rebound !!!

There’s a very old book with the marvelous name of Extraordinary Popular Delusions and the Madness of Crowds. Among other things it discusses the tulip mania of earlier years.

 

[Koolau]

There’s a very old book with the marvelous name of Extraordinary Popular Delusions and the Madness of Crowds. Among other things it discusses the tulip mania of earlier years.

I hope the new revision includes GameStop! I guess the author is no longer with us, so are there any volunteers?

 

[JoeWras]

Insurance

Insurance lags for homes and autos. It isn't a huge component of CPI, but it matters.

I expect the lag will start becoming more impactful the rest of the year. Although... Homeowners insurance feeds into the "shelter" CPI, which just means the current rise will be prolonged since the survey takers will be well aware of their rise in insurance and will factor that into what they would charge for rent.

I know it is "the numbers are the numbers," so spare me the differential calculus. Thank you.

Anecdotes matter, as they will eventually feed into the differential equations. And we all have plenty of anecdotes. Here's just a very small sample of recent posts from other threads on our board.

https://www.early-retirement.org/fo...omeowners-insurance-117100-7.html#post2941185

Our Liberty Mutual homeowner's insurance went up 82% from $2965 to $5395. The dwelling coverage went up 25% from $492K to $613K. But the "price" (premium per $ of dwelling coverage) also went up a staggering 46%.

https://www.early-retirement.org/fo...omeowners-insurance-117100-7.html#post2941201

I just got (and paid) my flood insurance, so here's the complete table. I thought I posted it earlier this week but I can't find it, so here ya' go:

Year	2021	2022	2023
Homeowners	$480	$503	$522
Wind & hail	$2,071	$2,374	$4,117
Flood	$572	$684	$795

https://www.early-retirement.org/fo...increases-in-2023-a-118058-2.html#post2937843

We have 4-vehicles. in total our most recent State Farm premiums were up 13%.

https://www.early-retirement.org/fo...increases-in-2023-a-118058-2.html#post2941156

Our auto premium is set to increase by more than 35% next month! No claims or points.

 

[GenXguy]

Insurance lags for homes and autos. It isn't a huge component of CPI, but it matters.

Yeah, my homeowner's insurance just skyrocketed 21% this year, but I believe it went up over 12% in 2021 and over 12% in 2022. So, I didn't feel like the high premium increases lagged other inflation and was actually even hgiher, it just got a whole lot worse this year with the 21% increase! Ironically, before I got my bill recently, I was hoping it would stabilize after the previous two years' of large increases. Also, no changes in deductible or coverage and no claims.

 

[jldavid47]

I hope the new revision includes GameStop! I guess the author is no longer with us, so are there any volunteers?

"Extraordinary Popular Delusions and the Madness of Crowds" was written in 1841 and its author, Charles Mackey, departed this mortal coil in 1889.

What he wrote in 1841 is still applicable today because human nature never changes.

 

[jldavid47]

From a press release about Cambell's earnings today:

Campbell's average selling price rose 12% in the quarter, but a 7% decline in total volumes signaled that Americans pressured by rising food prices were moving away to private-label products that are more affordable.

All the other big food behemoths pretty much did the same thing. So much for inflation being tamed. Interest rates aren't coming down any time soon.

 

[jldavid47]

I pay close attention to the actual current CPI numbers for a variety of reasons. First, it gives me a hint as to what the Fed may or may not do with respect to rates, which affects the returns on my fixed income investments and indirectly affects my equity returns. Second, it is the CPI change that determines my social security and pension COLAS. But otherwise, I just suck it up and deal with it. If I have to adjust my behavior, substitute one good for another, cut back my purchases or adjust my portfolio, then I do. But I could whine until the cows come home and it won't change the math.

If you really want that hint, pay attention to the PCE deflators. That's what the Fed looks at.

 

[Koolau]

If you really want that hint, pay attention to the PCE deflators. That's what the Fed looks at.

I looked up PCE deflators and found numbers but no explanation on PCE deflators. Can you give a brief tutorial on the subject? It's (sadly) a new one to me.

 

[jldavid47]

I looked up PCE deflators and found numbers but no explanation on PCE deflators. Can you give a brief tutorial on the subject? It's (sadly) a new one to me.

Google is your friend.

 

[Koolau]

Google is your friend.

Yeah, I did that and, as I said, found some of the PCE Deflators numbers. I guess everyone here knows about this subject and how it relates to inflation and how the gummint treats inflation.

 

[Gumby]

Here is an article that offers a good overview of the difference between PCE and CPI. They are usually but not always fairly closely correlated. Right now CPI is higher.

https://economics.td.com/us-cpi-pce...ower definition,their behalf by third parties.

CPI uses a narrower definition of consumer expenditures and only considers urban expenditures made directly by consumers. In contrast, PCE considers expenditures made by urban and rural consumers as well as expenditures made on their behalf by third parties.

 

[MichaelB]

I looked up PCE deflators and found numbers but no explanation on PCE deflators. Can you give a brief tutorial on the subject? It's (sadly) a new one to me.

It’s a different way to calculate inflation. CPI uses a baseline and fixed basket of goods and services. PCE deflator looks at the current mix of goods and services and compares them to last quarter. It’s considered a bit more dynamic.

Over time they both should show the same level of price change. In any particular point in time they will differ, but not by much.

 

[Koolau]

Here is an article that offers a good overview of the difference between PCE and CPI. They are usually but not always fairly closely correlated. Right now CPI is higher.

https://economics.td.com/us-cpi-pce...ower definition,their behalf by third parties.

Thanks, blessings, aloha.

Honestly never heard of PCE. The article was very helpful in understanding the differences. Thanks again.

 

[Koolau]

It’s a different way to calculate inflation. CPI uses a baseline and fixed basket of goods and services. PCE deflator looks at the current mix of goods and services and compares them to last quarter. It’s considered a bit more dynamic.

Over time they both should show the same level of price change. In any particular point in time they will differ, but not by much.

Very helpful. Blessings and aloha.

 

[CaptTom]

From a press release about Cambell's earnings today:

Campbell's average selling price rose 12% in the quarter, but a 7% decline in total volumes signaled that Americans pressured by rising food prices were moving away to private-label products that are more affordable.

All the other big food behemoths pretty much did the same thing. So much for inflation being tamed. Interest rates aren't coming down any time soon.

It would be interesting to look at three numbers for each consumer-focused corporation: Average selling price, average cost of materials and average change in profit over the same period.

I get that these companies are getting squeezed by their own materials and labor costs, but I can't help but wonder whether they're padding it a little to add in a larger profit margin, just because their customers are more tolerant of it right now.

And it's good to hear that people are switching to non-brand-name products. Unfortunately those are usually made in the same factories as the name-brand product, but at least it sends a message.

 

[Koolau]

It would be interesting to look at three numbers for each consumer-focused corporation: Average selling price, average cost of materials and average change in profit over the same period.

I get that these companies are getting squeezed by their own materials and labor costs, but I can't help but wonder whether they're padding it a little to add in a larger profit margin, just because their customers are more tolerant of it right now.

And it's good to hear that people are switching to non-brand-name products. Unfortunately those are usually made in the same factories as the name-brand product, but at least it sends a message.

I agree that "sending a message is good" but the bottom line is that the non-brand-name products DO save the consumer money. Often times, significantly.

I have found some substitute products which don't taste good enough to be substitutes. But most of the time I can find a substitute if I want to.

 

[USGrant1962]

It would be interesting to look at three numbers for each consumer-focused corporation: Average selling price, average cost of materials and average change in profit over the same period.

I get that these companies are getting squeezed by their own materials and labor costs, but I can't help but wonder whether they're padding it a little to add in a larger profit margin, just because their customers are more tolerant of it right now.

And it's good to hear that people are switching to non-brand-name products. Unfortunately those are usually made in the same factories as the name-brand product, but at least it sends a message.

After some gyrations around COVID, it looks like S&P500 profit margins are down over the last year-and-a-half and are right where they were prior to COVID. Profits causing inflation is a political talking point to deflect from the monetary and supply chain causes.

https://dqydj.com/sp-500-profit-margin/

https://fred.stlouisfed.org/graph/?graph_id=322600

 

[Koolau]

After some gyrations around COVID, it looks like S&P500 profit margins are down over the last year-and-a-half and are right where they were prior to COVID. Profits causing inflation is a political talking point to deflect from the monetary and supply chain causes.

https://dqydj.com/sp-500-profit-margin/

https://fred.stlouisfed.org/graph/?graph_id=322600

Yeah, I saw an oil guy being grilled by a reporter "What about those 200 Billion dollar profits?"

I expected him to say "Where were you in '82?" But he was much slicker than that - plus most people don't even remember '82 (Last one out of Houston, please turn out the lights.) SO basically, the guy didn't dodge but said the oil business has ups and downs which lead to good profits one year and also big losses the next (or words to that effect.)

 

[Montecfo]

Jobless claims rose to 261k, up 28k from last week and well ahead of the 235k expected.

Jobless claims increase more than expected to their highest since October 2021

https://www.cnbc.com/2023/06/08/job...ce-october-2021.html?__source=androidappshare

 

[dobig]

Jobless claims rose to 261k, up 28k from last week and well ahead of the 235k expected.

Jobless claims increase more than expected to their highest since October 2021

https://www.cnbc.com/2023/06/08/job...ce-october-2021.html?__source=androidappshare

Sort of scratching my head. Jobs number came out Jun 2 and nonfarm payroll employment increased by 339,000 in May. Above the 190,000 consensus. Market up 700 points on strong economic data. Then today we get a hot print on jobless claims and,....market rallies.

I have no idea if good news is still good news or in fact bad news or if all news right now is good news.

Guess we'll see next week when CPI comes out and then if the Fed really pauses as expected.

 

[Koolau]

Sort of scratching my head. Jobs number came out Jun 2 and nonfarm payroll employment increased by 339,000 in May. Above the 190,000 consensus. Market up 700 points on strong economic data. Then today we get a hot print on jobless claims and,....market rallies.

I have no idea if good news is still good news or in fact bad news or if all news right now is good news.

Guess we'll see next week when CPI comes out and then if the Fed really pauses as expected.

ALL NOISE. It's all just noise. Stay with your plan and ignore the reports and hysteria. Unless you plan to cash in your stash for a major BTD, don't worry about the noise. YMMV of course.

 

[Chuckanut]

SGOTR - Some Guy On The Radio - just said we are now in a Bull Market. Things feel good, but not great. I don’t know. So, it’s —-> Stay the course. Follow the plan. Keep diversified income sources. What else is new?

 

[audreyh1]

SGOTR - Some Guy On The Radio - just said we are now in a Bull Market. Things feel good, but not great. I don’t know. So, it’s —-> Stay the course. Follow the plan. Keep diversified income sources. What else is new?

Turn off the radio? Ha ha

We have a ways to recover past the 1/2/22 highs but people can say anything….. (and will)

But whatever, doesn’t matter to me.

 

[Koolau]

SGOTR - Some Guy On The Radio - just said we are now in a Bull Market. Things feel good, but not great. I don’t know. So, it’s —-> Stay the course. Follow the plan. Keep diversified income sources. What else is new?

Yep. Just one more SGOTR to ignore. I think SGOTR or SGOTTV are coming from pods now - like the "Invasion of the Body Snatchers." A great movie, but not something to base you're AA on.