Latest Inflation Numbers and Discussion

[CaptTom]

The Fed and the public will have different opinions on inflation as consumers memories are longer...

... and more reliable. Sorry if I just don't take word of a politician or pundit on everything.

Pointing to one small section of a wildly-swinging line on a chart is not necessarily a good way to discern a legitimate trend. But it can be used to deceive.

 

[Gumby]

The Fed and the public will have different opinions on inflation as consumers memories are longer, while Fed sticks with the current times. Exaggerated example…If we had 100% inflation one year, then 0% inflation the following year, Fed would consider inflation dead. While a consumer would disagree. As that scenario still stings the wallet even if that scenario showed a current 0% CPI.

Inflation is not an opinion, it is math. Inflation = dx/dt where x is price and t is time. And since the Fed can affect my life a lot more than any consumer's opinion, I'll stick with the Fed.

 

[Mulligan]

... and more reliable. Sorry if I just don't take word of a politician or pundit on everything.

Pointing to one small section of a wildly-swinging line on a chart is not necessarily a good way to discern a legitimate trend. But it can be used to deceive.

Gumby was missing my point. Math is the math which is a given for the science of inflation. It is what it is definition wise. But consumers base inflation on how it hits their wallet. They really dont care about the proper terminology of inflation, disinflation, or deflation…..And they have a long memory of a price change. Something that went from $5 to $10 in one year and is $10 three years later will still be viewed as inflation to the consumer even though there has been no price increase the subsequent 3 years.
Its the old “I remember when gas was 60 cents a gallon thing”.

 

[GenXguy]

Gumby was missing my point. Math is the math which is a given for the science of inflation. It is what it is definition wise. But consumers base inflation on how it hits their wallet. They really dont care about the proper terminology of inflation, disinflation, or deflation…..And they have a long memory of a price change. Something that went from $5 to $10 in one year and is $10 three years later will still be viewed as inflation to the consumer even though there has been no price increase the subsequent 3 years.
Its the old “I remember when gas was 60 cents a gallon thing”.

Exactly, just like my comments about the massive price increases on most everything since early 2020. Disinflation doesn't make that any better, it just makes those prices even higher, because it's still positive inflation. We're not going to see those prices again for most things. We consumers feel that sting for years... or forever in some cases.

 

[Aerides]

but that still doesn't mean that lower inflation means prices broadly are going down.

Of course it doesn't. By definition lower inflation means things are not going up as much. And going up 2-3% per year is totally normal, and should be expected in any retirement planning.

 

[Gumby]

I will say this once and avoid further comment. It is something my mother taught me long ago. To wit - the world doesn't care how you feel. It doesn't know or care about your anger or your fear. It is indifferent to your hopes and dreams. It doesn't know or care what you've planned. The world just is. And if you think otherwise, you are only fooling yourself.

As to inflation, it is what it is. It has been what it has been. It doesn't matter what you or I think about it. 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.

 

[GenXguy]

Of course it doesn't. By definition lower inflation means things are not going up as much. And going up 2-3% per year is totally normal, and should be expected in any retirement planning.

And I know that, and I think most people here know it, but my earlier post (with the link to the cnbc article) was in regard to those in the media that don't seem to get this and think lower inflation should meaning that prices should be dropping, which is not correct. And using the term disinflation would not have made it anymore correct. But having said that, I would have loved to have seen that real 2 to 3% inflation compared to what we've had these last couple years

 

[Koolau]

but my earlier post (with the link to the cnbc article) was in regard to those in the media that don't seem to get this and think lower inflation should meaning that prices should be dropping,

Again, I will say: The media KNOWs exactly what it means but it doesn't make good TV (if you are feeling charitable toward the media). I won't mention a darker view.

 

[CaptTom]

I've been trying to think of a better way to express this. Maybe a visual will help. Here's a graph of a random commodity (lumber) I pulled off the web:

Looking at this chart, I don't think anyone is going to say "Wow! That's pretty dramatic deflation!"

They're going to see a spike, and conclude prices are still high. If prices stabilize at the current (per the chart) price, I think any rational person would call that inflation, not deflation.

If you want to claim that, semantically, the downward part of that line is technically deflation, fine. But I'd say you're either being pedantic, or downright dishonest.

Just to be clear, I chose this chart only because it shows an exaggerated example of what I've been trying to explain. I know it's not representative of the broader economy. This is a hypothetical discussion about how to define deflation, not a statement on our current status. For that, only time will tell.

 

[Gumby]

Inflation is a rate of change, not a price level. It can be measured over any time period, but is typically measured over one year. Using your chart, if you measure starting from the spike in 2017, there has been about 3% yearly inflation in lumber over the past 6 years. If you measure since the end of 2020, there has been deflation.

I really don't understand what point you are trying to make. The fact that you don't like lumber prices today does not change the definition of inflation.

 

[MarieIG]

I was glad to see the prices of eggs down!

 

[Chuckanut]

Inflation is a rate of change, not a price level. It can be measured over any time period, but is typically measured over one year. Using your chart, if you measure starting from the spike in 2017, there has been about 3% yearly inflation in lumber over the past 6 years. If you measure since the end of 2020, there has been deflation.

I really don't understand what point you are trying to make. The fact that you don't like lumber prices today does not change the definition of inflation.

+1

I am reminded of mutual fund advertising. Pick the right starting and stopping points in the comparison and the Mediocre Fund can sound like guaranteed riches.

 

[eytonxav]

Saudis just announced they are cutting oil production, cascading impact will result.

 

[Koolau]

Saudis just announced they are cutting oil production, cascading impact will result.

Drill, baby drill??

 

[Bigdawg]

Drill, baby drill??

SJT and XOM. Sounds good to me. Filled up the diesel today. $3.39/g.

 

[Koolau]

SJT and XOM. Sounds good to me. Filled up the diesel today. $3.39/g.

Yeah, now that I'm on the mainland (in the heart land) I'm celebrating paying $3.40 vs what I was paying in Hawaii which was $4.40 per gallon of gas. If the Saudis have their way, I'm sure I'll be paying more soon.

Drill, baby drill??

 

[Bigdawg]

Yeah, now that I'm on the mainland (in the heart land) I'm celebrating paying $3.40 vs what I was paying in Hawaii which was $4.40 per gallon of gas. If the Saudis have their way, I'm sure I'll be paying more soon.

Drill, baby drill??

I'm off to San Diego to house/dog sit for 2 weeks. I get the lower gas price on the military bases but it's still way higher than here in MD. Interesting to see where oil goes here in the next few years with the EV push. In the meantime, Drill, baby drill??

 

[GenXguy]

I've been trying to think of a better way to express this. Maybe a visual will help. Here's a graph of a random commodity (lumber) I pulled off the web:

Looking at this chart, I don't think anyone is going to say "Wow! That's pretty dramatic deflation!"

They're going to see a spike, and conclude prices are still high. If prices stabilize at the current (per the chart) price, I think any rational person would call that inflation, not deflation.

If you want to claim that, semantically, the downward part of that line is technically deflation, fine. But I'd say you're either being pedantic, or downright dishonest.

Just to be clear, I chose this chart only because it shows an exaggerated example of what I've been trying to explain. I know it's not representative of the broader economy. This is a hypothetical discussion about how to define deflation, not a statement on our current status. For that, only time will tell.

Pretty sad. Those lumber prices, along with other building supplies and services, has really hit me hard because I had been putting off some major home maintenance and upgrades for that last few years hoping to retire first, and all these prices have exploded during that time.

After lumber prices came back down some, they actually went back up hitting another peak in 2022.

 

[madatrub]

SJT and XOM. Sounds good to me. Filled up the diesel today. $3.39/g.

Id prefer independents in this situation. VLO, PBF, etc

 

[CaptTom]

Inflation is a rate of change, not a price level. It can be measured over any time period...

I really don't understand what point you are trying to make. The fact that you don't like lumber prices today does not change the definition of inflation.

Correct. It can be measured on any time period you choose.

I don't like or dislike lumber prices. I thought I made it clear that I just picked lumber as an example because it had an exaggerated graph.

I am reminded of mutual fund advertising. Pick the right starting and stopping points in the comparison and the Mediocre Fund can sound like guaranteed riches.

^^^ This is the point I was trying to make. Picking one sliver of time and crying "deflation!" is dishonest. Articles about impending doom under that headline are just click bait.

 

[Koolau]

Correct. It can be measured on any time period you choose.

I don't like or dislike lumber prices. I thought I made it clear that I just picked lumber as an example because it had an exaggerated graph.



^^^ This is the point I was trying to make. Picking one sliver of time and crying "deflation!" is dishonest. Articles about impending doom under that headline are just click bait.

It seems everything is click bait these days. Finding "truth" is getting to be quite an exercise. YMMV

 

[Gumby]

Correct. It can be measured on any time period you choose.

I don't like or dislike lumber prices. I thought I made it clear that I just picked lumber as an example because it had an exaggerated graph.



^^^ This is the point I was trying to make. Picking one sliver of time and crying "deflation!" is dishonest. Articles about impending doom under that headline are just click bait.

It works exactly the same way when people are still screaming "inflation" after prices have steadied. I look at the numbers and make my own decisions based on logical analysis rather than emotion.

 

[EvrClrx311]

I'm pretty sure if you look back far enough you'll find that Tulips have deflated from a specific date... it's all relative to the time period you're looking at. Arguing about inflation from two different perspectives would be kind of like arguing about one rate of aging, from two variable speeds (one nearing the speed of light)... you're both right, from your own perspective. Inflation doesn't care, it just does what it does... same as time.

 

[Sunset]

I'm pretty sure if you look back far enough you'll find that Tulips have deflated from a specific date... it's all relative to the time period you're looking at. Arguing about inflation from two different perspectives would be kind of like arguing about one rate of aging, from two variable speeds (one nearing the speed of light)... you're both right, from your own perspective. Inflation doesn't care, it just does what it does... same as time.

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

 

[Gumby]

..... Inflation doesn't care, it just does what it does... same as time.

Precisely.