Latest Inflation Numbers and Discussion

[explanade]

During the chip shortage, carmakers chose to produce expensive cars, loaded with options.

Average car transaction shot up to around $50k.

Dealers couldn’t keep cars. Low allocations and they sold the ones they got, even with dealer markup.

Used car prices were also bid up.

So confluence of factors because 5-7 years ago, the average new car transaction was closer to $30k.

Oh and when you say workers want a big rise, don’t forget that the Big 3 are hugely profitable now, around $10 billion a year. They are paying their CEOs $25-30 million a year.

 

[Koolau]

During the chip shortage, carmakers chose to produce expensive cars, loaded with options.

Average car transaction shot up to around $50k.

Dealers couldn’t keep cars. Low allocations and they sold the ones they got, even with dealer markup.

Used car prices were also bid up.

So confluence of factors because 5-7 years ago, the average new car transaction was closer to $30k.

Oh and when you say workers want a big rise, don’t forget that the Big 3 are hugely profitable now, around $10 billion a year. They are paying their CEOs $25-30 million a year.

No doubt the big car companies have been very profitable for a couple of years. So the w*rkers want a "share." I wonder if in a couple of years and a big recession and the car companies are losing billions (again) if those same w*rkers will just as gladly take a 40% pay cut.

Cyclical businesses like cars and oil don't lend themselves to simple negotiations. How long ago was it that the gummint was bailing out the car companies? Are we gonna do that again when many of the w*rkers are laid off as happens every few years?

It's complicated - much more complicated than that the car companies are currently making money.

 

[wmc1000]

I'm using Tello with unlimited minutes and texts for $9/mo. I can't remember how much I paid for a landline back in the day, but I'm pretty certain it was something like $20.

We have used red pocket mobile for the past 3 years and get their 360 day plan which gives us unlimited talk and text plus 3GB is data per month. It runs $180 for each of us for the 360 day period. They give you the choice of carrier system networks, we use the att network.

 

[MichaelB]

These numbers don’t look right. The average transaction value new car price has gone up, but that is not all price. Some of it is composition - more higher priced cars and EVs, fewer lower priced cars.

From Edmunds, a Toyota Camry has a list price (msrp) around 10% higher in 2023 vs 2019. If the dealer gave 5% discount in ‘19 and now charges 5% over list, that’s an additional 10%. New car ‘23 is 20% higher than ‘19.

According to the BLS, the average weekly wage has gone from $936 to $1100, or around 17%. In terms of relative wages, a new car has risen in price by about 4%. If it took 33 weeks previously now it would take 34.

Over that same period total new vehicle sales declined by around 18%. This was mostly supply driven. It would make sense if manufacturers cut back on supply of lower priced vehicle which are less profitable and focused on the higher end.

Quote from the CarDealershipGuy:

Quote from the CarDealershipGuy:

Weeks of income needed to purchase a new car:

2019: 33 weeks
2020: 34 weeks
2023: 42 weeks (!)

The current state of new car affordability, in a nut-shell.

(via Cox Auto)

 

[explanade]

No doubt the big car companies have been very profitable for a couple of years. So the w*rkers want a "share." I wonder if in a couple of years and a big recession and the car companies are losing billions (again) if those same w*rkers will just as gladly take a 40% pay cut.

Cyclical businesses like cars and oil don't lend themselves to simple negotiations. How long ago was it that the gummint was bailing out the car companies? Are we gonna do that again when many of the w*rkers are laid off as happens every few years?

It's complicated - much more complicated than that the car companies are currently making money.

They made big concessions in 2008.

And they're probably not going to get 40%, that's probably an opening negotiation posture.

Or the 4-day work week with a big raise or a pension or retiree health care.


In any event, none of us are in the position of these workers, who see the company making big profits and their contract is up for negotiation but the management, who've seen their compensation go up a lot with the big profits, are offering what they see as a lowball offer.

Some of us here benefitted from compensation which rose as the fortunes (profits) of our employer rose. So I wouldn't begrudge it for these workers either.

Then again, sometimes management pays themselves and not the workers, like it's a zero-sum game.

 

[Koolau]

I'm using Tello with unlimited minutes and texts for $9/mo. I can't remember how much I paid for a landline back in the day, but I'm pretty certain it was something like $20 to $30/mo.

I'm not sure why you would buy an Android phone every 3 months. I usually get low cost ones and still use them at least 2 years.

I guess I've never heard of Tello. I'll have to look into it.

 

[homestead]

We have used red pocket mobile for the past 3 years and get their 360 day plan which gives us unlimited talk and text plus 3GB is data per month. It runs $180 for each of us for the 360 day period. They give you the choice of carrier system networks, we use the att network.

We use the same plan. They bumped up the data to 5GB now on that plan so if yours still shows 3GB let them know and they will reset it to 5GB.

 

[GravitySucks]

I'm using Tello with unlimited minutes and texts for $9/mo. I can't remember how much I paid for a landline back in the day, but I'm pretty certain it was something like $20 to $30/mo.

I'm not sure why you would buy an Android phone every 3 months. I usually get low cost ones and still use them at least 2 years.

My point was people complain about cell phone costs when it’s now cheaper than old land lines were even counting the device cost. My cheap androids last about 18 months.

 

[wmc1000]

We use the same plan. They bumped up the data to 5GB now on that plan so if yours still shows 3GB let them know and they will reset it to 5GB.

Just checked my account and it is now 5GB per month!

The first 5GB each month is high speed and then it would slow down but is actually unlimited data. Have never gone over a couple of GB's in a month so for roughly $15 it has been unlimited everything for us!

Also, currently you can get this 360 day plan for $120 on ATT network via Ebay, (OFFICIAL REDPOCKET STORE), which is what we have done and you can choose either new with sim or renewal only.

 

[Markola]

New acronym alert - Kitces.com just published an article by Justin Fitzpatrick discussing Sequence-of-Inflation Risk (SOIR I guess). It speaks to Monte Carlo type sims where the user/analyst inputs variables like expected long-term inflation. Yet inflation is variable, recently at 9% while previously at ~1.5%.

The point of the article is that sequence of inflation is a thing and it impacts success rates, just like SORR. We're coming out of a bad example and I think it shows based on OMY comments and the like.

https://www.kitces.com/blog/sequence-of-inflation-risk-retirement-investment-monte-carlo-technology/

Bummer. Little one can do at this point with certainty. Having a higher bond allocation to combat SORR hasn’t exactly worked out for a lot of us trying to navigate that minefield the last few years.

Kitces has also written that increasing one’s stock allocation after the early SORR period can help portfolio longevity, e.g. having a higher stock allocation once SS kicks in, etc. He also admitted there won’t be many takers.

 

[Marc]

Bummer.

Kitces has also written that increasing one’s stock allocation after the early SORR period can help portfolio longevity, e.g. having a higher stock allocation once SS kicks in, etc. He also admitted there won’t be many takers.

I can definitely see this happening for us. When I take SS at 70 our combined SS will be over $85K per year; that is $85K that doesn't need to be taken from IRAs. Therefore, I willl not need to keep 10% in cash so I will probably change from 55.35.10 to 60/35/5. In addition, at some point in our 70s we will cut back (or end) our traveling that will greatly lower our annual expenses; another reason to lower cash allocation.

Marc

 

[Breedlove]

We all need to get those old WIN badges out again …..

 

[Koolau]

We all need to get those old WIN badges out again …..

Ah, yes. "Whip Inflation Now." It really w*rked for Gerald Ford back in the day. I think I still have one of those in my sock drawer.


https://www.ebay.com/itm/1154739679...MIiqzozKbDgQMV9BBlCh1TKQL0EAAYAiAAEgL5SPD_BwE

 

[Breedlove]

They need to print a bunch of those badges for us people who have been through this before WIN ….Whip inflation Now …Or how about the cartoon of the NY hot dog man and his cart . Hot dogs were selling like crazy . Then he had no sales and his son tells him . “ dad we are in a recession “ .Used to see that on TV. As a little kid I didn’t understand it.

 

[Koolau]

They need to print a bunch of those badges for us people who have been through this before WIN ….Whip inflation Now …Or how about the cartoon of the NY hot dog man and his cart . Hot dogs were selling like crazy . Then he had no sales and his son tells him . “ dad we are in a recession “ .Used to see that on TV. As a little kid I didn’t understand it.

Yep.


"Loose Lips Sell No Hot Dogs." ca 1958??

 

[Koolau]

I think this is the original "hot dog" parable:


https://ellisonchair.tamu.edu/2009/03/21/parable-of-the-man-who-sold-hot-dogs/

 

[GenXguy]

I guess I've never heard of Tello. I'll have to look into it.

Tello sells plans on the T-Mobile network only. They used to use the Sprint network before that was closed down, so I started with that. I've been with them for several years.

 

[Montecfo]

The PCE index came out Friday. There is a lot in the release.

The so called Core PCE (excluding food and energy) is the Fed's favored inflation index. That came in at just 0.1% month over month and 3.9% year over year. the monthly figure was lower than expected and lowest since Nov. 2020.

The trend is interesting. The annual rate was 4.8% at end of April and has headed steadily lower.

https://www.bea.gov/news/2023/personal-income-and-outlays-august-2023

Here is some analysis.

https://www.cnbc.com/2023/09/29/pce-inflation-august-2023-good-news-for-inflation-hawks.html

 

[Koolau]

^^^^^^^^^^^^^



I guess that's all good news but gas here is almost $5 again!


But seriously, I don't really understand much of the two citations you list. Can you give us (dummies) the "inflation for dummies" version?

 

[CaptTom]

This is consistent with what I'm seeing in the real world. The rate of inflation has come down. Some things whose prices had spiked have eased back a little.

Of course none of this means we haven't seen very high inflation recently, well beyond the "official" figures. but at least the trend, as reported, reflects reality.

 

[Montecfo]

^^^^^^^^^^^^^



I guess that's all good news but gas here is almost $5 again!


But seriously, I don't really understand much of the two citations you list. Can you give us (dummies[emoji23]) the "inflation for dummies" version?

PCE, like CPI measures the rate of pricing changes overall in the economy. But they are not identical

Unlike CPI which has a static basket of goods, PCE considers the impact of substitution of goods, which is how most folks make purchases. PCE is also a broader measure and has different data sources.

The more important measure to the Fed is the so-called Core PCE which excludes food and energy costs. The reason for excluding these is because food and energy prices are highly volatile (both up and down). It is difficult to set policy based on measures which change so rapidly. Instead the Fed is interested in the extent to which all other prices are changing.

It doesn't mean food and energy price changes are not important.

We can always find individual prices we perceive to be rising more rapidly than overall prices. But these measures look at overall price changes but in a very methodical fashion.

Also the current report does not attempt to measure price changes more than a year ago. So even with relatively low inflation currently, prices reflect inflation which has happened prior to that also.

 

[JoeWras]

Looking at the PCE data in depth, the automobile components are down significantly month over month. The effect of the strike is still playing out and won't impact the Sept data. We'll see about October...

Incomes are up and the Fed looks at that too.

There's a lot of data here, all very interesting. And frankly, it is a PITA that BEA presents the data completely different than BLS. Leave it to competing government agencies. Full employment, I guess.

 

[Mulligan]

This is consistent with what I'm seeing in the real world. The rate of inflation has come down. Some things whose prices had spiked have eased back a little.

Of course none of this means we haven't seen very high inflation recently, well beyond the "official" figures. but at least the trend, as reported, reflects reality.

I noticed a one off anecdotal note on travel. I just booked a 5 night ski trip stay in Tahoe at Harrah’s. Air travel from St. Louis for 2 and hotel was under $1100 all in. That was about the same cost back in 2008 when we first started going. Of course the food and drink arent going to be 2008 prices, ha.

 

[Teacher Terry]

^^^^^^^^^^^^^



I guess that's all good news but gas here is almost $5 again!


But seriously, I don't really understand much of the two citations you list. Can you give us (dummies) the "inflation for dummies" version?

I can’t believe our gas is higher than yours. I just paid 5.50 at one of the cheapest places in town. My friend in California paid 6.40.

 

[Car-Guy]

Paid 3.19 this weekend. I guess that's half price that your friend is paying.