Latest Inflation Data and report

[Dtail]

It's all simply for show. You also have to look closer at the words and the messaging. It's not exactly going from $15B per month reduction to $30B per month reduction - it's $15B per month reduction maximum to $30B per month reduction maximum. They have still left themselves able to do whatever they want. Whether they do reduce by the maximum amount each month is to be seen.

My belief is that they're going to go their merry way until the stock market reacts negatively. Then, same as 3 years ago, they'll stop in their tracks and focus on supporting the stock market...which is not part of the Fed's mandate.

Interest rates are ultimately not going to move very much higher.

Hopefully there is just enough temporary blip up in rates and then catch that rate to lock in for X number of years.

 

[John Galt III]

Am I wrong? Or is the media misleading folks about inflation percentage? I listen closely to the reports on TV and radio, but if I didn't listen closely, I would think inflation was going up 7 % every month. Radio says "Inflation up again 7% in January, 2022 !!!". But of course that means inflation is up 7% over January, 2021. How much was inflation up from December, 2021? Possibly ZERO percent. The $2.99 per pound hamburger you bought in December, 2021 is still $2.99 a pound in Jan, 2022. And it will still be $2.99 a pound next month, but the media will scream "7% inflation for Feb, 2022" , since they are using an *annual* inflation rate but talking about it as though it were a monthly inflation rate. Very misleading, perhaps on purpose. The average Joe thinks prices are going up 7% per month, not 7% per year, because he or she is not listening closely.

 

[Chuckanut]

Am I wrong? Or is the media misleading folks about inflation percentage? I listen closely to the reports on TV and radio, but if I didn't listen closely, I would think inflation was going up 7 % every month. Radio says "Inflation up again 7% in January, 2022 !!!".

Never, never, never trust media people when it comes to math. This is the same crowd that told us that Mr. Bloomberg's run for the presidency cost enough money that it would have provided every American $1,000,000. IIRC, is was about $1.57 for each of us.

Really. You can't make this stuff up.

 

[Chuckanut]

One difference between now and 1970’s-80’s inflation, cash is absolute trash this time. Money market funds allowed you to almost keep up with inflation back then. Cash just lost almost double digits in purchasing power in the last year.

It's amazing that interest rates are still so low. Where's the outrage?

 

[ejman]

It's amazing that interest rates are still so low. Where's the outrage?

The bond vigilantes are all dead.

 

[MuirWannabe]

Never, never, never trust media people when it comes to math. This is the same crowd that told us that Mr. Bloomberg's run for the presidency cost enough money that it would have provided every American $1,000,000. IIRC, is was about $1.57 for each of us.

Really. You can't make this stuff up.

Still, I’d take the buck .57

 

[Mulligan]

The January year over year inflation rate was 7.5%. Not so good.

My [-]platinum plated solid gold[/-] bronze and pine teacher's pension has a COLA in it for which I am grateful. But, it is capped at 3% a year max. I gave up a lot to get and keep that pension and I still think the opportunity cost was worth it. Nevertheless, thank goodness for SS and my meager investments.

I have an educators pension too, but our cycle was June to June, so my COLA was 5% this January. Still that was $500ish for me. Inflation is personal, but I didnt have $500 in inflation this year. In fact this is my biggest personal “deflation” year. Refinanced my home note from 3.875% to 2.75%, bought a new car and trade in was hot, so my car payment dropped from $495 to $375, and my health insurance went from $700 to zero getting on girl friends plan.

 

[Out-to-Lunch]

You can't make this stuff up.

Apparently you CAN! They did!

 

[Chuckanut]

I have an educators pension too, but our cycle was June to June, so my COLA was 5% this January. Still that was $500ish for me. Inflation is personal, but I didnt have $500 in inflation this year. In fact this is my biggest personal “deflation” year. Refinanced my home note from 3.875% to 2.75%, bought a new car and trade in was hot, so my car payment dropped from $495 to $375, and my health insurance went from $700 to zero getting on girl friends plan.

At least in the mid 70's to the early 80's of the last century, the interest rates on savings accounts, CDs and treasuries approached the inflation rate, though the after tax real return was still negative. Today, we seem content to see our money wiped out by inflation. I have to think that at some point the politics of this is going to raise its ugly head. I'll leave it at that.

 

[mikes425]

Frustrating and unclear to me is the impact of this inflation surge on my portfolio which is about 45% equity, allegedly positioned as moderate to moderate-conservative with FI primarily comprised ofshort and intermediate-term bond funds, bank loan rate funds and most relevant to this market, a pretty significant allocation to TIPS funds like SCHP and VIPSX. However, it seems these components have been doing nothing to offset the equity downturn; i.e., bonds AND stocks being equally pummeled. I have an "occasional" hourly advisor who charges "by the question,' who has frequently advocated specifically inflation-protection funds for a long time for just such periods as this...we've held them for years. Help me understand why they seem to be offering zero 'protection' in this climate. My equity allocation is largely in ETFs - with a pretty reasonably diversified mix, right around 48%.


No doubt i'm taking less of a hit than somebody who's say, 70/30 or higher, equity to bond/FI ratio... but i see no particular upside or 'offset' being offered by the bond funds as they appear to be moving down in tandem with equities.



I've seen this phenomenon in past volatility cycles but never fully understood it.

 

[NW-Bound]

Am I wrong? Or is the media misleading folks about inflation percentage? I listen closely to the reports on TV and radio, but if I didn't listen closely, I would think inflation was going up 7 % every month. Radio says "Inflation up again 7% in January, 2022 !!!". But of course that means inflation is up 7% over January, 2021. How much was inflation up from December, 2021? Possibly ZERO percent. The $2.99 per pound hamburger you bought in December, 2021 is still $2.99 a pound in Jan, 2022. And it will still be $2.99 a pound next month, but the media will scream "7% inflation for Feb, 2022" , since they are using an *annual* inflation rate but talking about it as though it were a monthly inflation rate. Very misleading, perhaps on purpose. The average Joe thinks prices are going up 7% per month, not 7% per year, because he or she is not listening closely.

The official number is 0.6% for all items in January. Year over year, it is 7.5%. That's plenty bad.

The highest YoY inflation in the US was 24% in June 1920.

In recent memory, the highest YoY inflation was 14.8% in March 1980.

 

[NW-Bound]

No doubt i'm taking less of a hit than somebody who's say, 70/30 or higher, equity to bond/FI ratio... but i see no particular upside or 'offset' being offered by the bond funds as they appear to be moving down in tandem with equities...

Bonds go up to offset stocks only in a market downturn, when the economy tanks.

That's when the Fed has to reduce interest rate to spur investment by businesses for the economy to recover, and help people buy homes. Existing bonds that pay higher interests than the new reduced rates are more desirable than new bonds and will command a premium.

In the case that is unfolding now, the Fed will raise interest rate to slow down inflation. New bonds will pay more than old bonds, which become less desirable. Old bonds become less valuable.

And higher interest rates will slow down home buying, and speculative business investments. Stocks go down.

 

[JackJester]

All of this talk of inflation made me re-run my #s in firecalc. May 1st is the planned 'free-day' for me as I enter the RE life. Using CPI I get the 100% success as expected (35 year duration). Setting it to 6% inflation gets me 98% success. 7% gets me 88%. If the next 35 years will be an average of 7% then I'll just suck it up and switch to eating more PB&J when I'm older (still enjoying the same amount of wine ). Not changing any plans on my RE date.

 

[NW-Bound]

... If the next 35 years will be an average of 7% then I'll just suck it up and switch to eating more PB&J when I'm older (still enjoying the same amount of wine )...

Yes, same amount, but how about the quality of the wine?

 

[JackJester]

No 2 buck chuck that's for sure. It is nice being in the best wine country in the US ...WA state. No offense California.

 

[NW-Bound]

With inflation, I don't know how long TJ can keep selling the 2 buck chuck bottles.

It's been 3 buck chuck elsewhere outside of CA for many years. Is it still $2 in CA?


PS. Many dollar stores have had to raise their prices in the last few years. It's amazing that they have kept the $0.99 price for decades.

 

[Dtail]

All of this talk of inflation made me re-run my #s in firecalc. May 1st is the planned 'free-day' for me as I enter the RE life. Using CPI I get the 100% success as expected (35 year duration). Setting it to 6% inflation gets me 98% success. 7% gets me 88%. If the next 35 years will be an average of 7% then I'll just suck it up and switch to eating more PB&J when I'm older (still enjoying the same amount of wine ). Not changing any plans on my RE date.

No worries. We have never seen a 35 year period averaging 7% inflation.

 

[braumeister]

.

 

[Time2]

Am I wrong? Or is the media misleading folks about inflation percentage? I listen closely to the reports on TV and radio, but if I didn't listen closely, I would think inflation was going up 7 % every month. Radio says "Inflation up again 7% in January, 2022 !!!". But of course that means inflation is up 7% over January, 2021. How much was inflation up from December, 2021? Possibly ZERO percent. The $2.99 per pound hamburger you bought in December, 2021 is still $2.99 a pound in Jan, 2022. And it will still be $2.99 a pound next month, but the media will scream "7% inflation for Feb, 2022" , since they are using an *annual* inflation rate but talking about it as though it were a monthly inflation rate. Very misleading, perhaps on purpose. The average Joe thinks prices are going up 7% per month, not 7% per year, because he or she is not listening closely.

Sounds like you are arguing a point that you know is not true, but believe everyone else is to stupid to understand. I doubt there are many people that think the yearly inflation is over 100%. Then you give the example of no inflation for hamburger, should I take from that, you don't believe there is any inflation? I'm seeing prices increases all over.
I bought a TV antenna through Amazon last June for $80, today it is $130. The Centrum Multivitamin I get from Amazon was $15.40 a year ago is now $28.

Anyway, this morning I heard two talking heads say that inflation will go down this year, I hope they are right!
Is the government doing anything to try to relieve the supply chain problem? I'm finding so many things are not available. My daughter bought house paint back in Nov, and now needs more, Lowes where she bought the original are out of stock, she check 5 different stores. A common audio IC I wanted is out of stock at the usual electronic parts suppliers, Digi-key, Mouser, Allied, etc.
One of my pet lines was about how great capitalism is, "You can get any product you can think of. Somebody, somewhere, sees they can make a dollar if they build it, and BAM there it is."
I now see how delicate that is.

 

[Alan]

<Mod Note>
Posts have removed that were heading into partisan politics. Please help us keep the thread on topic.

 

[ExFlyBoy5]

Sounds like you are arguing a point that you know is not true, but believe everyone else is to stupid to understand. I doubt there are many people that think the yearly inflation is over 100%. Then you give the example of no inflation for hamburger, should I take from that, you don't believe there is any inflation? I'm seeing prices increases all over.
I bought a TV antenna through Amazon last June for $80, today it is $130. The Centrum Multivitamin I get from Amazon was $15.40 a year ago is now $28.

Anyway, this morning I heard two talking heads say that inflation will go down this year, I hope they are right!
Is the government doing anything to try to relieve the supply chain problem? I'm finding so many things are not available. My daughter bought house paint back in Nov, and now needs more, Lowes where she bought the original are out of stock, she check 5 different stores. A common audio IC I wanted is out of stock at the usual electronic parts suppliers, Digi-key, Mouser, Allied, etc.
One of my pet lines was about how great capitalism is, "You can get any product you can think of. Somebody, somewhere, sees they can make a dollar if they build it, and BAM there it is."
I now see how delicate that is.

And let's not not forget "shrinkflation" that isn't taken into account. So many packaged food/personal products have had the quantity reduced in the last 12-18 months. Even Costco TP sizes are reduced. That's complicates the math quite a bit.

 

[ShokWaveRider]

By rights the Fed Funds rate should be 6-8% by now. Remember the 90's. Pandering to the stock market thinks me. (Yoda)

 

[marko]

Might we hope for another raise on our SS next year? Best case: two raises in two years and then inflation drops back to previous levels with no claw-back! Ka-ching?!

 

[USGrant1962]

And let's not not forget "shrinkflation" that isn't taken into account. So many packaged food/personal products have had the quantity reduced in the last 12-18 months. Even Costco TP sizes are reduced. That's complicates the math quite a bit.

Why do you think that shrinkflation isn't taken into account? The CPI calculation is complicated math that does account for obvious stuff like shrinkflation. From the BLS Handbook of Methods:

If the selected item is no longer available, or if there have been changes in the quality or quantity (for example, a container of orange juice containing 59 ounces instead of 64 ounces) of the good or service since the last time prices were collected, the data collector selects a new item similar to the old item. This is referred to as a substitution.

When substitution occurs, the commodity analyst reviews the new item and price. The new price may be quality adjusted for use in index computation. Conceptually, the CPI seeks to be a constant-quality measure, though accurately quantifying quality change may not always be possible. Detailed information about quality adjustment procedures is in the calculation section.

https://www.bls.gov/opub/hom/cpi/data.htm

It is not even particularly hard because most grocery items now show a per ounce or per pound price right on the shelf; and gasoline, utilities, etc. are all priced per unit.

 

[ExFlyBoy5]

Why do you think that shrinkflation isn't taken into account? The CPI calculation is complicated math that does account for obvious stuff like shrinkflation. From the BLS Handbook of Methods:




https://www.bls.gov/opub/hom/cpi/data.htm

It is not even particularly hard because most grocery items now show a per ounce or per pound price right on the shelf; and gasoline, utilities, etc. are all priced per unit.

Well, I stand corrected. As much as I try to convince my wife, I don't know everything.