BJJ_GUY wrote: ↑Thu May 06, 2021 2:16 pm
Mountain Doc wrote: ↑Thu May 06, 2021 12:59 pm
BJJ_GUY wrote: ↑Wed May 05, 2021 10:43 pm
Mountain Doc wrote: ↑Thu Apr 15, 2021 8:43 am
stocknoob4111 wrote: ↑Thu Apr 15, 2021 8:30 am
I recently checked Auto rental rates and they have gone absolutely beserk, 1st week of June (NOT a holiday weekend), in Las Vegas econobox cars are renting for around $85/day. A friend said cars in the Yellowstone area were renting at $2000/week.
Crazy!
And what weighting should car rental prices receive in the CPI?
A supply and demand mismatch for one product that leads to skyrocketing prices is not the same thing as broader inflation rising.
Go check out commodity prices. Look at PPI data climbing. These are all factors that work their way through the economy and, to the extent companies can pass along the price increases to the customers, they will. Inflation tends to lag the change in cost of materials/production, but show up as increased prices on final goods. A lot of companies have already implemented higher prices in order to maintain their margins. Whether CPI says there is inflation or not, there are a lot of companies suggesting something different.
I don’t object to the statement that higher costs of production,
if they can be passed on to consumers, show up as higher finished product prices (nor do I find that statement strategically useful as an investor). It's really just saying, "if companies can raise prices, they will." But maybe I am not understanding your point... how does this relate to my comment about rental car prices? Do you think the sudden spike in rental car prices is caused by rental car companies passing on higher raw material costs?
I was pointing out that rising prices are not contained within the rental car industry. Just because CPI is both flawed, and lags, doesn't mean there is a lack of evidence to support the claim that inflation is already underway. I'm not basing this on how I feel or what I've seen, or which car rental company I checked with on current rates. I'm basing this on actual data from various sources rather than rely solely on CPI.
To make things simple, if you knew, with certainty, that inflation was going to pick up, would this not be actionable? Everything we discuss about potential scenarios, whether it's rising interest rates or persistent (or unexpected) inflation -- all of these inputs can lead to something 'that is strategically useful as an investor.' If you don't believe this to be true, then I'm not sure what you're gaining from this exercise in debate/discussion?
My point about rental car companies was simply this: not
every rising price is caused by inflation. Even in an economy experiencing widespread deflation, you could still find a particular good/service that has risen in price due to other factors. Pointing to one good/service as evidence of inflation is an extremely weak argument. I'm not claiming CPI is a perfect measure, and maybe it’s not even the best one. That is a different discussion. I’m also not making any prediction about if, or how much, inflation is coming.
Even if I could know with certainty that inflation was going to pick up (of course I cannot be certain, but I will grant you the hypothetical), it
still would likely be useless to me as an investor. Because if I could know it with certainty, so could everyone else. Thus, asset prices (stocks, bonds, gold, crypto, houses, etc) would adjust to reflect that knowledge and I would find myself buying the "inflation protected" assets at a higher price.
For information to be useful as an investor, you have to know
more than the collective market... in other words, you have to find pricing inefficiencies. I think the body of evidence overwhelmingly shows that investors should not base their strategy on macroeconomic predictions.