Watch out for inflation numbers

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mffl
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Re: Watch out for inflation numbers

Post by mffl »

watchnerd wrote: Thu Apr 15, 2021 9:04 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. :shock: Crazy!
When scalpers sell hot tickets at insane markup for high demand music or sporting event, is that systemic consumer inflation?
No, but housing, lumber, new cars, used cars, computers, chlorine, etc., etc., etc. At what point is it NOT systemic consumer inflation?

I think the sheer number of people complaining about it is rather indicative of a problem. I've certainly in years past worried that inflation would rear its ugly head, but this is the first time I've viscerally felt it.

And for the record, I've always been and still am opposed to holding gold or crypto. Doesn't mean I appreciate the inflation or think it isn't there.
annu
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Re: Watch out for inflation numbers

Post by annu »

So below is what folks are worried about, even after huge increases in 80s(most recently), things have come back down to normal

Image

And more recently

Image
BJJ_GUY
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Re: Watch out for inflation numbers

Post by BJJ_GUY »

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. :shock: 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.
Tanelorn
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Re: Watch out for inflation numbers

Post by Tanelorn »

mffl wrote: Wed May 05, 2021 10:12 pm but housing, lumber, new cars, used cars, computers, chlorine, etc., etc., etc. At what point is it NOT systemic consumer inflation?
Who are you going to believe - the Fed or your lying eyes? Buffett and Zell and lots of people without an interest in manipulating public opinion have been talking about the big inflationary impacts they’re seeing in their business.
index2max
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Re: Watch out for inflation numbers

Post by index2max »

Tanelorn wrote: Thu May 06, 2021 6:03 am
mffl wrote: Wed May 05, 2021 10:12 pm but housing, lumber, new cars, used cars, computers, chlorine, etc., etc., etc. At what point is it NOT systemic consumer inflation?
Who are you going to believe - the Fed or your lying eyes? Buffett and Zell and lots of people without an interest in manipulating public opinion have been talking about the big inflationary impacts they’re seeing in their business.
Exactly. The Federal Reserve's job is to help the federal government find funding for their deficits since foreign bond holders make up less than 50% of US debt holdings nowadays. Before the 2008 recession, foreign countries held about half of US bonds. I think countries like Japan and China realize the US government doesn't realistically have a shot of paying back their debts, so why load up any more?

The Federal Reserve have every incentive not to admit what is obvious: that inflation is here.

This is what happens when you keep increasing the money supply.

https://wiki.mises.org/wiki/Inflation#I ... ney_supply
mffl
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Re: Watch out for inflation numbers

Post by mffl »

index2max wrote: Thu May 06, 2021 7:25 am
Tanelorn wrote: Thu May 06, 2021 6:03 am
mffl wrote: Wed May 05, 2021 10:12 pm but housing, lumber, new cars, used cars, computers, chlorine, etc., etc., etc. At what point is it NOT systemic consumer inflation?
Who are you going to believe - the Fed or your lying eyes? Buffett and Zell and lots of people without an interest in manipulating public opinion have been talking about the big inflationary impacts they’re seeing in their business.
Exactly. The Federal Reserve's job is to help the federal government find funding for their deficits since foreign bond holders make up less than 50% of US debt holdings nowadays. Before the 2008 recession, foreign countries held about half of US bonds. I think countries like Japan and China realize the US government doesn't realistically have a shot of paying back their debts, so why load up any more?

The Federal Reserve have every incentive not to admit what is obvious: that inflation is here.

This is what happens when you keep increasing the money supply.

https://wiki.mises.org/wiki/Inflation#I ... ney_supply
Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.

I understand the people telling us it's all anecdotal, but what else can we do? The government entity that's supposed to give us the nice, well studied statistics is at the very least not measuring the same thing we're talking about. It doesn't have to be a conspiracy for it to be useless, it's just a bad measure of what people are experiencing.

And again, at some point an avalanche of anecdotes isn't an anecdote anymore, it's a statistic. This isn't one person on this forum complaining about the price of lumber, it's lots of us, complaining about lots of different goods, each who know lots of other people and business owners, and it's tons of publicly traded companies complaining about it publicly and in their earnings reports. Sure it might be asymmetric -- some of you arguing there hasn't been much inflation because your personal inflation is low should in fact factor into the average, but when the people who ARE experiencing inflation are experiencing lots of things with 100% to 500% price increases, that offsets at least a few people who aren't feeling any inflation.

And anyway I think what a lot of us are saying is that the personal inflation is coming for those of you who haven't felt it yet. It often hits the businesses first before they pass the price increases on to their customers, so maybe there's a couple month delay there. Several of you have already expressed low or zero personal inflation. I wonder what percentage of business owners out there think they're experiencing low or zero inflation for goods or labor.
Robot Monster
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Re: Watch out for inflation numbers

Post by Robot Monster »

index2max wrote: Thu May 06, 2021 7:25 am The Federal Reserve have every incentive not to admit what is obvious: that inflation is here.
Aren't other branches of government responsible for calculating the inflation figures, like PCE and CPI, upon which the Fed relies? Doesn't PCE come from the Bureau of Economic Analysis (BEA) and CPI come from the Bureau of Labor Statistics? Maybe the Fed is the innocent part here. :wink:
SlowMovingInvestor
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Re: Watch out for inflation numbers

Post by SlowMovingInvestor »

Tanelorn wrote: Thu May 06, 2021 6:03 am
mffl wrote: Wed May 05, 2021 10:12 pm but housing, lumber, new cars, used cars, computers, chlorine, etc., etc., etc. At what point is it NOT systemic consumer inflation?
Who are you going to believe - the Fed or your lying eyes? Buffett and Zell and lots of people without an interest in manipulating public opinion have been talking about the big inflationary impacts they’re seeing in their business.
My eyes (i.e. my own personal inflation) has been pretty non-existent over the last 4 years. If anything, I'd say food prices have gone down for me because of a large ultra discount supermarket chain that opened stores here. But I'm not extrapolating from that to say that CPI rate is too high.

Bufffet's businesses uses lumber a lot - not surprising they'd see increases. And Buffet certainly does have an interest in getting consumers of those goods to accept his price increases.

I'm not saying inflation isn't happening. It certainly is, especially in areas with shortages (chips, lumber) that have a ripple effect. I just question the predictions/commentary that a great deal of inflation is happening that isn't being captured by CPI.
Last edited by SlowMovingInvestor on Thu May 06, 2021 8:59 am, edited 1 time in total.
SlowMovingInvestor
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Re: Watch out for inflation numbers

Post by SlowMovingInvestor »

Robot Monster wrote: Thu May 06, 2021 8:45 am
index2max wrote: Thu May 06, 2021 7:25 am The Federal Reserve have every incentive not to admit what is obvious: that inflation is here.
Aren't other branches of government responsible for calculating the inflation figures, like PCE and CPI, upon which the Fed relies? Doesn't PCE come from the Bureau of Economic Analysis (BEA) and CPI come from the Bureau of Labor Statistics? Maybe the Fed is the innocent part here. :wink:
Also, during periods of much higher inflation (the late 70s), the DoL did report it and the Fed responded appropriately. Even though the economy was weaker and less able to take hikes.

There is one factor that I read about -- companies reluctant to increase prices during a pandemic that are more willing now. Add that to pandemic shortages, so yes I do expect some inflation. But I don't accept the notion that lots of inflation is being underreported.

[ Honestly, I've been reading articles/newsletters proclaiming lots of inflation coming since I started investing, but it's never happened. It was gold bugs then, now we have crypto fans too. I'm not suggesting all concerned about inflation are into gold/crypto, just wanted to point out that this is not a new concern]
Robot Monster
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Re: Watch out for inflation numbers

Post by Robot Monster »

SlowMovingInvestor wrote: Thu May 06, 2021 8:59 am ...But I don't accept the notion that lots of inflation is being underreported...
Yeah, I have a hard time wrapping my head around that, as well. Aren't there a lot of people involved in the collection and creation of the inflation numbers? Are they all involved in the conspiracy to keep them low? How is that even possible, and more importantly, whatever is their incentive? Do they all get Christmas bonuses based on keeping the government's costs down? Or do they do it just to get perverse satisfaction throwing those who rely on social security under the bus? (As social security is calculated off of CPI, yes?)

Hey, just askin'.
mffl
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Re: Watch out for inflation numbers

Post by mffl »

Robot Monster wrote: Thu May 06, 2021 9:09 am
SlowMovingInvestor wrote: Thu May 06, 2021 8:59 am ...But I don't accept the notion that lots of inflation is being underreported...
Yeah, I have a hard time wrapping my head around that, as well. Aren't there a lot of people involved in the collection and creation of the inflation numbers? Are they all involved in the conspiracy to keep them low? How is that even possible, and more importantly, whatever is their incentive? Do they all get Christmas bonuses based on keeping the government's costs down? Or do they do it just to get perverse satisfaction throwing those who rely on social security under the bus? (As social security is calculated off of CPI, yes?)

Hey, just askin'.
Some people may believe it's a conspiracy. I don't. I think it's simply some bad judgements (which may be completely well intentioned) about how to calculate hedonic adjustments and what to count / not count. CPI is just an incomplete tool for detecting the problem we're currently facing.

The fact that it errs on the low side probably improves its staying power for all sorts of reasons already stated, but that doesn't mean it has to be a conspiracy, or that anyone involved necessarily has evil intentions any more than you or I do, even though we disagree on this issue.

And the Fed isn't saying there's not higher inflation, I simply don't think they're capturing all of it, and they're confident it's transitory, which it may be. That's an awfully risky gamble though if it's not. Seems like the old "keep it under 2%" rule was a lot less risky than the "ehh, let it run hot so it can average 2% over some long unspecified period even though it will be hard to put Pandora back in the box once it's out" rule.
SlowMovingInvestor
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Re: Watch out for inflation numbers

Post by SlowMovingInvestor »

Robot Monster wrote: Thu May 06, 2021 9:09 am
SlowMovingInvestor wrote: Thu May 06, 2021 8:59 am ...But I don't accept the notion that lots of inflation is being underreported...
Yeah, I have a hard time wrapping my head around that, as well. Aren't there a lot of people involved in the collection and creation of the inflation numbers? Are they all involved in the conspiracy to keep them low? How is that even possible, and more importantly, whatever is their incentive? Do they all get Christmas bonuses based on keeping the government's costs down? Or do they do it just to get perverse satisfaction throwing those who rely on social security under the bus? (As social security is calculated off of CPI, yes?)
A few years back, I knew 2 people who used to work at the Bureau of Labor Statistics. Very conscientious economists, dedicated to data integrity. I'm sure they'd resign if they were told to cook the numbers.

Note too the Walmart Effect in the past, and the Amazon effect in the last few years. I think the efficiency of these companies has helped to drive down inflation.
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Re: Watch out for inflation numbers

Post by JimmyJammy »

mffl wrote: Thu May 06, 2021 9:21 am
Robot Monster wrote: Thu May 06, 2021 9:09 am
SlowMovingInvestor wrote: Thu May 06, 2021 8:59 am ...But I don't accept the notion that lots of inflation is being underreported...
And the Fed isn't saying there's not higher inflation, I simply don't think they're capturing all of it, and they're confident it's transitory, which it may be. That's an awfully risky gamble though if it's not. Seems like the old "keep it under 2%" rule was a lot less risky than the "ehh, let it run hot so it can average 2% over some long unspecified period even though it will be hard to put Pandora back in the box once it's out" rule.
Exactly. They're content to let it run. Don't fight the Fed. Good to have some TIPS in one's portfolio.
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dodecahedron
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Re: Watch out for inflation numbers

Post by dodecahedron »

SlowMovingInvestor wrote: Thu May 06, 2021 8:53 am
Tanelorn wrote: Thu May 06, 2021 6:03 am
mffl wrote: Wed May 05, 2021 10:12 pm but housing, lumber, new cars, used cars, computers, chlorine, etc., etc., etc. At what point is it NOT systemic consumer inflation?
Who are you going to believe - the Fed or your lying eyes? Buffett and Zell and lots of people without an interest in manipulating public opinion have been talking about the big inflationary impacts they’re seeing in their business.
My eyes (i.e. my own personal inflation) has been pretty non-existent over the last 4 years. If anything, I'd say food prices have gone down for me because of a large ultra discount supermarket chain that opened stores here. But I'm not extrapolating from that to say that CPI rate is too high.
Curious what chain that would be?

Along analogous lines, the food component of my own personal inflation rate has gone down for me in the past three years because (thanks to repeated recommendations from this forum), I started shopping regularly at Aldi. (It is a bit farther from my home than where I had shopped in the past, and thus had not previously been on my radar screen until repeated praises on this forum brought it to my attention. Once I gave Aldi a try I realized that it is so efficiently laid out and operated that I have saved quite a bit of time as well as money shopping there. The slightly longer trip is far more than offset by the smaller amount of time I spend navigating the aisles, finding what I want, and checking out. And the value in nutrition and taste for the dollar has definitely paid off as well.)

But even though CPI does not capture my exact idiosyncratic personal inflation experiences, I agree that in the long run it will be important to have a significant chunk of my portfolio insured against large CPI increases.
SlowMovingInvestor
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Re: Watch out for inflation numbers

Post by SlowMovingInvestor »

dodecahedron wrote: Thu May 06, 2021 9:35 am
SlowMovingInvestor wrote: Thu May 06, 2021 8:53 am
My eyes (i.e. my own personal inflation) has been pretty non-existent over the last 4 years. If anything, I'd say food prices have gone down for me because of a large ultra discount supermarket chain that opened stores here. But I'm not extrapolating from that to say that CPI rate is too high.
Curious what chain that would be?

Along analogous lines, the food component of my own personal inflation rate has gone down for me in the past three years because (thanks to repeated recommendations from this forum), I started shopping regularly at Aldi. (It is a bit farther from my home than where I had shopped in the past, and thus had not previously been on my radar screen until repeated praises on this forum brought it to my attention. Once I gave Aldi a try I realized that it is so efficiently laid out and operated that I have saved quite a bit of time as well as money shopping there. The slightly longer trip is far more than offset by the smaller amount of time I spend navigating the aisles, finding what I want, and checking out. And the value in nutrition and taste for the dollar has definitely paid off as well.)

Yup, Aldi is the chain I was referring to. Very good prices, good layout, very fast check out. And I don't have to cope with huge parking lots and monstrous sized Walmart or Costco stores.
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Re: Watch out for inflation numbers

Post by ApeAttack »

surfstar wrote: Wed Apr 14, 2021 4:00 pm Woohoo!

Lets inflate our mortgage away! 2.5% for 30 years will be very cheap - sooner or later...

Bring it on!
I also consider my mortgage to have inflation-hedging value. Currently I'm paying down a 30 year 2.5% mortgage at a 25 year rate by adding a small extra payment each month, but I'm not sure if I would be better off using the extra payment to invest in equities or even more I-Bonds as a further inflation hedge (and it would beef up my EF).

If significant inflation never occurs and I make less money from I-Bonds than paying off the mortgage, I could still use the I-Bonds to make a lump sum payment toward the end of the mortgage.

In the end, it probably won't matter much if inflation stays around 2-4% for the next couple decades.
May all your index funds gain +0.5% today.
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Seasonal
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Re: Watch out for inflation numbers

Post by Seasonal »

The Bureau of Labor Statistics publishes detailed reports on its methodology, movement in the CPI components, etc. The pushback I see is nowhere near as detailed and often boils down to "my costs are going up", citing a few examples, rather than some sort of point by point refutation or evidence of a systematic issue. Inflation, after all, is a systematic issue - it's a general rise in prices, not just an increase in some visible examples.

A current issue is that there has been a lot of disruption in the economy as it adjusted to the covid slowdown and as it moves back to normal. It takes a while to get factories going again, employees back in place, inventories back to a reasonable level, etc. During that process there will be shortages and those shortages can easily result in higher prices. These effects should be transitory, but it's not clear how quickly they will be fixed.

There a number of people who believe an increase in their costs are due to inflation (bad), while an increases in the prices they charge (wages or business prices) are something unrelated.
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Re: Watch out for inflation numbers

Post by willthrill81 »

watchnerd wrote: Wed Apr 14, 2021 4:09 pm Yes, there is a relationship, but CPI-U doesn't claim to track real estate prices.
Correct. It is meant to track the prices of consumer goods and services, not real assets (e.g., real estate, stocks, etc.).
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Mountain Doc
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Re: Watch out for inflation numbers

Post by Mountain Doc »

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. :shock: 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?
BJJ_GUY
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Re: Watch out for inflation numbers

Post by BJJ_GUY »

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. :shock: 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?
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Re: Watch out for inflation numbers

Post by Mountain Doc »

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. :shock: 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.
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Re: Watch out for inflation numbers

Post by DB2 »

mffl wrote: Thu May 06, 2021 8:10 am
Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
Same here. No one can find workers in a lot of jobs around here too...as many unemployed are "making" too much on unemployment.
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Re: Watch out for inflation numbers

Post by index2max »

willthrill81 wrote: Thu May 06, 2021 12:13 pm
watchnerd wrote: Wed Apr 14, 2021 4:09 pm Yes, there is a relationship, but CPI-U doesn't claim to track real estate prices.
Correct. It is meant to track the prices of consumer goods and services, not real assets (e.g., real estate, stocks, etc.).
Yes, but newly printed money also goes into assets too. Remember when the S&P500 was only about 1500 back in 2007?

“The Rich buy assets, the poor only have expenses and the middle class buys liabilities they think are assets”

-Robert Kiyosaki
DB2 wrote: Thu May 06, 2021 3:43 pm
mffl wrote: Thu May 06, 2021 8:10 am
Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
Same here. No one can find workers in a lot of jobs around here too...as many unemployed are "making" too much on unemployment.
Last summer in 2020, the manager of a boutique hotel in a historic home told me the employees begged the owner to furlough them because the unemployment paychecks were larger than their regular pay. :P

He was the only one working there that week.
mffl
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Re: Watch out for inflation numbers

Post by mffl »

DB2 wrote: Thu May 06, 2021 3:43 pm
mffl wrote: Thu May 06, 2021 8:10 am
Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
Same here. No one can find workers in a lot of jobs around here too...as many unemployed are "making" too much on unemployment.
In defense of the current situation, I saw some economist say the following:

"I often suggest that whenever anyone says, ‘I can’t find the workers I need,’ she should really add, ‘at the wages I want to pay.’"

Well, yeah. That's the problem. I suppose at some dollar amount you could recruit Bill Gates to work for you, but that's not the point. And it doesn't do the workers any good if their costs are going up too.

And another thing I'd add is that I don't know that it's fair to say that it's not inflation until it hits the end consumer. Perhaps that's how the CPI sees it, but in my opinion that's part of what's wrong with looking at it that way. There are a lot of people negatively affected long before the price increases hit the consumer. How do you think the homebuilders feel about upsetting their customers with price increases and the loss of business due to the increased price and/or inability to procure lumber, as one example? These are people too. Small business owners, employees of these business that are struggling due to inflated input costs, as well as shareholders of large publicly traded corporations. It's doing plenty of damage even if it hasn't hit the price stickers at the local Aldy's yet.
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Re: Watch out for inflation numbers

Post by Northern Flicker »

Also, when people like Jay Powell and Janet Yellen say that an increase in inflation is likely to be transient, they mean that the rate of increase will come back down, not that a year from now prices will roll back. If we have 3% inflation over the next year, those increases will stay baked in if inflation falls back to 1.8%. Nobody is predicting deflation.
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Re: Watch out for inflation numbers

Post by index2max »

mffl wrote: Thu May 06, 2021 4:03 pm
DB2 wrote: Thu May 06, 2021 3:43 pm
mffl wrote: Thu May 06, 2021 8:10 am
Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
Same here. No one can find workers in a lot of jobs around here too...as many unemployed are "making" too much on unemployment.
In defense of the current situation, I saw some economist say the following:

"I often suggest that whenever anyone says, ‘I can’t find the workers I need,’ she should really add, ‘at the wages I want to pay.’"

Well, yeah. That's the problem. I suppose at some dollar amount you could recruit Bill Gates to work for you, but that's not the point. And it doesn't do the workers any good if their costs are going up too.

And another thing I'd add is that I don't know that it's fair to say that it's not inflation until it hits the end consumer. Perhaps that's how the CPI sees it, but in my opinion that's part of what's wrong with looking at it that way. There are a lot of people negatively affected long before the price increases hit the consumer. How do you think the homebuilders feel about upsetting their customers with price increases and the loss of business due to the increased price and/or inability to procure lumber, as one example? These are people too. Small business owners, employees of these business that are struggling due to inflated input costs, as well as shareholders of large publicly traded corporations. It's doing plenty of damage even if it hasn't hit the price stickers at the local Aldy's yet.
Your common sense tells you that CPI is an imperfect measure of inflation. Your intuition is correct.

Inflation is caused by an increase in the money supply. The Mises Institute has lots of articles these types of economics topics for people trying to get common sense answers.

https://wiki.mises.org/wiki/Inflation#I ... ney_supply
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Re: Watch out for inflation numbers

Post by ballons »

mffl wrote: Thu May 06, 2021 8:10 am Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
So when shortages end and they stop fighting to overpay for inputs, these businesses will lower their prices?
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Re: Watch out for inflation numbers

Post by SlowMovingInvestor »

mffl wrote: Thu May 06, 2021 4:03 pm
And another thing I'd add is that I don't know that it's fair to say that it's not inflation until it hits the end consumer. Perhaps that's how the CPI sees it, but in my opinion that's part of what's wrong with looking at it that way. There are a lot of people negatively affected long before the price increases hit the consumer. How do you think the homebuilders feel about upsetting their customers with price increases and the loss of business due to the increased price and/or inability to procure lumber, as one example? These are people too. Small business owners, employees of these business that are struggling due to inflated input costs, as well as shareholders of large publicly traded corporations. It's doing plenty of damage even if it hasn't hit the price stickers at the local Aldy's yet.
CPI is specifically consumer directed.

We have a sizzling hot real estate market. Homebuilders seem to be doing quite well, not losing business. Indeed, both large and small companies in many areas (outside of those sectors that haven't recovered from the pandemic) seem to be doing well.

Also there are companies benefiting from lower supply, for instance - new car dealers and their sales staff (car salespeople are people too !). Heck, I likely benefited from it marginally when I sold my 20 year old car with body damage and airbag light for $1700 a few days back.
Aldi (not Aldy) prices are an anecdote of course, but it's a response to anecdotes that claim widespread inflation.
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Re: Watch out for inflation numbers

Post by mffl »

ballons wrote: Thu May 06, 2021 4:24 pm
mffl wrote: Thu May 06, 2021 8:10 am Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
So when shortages end and they stop fighting to overpay for inputs, these businesses will lower their prices?
See above. Everyone on both sides is defining "inflation calming down" as "rate of increase slows", not "prices will come back to normal". So no, they probably will not lower their prices, as their new, higher input prices are for the most part here to stay. This isn't going to ever get better as in "prices go back to normal". This will get better as in prices won't be rising so quickly every month, from an already permanently elevated baseline.
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Re: Watch out for inflation numbers

Post by mffl »

SlowMovingInvestor wrote: Thu May 06, 2021 4:26 pm CPI is specifically consumer directed.
Yep, agreed. And it's not a conspiracy, and the books are not cooked, but it is a pretty useless metric for what people experience as inflation.
SlowMovingInvestor wrote: Thu May 06, 2021 4:26 pm We have a sizzling hot real estate market. Homebuilders seem to be doing quite well, not losing business. Indeed, both large and small companies in many areas (outside of those sectors that haven't recovered from the pandemic) seem to be doing well.
Right, the real estate market is "hot", but that's just inflation, it's not any sort of productive price increases. The homebuilders I know are not actually all that happy about it, as they don't feel like they can pass all their cost increases on to their customers, and they also can't produce at capacity due to shortages.
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Re: Watch out for inflation numbers

Post by ballons »

mffl wrote: Thu May 06, 2021 4:39 pm
ballons wrote: Thu May 06, 2021 4:24 pm
mffl wrote: Thu May 06, 2021 8:10 am Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
So when shortages end and they stop fighting to overpay for inputs, these businesses will lower their prices?
See above. Everyone on both sides is defining "inflation calming down" as "rate of increase slows", not "prices will come back to normal". So no, they probably will not lower their prices, as their new, higher input prices are for the most part here to stay. This isn't going to ever get better as in "prices go back to normal". This will get better as in prices won't be rising so quickly every month, from an already permanently elevated baseline.
So lumber prices are never coming back down? If they free fall, builders are going to keep charging ~$35K extra per house and no one is going to get wise to being overcharged?
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Re: Watch out for inflation numbers

Post by mffl »

ballons wrote: Thu May 06, 2021 4:53 pm
mffl wrote: Thu May 06, 2021 4:39 pm
ballons wrote: Thu May 06, 2021 4:24 pm
mffl wrote: Thu May 06, 2021 8:10 am Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
So when shortages end and they stop fighting to overpay for inputs, these businesses will lower their prices?
See above. Everyone on both sides is defining "inflation calming down" as "rate of increase slows", not "prices will come back to normal". So no, they probably will not lower their prices, as their new, higher input prices are for the most part here to stay. This isn't going to ever get better as in "prices go back to normal". This will get better as in prices won't be rising so quickly every month, from an already permanently elevated baseline.
So lumber prices are never coming back down? If they free fall, builders are going to keep charging ~$35K extra per house and now one is going to get wise to being overcharged?
"Prices" in general are never going to come back down, correct. "Lumber prices" specifically may or may not come back down very soon, or when they do, by as much as you'd think. If this were only about lumber, it would be a much less serious problem, and irritating to only a comparatively small subset of individuals. Unless it persists for years, which is certainly possible. The longer it persists, the higher the probability that your need for that product intersects with a period of elevated cost. Anyway, it's far from just that. It's all across the economy in all sorts of completely unrelated inputs and finished goods.
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Re: Watch out for inflation numbers

Post by willthrill81 »

index2max wrote: Thu May 06, 2021 3:53 pm
willthrill81 wrote: Thu May 06, 2021 12:13 pm
watchnerd wrote: Wed Apr 14, 2021 4:09 pm Yes, there is a relationship, but CPI-U doesn't claim to track real estate prices.
Correct. It is meant to track the prices of consumer goods and services, not real assets (e.g., real estate, stocks, etc.).
Yes, but newly printed money also goes into assets too. Remember when the S&P500 was only about 1500 back in 2007?
That's true but doesn't have any relevance to CPI. Remember that a big goal for most investors is to get the best inflation-adjusted return, given their risk tolerance, on their capital that they can. If the nominal price of one's investments increases at a faster rate than the nominal price of the goods and services one buys, that's a win.
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Re: Watch out for inflation numbers

Post by LittleMaggieMae »

SlowMovingInvestor wrote: Thu May 06, 2021 4:26 pm
Aldi (not Aldy) prices are an anecdote of course, but it's a response to anecdotes that claim widespread inflation.
Aldi prices do go up. I've seen increases (and less fluctuation) on the prices at my local Aldi(s) in the last 6 months - the prices aren't trending back down with the change in season. I live in an area with lots of old style little Aldi stores. So, I tend to shop which ever Aldi is close to the other errands I am running.
I do like the new format/new construction stores (there's one but it's too far off any of my paths to go to regularly - since the same products are available in a closer store). I like the bigger foot print and wider aisles (and I do like that the first thing you get to is NOT chips and cookies and packaged junk food. )

Isn't that really the issue here? If inflation raises prices (that will not drop in the future) and income doesn't increase - it's still the same 'pinch' to ones wallet. If income hasn't currently go up to match the raises prices - then it's burdensome to one's wallet - as the wallet owner will have to carefully CHOOSE where and how to spend their limited money and perhaps forego some 'wants' and maybe some "needs".

I'm guessing since most people seem to be flush with cash - any increase in expenses probably doesn't feel all that bad.
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Re: Watch out for inflation numbers

Post by index2max »

willthrill81 wrote: Thu May 06, 2021 5:14 pm
index2max wrote: Thu May 06, 2021 3:53 pm
willthrill81 wrote: Thu May 06, 2021 12:13 pm
watchnerd wrote: Wed Apr 14, 2021 4:09 pm Yes, there is a relationship, but CPI-U doesn't claim to track real estate prices.
Correct. It is meant to track the prices of consumer goods and services, not real assets (e.g., real estate, stocks, etc.).
Yes, but newly printed money also goes into assets too. Remember when the S&P500 was only about 1500 back in 2007?
That's true but doesn't have any relevance to CPI. Remember that a big goal for most investors is to get the best inflation-adjusted return, given their risk tolerance, on their capital that they can. If the nominal price of one's investments increases at a faster rate than the nominal price of the goods and services one buys, that's a win.
Yes, CPI is not measuring true inflation. It only looks at an arbitrary basket of goods. That’s why I prefer following the money supply. Just because the money is sitting in a vault now doesn’t mean it won’t go into public circulation eventually.

Yup, like you said, in the long run, you want to own cashflowing assets whose prices you can increase when inflation occurs to stay ahead of the game
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Re: Watch out for inflation numbers

Post by Robot Monster »

SlowMovingInvestor wrote: Thu May 06, 2021 4:26 pm CPI...is a pretty useless metric for what people experience as inflation
Can you expand on that, please? Is it that the CPI component weights are off from what most people experience, or what exactly?

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Re: Watch out for inflation numbers

Post by willthrill81 »

index2max wrote: Thu May 06, 2021 5:33 pm
willthrill81 wrote: Thu May 06, 2021 5:14 pm
index2max wrote: Thu May 06, 2021 3:53 pm
willthrill81 wrote: Thu May 06, 2021 12:13 pm
watchnerd wrote: Wed Apr 14, 2021 4:09 pm Yes, there is a relationship, but CPI-U doesn't claim to track real estate prices.
Correct. It is meant to track the prices of consumer goods and services, not real assets (e.g., real estate, stocks, etc.).
Yes, but newly printed money also goes into assets too. Remember when the S&P500 was only about 1500 back in 2007?
That's true but doesn't have any relevance to CPI. Remember that a big goal for most investors is to get the best inflation-adjusted return, given their risk tolerance, on their capital that they can. If the nominal price of one's investments increases at a faster rate than the nominal price of the goods and services one buys, that's a win.
Yes, CPI is not measuring true inflation. It only looks at an arbitrary basket of goods. That’s why I prefer following the money supply. Just because the money is sitting in a vault now doesn’t mean it won’t go into public circulation eventually.

Yup, like you said, in the long run, you want to own cashflowing assets whose prices you can increase when inflation occurs to stay ahead of the game
Again, the money supply is not a measure of inflation. Money can remain on the balance sheets of commercial banks, major corporations, very wealthy individual, etc. for a very, very long time.

M3 has more than doubled over the last 10 years, but the nominal price of our groceries, utilities, clothing, phones and service, vehicles, etc. has not come close to doubling over that same period.
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Re: Watch out for inflation numbers

Post by SlowMovingInvestor »

Robot Monster wrote: Thu May 06, 2021 5:34 pm
SlowMovingInvestor wrote: Thu May 06, 2021 4:26 pm CPI...is a pretty useless metric for what people experience as inflation
Can you expand on that, please? Is it that the CPI component weights are off from what most people experience, or what exactly?
I didn't say that, mffl did, and I don't agree with the statement that CPI is pretty useless metric for what people experience as inflation.


No one has a basket of goods that exactly matches the CPI basket, especially given geographical variations, but that doesn't mean its useless a all. The reverse, in fact.
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Re: Watch out for inflation numbers

Post by 3CT_Paddler »

The large number of anecdotes will likely show up in the data in the coming months, but it might take months for these price increases to show up throughput supply chains and then a couple more months for reporting to show it.

My hunch is that an increase in the velocity of money is just starting. With a significant number of fully vaccinated people there is a lot of optimism out there. Outside of businesses directly impacted by the pandemic, there are many flush with cash and wanting to spend it this summer.
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Re: Watch out for inflation numbers

Post by willthrill81 »

3CT_Paddler wrote: Thu May 06, 2021 5:46 pm My hunch is that an increase in the velocity of money is just starting. With a significant number of fully vaccinated people there is a lot of optimism out there. Outside of businesses directly impacted by the pandemic, there are many flush with cash and wanting to spend it this summer.
We share the same suspicion. It won't surprise me at all if we see CPI rise to 4-5% over the next two or three years due to pent up demand from the last ~14 months being released, followed by rising interest rates.
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Re: Watch out for inflation numbers

Post by mffl »

SlowMovingInvestor wrote: Thu May 06, 2021 5:38 pm
Robot Monster wrote: Thu May 06, 2021 5:34 pm
SlowMovingInvestor wrote: Thu May 06, 2021 4:26 pm CPI...is a pretty useless metric for what people experience as inflation
Can you expand on that, please? Is it that the CPI component weights are off from what most people experience, or what exactly?
I didn't say that, mffl did, and I don't agree with the statement that CPI is pretty useless metric for what people experience as inflation.


No one has a basket of goods that exactly matches the CPI basket, especially given geographical variations, but that doesn't mean its useless a all. The reverse, in fact.
Fair enough, "useless" is an exaggeration.

But the type of issue we're seeing right now is its blind spot. I suppose even using the term "blind spot" is unfair, as it simply isn't designed to measure such things.

But there should be something that does measure broader price increases, which would be quite useful in situations like these. And I'd be more interested in that metric than CPI.

ETA: I agree with the other posters who suggest that part of the problem isn't even what CPI covers or doesn't cover -- it will reflect what's going on soon enough, it's just delayed.
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Re: Watch out for inflation numbers

Post by SlowMovingInvestor »

3CT_Paddler wrote: Thu May 06, 2021 5:46 pm The large number of anecdotes will likely show up in the data in the coming months, but it might take months for these price increases to show up throughput supply chains and then a couple more months for reporting to show it.

My hunch is that an increase in the velocity of money is just starting. With a significant number of fully vaccinated people there is a lot of optimism out there. Outside of businesses directly impacted by the pandemic, there are many flush with cash and wanting to spend it this summer.
A reasonable argument. Notable too that international travel is still not easy, so even recreational travel expenditures are likely to be spent in the US. That would be welcome for travel related businesses. Far better that money is spent on those businesses than on buying cryptopunks !

The question is what action can or should one take as an investor and/or consumer ?
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Re: Watch out for inflation numbers

Post by mffl »

SlowMovingInvestor wrote: Thu May 06, 2021 6:06 pm
3CT_Paddler wrote: Thu May 06, 2021 5:46 pm The large number of anecdotes will likely show up in the data in the coming months, but it might take months for these price increases to show up throughput supply chains and then a couple more months for reporting to show it.

My hunch is that an increase in the velocity of money is just starting. With a significant number of fully vaccinated people there is a lot of optimism out there. Outside of businesses directly impacted by the pandemic, there are many flush with cash and wanting to spend it this summer.
A reasonable argument. Notable too that international travel is still not easy, so even recreational travel expenditures are likely to be spent in the US. That would be welcome for travel related businesses. Far better that money is spent on those businesses than on buying cryptopunks !

The question is what action can or should one take as an investor and/or consumer ?
Fantastic point. Rather than just me grumbling, what do we do about it?

I *think*, but I'm open to other opinions on this, that we're unlikely to hit hyperinflation, this is just regular old, irritating, nest egg debasing inflation. I *think* this means you should have your money in income producing assets that don't have a fixed interest rate, i.e. stocks, maybe real estate. It just means that your 15% annual gains in stocks is more like 7% (or 9% or whatever) in practice.

As a consumer, my gut says "hold off", but of course that's irrelevant unless you think prices will "come back to normal", which they probably will not. Maybe a few specific examples of things you *might* (or might not) be better off waiting to buy would be houses or used cars. Other things with high inflation right now will probably not subside, or aren't things you can really wait on (pool chlorine tablets, as an example).

So maybe the action is... don't just do something; stand there? Or at least get the heck out of cash. I don't believe in either gold or crypto, so forget all that.
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Re: Watch out for inflation numbers

Post by ballons »

mffl wrote: Thu May 06, 2021 5:00 pm
ballons wrote: Thu May 06, 2021 4:53 pm
mffl wrote: Thu May 06, 2021 4:39 pm
ballons wrote: Thu May 06, 2021 4:24 pm
mffl wrote: Thu May 06, 2021 8:10 am Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
So when shortages end and they stop fighting to overpay for inputs, these businesses will lower their prices?
See above. Everyone on both sides is defining "inflation calming down" as "rate of increase slows", not "prices will come back to normal". So no, they probably will not lower their prices, as their new, higher input prices are for the most part here to stay. This isn't going to ever get better as in "prices go back to normal". This will get better as in prices won't be rising so quickly every month, from an already permanently elevated baseline.
So lumber prices are never coming back down? If they free fall, builders are going to keep charging ~$35K extra per house and now one is going to get wise to being overcharged?
"Prices" in general are never going to come back down, correct. "Lumber prices" specifically may or may not come back down very soon, or when they do, by as much as you'd think. If this were only about lumber, it would be a much less serious problem, and irritating to only a comparatively small subset of individuals. Unless it persists for years, which is certainly possible. The longer it persists, the higher the probability that your need for that product intersects with a period of elevated cost. Anyway, it's far from just that. It's all across the economy in all sorts of completely unrelated inputs and finished goods.
I didn't ask about prices in general. I am specifically asking about your anecdotal evidence that businesses are panic bidding for inputs due to shortages.

You are putting forth the theory that if prices fall after shortages end, businesses will refuse to pass on lower prices and customers will just accept that.
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Re: Watch out for inflation numbers

Post by mffl »

ballons wrote: Thu May 06, 2021 6:43 pm I didn't ask about prices in general. I am specifically asking about your anecdotal evidence that businesses are panic bidding for inputs due to shortages.

You are putting forth the theory that if prices fall after shortages end, businesses will refuse to pass on lower prices and customers will just accept that.
No I'm not, I'm saying I don't think input prices will fall for the most part, and therefore consumer prices won't either. Maybe a few extreme cases like lumber will settle down -- partially. I don't think the other prices will.
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Re: Watch out for inflation numbers

Post by willthrill81 »

mffl wrote: Thu May 06, 2021 5:52 pm But there should be something that does measure broader price increases, which would be quite useful in situations like these. And I'd be more interested in that metric than CPI.
What should be measured instead? Real assets? Prices for stocks, bonds, and real estate are easily tracked going back decades.
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Re: Watch out for inflation numbers

Post by DB2 »

mffl wrote: Thu May 06, 2021 4:03 pm
DB2 wrote: Thu May 06, 2021 3:43 pm
mffl wrote: Thu May 06, 2021 8:10 am
Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
Same here. No one can find workers in a lot of jobs around here too...as many unemployed are "making" too much on unemployment.
In defense of the current situation, I saw some economist say the following:

"I often suggest that whenever anyone says, ‘I can’t find the workers I need,’ she should really add, ‘at the wages I want to pay.’"

Well, yeah. That's the problem. I suppose at some dollar amount you could recruit Bill Gates to work for you, but that's not the point. And it doesn't do the workers any good if their costs are going up too.

And another thing I'd add is that I don't know that it's fair to say that it's not inflation until it hits the end consumer. Perhaps that's how the CPI sees it, but in my opinion that's part of what's wrong with looking at it that way. There are a lot of people negatively affected long before the price increases hit the consumer. How do you think the homebuilders feel about upsetting their customers with price increases and the loss of business due to the increased price and/or inability to procure lumber, as one example? These are people too. Small business owners, employees of these business that are struggling due to inflated input costs, as well as shareholders of large publicly traded corporations. It's doing plenty of damage even if it hasn't hit the price stickers at the local Aldy's yet.
My girlfriend is looking to get a deck built on current home - quotes running 2-3X higher than last year with these crazy lumber prices. Kicking herself for not doing it last year.
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Re: Watch out for inflation numbers

Post by mffl »

willthrill81 wrote: Thu May 06, 2021 7:36 pm
mffl wrote: Thu May 06, 2021 5:52 pm But there should be something that does measure broader price increases, which would be quite useful in situations like these. And I'd be more interested in that metric than CPI.
What should be measured instead? Real assets? Prices for stocks, bonds, and real estate are easily tracked going back decades.
Good point, but it's not necessarily bad if stocks increase in value if they produce greater returns (or are expected to produce greater returns in the future). To the extent their value is inflated due to TINA, I suppose that's just inflation.

Housing prices going up are just inflation. The house is the same as it was yesterday. Coca Cola might be selling more soda than it used to, so it's not necessarily inflation when its value goes up.
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Re: Watch out for inflation numbers

Post by DB2 »

index2max wrote: Thu May 06, 2021 3:53 pm
willthrill81 wrote: Thu May 06, 2021 12:13 pm
watchnerd wrote: Wed Apr 14, 2021 4:09 pm Yes, there is a relationship, but CPI-U doesn't claim to track real estate prices.
Correct. It is meant to track the prices of consumer goods and services, not real assets (e.g., real estate, stocks, etc.).
Yes, but newly printed money also goes into assets too. Remember when the S&P500 was only about 1500 back in 2007?

“The Rich buy assets, the poor only have expenses and the middle class buys liabilities they think are assets”

-Robert Kiyosaki
DB2 wrote: Thu May 06, 2021 3:43 pm
mffl wrote: Thu May 06, 2021 8:10 am
Every business owner I deal with in my business is convinced there's intense inflation going on. All their input costs have gone way up -- that is, the inputs they can actually acquire at all. They're all raising their prices.
Same here. No one can find workers in a lot of jobs around here too...as many unemployed are "making" too much on unemployment.
Last summer in 2020, the manager of a boutique hotel in a historic home told me the employees begged the owner to furlough them because the unemployment paychecks were larger than their regular pay. :P

He was the only one working there that week.
I know of two people collecting $660 a week (state + peuc money). This runs until Sept and it will be interesting what the state and congress does afterward. But both of them have said they are not going back to work to the make the same amount or a little more. I bet for many, even if unemployment was 70% of their typical earnings wouldn't go back to the job they did before unless they had to. Almost human nature not to. Why not sleep in and do what you want versus being in some crappy job (their perspective anyway).
Last edited by DB2 on Thu May 06, 2021 7:54 pm, edited 2 times in total.
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Re: Watch out for inflation numbers

Post by hi_there »

mffl wrote: Thu May 06, 2021 6:49 pm
ballons wrote: Thu May 06, 2021 6:43 pm I didn't ask about prices in general. I am specifically asking about your anecdotal evidence that businesses are panic bidding for inputs due to shortages.

You are putting forth the theory that if prices fall after shortages end, businesses will refuse to pass on lower prices and customers will just accept that.
No I'm not, I'm saying I don't think input prices will fall for the most part, and therefore consumer prices won't either. Maybe a few extreme cases like lumber will settle down -- partially. I don't think the other prices will.
It's a reasonably safe bet that prices will stay elevated overall, assuming the economy stays on a positive trajectory. Some reasons are supply chain caps on in-demand goods (lumber, semiconductors, etc.) and productions cuts to save on costs for out-of-demand goods (oil). Since the global supply chain is not optimized for post pandemic demand, the overall cost of attaining a market basket of goods will be higher. Plus, there is already a backlog of demand to work through before demand can subside.
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