Inflation for the month and year at highest rate in 13 years

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Rob5TCP
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Inflation for the month and year at highest rate in 13 years

Post by Rob5TCP »

The inflation for the prior year is 5.4%. Great for us that have 3.6% I Bonds, but not so great for everything else.

https://www.cnn.com/2021/07/13/economy/ ... index.html

New York (CNN Business)Prices keep rising in the United States, putting a squeeze on American consumers' wallets. That trend got worse in June.
The consumer price index, the nation's key inflation measure, jumped 0.9% in June, the largest one-month increase in 13 years. Over the last 12 months, prices were up 5.4%, the biggest jump in annual inflation in nearly 13 years.

Are you contemplating any changes in your allocation based on recent inflation. Would continued inflation change your allocations ?

Some of it looks to be one time problems (shortage of cars because of lack of chips). Time will tell if any of it is systemic and long term.
Last edited by Rob5TCP on Tue Jul 13, 2021 10:18 am, edited 1 time in total.
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Re: Inflation for the month and year at highest rate in 13 years

Post by jebmke »

No, no changes

edit here are some top items
Car rental 87.7% (y/y change)
Used cars 45.2%
Gas 45.1%
Laundry machines 29.4%
Airfare 24.6%
Moving 17.3%
Hotels 16.9%
Furniture 8.6%
Bacon 8.4%
But Y/Y metrics really aren't very meaningful given where the economy was a year ago.
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corn18
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Re: Inflation for the month and year at highest rate in 13 years

Post by corn18 »

jebmke wrote: Tue Jul 13, 2021 10:17 am No, no changes

edit here are some top items
Car rental 87.7% (y/y change)
Used cars 45.2%
Gas 45.1%
Laundry machines 29.4%
Airfare 24.6%
Moving 17.3%
Hotels 16.9%
Furniture 8.6%
Bacon 8.4%
But Y/Y metrics really aren't very meaningful given where the economy was a year ago.
If you compare it to 2 years ago, it's still inflation and the slope is increasing.

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Slacker
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Re: Inflation for the month and year at highest rate in 13 years

Post by Slacker »

corn18 wrote: Tue Jul 13, 2021 10:26 am
jebmke wrote: Tue Jul 13, 2021 10:17 am No, no changes

edit here are some top items
Car rental 87.7% (y/y change)
Used cars 45.2%
Gas 45.1%
Laundry machines 29.4%
Airfare 24.6%
Moving 17.3%
Hotels 16.9%
Furniture 8.6%
Bacon 8.4%
But Y/Y metrics really aren't very meaningful given where the economy was a year ago.
If you compare it to 2 years ago, it's still inflation and the slope is increasing.

Image
How does the average of inflation for 2020 and 2021 (ytd) combined compare to inflation in 2019 alone?
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Re: Inflation for the month and year at highest rate in 13 years

Post by HyperCat »

corn18 wrote: Tue Jul 13, 2021 10:26 am
jebmke wrote: Tue Jul 13, 2021 10:17 am No, no changes

edit here are some top items
Car rental 87.7% (y/y change)
Used cars 45.2%
Gas 45.1%
Laundry machines 29.4%
Airfare 24.6%
Moving 17.3%
Hotels 16.9%
Furniture 8.6%
Bacon 8.4%
But Y/Y metrics really aren't very meaningful given where the economy was a year ago.
If you compare it to 2 years ago, it's still inflation and the slope is increasing.

Image
But that isn't necessarily inflation. Car rentals, used cars themselves, computers, lumber, etc., are all drastically higher because of supply disruptions and/or shortages. Other items like airfare are higher because of industries trying to recoup losses from last year. There's no disputing that prices are higher, but there's also no indication this is permanent or a fundamentally accelerating trend. I will continue to view it as a temporary blip.
Last edited by HyperCat on Tue Jul 13, 2021 4:50 pm, edited 1 time in total.
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Re: Inflation for the month and year at highest rate in 13 years

Post by Seasonal »

Most likely transitory as the economy adjusts to reopening. Used cars are about one third of the increase and car related matters are over half of the increase. There's still a chip shortage and other supply chain adjustment issues. Look at the many posts here about soaring lumber prices and now those have returned to normal.

Markets are hardly reacting, even though we came in higher than consensus expectations. If markets aren't worried, then there does not seem much reason for concern.
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Re: Inflation for the month and year at highest rate in 13 years

Post by corn18 »

HyperCat wrote: Tue Jul 13, 2021 10:34 am
corn18 wrote: Tue Jul 13, 2021 10:26 am
jebmke wrote: Tue Jul 13, 2021 10:17 am No, no changes

edit here are some top items
Car rental 87.7% (y/y change)
Used cars 45.2%
Gas 45.1%
Laundry machines 29.4%
Airfare 24.6%
Moving 17.3%
Hotels 16.9%
Furniture 8.6%
Bacon 8.4%
But Y/Y metrics really aren't very meaningful given where the economy was a year ago.
If you compare it to 2 years ago, it's still inflation and the slope is increasing.

Image
But that isn't necessarily inflation. Used car rentals, used cars themselves, computers, lumber, etc., are all drastically higher because of supply disruptions and/or shortages. Other items like airfare are higher because of industries trying to recoup losses from last year. There's no disputing that prices are higher, but there's also no indication this is permanent or a fundamentally accelerating trend. I will continue to view it as a temporary blip.
The point made was that you cannot compare YoY data. So I provided data that looked further back. I have no idea if it's a temporary blip or not. I'll let you know in 5 years. Won't change anything I am doing, although I did just refi my mortgage to 2.25% fixed 30 year and that's a great inflation hedge.
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Re: Inflation for the month and year at highest rate in 13 years

Post by jebmke »

HyperCat wrote: Tue Jul 13, 2021 10:34 am There's no disputing that prices are higher, but there's also no indication this is permanent or a fundamentally accelerating trend. I will continue to view it as a temporary blip.
On any given day you can hear a talking head on Bloomberg Radio either extolling the likely rampant inflation coming or "nothing to see here."

Looking at long term bonds (nominal vs. Tips), the implied rate, long term inflation is up a bit but not raging.

Either way, unclear what I'd do differently even if I knew what was going to happen (which I don't).
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Re: Inflation for the month and year at highest rate in 13 years

Post by Leesbro63 »

It seems to me that inflation has been low for about 30 years. I wonder how this current spike fits in with that time frame. I guess one could argue that if inflation got high 13 years ago but subsided, this might be the same thing.
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Re: Inflation for the month and year at highest rate in 13 years

Post by corn18 »

jebmke wrote: Tue Jul 13, 2021 10:40 am
HyperCat wrote: Tue Jul 13, 2021 10:34 am There's no disputing that prices are higher, but there's also no indication this is permanent or a fundamentally accelerating trend. I will continue to view it as a temporary blip.
On any given day you can hear a talking head on Bloomberg Radio either extolling the likely rampant inflation coming or "nothing to see here."

Looking at long term bonds (nominal vs. Tips), the implied rate, long term inflation is up a bit but not raging.

Either way, unclear what I'd do differently even if I knew what was going to happen (which I don't).
Certainly the 10 yr breakeven rate is not going crazy. So those with money in the game are betting temporary blip. No guarantee they are right, though.

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Re: Inflation for the month and year at highest rate in 13 years

Post by Seasonal »

HyperCat wrote: Tue Jul 13, 2021 10:34 am... lumber, etc., are all drastically higher because of supply disruptions and/or shortages.... I will continue to view it as a temporary blip.
Lumber is no longer drastically higher. "Lumber prices have turned negative for the year after red-hot rally as the home improvement boom cools" https://markets.businessinsider.com/com ... ply-2021-7

Lumber is an example of a temporary blip.
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Re: Inflation for the month and year at highest rate in 13 years

Post by LadyGeek »

This thread is now in the Investing - Theory, News & General forum (general discussion).
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Re: Inflation for the month and year at highest rate in 13 years

Post by corn18 »

Leesbro63 wrote: Tue Jul 13, 2021 10:41 am It seems to me that inflation has been low for about 30 years. I wonder how this current spike fits in with that time frame. I guess one could argue that if inflation got high 13 years ago but subsided, this might be the same thing.
I don't see anything in the long term data that should cause panic. But you never really know. I wonder if anyone in 1973 knew they were about to get their butts kicked by inflation? Or that they hadn't actually recovered in 1977 and were about to get hammered again, but this time much worse?

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Re: Inflation for the month and year at highest rate in 13 years

Post by Chico78 »

The Fed says it's "transitory" meaning not permanent. Is transitory as in next few months or as in this transitory life here on earth? I don't know.
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Re: Inflation for the month and year at highest rate in 13 years

Post by jebmke »

Chico78 wrote: Tue Jul 13, 2021 10:53 am The Fed says it's "transitory" meaning not permanent. Is transitory as in next few months or as in this transitory life here on earth? I don't know.
I've listened to 2-3 interviews with governors (FED). What I heard them say is that the fundamental data they are seeing indicate it is likely transitory and that is guiding their policy decisions; and, that they continue to monitor the data and will respond accordingly.
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Re: Inflation for the month and year at highest rate in 13 years

Post by TurtleBeatsHare »

I’m less worried about the current inflation numbers than I am about how the Federal Reserve talks about the inflation numbers. The numbers for many of those items——particularly cars and the low wage/hospitality industries—should decline when the semiconductor shortage is addressed (might take a full year or two) and when more people return to work (which I predict will be this fall, when the extended/increased unemployment benefits end and schools reopen).

I’m much more concerned that the Federal Reserve is increasingly acting and talking like inflation isn’t a priority. Earlier this year, the Federal Reserve was denying inflation was a problem and refused to move their forecast numbers—which we’ve blown past. Then they claimed it would be transitory and end quickly (again—while I do agree with the transistors point, they were way too optimistic about the inflation ending by late summer). Now I occasionally hear Powell speaking about how higher inflation is beneficial. And of course, the Federal Reserve has “clarified” that it’s 2% inflation target is not a ceiling, but a long term average. These signals (ie denial, downplay, desirable) strike me as a Federal Reserve that is shifting its attitude towards inflation and may signal higher inflation in the future. People oftentimes forget that there is a real shift occurring in economics PhD programs—there are far more modern monetary theorists or people who focus in inequalities than there used to be and the people who lived through the 1970s are aging out of the profession. This might be creating a focus shift in priorities that is gradually manifesting even at the Federal Reserve.
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Re: Inflation for the month and year at highest rate in 13 years

Post by flyingaway »

I have noticed that the unit price of large pork butt meat at Walmart has increased from $1.49 to $1.99. That is a 34% inflation. Note that Walmart does not increase prices seasonally, unlike other grocery stores, so I tend to believe that the price increases is permanent.
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Re: Inflation for the month and year at highest rate in 13 years

Post by MishkaWorries »

jebmke wrote: Tue Jul 13, 2021 11:00 am
Chico78 wrote: Tue Jul 13, 2021 10:53 am The Fed says it's "transitory" meaning not permanent. Is transitory as in next few months or as in this transitory life here on earth? I don't know.
I've listened to 2-3 interviews with governors (FED). What I heard them say is that the fundamental data they are seeing indicate it is likely transitory and that is guiding their policy decisions; and, that they continue to monitor the data and will respond accordingly.
I'm noticing a trend.

1. Inflation? What inflation?
2. Inflation is transitory.
3. Inflation is fine -- just like funemoployment! It makes your paycheck bigger.
4. It's likely transitory.
5. Next year inflation should run hotter than normal but the year after that will be lower and therefore within our targets.
6.???

What worries me is the unexpected nature of all this inflation. Everyone knew last year numbers were artificially low so why are they getting surprised month after month?
What happened? The Consumer Price Index for All Urban Consumers increased 0.9% in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. This was the largest 1-month change since June 2008 when the index rose 1.0%. Over the last 12 months, the all-items index increased 5.4%, the largest 12-month increase since a 5.4% increase for the period ending August 2008.


This was the fifth month in a row that inflation has exceeded consensus estimates, and follows monthly increases of 0.6% in May (consensus was 0.4%), 0.8% in April (consensus was 0.2%), and 0.6% in March (consensus was 0.5%).

Core inflation, which omits food and energy, also surged 0.9% in June and has increased 4.5% over the last 12 months, the BLS said. Both of those numbers came in much higher than expectations.

Part of the “theory” of the higher inflation numbers for February to May 2021 was the very low baseline comparisons for the same months of 2020, when inflation sank to near zero during the rise of the pandemic. But that’s not the case for June, because inflation increased 0.6% in June 2020, certainly not a “depressed” number.
https://tipswatch.com/2021/07/13/u-s-in ... ectations/

Last year I decided to adjust my fixed income from 100% intermediate treasuries to 60/40 intermediate treasuries and intermediate Tips.
Last edited by MishkaWorries on Tue Jul 13, 2021 11:25 am, edited 1 time in total.
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Re: Inflation for the month and year at highest rate in 13 years

Post by ClassII »

TurtleBeatsHare wrote: Tue Jul 13, 2021 11:08 am I’m less worried about the current inflation numbers than I am about how the Federal Reserve talks about the inflation numbers.

I have a feeling the sudden change in how they perceive the 2% mandate is more just because of our immediate situation than any change in long term thinking. The instant deflation and reflation over the last year or so pretty much requires the Fed to just ride it out at least for a little while. If it stuck to it's traditional methodology we'd be seeing a ballooning of interest rates as they try to reign in the sudden spike of inflation. All that would do would ensure we don't get a V-shaped recovery as the moment we try to climb our way out the Fed stomps it all down with high interest rates.

I'm one of those who think this is highly temporary due to the aftershocks of the pandemic. It has nothing to do with the economy being fundamentally out of whack and more to do with supply chains having to reconfigure wildly from consumer driven to pandemic driven and back basically instantly. It's far better for all of us to endure a year of higher (but not dangerous) inflation to come out the other end in a better spot.

I say that as someone with a big newly cast fixed rate mortgage and 100% equities in my 401k so, I'm cool with it. :mrgreen:
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Re: Inflation for the month and year at highest rate in 13 years

Post by NiceUnparticularMan »

No changes needed (not that I would) since my overall portfolio strategy has long been biased toward protecting against unexpectedly high inflation. I have generally lost that bet on average, and while it would be nice if I stopped losing, I am not yet convinced it is about to pay off big.

Oh, there have long been people pushing to treat the 2% target as an average and not a ceiling, for reasons such as giving more headroom for helpful rate policies when needed. If you really hate the idea of like 2.1-3% inflation ever happening again, I guess that might concern you. But to me it is really at most a minor, and probably warranted, tweak.
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Re: Inflation for the month and year at highest rate in 13 years

Post by peppers »

Not making any changes to the portfolio.

Retired.

Although that uptick in the price of bacon stings a little. :annoyed
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Re: Inflation for the month and year at highest rate in 13 years

Post by nisiprius »

Our monthly expenses have declined noticeably for one simple and single reason: we are no longer getting all our groceries delivered via InstaCart.

(InstaCart has all kind of hidden expenses folded into it, it's hard to make a formal analysis but you have expenses stacked on expenses--you don't get store specials, the regular prices are higher than store prices, there seems to be a systematic tendency to show only less-economical smaller-sized packages. Shoppers replacements are, I think made mostly in good faith but they have a strong tendency to substitute rather than let a item go unfilled and the substitutes often are more expensive. And there are either delivery charges or a monthly membership charge and I choose to tip generously.)
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Re: Inflation for the month and year at highest rate in 13 years

Post by Robot Monster »

The Cleveland Fed's median CPI -- which looks at the median change in prices among index components -- was just 2.21% in June. (2.11% in May.)

The 16 percent trimmed-mean CPI was 2.9% in June. (2.62% in May.) It appears in the graph to have a much greater trajectory up which you can see in the link

The explanation for these measurements is:
By omitting outliers (small and large price changes) and focusing on the interior of the distribution of price changes, the median CPI and the 16 percent trimmed-mean CPI can provide a better signal of the underlying inflation trend than either the all-items CPI or the CPI excluding food and energy (also known as core CPI).
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Re: Inflation for the month and year at highest rate in 13 years

Post by Thesaints »

By omitting the outliers one may miss actual inflation for a long time.
As things are now, we are half way to a >10% rate on Series I Savings Bonds come November 1st...
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Re: Inflation for the month and year at highest rate in 13 years

Post by Morse Code »

Obviously, none of us know if this is long or short term, but it was predicted by every person I spoke to about it over the last 18 months. Even a fifth grader knows instinctively that when you give money away for nothing, it loses value. :oops:
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Re: Inflation for the month and year at highest rate in 13 years

Post by jebmke »

Morse Code wrote: Tue Jul 13, 2021 2:04 pm Obviously, none of us know if this is long or short term, but it was predicted by every person I spoke to about it over the last 18 months. Even a fifth grader knows instinctively that when you give money away for nothing, it loses value. :oops:
Isn't demand pressure more a function of money velocity rather than absolute quantity? I seem to recall seeing velocity charts that showed velocity declining. If both of those are "true" it would seem that the issues are supply-side rather than demand side.
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Re: Inflation for the month and year at highest rate in 13 years

Post by Morse Code »

jebmke wrote: Tue Jul 13, 2021 2:10 pm
Morse Code wrote: Tue Jul 13, 2021 2:04 pm Obviously, none of us know if this is long or short term, but it was predicted by every person I spoke to about it over the last 18 months. Even a fifth grader knows instinctively that when you give money away for nothing, it loses value. :oops:
Isn't demand pressure more a function of money velocity rather than absolute quantity? I seem to recall seeing velocity charts that showed velocity declining. If both of those are "true" it would seem that the issues are supply-side rather than demand side.
Not sure about the velocity aspect, but can't it be both more dollars and fewer goods at the same time? Anyway, it was very predictable without any understanding of economics. The unfortunate thing is it's a regressive tax that harms lower income people the most.
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Re: Inflation for the month and year at highest rate in 13 years

Post by rich126 »

nisiprius wrote: Tue Jul 13, 2021 12:03 pm Our monthly expenses have declined noticeably for one simple and single reason: we are no longer getting all our groceries delivered via InstaCart.

(InstaCart has all kind of hidden expenses folded into it, it's hard to make a formal analysis but you have expenses stacked on expenses--you don't get store specials, the regular prices are higher than store prices, there seems to be a systematic tendency to show only less-economical smaller-sized packages. Shoppers replacements are, I think made mostly in good faith but they have a strong tendency to substitute rather than let a item go unfilled and the substitutes often are more expensive. And there are either delivery charges or a monthly membership charge and I choose to tip generously.)
I don't mind if I pay a fee to get things delivered but as you point out, there are often a ton of documented fees as well as hidden expenses. At times I use things like Uber Eats, DoorDash, etc. and they not only have a delivery fee, service fee and a tip, many of them also charge you more for the food than if you buy it directly yourself. I only use them now because I get some credits from a few credit cards which negate the fees but on a constant basis it gets very expensive. A $10 pizza might easily cost $20 with a tip. I found it was cheaper to get a good quality meal from a place like Longhorn where I pick up the food than it was getting a couple of subs delivered (easily $30+).

A lot of inflation now tends to be hidden with various fees and/or decline of service (i.e., you end up spending a lot of time on the phone waiting for help).
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Re: Inflation for the month and year at highest rate in 13 years

Post by bobcat2 »

New and used car & truck sales have contributed about 1% of the 3.6% inflation in the CPI so far this year. (Inflation without car & truck sales is about 2.6% annual rate over first six months.) Over the second half of the year car & truck sales could subtract about 1% from the inflation rate. This suggests that inflation has been somewhat overstated in first half of year by CPI and will probably be understated in second half of year.

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Re: Inflation for the month and year at highest rate in 13 years

Post by Seasonal »

Morse Code wrote: Tue Jul 13, 2021 2:21 pmNot sure about the velocity aspect, but can't it be both more dollars and fewer goods at the same time? Anyway, it was very predictable without any understanding of economics. The unfortunate thing is it's a regressive tax that harms lower income people the most.
Any harm to lower income people may be balanced by a better labor market. If compensation rises more than costs, there's a benefit. Many economic factors affect both prices and employment. It depends on the numbers, but just looking at inflation misses the true picture.
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Re: Inflation for the month and year at highest rate in 13 years

Post by NiceUnparticularMan »

Seasonal wrote: Tue Jul 13, 2021 3:08 pm
Morse Code wrote: Tue Jul 13, 2021 2:21 pmNot sure about the velocity aspect, but can't it be both more dollars and fewer goods at the same time? Anyway, it was very predictable without any understanding of economics. The unfortunate thing is it's a regressive tax that harms lower income people the most.
Any harm to lower income people may be balanced by a better labor market. If compensation rises more than costs, there's a benefit. Many economic factors affect both prices and employment. It depends on the numbers, but just looking at inflation misses the true picture.
Undoubtedly this was ALSO distorted by recession effects, but there was a big increase of average hourly earnings for production and nonsupervisory employees over inflation during the pandemic/recession:

Image

The recent inflation has clawed back some of that, so we'll see, but hopefully once everything settles down, ordinary workers come out of all this with higher wages in real terms.

By the way, that finally took real wages by this measure above where they had been in the early 1970s peak. Which isn't going to come close to tracking unit labor productivity over that time, but still it is an interesting milestone (and a long time coming):

Image
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Re: Inflation for the month and year at highest rate in 13 years

Post by heyyou »

The thread title is well written for capturing attention.
Airfare, hotels, and furniture are up. As a retiree, I will pay more attention when my personal spending is bothered by noticeable inflation. I might have to wait longer between trips to compensate for the travel inflation.

Once again, BHs have helped me financially since you recommended delaying SS. Since half of my steady retirement income is inflation buffered these days, isn't my personal rate of inflation half of the published number or even less if I don't travel nor get new furniture or car?
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Re: Inflation for the month and year at highest rate in 13 years

Post by Thesaints »

jebmke wrote: Tue Jul 13, 2021 2:10 pm
Morse Code wrote: Tue Jul 13, 2021 2:04 pm Obviously, none of us know if this is long or short term, but it was predicted by every person I spoke to about it over the last 18 months. Even a fifth grader knows instinctively that when you give money away for nothing, it loses value. :oops:
Isn't demand pressure more a function of money velocity rather than absolute quantity? I seem to recall seeing velocity charts that showed velocity declining. If both of those are "true" it would seem that the issues are supply-side rather than demand side.
It is actually "money velocity times money quantity". They both count the same. Right now we are seeing a triple effect:
- Supply chain suffering from covid
- Giveaways by the Government (finally some QE for individuals !)
- Reference CPI-U value depressed by initial covid uncertainty
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Re: Inflation for the month and year at highest rate in 13 years

Post by muffins14 »

Seems like the solution is to not buy a used car, or lumber
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Re: Inflation for the month and year at highest rate in 13 years

Post by Portfolio7 »

Rob5TCP wrote: Tue Jul 13, 2021 10:15 am Are you contemplating any changes in your allocation based on recent inflation.
Would continued inflation change your allocations ?
No. Core CPI ex-“pandemic affected services” was +0.31% in April, +0.28% in May, +0.22% in June. The trend is declining, not increasing.

No. My portfolio is 80% equities. Nothing to change there. The 20% in Stable Value I might shift some to Treasuries or Tips, but that's not really a change - my FI positioning is always subject to yields (but don't take that as an assertion of expertise. I barely know what I'm trying to do when it comes to bonds.)
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Re: Inflation for the month and year at highest rate in 13 years

Post by Mel Lindauer »

I think I'll make copies of my 3.4 and 3.6% I Bonds and see if that doubles my monthly interest. :happy
Best Regards - Mel | | Semper Fi
adestefan
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Re: Inflation for the month and year at highest rate in 13 years

Post by adestefan »

Portfolio7 wrote: Tue Jul 13, 2021 4:47 pm
Rob5TCP wrote: Tue Jul 13, 2021 10:15 am Are you contemplating any changes in your allocation based on recent inflation.
Would continued inflation change your allocations ?
No. Core CPI ex-“pandemic affected services” was +0.31% in April, +0.28% in May, +0.22% in June. The trend is declining, not increasing.

No. My portfolio is 80% equities. Nothing to change there. The 20% in Stable Value I might shift some to Treasuries or Tips, but that's not really a change - my FI positioning is always subject to yields (but don't take that as an assertion of expertise. I barely know what I'm trying to do when it comes to bonds.)
Yup. The automotive industry is driving just about all of inflation right now.
Seasonal
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Re: Inflation for the month and year at highest rate in 13 years

Post by Seasonal »

muffins14 wrote: Tue Jul 13, 2021 4:43 pm Seems like the solution is to not buy a used car, or lumber
See this post regarding lumber: viewtopic.php?p=6116699#p6116699
flyingaway
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Re: Inflation for the month and year at highest rate in 13 years

Post by flyingaway »

muffins14 wrote: Tue Jul 13, 2021 4:43 pm Seems like the solution is to not buy a used car, or lumber
Some people might just buy a used car or lumber they originally planned to buy one or two years later.
Scooter57
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Re: Inflation for the month and year at highest rate in 13 years

Post by Scooter57 »

adestefan wrote: Tue Jul 13, 2021 5:01 pm
Portfolio7 wrote: Tue Jul 13, 2021 4:47 pm
Rob5TCP wrote: Tue Jul 13, 2021 10:15 am Are you contemplating any changes in your allocation based on recent inflation.
Would continued inflation change your allocations ?
No. Core CPI ex-“pandemic affected services” was +0.31% in April, +0.28% in May, +0.22% in June. The trend is declining, not increasing.

No. My portfolio is 80% equities. Nothing to change there. The 20% in Stable Value I might shift some to Treasuries or Tips, but that's not really a change - my FI positioning is always subject to yields (but don't take that as an assertion of expertise. I barely know what I'm trying to do when it comes to bonds.)
Yup. The automotive industry is driving just about all of inflation right now.
It would appear you don't do your family's food shopping. Or eat at locally owned restaurants.
MadHungarian
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Re: Inflation for the month and year at highest rate in 13 years

Post by MadHungarian »

Mel Lindauer wrote: Tue Jul 13, 2021 5:00 pm I think I'll make copies of my 3.4 and 3.6% I Bonds and see if that doubles my monthly interest. :happy
When my employer got their first color copier a few decades ago, i tried copying a $20 bill on it just to see what would happen. The machine recognized the bill and went into shutdown mode.

But now the thing that bugs me about TIPS/IBonds is that in order to get any meaningful effect, you need to have a large enough % in them so that now you get all their negative aspects as well (ie, limitied long-term growth). This applies to everything of course, like Intl stocks too. Ah, reality always irritates me...
aristotelian
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Re: Inflation for the month and year at highest rate in 13 years

Post by aristotelian »

TurtleBeatsHare wrote: Tue Jul 13, 2021 11:08 am I’m less worried about the current inflation numbers than I am about how the Federal Reserve talks about the inflation numbers. The numbers for many of those items——particularly cars and the low wage/hospitality industries—should decline when the semiconductor shortage is addressed (might take a full year or two) and when more people return to work (which I predict will be this fall, when the extended/increased unemployment benefits end and schools reopen).

I’m much more concerned that the Federal Reserve is increasingly acting and talking like inflation isn’t a priority. Earlier this year, the Federal Reserve was denying inflation was a problem and refused to move their forecast numbers—which we’ve blown past. Then they claimed it would be transitory and end quickly (again—while I do agree with the transistors point, they were way too optimistic about the inflation ending by late summer). Now I occasionally hear Powell speaking about how higher inflation is beneficial. And of course, the Federal Reserve has “clarified” that it’s 2% inflation target is not a ceiling, but a long term average. These signals (ie denial, downplay, desirable) strike me as a Federal Reserve that is shifting its attitude towards inflation and may signal higher inflation in the future. People oftentimes forget that there is a real shift occurring in economics PhD programs—there are far more modern monetary theorists or people who focus in inequalities than there used to be and the people who lived through the 1970s are aging out of the profession. This might be creating a focus shift in priorities that is gradually manifesting even at the Federal Reserve.
I don't think they are unconcerned or changing their fundamental stance, they are just accepting inflation as the price of stimulus. They have a dual mandate and for the last 1.5 years the focus has been keeping the economy going. Nothing alarming about that. If inflation becomes a long term trend, I would expect the Fed to adjust policy.
Da5id
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Re: Inflation for the month and year at highest rate in 13 years

Post by Da5id »

Interesting writeup today at https://tipswatch.com/ I've liked his pieces on seekingalpha about i-bonds, but he doesn't write there any more. His takeaway isn't too shocking
My conclusion: Economists really have no idea where inflation is heading.
Last edited by Da5id on Wed Jul 14, 2021 8:38 am, edited 1 time in total.
jebmke
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Re: Inflation for the month and year at highest rate in 13 years

Post by jebmke »

Da5id wrote: Tue Jul 13, 2021 5:40 pm Interesting writeup today at https://tipswatch.com/ I've like his pieces on seekingalpha about i-bonds, but he doesn't write there any more. His takeaway isn't too shocking
My conclusion: Economists really have no idea where inflation is heading.
This is why the mass of bond buyers and sellers may be the best estimate of future inflation, albeit also a fuzzy estimate which could be wrong.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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Godot
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Re: Inflation for the month and year at highest rate in 13 years

Post by Godot »

MadHungarian wrote: Tue Jul 13, 2021 5:37 pm
Mel Lindauer wrote: Tue Jul 13, 2021 5:00 pm I think I'll make copies of my 3.4 and 3.6% I Bonds and see if that doubles my monthly interest. :happy
When my employer got their first color copier a few decades ago, i tried copying a $20 bill on it just to see what would happen. The machine recognized the bill and went into shutdown mode.

But now the thing that bugs me about TIPS/IBonds is that in order to get any meaningful effect, you need to have a large enough % in them so that now you get all their negative aspects as well (ie, limitied long-term growth). This applies to everything of course, like Intl stocks too. Ah, reality always irritates me...
It's not like you are alone in this. You have plenty of company.
"If by Godot I had meant God I would have said God, and not Godot." | ― Samuel Beckett
MishkaWorries
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Re: Inflation for the month and year at highest rate in 13 years

Post by MishkaWorries »

Scooter57 wrote: Tue Jul 13, 2021 5:30 pm
adestefan wrote: Tue Jul 13, 2021 5:01 pm
Portfolio7 wrote: Tue Jul 13, 2021 4:47 pm
Rob5TCP wrote: Tue Jul 13, 2021 10:15 am Are you contemplating any changes in your allocation based on recent inflation.
Would continued inflation change your allocations ?
No. Core CPI ex-“pandemic affected services” was +0.31% in April, +0.28% in May, +0.22% in June. The trend is declining, not increasing.

No. My portfolio is 80% equities. Nothing to change there. The 20% in Stable Value I might shift some to Treasuries or Tips, but that's not really a change - my FI positioning is always subject to yields (but don't take that as an assertion of expertise. I barely know what I'm trying to do when it comes to bonds.)
Yup. The automotive industry is driving just about all of inflation right now.
It would appear you don't do your family's food shopping. Or eat at locally owned restaurants.
Food sector:
Jan .1
Feb .2
Mar .1
Apr .4
May .4
Jun .8

The food index increased 0.8 percent in June, as did the food at home index;
both indexes rose 0.4 percent in May. As in May, the food at home increase was
mostly due to the index for meats, poultry, fish, and eggs, which increased 2.5
percent over the month. The beef index rose 4.5 percent in June, its largest
1-month increase since June 2020. The index for fruits and vegetables rose 0.7
percent in June after being unchanged in the preceding month. The nonalcoholic
beverages index increased 0.9 percent in June after declining 0.5 percent in May.
The index for other food at home rose 0.2 percent in June, as did the index for
dairy and related products.

In contrast to these increases, the index for cereals and bakery products was
the only one of the six major grocery store category indexes to decline in June,
falling 0.3 percent over the month after increasing 0.5 percent in May.

The food away from home index rose 0.7 percent in June following a 0.6-percent
increase in May. The index for full service meals rose 0.8 percent, its largest
monthly increase since last June. The index for limited service meals increased
0.6 percent in June.

The food at home index increased 0.9 percent over the past 12 months. All six
major grocery store food group indexes increased, but the index for fruits and
vegetables was the only one to rise more than 0.8 percent; increasing 3.2 percent.

The index for food away from home rose 4.2 percent over the last year, the
largest 12-month increase in that index since the period ending in May 2009.
The index for limited service meals rose 6.2 percent since June 2020 and the
index for full service meals rose 4.1 percent over the last 12 months. The index
for food at employee sites and schools declined sharply over the last year,
falling 29.9 percent.
We plan. G-d laughs.
tomsense76
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Re: Inflation for the month and year at highest rate in 13 years

Post by tomsense76 »

If you haven't already, you should probably read SimpleGift's earlier thread on how to view the inflation data ( viewtopic.php?t=351026 ) or any of their other recent threads about inflation.

Edit: Would add recent Odd Lots episodes on shipping, which plays a crucial role in a lot of this and doesn't seem to come up enough in these discussions
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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Forester
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Location: UK

Re: Inflation for the month and year at highest rate in 13 years

Post by Forester »

I don't trust anyone's opinion on inflation and I'm not changing my portfolio which has inflation indexed bonds, gold, smallcap & value tilts. Honestly the deflationists/"it's transitory" crowd are just as shifty as the uber goldbugs. All we can say is that aggregate market opinion is not yet worried.
Last edited by Forester on Tue Jul 13, 2021 6:40 pm, edited 1 time in total.
Thesaints
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Re: Inflation for the month and year at highest rate in 13 years

Post by Thesaints »

jebmke wrote: Tue Jul 13, 2021 5:43 pm This is why the mass of bond buyers and sellers may be the best estimate of future inflation, albeit also a fuzzy estimate which could be wrong.
Over the past 12 months the same mass of bond buyers has estimated 1.11% and 2.46% for the 5-year average inflation. They can't both be right !
TurtleBeatsHare
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Re: Inflation for the month and year at highest rate in 13 years

Post by TurtleBeatsHare »

aristotelian wrote: Tue Jul 13, 2021 5:37 pm I don't think they are unconcerned or changing their fundamental stance, they are just accepting inflation as the price of stimulus. They have a dual mandate and for the last 1.5 years the focus has been keeping the economy going. Nothing alarming about that. If inflation becomes a long term trend, I would expect the Fed to adjust policy.
My understanding is that there are millions of unfilled job openings and a labor shortage. If that is accurate, then the Federal Reserve is pursuing inflation without improving employment.

I’d also note that while I do think some of these numbers are transitory, the month to month CPI adjustments were .9%—which would amount to 10-11%, if annualized. While there are some base effects from 2020’s price drop—ie the baseline numbers from which we calculate annual inflation—the high month over month numbers (which appear to be accelerating) are alarming. While I agree that it appears that autos and fuel are significant contributors, the CPI and PCE mistakenly (in my opinion) do not look at house prices, which are up 14% nationwide from last year.

I cannot understand why the Federal Reserve is pursuing low interest rates as aggressively as they are in light of the inflationary pressures and labor shortage. In fact, they are pursuing low interest stimulus at an even more aggressive rate now that at any point in 2020 because the real, inflation adjusted rates that they are setting are more negative now (and becoming more negative as inflation rates increase), so their monetary policy is becoming even easier than early this year or last year.

I am thankful that I am young enough that fixed income does not have to be a large part of my portfolio. Between depressed yields due to QE and inflation risks, I would not want to have to produce income with my portfolio, although I may be eating these words in 5 years, if the stock market loses significant value due to increase bond rates and capital migration away from equities into fixed income.
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