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Registered User
Joined: 10/7/2004
Posts: 2,126
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The core CPI is tamed because the merchants already have problems selling their goods. Energy and food care less because there you have no choice. Humans need to eat regardless, and energy can be trimmed only so far - you still have to go to work, grocery shopping, take kids to schooll, etc. Does this mean that the energy and food are not raising the inflationary line well out of proportion? Of cource they are whether core or non core CPI still makes no difference. The consumer's pocket know no distinction between the two. Who are they kidding?
Be aware that those numbers are not as good as they paint them to be, in fact they are not good at all. Do you think that the feds are going to buy this? Think again.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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BigB, thought you might like to read a couple little snippets from today's RealMoney columnist conversation thread on CPI:
(text removed by moderator - article reprinted without permission)
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Registered User
Joined: 11/16/2004
Posts: 105
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BigBlock
Know what you mean, when real commodity prices reach their limit of elasticity, and a shift in consumer spending shows up on missed earnings reports I start looking for(Divergence in BOP). I've set up some PCF's for changes in subindustry rotations month to month and sort using visual changes in BOP. Whatever strength & direction the market takes short term, inflation means a change in valuations, sector rotation, more shorts & fewer longs.
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Registered User
Joined: 12/2/2004
Posts: 15
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Bucket Shop
Would you be willing to share your PCF's that you use to look for changes in subindustry rotations?
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Registered User
Joined: 12/19/2004
Posts: 457
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BigBlock,
I used to think the way you do regarding inflation. I'm not so sure now.
The reason "core inflation" is measured is because energy and food are very volatile, and subject to things not related to money supply.
What we are really trying to look at when measuring "inflation" is how the quantity of money is affecting the price of goods. Is there an overall increase in money, leading to price rises? Or is money supply contracting?
As far as I know, there isn't a good measure of the exact quantity of money available, although some data I've heard about suggest little growth in money supply, depending upon how you measure it. Who knows what the real answer is.
I have the feeling the FED is fighting the wrong battle. The next recession, whenever that is, could be much more severe than anyone expects. Take away the easy money, and the credit addicted consumer is likely to send the economy into a shocking "cold turkey" withdrawl.
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Registered User
Joined: 11/13/2004
Posts: 141
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QUOTE (rmr1976) BigBlock,
I used to think the way you do regarding inflation. I'm not so sure now.
The reason "core inflation" is measured is because energy and food are very volatile, and subject to things not related to money supply.
Like posted above I also have a beef with the Core and Non Core figures
Though I know food and energy are excluded because they are volital, I still like to see this data included and beleive perhaps that the the non core part of the CPI should be adjusted in a weighted or normalized fashion, and included with the core CPI as over time the non core goes go up and down in an over all fashion just like the core CPI and is still contributing to over all inflation.
Example look at how long the price of gas has remained high, then look at the fact that many expect it to remain high and go even higher and then compare it to year ago levels.
Look at the cost of beef, if I remember right it was just over a year a go that a pound of hamburger meat could be brought for as little as $0.99 a pound on sale, but it seems that since then I have been lucky to find it for lest than $1.99 a pound even on sale
The same is true for milk, the current average price for a gallon of milk is almost a dollar higher than it was a year ago
These items are all consumer staples and if you have a family there is just no way around paying these higher prices, and the larger the family the more it hurts.
UserTM
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Registered User
Joined: 12/6/2004
Posts: 48
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QUOTE (fpetry) BigB, thought you might like to read a couple little snippets from today's RealMoney columnist conversation thread on CPI:
(text removed by moderator - article reprinted without permission)
Hey Moderator -- if fpetry is only quoting "snippets" to make a larger point, that's "Fair Use" under copyright law.
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Registered User
Joined: 12/6/2004
Posts: 48
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QUOTE (BigBlock) The core CPI is tamed because the merchants already have problems selling their goods. Energy and food care less because there you have no choice. ...Be aware that those numbers are not as good as they paint them to be, in fact they are not good at all. Do you think that the feds are going to buy this? Think again.
I think the core CPI is correct -- for now, anyway.
Think about the flood of cheap imports coming into the U.S. from abroad. Given the record-high productivity and efficiency rates in the mass-manufacturing and delivery of these goods, the effect of higher oil and fuel costs on the wholesale cost of these goods is rather marginal. Consider a container vessel full of 100,000 toasters headed for Walmart: spread the higher transportation cost over 100,000 toasters and the price of each toaster only has to go up by pennies to cover the cost. Food, on the other hand, is perishable (time to market) and is more energy intensive to grow, harvest and deliver. That's why oil prices show up in food but not core.
The number one factor needed to boost core CPI is wages. When wages go up in lockstep with inflation, that's when a true inflationary spiral is born. However, wage earners have little leverage in the global economy to ask for higher pay, which is why corporate profits have soared but wages remain relatively stagnant. Notice how the job numbers are mildly positive -- and why not, labor is a bargain right now. Unfortunately, putting a wage squeeze on Americans is not a healthy thing in the long run.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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QUOTE (NutOnABike) QUOTE (fpetry) BigB, thought you might like to read a couple little snippets from today's RealMoney columnist conversation thread on CPI:
(text removed by moderator - article reprinted without permission) Hey Moderator -- if fpetry is only quoting "snippets" to make a larger point, that's "Fair Use" under copyright law.
NutOnBike, thanks for the defense:) I truly thought I was using proper protocol with the quotes, in that the quotes were indeed small snippets from a larger column, and the authors were named. But I apologize anyway for violating posting policy.
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Registered User
Joined: 11/16/2004
Posts: 105
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QUOTE (spiker) Bucket Shop
Would you be willing to share your PCF's that you use to look for changes in subindustry rotations?
Spiker,
I like to use price action changes & RSI to Sort thru the Media General Industry Groups.I dedicated a tab to four time period type PCF's and use a process of elimination by removing successive flagged qualifiers.
Prior month 3 is: ((C63 - C83) / C83) * 100
Prior month 2 is: ((C42 - C62) / C62) * 100
PRior month 1 is: ((C21 - C41) / C41) * 100
Current month is: ((C - C20) / C20) * 100
These are very flexible to sort thru and select the top or bottom ranges to flag & unflag into a new watch lists. I like to get 10 to 20 industries to watch & then use TSV visual difference sorts & BOB changes over a few trading days to catch early entry buys within secrors gaining momentum & shorts for stocks within weakening industry groups.
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