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Investment Analysis Clubs / Value Hounds
|Subject: Re: Lies, damn lies and CPI||Date: 3/25/2013 3:19 PM|
|Author: TMFKMHinson||Number: 14030 of 21241|
"M.I.T. has something called "the billion price index", in which the computer literate dispatch web crawlers to find the prices of identical items, month after month, and from that calculate inflation."
I make no claims about what inflation is today, and I wouldn't know how to calculate it, but this seems a useless proxy for it thought up by computer nerds rather than real people trying to make ends meet each month.
First... it's global, and inflation that I care about is in US$. If global inflation is tepid, and US inflation is raging, I'm still hosed. (Not that I'm predicting that.)
Second... The percentage of my monthly budget that could be bought from an online retailer is probably less than 10%, and so how does this really capture what I lay out every month. At first glance it seems to neglect fresh foods (the bulk of my grocery budget), fuel, my utilities expenses, my housing expenses, etc. That's 75% of my budget right there. Heck, my housing expense has gone up 8% a year over the last 12 years, and that's to live in a comparable home that whole time. Annecdotal, sure, but fuel prices have gone up ~6-7% a year over that time frame.
I don't really know what inflation is at, or how useful attempts to pin one number on it are, but I do know I wouldn't put my money in CPI based TIPS and hope to keep up with it.
Hussman had an interesting chart in this update here... First one, about four paragraphs in...
To expect to print and print and print and take monetary supply to unprecedented levels relative to economic output and not have repercussions seems unlikely to me. When or how those materialize is beyond me, and I suspect anybody who claims to know the specifics is laughable as an informed thinker at best. But I think it warrants some thought about the range of possible outcomes nonetheless, and how to position yourself accordingly. That's the far more interesting discussion to me, definitely more than pinning a single number on a complex phenomenon that affects different parts of the economy and different people differently.
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