INFLATION IS OUR FRIEND

Talk is cheap but let?s see JP has the guts to follow through once stock crashes and unemployment becomes high.
Maybe he is talking tough to lower the inflation expectations but ?data driven? so he can pivot any time.
 
They can?t inflate away the debt. That would assume they are actually going to pay it down. We all know there is no possible way for that to happen. All it may do is slow the debt growth based on the way its measured (as a % of GDP)
 
Remember, higher interest rates mean increases in servicing the existing and future government debt. Those higher interest payments have to come from somewhere.
 
OCtoSV said:
woodburyowner said:
USCTrojanCPA said:
I think inflation will probably come down to 4-5% by the end of the year but the hard part will be getting it to 2%, that's where the "pain" will come.
Click to expand...

Inflation is currently at 8.5%.  No way it gets to 4-5% by the end of the year.  The major components that drive the inflation number do not change that quickly.  The components that do (ie. gas) only make up a small part of the overall calculation (which everyone seems to focus on since they see it everyday).  Housing cost is still increasing..
Click to expand...
Thank you. I love my Trojan brother but stating inflation will fall that much in 4 months shows a gross misunderstanding of the impact of deglobalization on the US economy and the persistence of rent inflation where housing makes up 40% of PCE as base pillars of inflation. I see the Fed hiking until inflation gets down to 6% or so, and then they'll let everyone know that is the new normal. They can't get it any lower unless we re-embrace China mfg and Russian oil and nat gas.

We've had 40 yrs of declining interest rates which made RE a no brainer long position. Only those over 60 likely experienced the early 80s and early 90s. Things are going to get bumpy and leverage at today's valuations is high risk. Powell is really feeling his inner Volcker.
Click to expand...

Remember that inflation is a year over year measure. So we'll start lapping higher price levels in a few months. Last months CPI was the first time we saw a month over month decline in CPI-U. It doesn't take much of a continued decline to get to Martin's 4-5% by year end. Especially with the tightening that is going on.
 
ChiKid24 said:
OCtoSV said:
woodburyowner said:
USCTrojanCPA said:
I think inflation will probably come down to 4-5% by the end of the year but the hard part will be getting it to 2%, that's where the "pain" will come.
Click to expand...

Inflation is currently at 8.5%.  No way it gets to 4-5% by the end of the year.  The major components that drive the inflation number do not change that quickly.  The components that do (ie. gas) only make up a small part of the overall calculation (which everyone seems to focus on since they see it everyday).  Housing cost is still increasing..
Click to expand...
Thank you. I love my Trojan brother but stating inflation will fall that much in 4 months shows a gross misunderstanding of the impact of deglobalization on the US economy and the persistence of rent inflation where housing makes up 40% of PCE as base pillars of inflation. I see the Fed hiking until inflation gets down to 6% or so, and then they'll let everyone know that is the new normal. They can't get it any lower unless we re-embrace China mfg and Russian oil and nat gas.

We've had 40 yrs of declining interest rates which made RE a no brainer long position. Only those over 60 likely experienced the early 80s and early 90s. Things are going to get bumpy and leverage at today's valuations is high risk. Powell is really feeling his inner Volcker.
Click to expand...

Remember that inflation is a year over year measure. So we'll start lapping higher price levels in a few months. Last months CPI was the first time we saw a month over month decline in CPI-U. It doesn't take much of a continued decline to get to Martin's 4-5% by year end. Especially with the tightening that is going on.
Click to expand...

Still think 4-5% is possible?  We will be lucky to be in the low 7s.
 
My guess is that today's number reflects the end result of high Diesel fuel. We know the price from January to right now, but that additional $2.50 per gallon doesn't make it into the final price at the store for the goods and services delivered until later down the supply line. The cost of rent is also still elevated and likely to stay that way for some time.

So assuming a .75 hit next week to the Prime Rate, credit cards with balances and HELOC rates are going to get very spicy. Christmas for many will be pretty lean this year.

We'll know more about Fed policy once their rate hikes have created a sub 27k DOW, a 5-10% home price reduction (nationwide), and US Unemployment at 5-7 percent. Also, separate to any Fed action, if there are any riots in Europe during the winter over energy shortages, we may see some rate reductions to keep the mobs at home content. 

Admittedly, this is on the grim end of the scale, but it's reasonable to start from a worse case scenario and hope for the best than to discount risk only to get caught unprepared if things spin closer to these numbers.

My .02c
 
woodburyowner said:
ChiKid24 said:
OCtoSV said:
woodburyowner said:
USCTrojanCPA said:
I think inflation will probably come down to 4-5% by the end of the year but the hard part will be getting it to 2%, that's where the "pain" will come.
Click to expand...

Inflation is currently at 8.5%.  No way it gets to 4-5% by the end of the year.  The major components that drive the inflation number do not change that quickly.  The components that do (ie. gas) only make up a small part of the overall calculation (which everyone seems to focus on since they see it everyday).  Housing cost is still increasing..
Click to expand...
Thank you. I love my Trojan brother but stating inflation will fall that much in 4 months shows a gross misunderstanding of the impact of deglobalization on the US economy and the persistence of rent inflation where housing makes up 40% of PCE as base pillars of inflation. I see the Fed hiking until inflation gets down to 6% or so, and then they'll let everyone know that is the new normal. They can't get it any lower unless we re-embrace China mfg and Russian oil and nat gas.

We've had 40 yrs of declining interest rates which made RE a no brainer long position. Only those over 60 likely experienced the early 80s and early 90s. Things are going to get bumpy and leverage at today's valuations is high risk. Powell is really feeling his inner Volcker.
Click to expand...

Remember that inflation is a year over year measure. So we'll start lapping higher price levels in a few months. Last months CPI was the first time we saw a month over month decline in CPI-U. It doesn't take much of a continued decline to get to Martin's 4-5% by year end. Especially with the tightening that is going on.
Click to expand...

Still think 4-5% is possible?  We will be lucky to be in the low 7s.
Click to expand...

I'll take the under on low 7s all day. This is the second consecutive month where CPI-U declined on a month/month basis and the pace of the decline accelerated. June was 296.311, July was 296.276 (down 0.035 from June), and now August is 296.171 (down 0.105 from July). Given the trend and the continued fed tightening, you would assume month/month declines continue and likely accelerate further. But even if it stays flat at 296.171 for the rest of the year, we would be at 6.2%. It would take a pretty significant direction change for us to be in the low 7s.
 
Been saying this lag on the inflation numbers that rents present will play out over the later part of this year and into next year.  this ain?t over by a longshot

If You Want to Know Where US Inflation Is Heading, Look at Rents
Rents have always been important in measures of inflation, due to their outsize share in most household budgets: They comprise a little over 30% of the headline consumer price index, and about 40% of the core index.
The consumer price index measure of rental inflation should follow, though with a long lag. Detmeister sees rental inflation climbing north of 7% early next year -- and even by the end of 2024 it will remain elevated, at about 4.5%, above the pre-pandemic norm.

?In many cases, you don?t get the jump up to those market rates until the tenant moves out, and that could be a year from now, two years from now, five years from now,? Detmeister said. ?It?s going to take a few years to get back to the pre-pandemic pace.?
https://finance.yahoo.com/news/want-know-where-us-inflation-110000417.html
 
Soylent Green Is People said:
My guess is that today's number reflects the end result of high Diesel fuel. We know the price from January to right now, but that additional $2.50 per gallon doesn't make it into the final price at the store for the goods and services delivered until later down the supply line. The cost of rent is also still elevated and likely to stay that way for some time.
Click to expand...

You can see a general component breakdown of CPI here:  https://www.bls.gov/news.release/cpi.nr0.htm

More detail here:  https://www.bls.gov/news.release/pdf/cpi.pdf

This table includes relative weights:  https://www.bls.gov/news.release/cpi.t01.htm

The most recent reading shows, among other things:
Growth in food costs
Overall negative growth in energy costs
Negative growth in energy commodities (i.e. oil & gas)
Growth in electricity cost
Growth in shelter costs

Part of the reason the overall reading of inflation was "high" was because the cost of shelter has a high relative weighting (32%) and it increased 70bps vs prior month.
 
All too easy?cycles gonna cycle

morekaos said:
Pile on top of that Rent and mortgages and you have quite a bonfire....

Worst US inflation since ?82 is huge underestimate
Government?s CPI says the cost of shelter rose 4% in the past year but home prices and rents are up nearly 20%

Shelter accounts for about a third of American household expenditure, and the cost of buying or renting shelter is up nearly 20% over the past year. Yet the Consumer Price Index (CPI) for shelter reported Jan. 12 by the US Bureau of Labor Statistics showed an increase of just 4.2 over the past year.

Private surveys conducted by the big rental sites, Zillow and Apartmentlist.com, show increases of 13% to 18% during 2021, and the Case-Shiller Index of US home prices jumped 18% in the year through October.

Part of the discrepancy involves a simple time lag. The US government looks at the present cost of housing while the private rental surveys register the cost of a new rental. It takes a while for leases to expire and new, higher-cost leases to take effect. Changes in the Apartmentlist.com rent index predict changes in the CPI shelter index with lags up to eight months. That explains at least part of the divergence of the CPI rent inflation number from the private rental surveys.

This time, the CPI rent inflation rate of 4.2% undershot the private rental data. As old leases expire and new leases are written, the CPI index for shelter should rise by 14 percentage points. Shelter makes up 32.3% of the Consumer Price Index, so 14 percentage points in the cost of shelter would add another 4.5 percentage points to the headline inflation number.

That's an additional 4.5 percentage points on top of the 7% annual rate of CPI inflation. In other words, accurate accounting for real-world shelter costs would put consumer inflation in the US around 10% a year. And double-digit inflation would cause a market meltdown.

The probability is that inflation will run closer to 10% than 5% for the first half of 2022, pushing the Fed to tighten more than investors now expect.
https://menafn.com/1103530469/Worst-US-inflation-since-82-is-huge-underestimate
https://youtu.be/P_BcYjEUxHQ
Click to expand...
 
Soylent Green Is People said:
My guess is that today's number reflects the end result of high Diesel fuel. We know the price from January to right now, but that additional $2.50 per gallon doesn't make it into the final price at the store for the goods and services delivered until later down the supply line. The cost of rent is also still elevated and likely to stay that way for some time.

So assuming a .75 hit next week to the Prime Rate, credit cards with balances and HELOC rates are going to get very spicy. Christmas for many will be pretty lean this year.

We'll know more about Fed policy once their rate hikes have created a sub 27k DOW, a 5-10% home price reduction (nationwide), and US Unemployment at 5-7 percent. Also, separate to any Fed action, if there are any riots in Europe during the winter over energy shortages, we may see some rate reductions to keep the mobs at home content. 

Admittedly, this is on the grim end of the scale, but it's reasonable to start from a worse case scenario and hope for the best than to discount risk only to get caught unprepared if things spin closer to these numbers.

My .02c
Click to expand...

The price of gas got down to 3.59 here and stayed there for weeks. Tustin finally started dropping but we stayed steady. Suddenly the price here zipped up to 3.84 with the next nearest costco 3.96. When it started to rise, I thought it was just costco and sams club finally realizing they could get more or going up because of holiday driving but then it just kept going. Maybe it's something to do with hurricane Kay but it could be more than that.
 
Commodities is where diesel prices impact prices the most.

Gas is low today, but the impact is measured and compared over the last 12 months, not the most recent quarter. Lower gas can help push CPI in Feb/March, just not right now. We are also running out of Strategic Petroleum Reserves and will need to be replenished at a higher price unfortunately.

My .02c
 
Soylent Green Is People said:
Commodities is where diesel prices impact prices the most.

Gas is low today, but the impact is measured and compared over the last 12 months, not the most recent quarter. Lower gas can help push CPI in Feb/March, just not right now. We are also running out of Strategic Petroleum Reserves and will need to be replenished at a higher price unfortunately.

My .02c
Click to expand...

Didn't we sell the Reserves to China?
 
Ready2Downsize said:
Soylent Green Is People said:
Commodities is where diesel prices impact prices the most.

Gas is low today, but the impact is measured and compared over the last 12 months, not the most recent quarter. Lower gas can help push CPI in Feb/March, just not right now. We are also running out of Strategic Petroleum Reserves and will need to be replenished at a higher price unfortunately.

My .02c
Click to expand...

Didn't we sell the Reserves to China?
Click to expand...

Along with grandpa Joe?s soul
 
morekaos said:
When a business man is running the economy...

Trump Announces Massive Oil Purchase for Strategic Petroleum Reserve

According to Trump, the oil purchases will have numerous benefits, including "saving the American taxpayer billions and billions of dollars, helping our oil industry, and ... it puts us in a position that's very strong, and we're buying at the right price."
https://www.fool.com/investing/2020/03/13/trump-announces-massive-oil-purchase-for-strategic.aspx

$32.11 a barrel...When a moron is running the economy...

Biden administration launches plan to refill emergency oil reserve

New York (CNN Business)The Biden administration plans to seek bids this fall to buy 60 million barrels of crude oil as the first step in a years-long process aimed at replenishing America's emergency oil reserve, an Energy Department official told CNN.
https://www.cnn.com/2022/05/05/energy/spr-biden/index.html

$110.41 a barrel....idiot!
Click to expand...
 
See?.Inflation is your friend?I told you so?.

?The American People Won?: Biden Celebrates ?Inflation Reduction Act? as Market Plummets over August Inflation News
However, despite what its name indicates, the bill will not tame record-breaking inflation in the near future, and may even make it worse, according to a report by the Congressional Budget Office (CBO).
The CBO report said it estimates the bill will have a ?negligible effect on inflation? in 2022. For 2023, the agency predicted inflation would be .1 percent lower or higher than it is currently due to the passage of the bill.
A report published by the Penn Wharton Budget Model (PWBM) found the bill?s ?impact on inflation is statistically indistinguishable from zero.?https://www.nationalreview.com/news...act-hours-after-dismal-august-inflation-news/
https://youtu.be/zDAmPIq29ro
 
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