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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (31603)	5/3/2005 12:28:48 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Mish, you think CPI is understated ... why? and what do you think is the current inflation rate? Because I do not belive a damn thing. ggg Take the GDP for example. We all know that hedonics distorts it but by how much? 1/2 1/3 1/4? How about Unemployment? This one is easier because we have alternative measures that put it at 9% or so but I happen to think even that is easily off by 1% or more. Who knows perhaps 2-3% I will give a range of 8-12% certainly not 5.2% Everyone bitches about food but not me. I buy what's on sale. Right now you can get chicken quarters (thigh/leg) for 49 cent a pound. Can you grow chickens for that price? I doubt it. Sheeesh .49 a pound! They have to be fed, trucked, hauled, plucked, quartered, shipped, stocked, and refridgerated almost every step of the way and they are selling these for .49 a pound. It is nuts to complain about food! Pork chops were $5.49 for over a month. So I did not buy any. Yesterday they were on sale for $2.49 so I stocked up. Food is easy. PCs and electronics are down. But housing is up big time. Huge. But.... how many are buying a new home? Many folks stay in the same house for something like forever. If the house is paid off does their mortgage go up? NO they do not have a mortgage. Rent is not going up either. Thus 1/2 the population does not feel the effects of this housing boom at all. Thus while rent equivalent is wrong, pure appreciation is wrong as well. It is not as bad as some think and not as good as reported. Does this make sense? Is gasoline going up because of inflation or other things? Does it matter? As part of CPI, probably not. Price up = price up regardless of reason. Perhaps 4% is close, but hell perhaps 5% is closer. But..... When housing reverses perhaps it will fall to 2% quickly. (a real 2% not a distorted 2%). I can see real rates being restrictive by a full 1% easily if and when housing turns. Given the gross distortions how can anyone have much confidence in much of anything? Yes the CPI is higher, by how much is debatable. I will say this: talk of hyper-inflation is nuts. Mish