Consumer Price Data: US In Deflation

The Consumer Price report is just out from the Labor Department.  As always, there’s some good news and some bad in it.  The BAD is that on a 12 month basis the unadjusted 12-month numbers are down – two-tenths of one percent

This leads fearful bureaucrats to quick, hurry up and seasonally adjust something, quick!  Of course, since April of 2014 was exactly the same season as April 2015, just adjustments smell to rational people (like us, though I’m not too sure about thee) to smell like an odiferous male cow pie.

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.

Over the last 12 months, the all items index declined 0.2 percent before seasonal adjustment.

The index for all items less food and energy rose 0.3 percent in April and led to the slight increase in the seasonally adjusted all items index.

The index for shelter rose, as did the indexes for medical care, household furnishings and operations, used cars and trucks, and new vehicles.

In contrast, the indexes for apparel and airline fares declined in April.

The energy index declined in April, while the food index was unchanged.

The indexes for gasoline, natural gas, and fuel oil all declined, while the electricity index was unchanged.

The food at home index declined for the second month in a row, offsetting an increase in the index for food away from home. Major grocery store food group indexes were mixed. The all items index declined 0.2 percent for the 12 months ending April.

This represented a slightly larger decrease than the 0.1-percent decline for the 12 months ending March. The decline was driven by the energy index, which fell 19.4 percent over the last 12 months, with all the major components declining except electricity.

The food index rose 2.0 percent over the last year, and the index for all items less food and energy rose 1.8 percent.

No doubt, I am personally responsible for the food price decline (*I was dieting hard in April).

The problem, as always, is that CPI data can be very misleading.  Let’s have a peek inside the BLS Manual that describes how some of the numbers are put together starting with Housing:

Shelter
The CPI housing unit sample is the source of the data on
residential rents used to calculate changes in rents for the
rent of primary residence (rent) index. The housing survey
also uses these rent data in calculating changes in the rental
value of owned homes for the owners’ equivalent rent of
primary residence (REQ) index. These two shelter indexes
account for over 28 percent of the total CPI weight as of
December 2003.

Well, you can see the problem:  It’s statistically difficult for people to capture real changes to housing expenses because when an ARM resets, to use one example, how do you reliably capture that?  And what about the add-on effects of property taxes?  Slippery doesn’t even begin to wrap your head around this one.

But, I would offer that since housing prices have recovered strongly since 2009, that it has likely, as I see it, tended to mask the effects of pernicious deflation.   If you have owned a home through the whole housing bubble, bust, and recovery, your property taxes have likely gone up…and so it would seem deflation could be masked by that.

Another problem with keeping the statistics “honest” involves replacement goods.  Say, for example, the tendency of many stores to carry only USDA Select grade beef.   Didn’t used to be that way.  Used to be people ate a lot more Choice beef.    And, back in  the day Prime beef was also consumed.  Good luck finding it.  We have to drive 50-miles (and we’re in the middle of cattle country!) to buy a really good steak.

This is where the substitution problem comes in.  When people switch from Choice Top Sirloin to Select Sirloin (*topless, so to speak), how do you capture that?

Well, if you read the manual, you’ll see there is a formula and approach for that.

But then again, how do you price something like computers into the index?  II would be willing to bet that for a significant portion of the population, communications expenses are understated.  Because – at least in our home – communications expenses involve computers, phones, readers, landlines, DSL up-charges and a lot of other things.  We spend at least $500 a month on computing – and that’s more than our home cost.

May seem outlandish, but I know lots of people with $200+ cell phone bills and they buy a new phone every year…and that’s something I need to ask BLS about, one of these days when we get time.

The consumer profile of America is changing:  People are making not too much more, and whenever we shift consumption habits, it’s hard to encompass that with a single number like CPI.

Hedonic adjustments, sampling and non-sampling errors, effects of taxes…all that stuff adds up to a number.

And one that impacts 80-million people’s incomes – because that’s how many folks have salary and retirement adjustments based on this slippery stuff called CPI.

Amazingly, the futures show only a small decline.  Apparently, drug testing on Wall Street isn’t as rigorous as you’d think going into a holiday weekend…

Republicans Sell Out, Too

Secret Trade Bill clears a key Senate hurdle.  And I’m going on the record telling you when secret laws are passed that that public can’t read, it makes the US look more and more like a totalitarian state.

Voting on secret laws is bullshit, plain and simple.  If it wasn’t dirty, and wasn’t good, it would be done in public.

Anyone voting on Secret Laws not open to public inspect and debate is guilty of treason, as I see it.  And so’s the guy who made it illegal for the contents to be revealed.

Or, didn’t that get though your thick skull in the re-education camps call the Education System?

Government is now totally out of control and beyond the public’s reach.  But you knew that already…so why stress on it…

Quick!  Distract Everyone

How about a nice quadruple murder to keep the public eye off the crooked secret trade bill dealings?

“The Daily Bomber” is Back

I used to run a feature, now and then, when newsroom/gallows humor got the best of me, called The Daily Bomber

It’s a bad enough idea that it’s time to recycle it….so here goes…

Saudi Mosque Hit by Bomb Blast

Police: Pipe bomb discovered, detonated in south St. Louis

British cab driver guilty of Iraq bombing

This last one is interesting:  Dude blows up Americans building IED’s in  ‘Raq, immigrates to England where he drives a cab…and the Brits keep letting people in.   Doesn’t give me much confidence in the thinking skills of the British, it reinforces my belief in Political Correctness Disease (PCD), and it explains why our forefathers (and fivemothers) left England hundreds of years ago.

Sadly, we are on the same mental acuity slide…and fostered by those incurably infected with PCD.

One of these days the WHO will proclaim PCD is real…but it will be tossed off as WHO-who.  A poor ho-ho from Ure he-he.

Coping: The I-Ching Inbox & Real Life Ray

This morning’s column was going to be a dissertation on how Skype and other video conferencing is bleeding out travel companies.  But the research on that quickly got hip deep and will turn into a Peoplenomics™ report.  It’s interesting ground to till.

With far too much data, I was wondering what would make an interesting topic.  So I consulted the I-Ching Inbox. 

I’ve mentioned my I-Ching Inbox before:  When a reader asked a while back “Where can I buy this I-Ching Inbox software?” I hated to break the news to him:  Everybody has an I-Ching Inbox, already.  It’s abbreviated ICIB.

The way is works is simple:  You just “throw the sticks” mentally and go through your email inbox with no particular focus. 

That’s right – unlike those management geeks that say “sort with purpose, delete mercilessly, I will advise you to do exactly the opposite.  There are gems in there; but you have to keep an open (placid or still) mind to pick up on what the Universe is laying before you.

Take this morning, for example.

There I was, sleepily going through emails with nothing in mind, other than the question I wanted the ICIB to answer.

Poof!

Magically, an email from my friend Ray appeared.

Ray’s written many times – and in fact I’m terrible at not answering email.  (Elaine would tell you I get “stuck” in the space between  the ears, often as not.  She’s got questions that get asked over a three day period before I get around to answering them.)

This morning, the ICIB produced a marvelous email from Ray that sums up many of our recent discussions and ponderings. 

“This is the kind of thing readers want to read, Ure” was what it was telling me.  “Readers want representation and Ray is the kind of quality reader you want.  He’s not too liberal, not whacked conservative, bright, well learned, articulate…and he writes as well as you…”

It took a few seconds for the thought to clarify.  The ICIB was telling me, in so many words, to let Ray’s email be this morning’s column.

Bit risky, I thought.   After all, Ray’s email began with a FB/texting abbreviation some people might not get: ISTM.

It Seems to Me = ISTM” reported the Omnipotent Browser, who’d been quietly observing my dilemma through an open window.

Nothing ventured, nothing gained:  Here’s Reader Representative Ray’s take on things:

“ISTM George, the moreder you think about Waco, the pisseder you get…
Just for funsies, I dropped in yesterday on a 2-wheeler site which tracks (and probably sponsors) a number of rallies, poker runs, and other sundry GTGs.

My one-word comment about this latest Waco incident:
Baldwin.

Baldwin, Michigan is a town of about 600 people. They host the oldest “Blessing of the Bikes” of which I’ve ever heard (started in the 1950s or early ’60s.) It is the biggest biker rally in North America that nobody has heard of (I’m assuming people have heard about Myrtle Beach…) This year’s 3-day event hosted 40,000 bikers. I’ve no doubt every M/C including the outlaw clubs had representation there. IOW the Bandidos and Cossacks were there, too.

Um, it was last weekend…

Lessee, when was this Waco shooting, again…?
Baldwin has, (I’m guessing) probably three full-time police, and the County, perhaps a dozen more… to handle 40,000 bikers…
‘Nuff said?
________________________________________

For RV shopping I haven’t a clue when to buy, but shop MI, WI, IL, IA, OH, and especially IN for where to buy. 90% of the RV manufacturers are in Michiana — the piece of Indiana, Michigan, and Ohio which lies between US-30 and I-94. Many of the craftsmen who build these are Amish, and they really are craftsmen. The coaches also depreciate like lead balloons. It’s not unusual to see a 3yo $200k Coachmen or Monaco, or a $400k Newmar sell for a quarter of it’s sticker. I’ve seen class A GMC and Winnebago RVs from the 1980s, in good condition, sell for under $4000 (Yes, the General built RVs for several years. They have an ownership following that’s nearly as rabid as Airstream has for their towbehinds…) Speaking of towbehinds, they’re not my cup of tea, but I see decked-out luxo trailers in the 4-6yo range, listed for $7k or less, all the time.

Personally, were I going to go RVing, I’d latch onto a 42 foot or larger “toy hauler,” (an RV with a garage built into it’s stern) shove a Mini in the garage, and go anywhere I pleased. The vast majority of name race drivers pilot toy haulers. The owners and top-shelf drivers (people like Roger Penske and Tony Stewart) dump their RV and buy a new one every other year. The RV gives you a rolling “base camp,” the mini gives you a fun, high-MPG day-cruiser and grocery-getter which can actually haul stuff (I don’t like Smart because it can’t, and gets worse mileage than any Mini.) Make the Mini a drop-top and you can haul a bundle of 2x4s or chain-link top rail (also known as “instant antenna mast…”
________________________________________
The bankster-spank was in today’s paper. I overheard someone say “good” with respect to it, which prompted me to butt-in (uncharacteristically) and ask: Would you buy a $5 lottery ticket, if it were guaranteed to win you a minimum of $1000? THAT is what these banks did, except they are also the ones who rigged the lottery so they’d win. In my opinion they should have to pay back everything they stole, 3x over, and the people who did it should go to jail.
I believe I got through to them…

________________________________________
With HAMvention just past, now might be a good time to shop radios. I saw a working (genuine Collins) R390A/URR sell on eBay a week or so ago, for $400 { http://www.ebay.com/itm/111656199442 } and an HT-30 for $900 { http://www.ebay.com/itm/171784740753 }. The HT-30 is the first one I’ve seen sell anywhere, in the six years I’ve been watching boatanchors. I’m currently watching a working HT-41 { http://www.ebay.com/itm/121654385647 } which the seller has listed as a $350 BIN. I’m not interested in it, or in the stuff he’s about to list (an HT-32A and an SX-101) other than to see if it sells, and for how much. Sometimes information is sufficient…

(I’ve been looking at that HT-41 amplifier myself:  Since Ure’s radio ranch already has restored an SX-111/HT-37 combo that the HT-41 amp matches.  But I’m still holding out for the HT-45 Loudenboomer amp for the SX-117/HT-44 pairing.  The guiding principle being “You can only spend it once….”)

In fairness, Ray also included a long discussion about terrorism targets – something we have been tracking on the Peoplenomics site because there’s just too tight a linkage between “terrorism” and economic activity.

I mean think about it:  If you could orchestrate terror, you orchestrate not only a means for control, but it becomes a huge overnight growth industry.  Think where the economy would be without 9/11 and the “echo events” that are served up:  We’d have blown up the economy by now.

But in Police State Lite you don’t get that blow-up.  What you get is a militarization of police to the point where Adolph Hitler of 1935 would be envious.  “Terror” gives us an excuse to institute “Papiere  Bitte?” for travel in this formerly free country.  And the hell of it is, no one seems to recognize it, except for the clear thinkers around here.

Sinclair Lewis wrote: “When fascism comes to America, it will be wrapped in the flag and carrying a cross.”.

The wars on Terror and Drugs comes close.  They get wrapped in flags and there’s a cross angle to the WOT, but in a rhyme off Sinclair, calling out our sworn enemies isn’t allowed.  Might be an interesting conversation with Pamela Geller.

Radical Retirement Reform

I didn’t mean to step on any toes in yesterday’s discussion about radical retirement reform.  But, in case you haven’t noticed, the communists an d socialists have taken over America by degrees, and the consolidation of everyone into a single retirement system – on economic grounds – is certainly something to be anticipated.

But the idea wasn’t aimed at retired government workers who do  actual work and provide good value for the tax dollar.  (See the discussion comments on point.)

What I was referring to was the hoards of highly paid government workers, not the little people like us.  Take a read through the article in Government Executive over here for some examples.  What you’ll find is that in government nowadays, just like in the private sector, the rich get richer and the poor get what we’ve got.

One of the comments on point:

“I agree. I’m a retired State of Texas worker. I paid a good percentage of my pay into the retirement system and SS. I had to retire because of poor health after 25 years. I get 2.3% of my working paycheck for each year I worked. Ya, about 52%! How many people do you know of that can survive on half of their pay? Texas State workers don’t get outrageous retirement packages. We’re just plain old tax paying worker bees like every one else. Please stop lumping us in with the economy breaking Union people! Don’t even get me started on the social security disability system! Everything is set up to accommodate the blood suckers, fakers, and pond scum of our society.

That issue of retiring on “Half your pay” is a huge one.

Elaine and I have been working on this for years, now.  It’s why we live in a rehabbed mobile/modular in the East Texas Outback.

You see, the question is exactly right:  How can you live on half your income?  That’s where we are, too.

The way to do it is simple:  Reduce your outflow.  That means not having a mortgage, paying off debt instantly to avoid finance charges.  And – big secret that Peoplenomics subscribers already know – we will be selling the beloved Beechcrate next year when we’re in a stock market bubble blow-off top.

From there, the money will go into park and when the economy collapses, we will buy what we want for 50-cents on the dollar, or less.  And that will include stocks once we get back down to 2009 levels, again, or lower.

The real problem isn’t today.  The real retirement problem is coming down the road in 2025, or so.  Because with a huge drop in markets, that means retirement benefits will become an extreme burden sooner than later.

And who is government going to screw first?  The military that could lead an uprising against corporate governance?  I don’t think so.  Or, how about the loyal federal employees who have retired?  Again,. no, because the Palace Guards would revolt.  And the Jester in Chief needs his Court.

So that gets us down to folks like us:  By the time the next financial “haircut” is applied, we will be trying to live on one-third of previous incomes.  And guess what?  That means a massive reduction in expenses.

That’s why we have no monthly cable bill.  A few streamed shows on Netflix,  News still comes from wire services, online papers, press releases, and Free-to-Air satellite TV when China sometimes does a much better job of reporting than the corporate media in this country. 

Don’t mean to start the long weekend on a sour note.  Just be aware that many of the core values that friends and family died for have already been committed to the junkyard in the longer span of history.

We just can’t see it yet.  But like the Reichstag fire back when, the writing’s on the wall.

Write when you break-even.  And yes, a short column Monday.

George  george@ure.net