"Mind-bendingly nuts."
The CPI is not the cost of living.
Just a shorter note today before I head to the beach. I’ve been sparring with econ PhD’s all week and need to chill. They’re hopeless. (Note that this does not include the econ PhD’s who follow me, God bless ‘em. They’re fine.) This one is free for all. Please consider subscribing. It will all go towards my health insurance.
“Incomes have increased in the past year to match inflation for 15% of consumers”
Don’t see anyone ever expecting 2% below…
Massive Adjustments to Health Insurance CPI "has now caused the year-to-year health insurance CPI to COLLAPSE by 37.3%, despite widespread and big price increases of health insurance."
September (this CPI release!) was the last month of the monthly push-down adjustments to the health insurance CPI, which started with the October CPI last year. For the October CPI, to be released in November, the adjustment will swing (I discussed the gory details here).
The adjustment pushed down the health insurance CPI every month on a month-to-month basis by 3.4%-4.3%, which has now caused the year-to-year health insurance CPI to collapse by 37.3%, despite widespread and big price increases of health insurance.
A 4% month-to-month plunge, as opposed to a 1% month-to-month rise, as would be the case, represents a month-to-month swing of 5 percentage points! The 37.3% year-over-year collapse, instead of something like a 12% increase, as would be the case, represents a swing of nearly 50 percentage points!
The more we narrow down the CPI metrics – overall CPI to core CPI to services CPI to core services CPI – the worse this adjustment distorts the narrowed-down figures.
The health insurance CPI as a price index itself (not percent change) in September collapsed to the price level of August 2018, despite big health insurance increases since then. This adjustment has understated “core CPI” and even more so “core services CPI.” Mind-bendingly nuts:
This is a hugely important and largely unacknowledged point:
Podcasts
How the Federal Reserve Works with Joseph Wang Not bad. Wang is refreshingly critical of the place he used to work.
Trepp Podcast 221 Interesting that only 30% of CRE loans are getting paid off when do, about half of normal. Sounds like the bigger the loan, the bigger the problem - smaller loans are more likely to scrape some cash together.
"Social Security Announces 3.2 Percent Benefit Increase for 2024" The official CPI YOY (not ex-everything) has been above 3.2% for 28 of the past 30 months.
I was listening to one of those Twitter Spaces and the great Mike Taylor prompted me to do this chart, for what it's worth: $HYG to $TLT ratio.
I’m sure could have used better examples, but his point was that high-yield has been outperforming sovereign debt.
"All of our GDP growth is government excess."
“I'll say it again - I have never seen so many stocks that are publicly traded companies that will go to zero in the next year to eighteen months. It is astonishing how many. Never seen anything like it.”
Podcast: Bill Chen on the opportunity in publicly-traded Real Estate Interesting discussion. Caveat emptor.
“I went through the last 20+ years of [Realty Income Corp.] 10-K and 10-Qs (I’m still doing this) I wrote out what they bought and their cap rates and I found most of them weren’t exceptional. Most REITS just did well because it was near impossible to buy a bad cap rate when rates just kept lowering. If you look at some of their super old deals they were amazing. Hence the great performance. I also don’t like that 80%+ of their locations are retail. Of all the industries retail is the most competitive and hardest to stay afloat. I then looked at how well a lot of their renters are doing and found a lot of the renters were struggling big money just didn’t see it yet.”
Interestingly, Fannie Mae reports 2023 Mobile Home Community sales are down to just $1 billion nationwide, about 58% lower than sales during the first half of 2022.
U.S. MBA Mortgage Refinance Index
U.S. MBA Purchase Index
30-Year Mortgage Rate
30-Year Bond Yield
"The war on inflation is over. We won, at very little cost.”
- Paul Krugman, Winner of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 2008
Paul Krugman needs to lose his job. Period.
Krugman is the best comedian on earth. I especially enjoy his endless impersonations of a senile economist.