{"id":357,"date":"2010-02-19T10:39:00","date_gmt":"2010-02-19T15:39:00","guid":{"rendered":"http:\/\/www.intuitiveinvestor.com\/web\/?p=357"},"modified":"2018-08-21T09:09:18","modified_gmt":"2018-08-21T13:09:18","slug":"inflation-figures-consumer-price-index-style","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/02\/19\/inflation-figures-consumer-price-index-style\/","title":{"rendered":"Inflation figures, Consumer Price Index-style"},"content":{"rendered":"

The Department of Labor announced January Consumer Price Index figures.\u00a0 The CPI is the standard measure of inflation in the U.S. economy.\u00a0 Specifically the CPI rose 0.2%, however the so-called “core number” which nets out volatile food and energy prices, actually fell<\/em> by 0.1%.\u00a0 That marks the first decline in CPI since\u00a0December of 1982.\u00a0 Wow!<\/span><\/p>\n

Analysis:<\/strong> Right now CPI is being tracked by many stock investors because they are wary of any Federal Reserve interest rate increases designed to stave off inflation.\u00a0 So if CPI remains tepid then the thinking goes the Federal Reserve doesn’t have to raise interest rates (see my last post, in fact).\u00a0 However, it’s my feeling that the Federal Reserve is much more sophisticated in its analysis of inflation than it used to be.<\/span><\/p>\n

All throughout the real estate asset bubble CPI remained very tame.\u00a0 Unfortunately, the Federal Reserve focused on traditional measures of inflation and absolutely ignored the increasing values of both the stock market and the real-estate market.\u00a0 Duh!\u00a0 This is because the traditional thinking at the Fed has always been that markets take care of themselves and don’t need to be included in an analysis of inflation.\u00a0 Yet a massive increase in the price of anything is inflation and so the Fed can no longer exclude the values of asset markets in its inflation analysis.\u00a0<\/span><\/p>\n

I would truly be SHOCKED if, in the future, this same assumption is made.\u00a0 So while the financial markets will likely welcome this news as a harbinger of continued low rates from the Federal Reserve, I feel that is a spurious assumption.<\/span><\/p>\n

What will be more important to watch is the price level for all goods, services, and assets in the economy.\u00a0 Fortunately, the stock markets have been accurately discounting the economy.\u00a0 While the market is, in my opinion, fairly to slightly over-valued, this is a marked change from the\u00a0nearly thirty year period of 1982-2008 where the entire market was massively over-valued.\u00a0 So rationality appears to have returned to the realm of equity investing.\u00a0 This is a\u00a0relief, frankly, to me and I am sure to the Fed, too.<\/span><\/p>\n

Importance grade:<\/strong> 5; investors will think this is tremendously good news.\u00a0 However, it is only good news in conjunction with\u00a0rationally priced asset markets.<\/span><\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The Department of Labor announced January Consumer Price Index figures.\u00a0 The CPI is the standard measure of inflation in the U.S. economy.\u00a0 Specifically the CPI rose 0.2%, however the so-called “core number” which nets out volatile food and energy prices, actually fell by 0.1%.\u00a0 That marks the first decline in CPI since\u00a0December of 1982.\u00a0 Wow! […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-357","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/357","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=357"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/357\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=357"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=357"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=357"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}