Wednesday, December 13, 2017

November 2017 CPI

More of the same.

By the way, I don't see falling rent inflation as a good thing.  There isn't enough residential investment to moderate rent inflation through supply.  It is a demand-side effect.  This is reminiscent of 2007.  I continue to expect rate hikes to trigger a contraction, but admittedly I've been a little ahead of the curve on this.

Inflation has declined and lending has been soft, but it hasn't yet translated into broader contraction.  Although, long bond positions haven't performed so badly in the meantime.

5 comments:

  1. How do you reconcile a "weak demand" environment with record corporate profits?

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    1. Corporate profit reflects foreign revenues, corporate leverage levels, and the portion of interest expense that is an inflation premium, so it isn't a very good measure of domestic corporate operating profit. Mostly profits are high because leverage is low, the inflation premium is low, and foreign profits have grown over the long term. And corporations aren't the source of demand for residential shelter.

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  2. And here I am considering buying a "cheap" condo in Queens because it manages to be cheaper than rent.

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  3. - CPI is a (GIANT) joke. Healthcare has a weighting of about 4%, 5% (6% ??) in the CPI but Healthcare is about 16 to 17% of US GDP.
    That's why the weighting of Healthcare should be increased accordingly to that same 17%.

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    1. Shouldn't it be even higher? Consumer spending is a subset of GDP, but can any healthcare spending be considered anything other than consumer spending?

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