Sunday, April 17, 2011

Shame on CNBC

April 12, 2011
CNBC: Inflation Actually Near 10% Using Older Measure

Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.

Will CNBC refer to information provided by Coast to Coast AM next? "Enquiring" minds want to know if UFO sightings will be included in the CNBC of the future. I'm not necessarily opposed I guess. They already have Jim Cramer's Mad Money. It might not be that much of a shocker.

I keep track of every penny I spend. I am not seeing the inflation that Shadowstats claims, nor is the Billion Prices Project over at MIT.

This post inspired me to actually give you a glimpse of my personal finances. I've adjusted my annual expenses for the inflation the government reports to us.

Click to enlarge.

Here are some notes to go with the chart.

* As you can see, I do not lead the life of the rich and famous. I'm quite frugal. I value my free time much more than I value spending money.

* The chart does not include investments or taxes on those investments. It does include every other form of taxation though (including property taxes on my paid off home).

* The chart does not include the financial support I offer to my unemployed girlfriend.

* The period right now is very comparable to the period in early 2004. My standard of living is almost identical in every possible way. I had no health insurance. I had no desire to hoard. I had no unexpected expenses. I was equally frugal. As seen in the chart, the CPI claims that my standard of living is identical and I can tell you first hand that it pretty much is.

* My expenses tend to be lowest when I don't have health insurance and I don't have big medical bills. Go figure. I would prefer to have health insurance right now but I can't get it. I was denied. I should have it again by the end of the year though.

* Based on real interest rates, I'd be hoarding again right now. I've just run out of ideas it seems. Toilet paper is still cheap. Perhaps I'll buy even more of that. What's the harm?

If inflation was running as hot as Shadowstats has claimed, the last 10 years would have financially ruined me. I'm not financially ruined. Therefore, I find their claims somewhat fishy to say the least.

I cannot say what the future holds. I can say that inflation in the CPI has been relatively tame and the inflation I have personally seen has been relatively tame. The problem has come from the short-term income side. It is difficult to keep up with even tame inflation when 1-year treasuries are paying 0.24%.

Should inflation pick up (again), I am fairly confident that the CPI will show it. That is why I am still comfortable holding inflation protected treasuries and inflation protected I-Bonds long-term.


getyourselfconnected said...

I am glad you have not seen inflation too much. Still, I would hardly characterize your lifestyle (smart) with how the average person goes about things. School costs, gas driving to work a fair distance, etc add up quite a bit.

Stagflationary Mark said...


The typical person doesn't have much in the way of school costs either.

The cost of gasoline has gone up but the price of new cars sure hasn't much.

At 25 mpg and at $4 per gallon, a $30,000 car is still worth 187,000 miles of gasoline.

Keep in mind that since I am home all the time (retired) I also have higher heating costs for my home than most would have.

I also have higher than typical medical costs in general since I have no employer to help subsidize me.

And lastly, and most importantly, I have to buy more toilet paper. Nobody gives me any for free unless I am out shopping these days. I have no sympathetic employer, lol. ;)

Overall, I think my exposure to the CPI isn't as biased in the downward direction as it might sound.

Stagflationary Mark said...

One more thought.

Inflation tends to hit the frugal and/or poor the hardest.

If $1 is added on to the price a dinner at a fancy restaurant to cover the increased price of sugar then the percent change is minimal.

If $1 is added on to the price of Coca Cola at a local grocery store to cover the increased price of high fructose corn syrup then the percent change is not so minimal.

In that respect, I have more direct exposure to commodity prices than many. I rarely eat out. I tend to spend money like a poor person would/should. We even buy flour in bulk.

When I first turned bearish I could buy 5 12-packs of Coca Cola for $10 on sale. I now consider 4 for $12 to be an okay sale. Sigh.

I think I am somewhere in the middle ground. That doesn't mean the poor couldn't be experiencing much higher personal inflation rates and the rich much less. An average is an average. It says nothing about distribution.

I feel really sorry for the working poor that have long commutes. There comes a point where gasoline prices will no longer make that economically feasible. Worse, the poor person then comes home to see the price of sugar skyrocket. Sigh.

My girlfriend is in that trap somewhat. There have been a few job opportunities but they paid too little to justify the long commute.

Troy said...

> I've just run out of ideas it seems. Toilet paper is still cheap. Perhaps I'll buy even more of that. What's the harm?

Carpet beetles love that stuff, so watch out for that mode of loss.

Can't put that on Schedule A, alas.

Stagflationary Mark said...


Great point!

Beware the ides of carpet beetle marches!

Ides of March

Ay, they have come, but they are not gone.

Fortunately, my TP is sealed in plastic and is kept in a dry room.

As proof nothing is risk free, there could always be a roof leak though.