The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 1.1 percent before seasonal adjustment.
Similarly to April and May, a decline in the energy index caused the seasonally adjusted all items decrease in June. The index for energy decreased 2.9 percent in June, the same decline as in May, with a decline in the gasoline index accounting for most of the decrease. This more than offset an increase in the index for all items less food and energy, while the food index was unchanged for the second month in a row.
The index for all items less food and energy rose 0.2 percent in June after increasing 0.1 percent in May. A broad array of indexes posted increases, including shelter, apparel, used cars, medical care, tobacco, and recreation. These increases more than offset declines in the indexes for household furnishings and operations and for airline fares. The 12-month change in the index for all items less food and energy remained at 0.9 percent for the third month in a row.
One Month Change in CPI-U
12-Month CPI-U Change vs. Year Ago
Oil and the CPI
For, now the CPI (less food and energy) has been hovering near +1% for about a year. However, it is not really valid to exclude food or energy but the Fed does it to justify their inflationary policies (policies that clearly are not working now).
The jump in "all items" in the second chart reflects the rebound in oil prices in Spring-Summer of 2009 when crude soared from $35 a barrel to close to $80 a barrel.
Of course hyperinflationists were screaming every step of the way, conveniently ignoring the plunge from $140 to $35.
When it comes to prices, people have selective memories. They remember every penny uptick in gasoline prices, but forget the times they drop. The same applies to most everything else, but energy is very noticeable because people are constantly filling up their tanks.
May CPI and Core CPI were out this morning. As we all know, nothing is worth anything anymore. Until further notice and some change in trend, the discussion simply cannot be about inflation.
Sorry, Inflationistas. Nothing to see here just yet. Now if only the drop in cost of living expenditures could become a favorable topic of conversation to counterbalance all the moroseness and hand-wringing…
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months the index increased 1.8 percent before seasonal adjustment, the first positive 12-month change since February 2009.
Most of the change was due to energy; gasoline was up sharply (as we saw yesterday in the PPI.)
Core was a literal zero.
Food was up a bit, but I continued to be puzzled by the difference between gasoline and "fuel oil."
Why? Because "fuel oil" (that is, heating oil) is exactly the same thing as #2 diesel – that is, road diesel fuel. The only difference is the tax (and the presence of dye in the heating oil to denote that the tax has not been paid.) But for the legal (tax) issues you can run "heating oil" in your diesel car or truck, and vice-versa – they are identical products.
Used vehicles were also up materially – a reflection of the distortion from "cash for clunkers" still present in the data (it hit its maximum in October at +3.4%) Prices for new vehicles were also up (again, the maximum was in October) – again denoting the "back-door" bailout of the automakers from cash-for-clunkers. Unlike the new vehicle deal however, which you got a tax credit for, the buyer of a used car just got plain old-fashioned screwed through price-jacking caused by constraints in supply. (Just wait though – in the new year when people can’t make the payments on those CFC deals, you’ll see what happens to used car prices…. supply and demand you know.. )
Medical care was up as usual (gee, how come it keeps rising faster than overall inflation?) and shelter costs were down (remember, this is not "housing", as that would expose reality – it is "owners equivalent rent")
All in all a blah report – but given the PPI that’s expected – the fun and games in the CPI report resulting from yesterday’s PPI should show up in a month or two.
Here is an excerpt from today’s Bureau of Labor Statistics Non-farm Payrolls report.
"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.
Household Survey Data
In October, the number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points…
The civilian labor force participation rate was little changed over the month at 65.1 percent. The employment-population ratio continued to decline in October, falling to 58.5 percent."
An astute reader noticed that the BLS press release says that 190,000 jobs were lost from payroll employment, but the number of unemployed persons increased by 558,000. What’s up with that?
The BLS report consists of two independent data samples. BLS has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.
There is the "Establishment Survey" which is based on responses from a sample of about 400,000 business establishments, about one-third of total nonfarm payroll employment. The headline payroll number, the job loss of 190,000, is based on this data.
Then there is the "Household Survey" which is a statistical survey of more than 50,000 households with regard to the employment circumstances of their members, which is then applied to the estimates of the US population to obtain the unemployment number. This survey was started in the 1950′s and is conducted by the Census Bureau with the data being provided to BLS. It is from the household survey that more detailed information is obtained about employment statistics within population groups like gender and age, wages, and hours worked. It is this study that is responsible for the unemployment rate of 10.2%.
So which survey is correct? Neither. The truth is somewhere
Fantastic dish served up at Jesse’s Cafe. Highly recommended – especially if you’re a normally intelligent person who can’t understand economics. It has nothing to do with you! Imagine being an inquisitive medical student at the time when blood-letting was used to treat all ills… I loved this:
"The ugly truth is that economics is a science in the way that medicine was a profession while it still used leeches to balance a person’s vapours. Yes, some are always better than others, and certainly more entertaining, but they all tended to kill their patients."
Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong
US Personal Income has taken its worst annual decline since 1950.
This is why it is an improbable fantasy to think that the consumer will be able to pull this economy out of recession using the normal ‘print and trickle down’ approach. In the 1950′s the solution was huge public works projects like the Interstate Highway System and of course the Korean War.
Until the median wage improves relative to the cost of living, there will be no recovery. And by cost of living we do not mean the chimerical US Consumer Price Index.
The classic Austrian prescription is to allow prices to decline until the median wage becomes adequate. Given the risk of a deflationary wage-price spiral, which is desired by no one except for the cash rich, the political risks of such an approach are enormous.
On paper it is obvious that a market can ‘clear’ at a variety of levels, if wages and prices are allowed to move freely. After all, if profits are diminished, income can obviously be diminished by a proportional amount, and nothing has really changed in terms of viable consumption.
The Supply side idealists (cash rich bosses, Austrians, Marxist, monetarist, and deflationist theorists) would like to see this happen at a lower level through a deflationary spiral. The Keynesians and neo-liberals wish to see it driven through the Demand side, with higher wages rising to meet the demands of profit in an inflationary expansion. Both believe that market forces alone can achieve this equilibrium. Across both groups runs a sub-category of statism vs. individualism.
Unfortunately both groups are wrong.
Both approaches require an ideal, almost frictionless, objectively rational, and honest economy in…
Another mixed bag of data this morning. Most alarming is the continuing trend in negative consumer data. As we all know by now, yesterday’s retail sales data was weak at best – something we’ve been reporting on here at TPC weekly thru our ICSC and Redbook data reports.
Consumer sentiment readings continue to trend in-line with broader spending habits. This morning’s reading came in at 63.2 – almost 5 points below consensus. This continues to represent the broader economic themes we are seeing; deflation in the things we own and inflation in the things we need.
CPI came in flat which is reflective of the sluggish economy. This morning’s data was in-line with estimates at 0%. The lack of pricing power across the broad economy is in-line with the lack of expansion in corporate revenues. There is little demand for goods and even less pricing power. I’d love to spin this into a positive, but it simply displays the death grip that deflation continues to maintain on the broad economy.
On the bright side, capacity utilization and industrial production posted slight improvements. This is a clear sign that the recession is likely to end in the upcoming quarter. Unfortunately, the rebound in both indicators show clear signs of the sluggish and below trend recovery we are likely to see. It won’t be a technical recession, but it will probably continue to feel like one.
All in all, this morning’s data nicely summarizes the themes we continue to focus on here at TPC. The consumer is weak, deflation remains the bigger concern and the recovery (if we can call it that) is likely to be far from v-shaped. As for the markets, complacency remains the name of the game. Own equities at your own risk – which I believe are highly elevated currently….
So, I got lucky and somehow predicted Q2 GDP the night before the release (as a friend of mine told me, "even the blind chicken gets the kernel of corn"), BUT I’ll try again. Economists (smarter than me) are predicting a month over month CPI print of 0.0%. I’ll go on record here that it will come in lower. To understand my reasoning, lets take a look at details from today’s July import price levels release. Marketwatch reported:
Prices of imported goods fell 0.7% in July, the first decrease since January as petroleum prices declined, the Labor Department estimated Thursday.
Analysts polled by MarketWatch had expected the import price index to fall 0.1%.
Import prices were down 19.3% in the past year, the largest annual decline since the data were first published in 1982. In June, the import price index rose a revised 2.6%, compared with a prior estimate of a 3.2% gain.
In July, imported petroleum prices fell 2.8%, the first decrease since January. The petroleum imports price index is down 49.9% over 12 months. Non-petroleum import prices fell 0.2% in July, and are down 7.3% for the year, the largest 12-month decline since the data began publication in 1985.
We can see below that the change in the import price level was largely driven by the change in fuel (i.e. petroleum) prices.
Now the significance. There has been a very strong relationship between the price level of imports and broad CPI, as changes in the price of petroleum has been the main driver of CPI. Thus, the fact that July’s import prices declined makes me think we may be in for a surprise regarding July’s CPI print. The below chart shows the longer term relationship.
Regardless of the month over month figure, expect a sizable drop in the year over year number. As we can see below, prices spiked last July as the bubble in oil was in full gear. Thus, if prices are flat month over month (as expected), the year over year CPI will move down to -1.9%.
The important question… how do you position for this? I personally own TLT (a long positon in the long bond). My view is if CPI comes in lower than…
Inquiring minds are asking "What is the Real CPI?" It’s a good question, too. However, you can find many widely differing opinions. For example, you will get one answer from the government, a different answer from sites like Shadowstats, and a third opinion from me.
That’s an interesting chart, especially given the hyperinflationary bent of John Williams. He pegs the CPI at 2% as of May 2009 and had it at 9% mid-2008 and right around 5% in 2007. In contrast, the official CPI was 5.5% in mid-2008 and 2+% in 2007.
The problem with all of those numbers is they fail to properly take housing into consideration. And housing has been falling like a rock.
Should housing be in the CPI? How?
Bear in mind the government considers housing a capital good not a consumption item. Based on the idea that one would be renting a house if one did not own it, the government uses Owners Equivalent Rent (OER) and not housing prices in the CPI. OER is the largest component in the CPI.
By the same measure one might argue that lawn mowers and automobiles are capital goods. Lawn mowers are durable, not immediately consumed, and if one owns buildings and uses lawn mowers to maintain their properties (or if one hired someone to cut their lawns for them), the mowers would indeed be depreciated over time as a capital expense. The same logic also applies to auto leases.
Let’s explore this from a practical standpoint starting with theory.
Page 47: The treatment of owner occupied housing is difficult and somewhat controversial. There may be no consensus on what is the best practice. The distinctive feature is that it requires the use of an extremely large fixed asset in the form of the dwelling itself.
Page 147: The treatment of owner-occupied housing is arguably the most difficult issue faced by CPI-compilers. Equally important it may be difficult to identify a single principal purpose for the CPI.
In particular, the dual use of CPIs as both macroeconomic indicators and also for indexation purposes can lead to
The automatic dividend reinvestment is the easiest one to do. Once you purchase a dividend paying stock, you essentially check the “dividend reinvestment” box. As a result, your dividend income is reinvested into more shares of the same stock, and you start the income compounding process. The set it and forget it type of action is particularly appealing to in...
A New Jersey Transit commuter train derailed and crashed into the Lackawanna Station in Hoboken, NJ this morning around 8:30AM causing major structural damage to the terminal and numerous passenger injuries. Initial images from the station seem to indicate that a section of the roof has collpased and passengers are reportedly trapped under debris.
Passengers told WABC it was train number 1614 on the Pascack Valley Line, which left Spring Valley, N.J. at 7:23 a.m. bound for Hoboken and apparently was running late.
Border skirmishes between India and Pakistan have been going on for years. But with social mood darkening everywhere, and with India making the claim ‘Significant casualties’ inflicted on ‘launch pads’ for militant attacks, one can’t help but wonder when this erupts in a major way.
India said it had carried out “surgical strikes” overnight across its disputed border with Pakistan to target groups of militants that were allegedly planning to carry out terror attacks on Indian territory.
In early 2009, the seven largest publicly traded college operators were worth a combined $51 billion. Today, they’ve been all but wiped out.
When Barack Obama took office, America’s seven largest publicly traded college operators were worth a combined $51 billion, with more than 815,000 students enrolled at campuses spread across the country. The schools were flooded with with people seeking shelter from the recession, returning to school to pick up new skills.
Almost eight years later, the industry has been decimated. The seven largest listed operators are worth just over $6 billion, and the most valuable co...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer. One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."
Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.
Genetic components are the DNA sequences that are 'inherited.' Some of these genes are stronger than others in their expression (e.g., eye color). Yet, some genes turn on or off due to external factors (environmental), and it is und...
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.