Cents and Sensibility: the Inflation Guy Podcast

Eleven episodes ago, the Inflation Guy presented five ways that endowment CIOs could improve their inflation allocations. In a way, that put the cart before the horse and so the IG is circling back: what is it about UPMIFA that virtually demands that CIOs address their asset strategies in real space? The basic problem is that two of the seven factors that endowment investment committees are to consider under UPMIFA are in tension in nominal space. But, by changing the problem to look at it in real space, the "consideration of inflation" requirement and the "real value of the endowment" requirement can operate in harmony. Well, that's the gist of it. Listen to the podcast to hear why this is true! And check out our new website! (link below) NOTES Podcast Callback: Ep.71: 5 Simple Ways an Endowment Can Improve its Inflation-Protection Allocation To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the new website!: https://www.EnduringInvestments.com/  

In this edition of the monthly CPI Report Summary, the Inflation Guy sets the stage by reminding us about the backdrop: the low, low inflation reports of the last two months. These were somewhat quirky, in mostly different ways, and the IG explains why today's higher-than-expected inflation report is a sign that - although things are getting better - inflation is about to get to the 'sticky part' where continued improvement all the way to the Federal Reserve's goal becomes more challenging. NOTES Podcast Callback: Ep.74: Inflation Folk Remedies To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

“Hedonic adjustment” is a curse word among those who think that inflation figures are all scrubbed to look nice by the Bureau of Labor Statistics (if they are, the BLS did a pretty rotten job of it over the last couple of years!), but it is not nearly as sinister as you might think it is. In this episode, the Inflation Guy goes inside-baseball again to explain hedonic adjustment, and the offsetting effect that no one ever seems to complain about because it pushes inflation higher. It's okay to hate inflation, but don't blame hedonic adjustment! Or the Inflation Guy. He's just the messenger.   NOTES To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ Podcast Callback: Ep. 4: The Making of an Inflation Index Website reference: BLS Link to Hedonic Adjustment Q&A Website reference: BLS Link to Hedonic Adjustment for Men’s Suits Research reference: Johnson, D.S., S.B. Reed, and K.J. Stewart . 2006. “Price Measurement in the United States: a Decade Aftert he Boskin Report.” Monthly Labor Review 129 (5): 10–19.

The inflation derivatives market is currently suggesting that prices will decline in the US between August (the report we get in a couple of weeks) and December. Does this mean that inflation is upon us? No, and the reason why is something called 'seasonal adjustment.' It turns out that seasonal adjustment is critically important for inflation markets, and the market's pricing is not nearly as outlandish as it looks. In this podcast, the Inflation Guy explains in plain English what seasonal adjustment is, and what it means in this case. NOTES To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

Recent data out of China has shown growing stresses in the property market, implying stresses in banking; weakness in the trade balance; and generally disappointing growth. This has led some observers to suggest a deflationary wave is headed our way. In this episode, the Inflation Guy recalls a prior example where weakness in Pacific Rim countries actually provoked acceleration in Western economies, and rising inflation. NOTES: Book: Maestro, My Ass! https://amzn.to/45hhFbP

The US CPI was released today and was a modest positive surprise to expectations that were already pretty optimistic in the sense that economists (and the Inflation Guy) were expecting a low print. In this podcast, the IG breaks down the report and points out the very positive developments...along with some curious quirks that soften the miss. But the big question is, what happens next? And here, the Inflation Guy is less sanguine. He gets specific about why, in this podcast. Tune in, and subscribe! NOTES Pod callback: “Inflation Folk Remedies” Blog callback: “Three Colliding Macro Trends” Blog callback: “Summary of My Post-CPI Tweets (July 2023)” To Subscribe to the Quarterly Inflation Outlook: https://inflationguy.blog/shop/

The Inflation Guy, let's face it, sometimes goes a little off the rails when the topic is inflation and the importance of the inflation lens. In this episode, he compares inflation to the fabric of space-time. Can you imagine? The upshot is that even if you don't know anything about space-time, it is still very important to you - and it is crucially important if you happen to be launching rockets. So if you're launching investment rockets, then the fabric of the price-system-space-time should be very, very important to you. It's a good point. Just seems like he could have said that more succinctly. NOTES Blog callback: “Wimpy’s World” Pod callback: “Ep. 21: Recording for Posterity the Absurdity of Negative Interest Rates” Chart of Enduring Quebec Retiree Inflation strategy vs Qc Retiree Inflation: Thru June 2023

Let's take a big step back. The Inflation Guy spends a lot of time in his podcasts talking about the current CPI figures and fairly short-term considerations. But economic episodes are like books, with rising action, a climax, and falling action - and bigger cycles are like book series (think Harry Potter). As we get closer to the end of this book, we need to think about how the next book advances the plot. The Inflation Guy talks through the current chapters, looks forward to the end of this book, and suggests what he thinks Book 2 will look like. Because inflation is not a book you can put down: you're in it to the end. NOTES Podcast callback: “Ep. 50: What the Money Velocity Comeback Means for Inflation, and Investors” The Inflation Guy's book: “What’s Wrong with Money?: The Biggest Bubble of All” – by the way the price online is absurd. Email inflationguy@enduringinvestments.com and he can sell you out of his own stock. If you're in Europe, try https://www.wiley.com/en-be/What%27s+Wrong+with+Money%3F%3A+The+Biggest+Bubble+of+All-p-9781119191162 Chart of the M/Q and V convergence: https://inflationguy.blog/wp-content/uploads/2023/07/convergence.jpg Link to Trivia Answer Audio: https://www.youtube.com/watch?v=q4-gsdLSSQ0  

There is something between 'snake oil salesmen' and trusted information providers. People giving you folk remedies are generally well-intentioned, but merely lack the background to be truly authoritative about the malady they are trying to cure. So it is with economics, and these days especially with inflation. In this episode, the Inflation Guy gives three current examples of inflation-related advice and popular models that fall into the category of 'inflation folk remedies.' NOTES: Book: This Time is Different: Eight Centuries of Financial Folly by Carmen M Reinhart and Kenneth S Rogoff Podcast callback: “Ep. 72: Chapwood Index vs CPI – Which is the Better Inflation Index?” Article: “This Statistic Could Be Distorting How We Think About Inflation,” New York Times.com Article: “Disentangling Rent Index Differences: Data, Methods, and Scope”, by Brian Adams, Lara Loewenstein, Hugh Montag, and Randal J. Verbrugge Blog Article: “Multivariate Core Trend Inflation”, Federal Reserve Bank of New York

In the monthly analysis of the CPI report, the Inflation Guy reflects on an improving inflation picture while cautioning that it isn't improving quite as much as the surprisingly-awesome core and headline figures today suggested. There were two large outliers that likely won't repeat. That said, it is a positive-enough report that the Fed's presumptive rate hike expected later this month might be deferred. Inflation continues to trend slowly lower, but only slowly - and although the longest journey begins with a single step there are a whole lot of steps ahead before we get to the 2% Promised Land. Notes: Inflation Guy Shop: https://inflationguy.blog/shop/