CPI drops so inflation no longer a concern...NOT (borrowing, unemployed, economy)

[slackjaw]

It's my understanding that despite the late summer upsurge in valuations trading hasn't been that heavy and there is still tons of cash on the sidelines or still riding bond funds.

Hardly piling into stocks.

[mathjak107]

Originally Posted by HappyTexan

Commodity inflation will get us. Cotton closed up today at at 140 year high.
Hasn't been this high since 1870..Reconstruction.

not without wage growth and job growth it wont...commodities pricing by itself is the smallest part of a finished goods price.

only 10% of the price of a loaf of bread is based on wheat prices. its all labor costs,production costs,shipping costs and advertising... most companies have been just absorbing these increases with out passing them on.


commodities rising may actually slow us down at this point, a rise in oil could suck even more of the little most of us have to spend after pay cuts and changing jobs that are paying a fraction of what we had . that would come at the expense of us spendng on other goods and services... its all a case now of buying this or that and until we have enough money in our hands to buy this and that we dont really have the building blocks in place for general price increases across the board. while 3% is generally normal for us i think we have a couple of years before we go much above that as a new normal level.

[user_id]

Ugh, cotton prices are going up because a bunch of cotton crops were destroyed. Its a supply shock that has nothing to do with the FED, after all cotton is a global commodity.

Anyhow the wholesale cost of a cotton t-shirt has only gone up around 5~10%. That translates into perhaps 2~4% increase in retail if the retailers bother marking it up (since the increase is short term they are likely to just absorb it).

[mathjak107]

even when commodities were soaring before the down turn some rose over 100% yet the price increases on those prodiucts associated with it rose on average 5-7%... it wasnt across the board with every product either,,as certain products rose other products fell..

high inflation is about a general rise in prices across the board caused by to much money chasing to few goods .. its my opinion we are all pretty far away from having to much money at this stage. not enough money is a bigger issue.

[POhdNcrzy]

You may have heard about US Steel selling off the other day. This isn't the only reason for the drop in share price, but the company said that the price of iron ore is up 57% versus one year ago.

This is the trend and sure seems it will continue. This HAS to translate into some nasty cost-push inflation at some point, right?

[mathjak107]

yep, it will eventually as soon as wages start rising and more people are working so we can get more money out there chasing those goods. but many like myself got new jobs that pay way less and everything becomes a matter right now of if i spend more for one thing i have to spend less for another.

[Mircea]

Originally Posted by user_id

That translates into perhaps 2~4% increase in retail if the retailers bother marking it up (since the increase is short term they are likely to just absorb it).

Absorb what? T-shirts cost about $0.09 to $0.12 a piece.

That's what the GAP pays. Doesn't matter whether the Ts are imported from Mexico, Romania, Pakistan, UAE or Thailand (that's where they come from).

GAP's processing costs are $0.117 per carton (11.7 cents) and a carton is 24 Ts. They usually hit their processing costs. That's the cost to bring one carton of Ts from port to distribution center, receive it, stock it, pick it, pack it and send it to a GAP store. I don't know what the GAP store costs are.

In fact there's nothing the GAP buys that costs more than $0.22 except leather belts and shoes from Italy. That dress at the GAP out-let that says $199 marked down to $99? That's a faux-mark-down. That dress was never on sale at any time ever for $199. It came off the truck that way.

[POhdNcrzy]

Originally Posted by mathjak107

Realize one thing:the cpi index is a price index not a cost of living index..

the cpi is a basket of goods and that basket is massaged in various ways to keep it low as possible .its merely a manipulated price index.....

want an example?: if flank steak increases to much and approaches the price of filet mignione then the flank steak is subbed for the filet ,considered a betterment and hense no price increase is figured..
by the way thats off the gov'ts own explanation of the cpi on their website..
you just need to read between the lines of what they are explaining in different parts of their explanation..

but while we look at the cpi as a cost of living index it is not....

a cost of living index is very individualized...

it would look like this...

THE PRICE CHANGE X HOW MANY TIMES YOU BOUGHT IT X A QUALITY FACTOR OR STANDARD OF LIVING FACTOR.

while cheap crappy k-mart jeans may have gone down ,a good pair of gap jeans have gone up so quality has to be figured in there....

the best of breed sony xbr in the 80's was 900 bucks.... its closest equal performance wise today may cost 250 bucks or less..however the best of breed today from sony will cost you 2500.00 bucks in that line so its all relative to quality and where the things you buy rank.

i know im well up over the last few years in what expenses cost us regardless of what the cpi price index shows.

Jak, here is a nice article about how the Guv manipulates the CPI downwards which discusses the "substitution" methodology you refer to:

Financial Sense Storm Watch Update "The Core Rate" by Jim Puplava 06/24/2005

[mathjak107]

good article,thanks

[slackjaw]

My costs have been pretty static over the past couple years. Actually that is just an assumption I'm using a pretty blunt tool to support that claim:

net_income - x = leftover_for_savings

I guess it is possible that we've lucked out with fewer unexpected major expenses or something, I dunno.