Financial topics

[aeden]

https://www.youtube.com/watch?v=bVMG8VygRTk word

[aeden]

No sympathy for anyone getting screwed this point in Californicate.
Bend over and take it, simps.
Useful idiots are always the last ones to it figure it out.

[vincecate]

My "Another Fine Mess" post got onto Seeking Alpha:

https://seekingalpha.com/article/447506 ... en-us-into

Hope for some interesting comments there.

[richard5za]

** 13-Dec-2021 World View: Interest rates and the Law of Reversion of the Mean

> without any corrective action we will just watch inflation come
> down? Never seen that before

> ** 13-Dec-2021 World View: Watch inflation
>
>
So that's a 100 year period. Let's compute the average annual change
in the cpi during this 100 year period.

So if x is the annual change in the cpi, then we have this equation:

19.0*(1+x)**100 = 261.582

So I'm suggesting that the end may come as early as February, thanks
to the "corrective action" provided by such factors as supply chain
problems clearing up, holiday-based demand decreasing, and
post-holiday sales bringing retail prices down. It may start coming
down a bit later than that, but the Law of Reversion of the Mean says
that it won't be much later. And that doesn't mean that the cpi will
fall below 2.26% in February. It means that the cpi will have peaked
in February, and will start falling month after month, until it's
below 2.26% and, indeed, until it's below 0.

I am not ignoring you; just thinking through the ideas you have suggested

[John]

** 13-Dec-2021 World View: Interest rates and the Law of Reversion of the Mean

> without any corrective action we will just watch inflation come
> down? Never seen that before

> ** 13-Dec-2021 World View: Watch inflation
>
> Here is my table of historical CPI data from 1914 to the present:
>
> http://www.generationaldynamics.com/pg/ww2010.i.cpi.htm

> Check out 2009 and 2015.

> Yes, but just looking at an historical inflation table doesn't
> tell you very much. The interest rates in these years were "up a
> bit" versus the previous year, but other factors would include
> currency exchange rate, trading partner inflation figures, oil
> price, gdp growth, political objectives, etc, etc. Complicated
> stuff where mechanical projections don't work at all well.

If I understand you, you're saying that some or all of these factors
that you've listed were the "corrective action" that brought about the
cpi decreases in 2009 and 2015. I'd be curious to know which of them,
specifically, provided the "corrective action" that you're saying was
necessary. And don't some of these factors also apply today?

There are probably hundreds of such factors. If you watch CNBC and
Bloomberg TV and Fox Business Network, as I do, then each analyst
guest seems to have a different factor or list of factors. "Yes, my
friends, more people are getting pizza for lunch, which is increasing
demand for Wesson oil which is being hit by supply chain issues, and
that alone is the greatest factor increasing the cpi."

Let's look at it a different way. Let's ignore the myriad factors,
and just look at the cpi as a variable by itself:

- In Jan 1921, the cpi was 19.0
- In Jan 2021, the cpi was 261.582

So that's a 100 year period. Let's compute the average annual change
in the cpi during this 100 year period.

So if x is the annual change in the cpi, then we have this equation:

19.0*(1+x)**100 = 261.582

Solving gives you x=0.02622 or 2.62%.

We now apply the Law of Reversion of the Mean. If the inflation rate
is below 2.62% for a while, then the Law of Reversion of the Mean says
that it will have to be above 2.62% for by an equivalent amount by a
roughly equivalent period of time. And vice-versa.

So the annual inflation rate has been well above 2.62% since March
2021. But it was well below 2.62% since Sept 2018 before that. This
suggests that the current high rates are a reversion from the earlier
low rates. But this can't go on forever, and I think that most people
believe that the current interest rate surge will end in the new year.

So I'm suggesting that the end may come as early as February, thanks
to the "corrective action" provided by such factors as supply chain
problems clearing up, holiday-based demand decreasing, and
post-holiday sales bringing retail prices down. It may start coming
down a bit later than that, but the Law of Reversion of the Mean says
that it won't be much later. And that doesn't mean that the cpi will
fall below 2.62% in February. It means that the cpi will have peaked
in February, and will start falling month after month, until it's
below 2.62% and, indeed, until it's below 0.

Update: Math corrected. [14-Dec, 9 am]

[richard5za]

John, I had a look at how inflation forecasting is done in Europe. With massive computerised forecasting models inclusive of all variables, and possible variations, its still an inexact science. If inflation is 2% now the forecast for 12 months out might be 2.3% but with high/low possibilities of minus 1% to plus 4.5%. Its a bit like the weather where tomorrow is generally reasonably accurate but two weeks time is pandora's box!
So the question you ask is can we take a single series with a lot of data (you have monthly for over 100 years) and project it.
The only way to answer this is try empirical analysis. Are there cycles in the data, short term, long term, etc, etc; how to best understand the serries, etc. Then take the first 80 years and project it and see if you are getting sense against historical actuals.
Now who is the best person to do this? Higg, of course. Higg is our maths boffin.
Higg, where are you? And how are you? Trust all well.

[John]

Yes, Higg. Where are you?

[vincecate]

"The market is disconnected from everything. Throughout history, there are correlations you would expect to hold constant between the market, consumer confidence, and the economy. Currently, after a decade of zero interest rate policy, massive amounts of liquidity, and financial supports, the market has become detached from reality. "

https://realinvestmentadvice.com/the-ma ... verything/

[Cool Breeze]

John, I had a look at how inflation forecasting is done in Europe. With massive computerised forecasting models inclusive of all variables, and possible variations, its still an inexact science. If inflation is 2% now the forecast for 12 months out might be 2.3% but with high/low possibilities of minus 1% to plus 4.5%. Its a bit like the weather where tomorrow is generally reasonably accurate but two weeks time is pandora's box!
So the question you ask is can we take a single series with a lot of data (you have monthly for over 100 years) and project it.
The only way to answer this is try empirical analysis. Are there cycles in the data, short term, long term, etc, etc; how to best understand the serries, etc. Then take the first 80 years and project it and see if you are getting sense against historical actuals.
Now who is the best person to do this? Higg, of course. Higg is our maths boffin.
Higg, where are you? And how are you? Trust all well.

The first step is having an honest discussion and analysis is admitting and realizing (publicly) that CPI is only part of the equation of cost of living, and has been changed over the years (yes manipulated) to suit the needs of the power brokers via consumer manipulation/propaganda. Do you at least understand this, richard?

For example, if we used 1970s CPI formulas, inflation would be around 15% minimum. Now, if people like John or the other guys wanna say deflation WILL happen, fine, but it's not happening nor are we seeing anything happen currently that anything but inflation. Why is that so hard to recognize or is it considered controversial? It's literally stating the facts at hand.

[richard5za]

Do you at least understand this, richard?

For example, if we used 1970s CPI formulas, inflation would be around 15% minimum. Now, if people like John or the other guys wanna say deflation WILL happen, fine, but it's not happening nor are we seeing anything happen currently that anything but inflation. Why is that so hard to recognize or is it considered controversial? It's literally stating the facts at hand.

Hi Cool, I don't live in North America, don't have the feel of private consumption expenditure there, don't know the politics on the manipulation of CPI data, etc
What I can say is that in my own country I am comfortable with the consistent calculation of the CPI since my university days (economics major) now more than 50 years ago.
You do need to remember that the CPI will be different for different communities and socio-economic groups in every country, and the overall figure is simply a country average. So what we personally experience might be different to the published figure.
Coming now to your 15% figure presumably versus 12 months ago? My gut says not possible with the US dollar strengthening 8% over the period. Energy had a massive increase in the published data and looked correct, but now will go negative if oil remains at current levels.
John may well be correct when he says the CPI will be well down in the first half of next year. I don't know. I don't have the competence to forecast inflation for the USA