Yes - but we should all be weary of this.
CPI is measured in funky ways, and it's tough one.
Problems with measures:
+ Both housing and Oil prices are usually left out of the numbers they use (included in others).
There are reasons for doing this, but it's bazonkers crazy to think of 'consumer prices' as not including their #1 item (housing) and a huge variable cost that consumers pay for directly (gas) but also that goes into everything (airline tickets, transport of stuff, taxi, etc. etc..)
And of course the hardest thing to measure is the real value increase of a product ... i.e. a tomato that is bigger, redder, juicier, healthier - is worth more than one that is not. So - if prices for tomatoes stay flat - but - their value has actually increased, well, that's deflation. That intangible is super hard to measure and quantify.
It's the later issue that is at the heart of so many economic arguments: some say we are 'poorer than ever' - and yet, every single bit of material consumable is way better than it ever was. The crappiest Peugot today drives better than the #1 Mercedes from 1985 ...
This is funky for another reason: people don't live in similar housing to what people lived in in the past. If you look at census data (American Housing Survey) from 40-50 years ago, you find the average American home was under 1500 square feet, 2-3 bedrooms, 1-2 bathrooms, no AC, no laundry machines, and so on. In fact, the average American home in the 1970s was smaller and had less amenities than the average current American home for people below the poverty line.
Any measure that just looks at the change in housing costs and doesn't adjust for the benefits of on-average larger homes with more amenities will end up overestimating that piece of monetary inflation (accidentally counting lifestyle inflation.) As you say, it's really hard to measure the "real value increase of a product", and that makes a lot of inflation measures... sketchy.
Meanwhile, the important things, such as percentage of income directed toward expenses and debt payment, and amount of leisure, may not have improved.
More households are composed of both prime-age adults working than 30 years ago. Are expenses simply rising to match this rate of increased employment?
Either way, it’s sketchy until those factors are quantified.
Indeed. And yet, that's what we buy. Or, that's what's being built and therefore that's what we can buy. I don't know whether buyers or builders/zoning are to blame, I just know that when we try to measure inflation, it's really hard to divide monetary inflation from lifestyle inflation -- how much is "money is worth less", and how much of it is "you're buying something better"?
out of 118.29 million housing units, 80.8m (68%) have dishwashers, 97.6m (82%) have washing machines, and 95.7m (81%) have dryers. For the grandparent: 105m (89%) have AC, and 112m (94%) have a furnace or heat pump or water/steam heat or built-in electric heat of some sort. All of those numbers would qualify as "most".
Looking at the oldest stats I can find for each of those categories:
1970 -- out of ~75.3 million housing units, 35.3m (47%) have AC, and 62.6m (83%) have a furnace or heat pump or water/steam heat or built-in electric heat of some sort.
1985 -- out of 99.9 million units, 42m (42% heh) had dishwashers, 67m (67%) had washing machines, and 58m (58%) had clothes dryers.
So 26% more homes have dishwashers, 15% more have washing machines, 23% more have dryers, 42% more have AC, and 11% more have better heating systems compared to the earliest data I was able to find. Point being, there's been a significant increase in the availability of many important in-house amenities over the last 50 years. Not that everyone has every amenity, but a lot more people have them, and that definitely affects the way we should interpret stats relating to housing costs.
From context, I suspect, though I'm not certain, that you mean “wary” (cautious), not “weary” (tired).
Does CPI decrease artificially based on subsidies to the indexed goods? For example with milk or any food with corn syrup, where the actual cost of production isn't reflected in the market price.
Even when measuring real dollars, it's not a surprise. The great majority of the time, the aggregate national income, measured by GDP, grows in the U.S. and in any other advanced economy.
In the last 30 years, I count 11 quarters out of 120 when the GDP shrank.
Real means the numbers are adjusted for inflation.
Truth is that economies change slowly, and politicians have much less control over it than we all like to believe.
I dont know why you are being downvoted, this is a very sensible comment. Changes in society are slow and progressive, except in very specific circumstances.
War can change things, disasters, foreign economic threats (say a trade war with a major superpower). Those can have rapid effects as well.
As always there were some short-term positive Keynesian stimulative effects by increased government spending, but a massive run-up of the deficit did increase the cost of servicing the national debt, which might otherwise have been directed into productive enterprises, rather than the wasteful Iraq war which achieved negative progress.
The Shiller P/E ratio is at a 2nd-time high - the only other higher time being the dot-com boom and bust: multpl.com/shiller-pe/
Lots of opportunity lost. I just can't get over the feeling of repetitious omens. My family (commercial real estate clan) says when new large office building construction goes up it tends to signal end of bull run. Where I live we are voting on a large bond on the back of HUGE growth in home values, last time we did this was 2007...
Not really. It's only dependent on stock prices inherently reflecting all of the information buyers and sellers have about their expectations, including expected risk and reward. Trying to "time" the market basically means trying to find a signal other buyers and sellers haven't figured out, or at least not enough of them to cause prices to shift accordingly.
Which isn't to say it's impossible. You can be among the first to notice something is awry. It just probably won't be "the P/E is off"; lots of people look at that. It'll be something like in the last housing bubble -- "huh, I noticed housing prices are way out of reach for median income earners, so I looked into loan practices, and apparently risky loans are being repackaged and sold off in a way that masks the risk" and then watching things like loan default rates like a hawk, and then selling as soon as loan defaults started affecting the market.
Maybe I define market timing differently. Holding a healthy cash position for future investment and selling investments from time to time based on either their valuation or prospects, whatever that is called, is not a bad idea.
I contrast that with being 100% invested in index funds at all times, forever. That might backtest well, but that doesn't mean it will forward test at all well.
Sure, with a 30-year horizon, everything smooths. But entering a market at the wrong time has severe implications.
That said, it is far more probable that a reluctant investor misses growth opportunities by failing to invest than by investing at the wrong time.
I think these are a decent choice for disinterested people.
Also, if you think the market is going down, one doesn’t need perfect timing. You can get out and have cash on hand to buy later. If everything goes down 25% and you sold out 5% below the max value, you now have more money than your peers, which started in the market, to get gains in the future.
However, in the last decade or so, I made it all back plus another 60%. If I had pulled out I'm pretty sure I would have missed a lot of those gains.
Everyone in this booming economy should either go around interviewing and getting job offers until they are satisfied or start their own business.
There's not much sense in complaining about your situation if you've done neither of those.
We're in the midst of an insane sociological revolution regarding "ability." 100 years ago it didn't matter if you had a 140 IQ because you were just out plowing the field the same as your neighbor. For the first time in the history of mankind general cognitive ability is the biggest factor in your ability to acquire resources. Unfortunately that's largely biological in nature. You can reduce IQ pretty easily with poor nutrition, abuse, etc. But it's really hard to raise IQ meaningfully. Life is already difficult for well meaning, hard working people with low cognitive ability, and I think it's only going to get worse. In the meantime, high cognitive ability people will be doing well, whether they're coding or doing other brainy work.
After a certain fairly low threshold, having more money doesn't automatically make you more happy (i.e. you're already fed and clothed and have a place to sleep). Once you have crossed that threshold, you'll have to weigh work satisfaction against pay, and it may turn out in favor of the low-paying job you enjoy more.
In my view, you should take income as a signal, one piece of information. It's the market telling you which fields are valued by others and yet have too few practitioners. It's not the only signal - you should also listen to your feelings about whether you enjoy the work, whether you feel like you're growing, whether you can live in a geographic location you like, whether you can work hours that suit you, whether the results of your work accord with your values, and so on. But you make tradeoffs between these factors: you don't get to have everything. If you decide to follow your passion with a non-lucrative field, that's fine, but realize that the consequence of your decision is that you will make less than someone whose work is valued more highly by the market. And it's up to you to decide whether the things you could buy with that money are worth more than the experience of doing the job.
Perhaps I'm not parsing this properly, but it sounds like you're suggesting we should advise children on how to navigate the fantasy society you want to live in rather than giving them sober advice based on objective reality.
Do you have any capacity for empathy or understanding a life situation that is not your own?
Edit: Since this was down voted, I want to be clear: this is not snark. This was meant as a very real commentary on how important it is that we have the ability to inflate our way out of debt. It's critical to understanding the power dynamics at play here.
There is no need to pay off the debt, as long as it grows slower than the economy it is shrinking in real terms.
Furthermore it serves an important purpose as a "risk-free" investment of US dollars and as a tool for monetary policy through open market operations. In fact there isn't enough outstanding debt for the second role, which is why during the financial crisis the Fed expanded its balance sheet to include mortgage backed securities.
Finally any country with its own currency can't really default on payments, except in a technical sense like the "debt ceiling". Instead if the government continues to run expanding deficits then inflation will rise and smooth things out, statistically reducing the debt. Think of it as everyone who owns dollars pays off a bit of their share of the debt.
Severe inflation like in the 1970's or worse is clearly harmful, but deflation is more harmful than moderate inflation. We have been running below policy maker goals of about 2% inflation for a while, despite the cries from deficit hawks that massive inflation is right around the corner due to QE.
As of September 2014, foreigners owned $6.06 trillion of U.S. debt, or approximately 47% of the debt held by the public of $12.8 trillion and 34% of the total debt of $17.8 trillion. The largest holders were China, Japan, Belgium, the Caribbean banking centers, and oil exporters.
2.5 / (40.6 + 2.5) = 5.8%
> "…please use the original title, unless it is misleading or linkbait."