Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
He starts off with a graph showing the core Consumer Price Index (CPI) and the core personal consumption expenditure (PCE) "deflator". As he explains, the CPI has an extra lag due to its heavier weighting of rent (which is itself a lagging measure). Note that the window sizes of the two lines are different - six months and twelve months. He uses this to illustrate the impact of window size on the numbers.
This is somewhat of a cheat. You're seeing two different factors (different metrics and different window sizes) added together (effectively amplified) and being told that this graph shows how window size matters.
Yes, he does say that window size is partly the explanation for the difference in the lines shown. But then why not show how each factor, separately, impacts the end result before combining them?
People here, at least those using technical analysis, understand the importance of window size in moving averages. But I don't think they compare a 50 day MA of the S&P 500 with a 100 day MA of the DJIA. Oranges and tangerines.
He got it right months ago, when he opined: "while people don’t necessarily disagree with the proposition that inflation is coming down, they do inevitably bring up the cost of groceries."
We can even forget about groceries and look instead at core goods and services. Regardless, people feel prices; inflation just confirms the feeling that prices are higher. Here's the Fed's graph of core prices, not core inflation. (Inflation is the slope, or first derivative, of prices - how fast prices are rising.)
That's a pretty big mountain to climb. Sure inflation is coming down. See how prices are nearly plateauing (inflation slowing towards zero)? If you look closely, you can even see the slope starting to decline (prices still rising, just more slowly) around Feb or March 2023. (If you remember Calc 101, second derivative equaling zero might ring a bell.) Core inflation is receding and prices are stabilizing.
But in the end, this is the picture people see. The lag is not just the statistics, it's in people's expectations. When their price expectations finally catch up to the (almost) plateau everyone will feel more comfortable. That takes time.
I’m thinking maybe we as investors should target whatever the agreed upon inflation rate is? Come in a bit underROI and you’ve failed. Finish a bit over the ROI and you’re a “success”. In that case cash, even at 4%, would be a winning recipe. Whopie!
I could explain yet again how to read a given NYT piece using a privacy session in one's noncustomary browser, but don't want to seem more condescending than usual.
>> in the end, this is the picture people see. The lag is not just the statistics, it's in people's expectations. When their price expectations finally catch up to the (almost) plateau everyone will feel more comfortable. That takes time.
Ah. Well then.
Actually I have posted a few column links here, PK and others, iirc, explaining this too, possibly also with supposedly misleading art. The last one, I believe, suggested that 2y is the time it takes.
I could explain yet again how to read a given NYT piece using a privacy session in one's noncustomary browser, but don't want to seem more condescending than usual.
LMAO!!!
Dude, the very use of the word "again" connotes condescension. Used in the sequence of "I could explain yet again" takes it beyond a suggestion.
I could explain yet again how to read a given NYT piece using a privacy session in one's noncustomary browser, but don't want to seem more condescending than usual.
Bless your heart David. Learning how to circumvent paywalls erected by content creators, publishers, and producers is low on the list of tools I seek to add to my kit.
Maybe the Times loves to give stuff away for free to people clever enough to evade their paywall.
With my subscription to The NY Times I am able to gift 10 articles/mo. They practically beg me to do it. Their options for doing so (email, message, FB etc.) even has a "copy Link" choice. Maybe look into that.
Comments
Note that the window sizes of the two lines are different - six months and twelve months. He uses this to illustrate the impact of window size on the numbers.
This is somewhat of a cheat. You're seeing two different factors (different metrics and different window sizes) added together (effectively amplified) and being told that this graph shows how window size matters.
Yes, he does say that window size is partly the explanation for the difference in the lines shown. But then why not show how each factor, separately, impacts the end result before combining them?
People here, at least those using technical analysis, understand the importance of window size in moving averages. But I don't think they compare a 50 day MA of the S&P 500 with a 100 day MA of the DJIA. Oranges and tangerines.
He got it right months ago, when he opined: "while people don’t necessarily disagree with the proposition that inflation is coming down, they do inevitably bring up the cost of groceries."
We can even forget about groceries and look instead at core goods and services. Regardless, people feel prices; inflation just confirms the feeling that prices are higher. Here's the Fed's graph of core prices, not core inflation. (Inflation is the slope, or first derivative, of prices - how fast prices are rising.)
Source: https://fred.stlouisfed.org/series/CPILFENS#0
That's a pretty big mountain to climb. Sure inflation is coming down. See how prices are nearly plateauing (inflation slowing towards zero)? If you look closely, you can even see the slope starting to decline (prices still rising, just more slowly) around Feb or March 2023. (If you remember Calc 101, second derivative equaling zero might ring a bell.) Core inflation is receding and prices are stabilizing.
But in the end, this is the picture people see. The lag is not just the statistics, it's in people's expectations. When their price expectations finally catch up to the (almost) plateau everyone will feel more comfortable. That takes time.
If it's Krugman it must be "correct".
I’m thinking maybe we as investors should target whatever the agreed upon inflation rate is? Come in a bit under ROI and you’ve failed. Finish a bit over the ROI and you’re a “success”. In that case cash, even at 4%, would be a winning recipe. Whopie!
Giroux would be outdated by this new standard.
Merry Christmas & Happy New Year!
>> in the end, this is the picture people see. The lag is not just the statistics, it's in people's expectations. When their price expectations finally catch up to the (almost) plateau everyone will feel more comfortable. That takes time.
Ah. Well then.
Actually I have posted a few column links here, PK and others, iirc, explaining this too, possibly also with supposedly misleading art. The last one, I believe, suggested that 2y is the time it takes.
LMAO!!!
Dude, the very use of the word "again" connotes condescension. Used in the sequence of "I could explain yet again" takes it beyond a suggestion.
Level achieved!
But you know that, right?
Maybe the Times loves to give stuff away for free to people clever enough to evade their paywall.
If I think there is content there that would be of interest to this group, how do you think I should proceed or handle that?
You don't want to appear condescending about offering piracy advice. I don't really care how people react to my opinions about content pirates.
https://www.nytimes.com/2023/12/31/opinion/economy-presidential-election.html