Thread: Recession?

Originally Posted by Ziggy2

And you pay capital gains tax on the numeric increase though the real value is less.

A friend who used to own a construction company was complaining about this very recently.
He was pissed about it and said "I'm just gonna get out of stocks. I have to pay almost 1/2 of a million in capital gains tax this year."
I was "Okay,..... At long term rates just how much did you make last year? I'd like to have such a problem...... I think If I had your money I'd burn mine"

I inherited a piece of an IRA in good stocks just over a year ago. It is now worth almost twice and no taxes due until I take a distribution.
Perhaps it will collapse and all the "paper" gain lost. If it drops to 1/2 the value, the Dow goes to 15,000 or under, I lost nothing.
Short term "playing the market" is very risky and taxed higher, long term it just keeps on going.
If in cash what does your savings account pay? Will it even touch the CPI?

My wife also has inherited money. She has it parked in a savings account as she want's no risk and stocks or bonds are so confusing to her.
In an older time she would just stuff it under the mattress or bury it in the backyard. That would make her feel safe.
I try to talk about it but have given up. It is her money and and if it feels good to her .... happy wife, happy life.
Bob

Originally Posted by CarbideBob

A friend who used to own a construction company was complaining about this very recently.
He was pissed about it and said "I'm just gonna get out of stocks. I have to pay almost 1/2 of a million in capital gains tax this year."
I was "Okay,..... At long term rates just how much did you make last year? I'd like to have such a problem...... I think If I had your money I'd burn mine"

I inherited a piece of an IRA in good stocks just over a year ago. It is now worth almost twice and no taxes due until I take a distribution.
Perhaps it will collapse and all the "paper" gain lost. If it drops to 1/2 the value, the Dow goes to 15,000 or under, I lost nothing.
Short term "playing the market" is very risky and taxed higher, long term it just keeps on going.
If in cash what does your savings account pay? Will it even touch the CPI?

My wife also has inherited money. She has it parked in a savings account as she want's no risk and stocks or bonds are so confusing to her.
In an older time she would just stuff it under the mattress or bury it in the backyard. That would make her feel safe.
I try to talk about it but have given up. It is her money and and if it feels good to her .... happy wife, happy life.
Bob

I remember years ago when a bunch of my contemporaries came home for the Christmas break from college. We were at a restaurant eating breakfast and an older person there that was somewhat of a mentor to the group asked one of the attenders that happened to be going to a slightly prestigious school and studying economics what we should do with our money to keep it safe. His reply was so non-typical. He said,"Stick it in your mattress." We all laughed but the guy was actually serious.

I think one of the key points to successful investing are finding assets that generate a decent consistent cashflow and appreciate over the long term. These tend to be not very sexy nor bragged about since they do not skyrocket in value and considered desirable by the speculator crowd.

Originally Posted by BoxcarPete

Not quite. Cumulative inflation since 2007 is approximately 24% so you would still have between 14k and 15k of 2007 dollars.

They get that number by weighting desktop computers and flatscreen teevees the same as food, housing and medical.

In the real world, the numbers are not as claimed. I'll stick with half or less.

Originally Posted by EmanuelGoldstein

They get that number by weighting desktop computers and flatscreen teevees the same as food, housing and medical.

The CPI basket is weighted based on the relative importance of each item in a typical household budget.

Housing is approx 42%, medical is about 10%, food is about 15%.

TV's are like 0.1%

So if housing or food prices doubled, it would reflect in the CPI right away. If TV prices doubled, you wouldn't even notice it- the weighting of TV's is insignificant in comparison.

https://www.bls.gov/cpi/tables/relat...tance/2019.pdf

Originally Posted by jancollc

The CPI basket is weighted based on the relative importance of each item in a typical household budget.

Housing is approx 42%, medical is about 10%, food is about 15%.

So if housing or food prices doubled, it would reflect in the CPI right away.

In fact it has, and their bullshit stats have not. So I spit on their lying statistics. In one summer near Blaine I watched prices for many of those items go up 20% and more. Six months.

Maybe if you live in the middle of the desert somewhere ...

Get on Topic, and keep your political baggage deep in your ass.

Originally Posted by otrlt

Get on Topic, and keep your political baggage deep in your ass.

Inflation is not political, dear.

Originally Posted by EmanuelGoldstein

Inflation is not political, dear.

Inflation numbers have politics and lots of economic theories to get the exact values. Plus-minus 1/8" is not political, the last 32nd is the fuzzy area.

Originally Posted by memphisjed

Inflation numbers have politics and lots of economic theories to get the exact values.

And recessions don't ?

House prices arnt included in CPI, with good reason as it would make the inflation numbers far too realistic .

Inflation is the excessive creation of bank credit (money to us the great unwashed). Stocks are doing well atm, till its decided that they wont. Then comes the pre planned crisis and our handover of something they want. Then we all get in line and do it again.

Its a funny old game that we have no say in. Except that actually we do, we have the ultimate say, we just dont know it.

Originally Posted by Demon73

House prices arnt included in CPI, with good reason as it would make the inflation numbers far too realistic .

The CPI is looking at consumption. Houses aren't something that get consumed in any given year, so they are not included in the CPI.

The inflation in house prices is accounted for in a different way, which is to say rents and "owner's rent equivalents". These 2 categories make up the bulk of the housing costs in the CPI.

It's done that way to separate current consumption from future consumption- both are represented in the market price of the house.

Originally Posted by jancollc

The CPI is looking at consumption. Houses aren't something that get consumed in any given year, so they are not included in the CPI.

The inflation in house prices is accounted for in a different way, which is to say rents and "owner's rent equivalents". These 2 categories make up the bulk of the housing costs in the CPI.

It's done that way to separate current consumption from future consumption- both are represented in the market price of the house.

Interesting. I wonder if that approach takes into account the downsizing that people inevitably do when housing prices go up. Doesn’t seem like it would. Fair and accurate would consider the cost of the same apartment or house year to year.


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Rent is monthly and that would be a pretty good indicator of housing at large.


Put me in the camp with those that believe inflation is understated............................I prefer Shadowstats numbers.

Originally Posted by rj1939

I prefer Shadowstats numbers.

Whoa. Thank you very much for this. I don't know if John Williams is a commie, a reactionary, or a tinfoil hat guy but this




is much closer to the world I live in. And it's the same methodology the US used to calculate inflation in 1980 .... Concidentally, that would be when we had savings in a local bank and Wall Street / Goldman did not have such a vicious grip on our balls or own the national government.

What would happen to the US in case of a virus outbreak such as China is experiencing ? Could the public survive for three weeks without an income ?

EXACTLY ! Definitely worth ten minutes of your time



p.s. Thank you very much, rj. This is EXACTLY what I think we experience as people living in the real world, not the government-cheated world of phony statistics. And it explains the manner in which that happened. Super !

On rent and housing :

"Homeowners’ Equivalent Rent, or Hedonic Adjustments to Imaginary Numbers. On the weighting front, it is worth considering that fully 24.0% of the total current CPI-U inflation reporting reflects the category of “homeowners’ equivalent rent of residences.” Instead of reflecting some measure of home prices, as was the case before 1983, the BLS estimates the cost of housing based on what homeowners theoretically would pay to themselves in order to rent their own homes from themselves. The BLS then estimates how much homeowners raise the rent on themselves each month. "

Jancollc, go hang your head Bad boy, bad !

As Mark Twain said: "There are lies, damn lies and then statistics"

The BLS (Bureau of Lies and Statistics) has a lot of them, not very reliable in my world. I wonder if we are taking a page out of Argentina's playbook, they put out numbers that are complete fiction, but it seems to keep people from knowing the truth.

Originally Posted by adh2000

Interesting. I wonder if that approach takes into account the downsizing that people inevitably do when housing prices go up. Doesn’t seem like it would.

You're right, it does not account for substitution bias. When the economy is down, many people will substitute something less expensive, and the CPI basket has no visibility into this. This tends to make CPI overstate in down times, and understate in good times.

Originally Posted by adh2000

Fair and accurate would consider the cost of the same apartment or house year to year.

That's what they are trying to do with rents and rent equivalents. Housing costs are a significant part of household budgets- but you can't count the entire cost of the house, which may be amortized in a 30-year mortgage.

It helps to remember that CPI does not care about what something costs. It only cares about the change from year to year.

A million dollar house in San Francisco might only be 100K in Tennessee. CPI doesn't care.

What they are trying to quantify is the effect of inflation on household budgets, and what adjustments to things like Social Security have to be made so beneficiaries can stay relatively even with inflation.

It's a statistical number- not a real world one. An 80 year old man probably has higher medical expenses than a 30 year old, but the CPI says they both spend 8% of their household budget on medical expenses...

Originally Posted by jancollc

You're right, it does not account for substitution bias. When the economy is down, many people will substitute something less expensive, and the CPI basket has no visibility into this. This tends to make CPI overstate in down times, and understate in good times.

Isn't that what governments want?

Originally Posted by jancollc

You're right, it does not account for substitution bias. When the economy is down, many people will substitute something less expensive, and the CPI basket has no visibility into this. This tends to make CPI overstate in down times, and understate in good times.

It's worse than that. By changing from an objective comparison to a subjective comparison, it makes the entire "indicator" into a pot of shit. It's trash.

It's a statistical number- not a real world one.

It's not even statistical. Statistics at least have to do with real numbers. Prior to 1980 it was an attempt to compare the real cost of living, aka real world costs. Changing it to a subjective basis "the quality of life" meant they could swivel the numbers to say whatever they liked. And of course what they liked was going to be understated, which means lower payments. The number is pig shit, quoting it is dishonest.

When they can say "These tires are four times as expensive but they last twice as long (objective values, reasonable) and they give a better ride (subjective crap, has no place in statistics whatsoever) "therefore on the basis of qualty of life, they are cheaper" -- this is flatout horseshit and doesn't even begin to reflect the world of grocery stores and rent payments which we have to live in.

If you'll notice, it's only a one-way street, as well. Subectively, they can decide that "a better ride" makes tires that objectively cost twice as much into a "cheaper" new price. But when the discreditors refute Mr Williams methods, they never downgrade for quality losses, only upgrade. Anyone buy strawberries recently ? Plums, peaches, tomatoes ? May as well scoop the toilet for this morning's #2. Cardboard. Garbage. To honestly compare 1980 produce to current produce you would have to buy the most expensive "organic" stuff at some boutique Whole Foods. Even then the quality is lower. So even in their lying, the methodology is not consistent.

The only honest thing to do is compare actual prices and let "quality" fall where it may. But that does not serve their purposes. Honesty really would be the best policy, this is one reason the majority of the US public does not trust the government. Why should we ? They are liars.

I don't much care if his recalculation methods can be disputed, his underlying point is correct. The entire edifice of these government stats is bullshit. It's not even honestly manipulated numers, it's fantasy designed to hde the facts. To say "inflation is only 2%" based on this shit is disingenuous.

To All;
Inflation is dead, the current administration and the previous has been working at increasing demand and inflation of capital goods, but it will take some time. Inflation is good, we haven't seen any of it for more than 25 years.

Deflation is your worst nightmare, talk to anyone over 90 and they will tell you what it's like.

Originally Posted by otrlt

To All;
Inflation is dead, the current administration and the previous has been working at increasing demand and inflation of capital goods, but it will take some time. Inflation is good, we haven't seen any of it for more than 25 years.

Deflation is your worst nightmare, talk to anyone over 90 and they will tell you what it's like.

Wow! I guess its monday morning there too eh!

Inflation/Deflation can both be devastating and it depends on how the individual holds their wealth. With the threat of either in any meaningful way were forced to speculate.

Can I ask, do you know what money is and where it comes from?