Cents and Sensibility: the Inflation Guy Podcast

In this edition of the monthly CPI Report Summary, the Inflation Guy sets the stage by reminding us about the backdrop: the low, low inflation reports of the last two months. These were somewhat quirky, in mostly different ways, and the IG explains why today's higher-than-expected inflation report is a sign that - although things are getting better - inflation is about to get to the 'sticky part'...

“Hedonic adjustment” is a curse word among those who think that inflation figures are all scrubbed to look nice by the Bureau of Labor Statistics (if they are, the BLS did a pretty rotten job of it over the last couple of years!), but it is not nearly as sinister as you might think it is. In this episode, the Inflation Guy goes inside-baseball again to explain hedonic adjustment, and the offsettin...

The inflation derivatives market is currently suggesting that prices will decline in the US between August (the report we get in a couple of weeks) and December. Does this mean that inflation is upon us? No, and the reason why is something called 'seasonal adjustment.' It turns out that seasonal adjustment is critically important for inflation markets, and the market's pricing is not nearly as out...

Recent data out of China has shown growing stresses in the property market, implying stresses in banking; weakness in the trade balance; and generally disappointing growth. This has led some observers to suggest a deflationary wave is headed our way. In this episode, the Inflation Guy recalls a prior example where weakness in Pacific Rim countries actually provoked acceleration in Western economie...

The US CPI was released today and was a modest positive surprise to expectations that were already pretty optimistic in the sense that economists (and the Inflation Guy) were expecting a low print. In this podcast, the IG breaks down the report and points out the very positive developments...along with some curious quirks that soften the miss. But the big question is, what happens next? And here,...

The Inflation Guy, let's face it, sometimes goes a little off the rails when the topic is inflation and the importance of the inflation lens. In this episode, he compares inflation to the fabric of space-time. Can you imagine? The upshot is that even if you don't know anything about space-time, it is still very important to you - and it is crucially important if you happen to be launching rockets....

Let's take a big step back. The Inflation Guy spends a lot of time in his podcasts talking about the current CPI figures and fairly short-term considerations. But economic episodes are like books, with rising action, a climax, and falling action - and bigger cycles are like book series (think Harry Potter). As we get closer to the end of this book, we need to think about how the next book advances...

There is something between 'snake oil salesmen' and trusted information providers. People giving you folk remedies are generally well-intentioned, but merely lack the background to be truly authoritative about the malady they are trying to cure. So it is with economics, and these days especially with inflation. In this episode, the Inflation Guy gives three current examples of inflation-related ad...

In the monthly analysis of the CPI report, the Inflation Guy reflects on an improving inflation picture while cautioning that it isn't improving quite as much as the surprisingly-awesome core and headline figures today suggested. There were two large outliers that likely won't repeat. That said, it is a positive-enough report that the Fed's presumptive rate hike expected later this month might be...

The Inflation Guy is often asked about the Chapwood Index, which is a non-governmental inflation index that is billed as a “true cost of living index, unlike CPI.” In what ways does this index achieve that goal, and where does it fall short? This episode also serves as another illustration of how the Inflation Guy can go off the rails even when given a simple assignment. Which is better, Chapwood...

The Inflation Guy shows a bit more focus in this episode of the podcast, aiming his comments squarely at endowment CIOs and the OCIOs that serve them. He discussed 5 simple ways that an endowment can improve its inflation-protection allocation. Take the test! If you're already doing all five, you are in the 99th percentile. But if you're not - it's fixable! NOTES: “TIPS, the Dual Duration, and the...

In this episode, the Inflation Guy confronts the question of "Greedflation." What is it, and is it real? Is inflation all the fault of smelly capitalists? And what is the difference between the consumer's greed, wanting to pay less, and the company's greed, wanting you to pay more? Corporate margins are expanding, along with higher inflation. Does that constitute prima facie evidence of greedflati...

In this, the monthly analysis of the CPI report, the Inflation Guy homes in on a couple of reasons that core inflation is staying high, despite widespread forecasts that it should be decelerating more quickly: Rents are still rising at about 6% per year, even though many economists have convinced themselves that rents should decline (despite higher costs for landlords, higher incomes for customers...

In this episode, the Inflation Guy answers a question he is often asked: what makes a good trader? In listing what he thinks the four main attributes of a good trader are, he demonstrates one of them here by asking the question, "How could I be wrong?" and discusses how he would structure a position based on that assumption. So, if you tuned in this week as one of the people thinking 'this guy is...

The Fed, along with most global central banks, considers 2% (or in that neighborhood) to be the definition of "price stability" that it aims for. Except that in the Fed's case, that 2% is on PCE (not CPI), and they only aim to hit that as an average over some (unstated) period of time. However, even that is proving to be...somewhat difficult, leading to "murmurs" in some quarters that the Fed shou...

This week, the Inflation Guy brings another special guest on the set. Andy Fately is a veteran of more than 40 years in the foreign exchange markets, trading spot, forwards and options as well as running businesses for major US and international commercial and investment banks.  He is known as the FX Poet ( https://fxpoetry.com/about-2/ ), but really focused on creating solutions for risk managers...

The Inflation Guy addresses this month's CPI report, which showed an above-expectations Core CPI number (by a little). However, the internals of the report were not too bad, and according to the Inflation Guy today's data turns out to be a really good one supporting the timing of the Federal Reserve Board's pivot from active-tightening to steady-policy. The months ahead, though, still are unlikely...

The M2 measure of the money supply has declined 4% from its peak 8 months ago - the largest decline since M2 has been measured starting in 1959. On the other hand, the Velocity of M2 has risen 8%, tying the largest increase in history. Which of these two titanic monetary tides will prevail? Does the decline in money presage the beginning of a deflationary debacle (at least for the stock market)? T...

In this episode, the Inflation Guy again tilts at windmills by ranting about recent comments by Bank of England Chief Economist Huw Pill to the effect that the reason inflation is remaining high is because normal people are not accepting that they are worse off, and therefore insist on arguing for higher wages rather than "taking their share" of the pain. Wow, he gets animated in this one. It's on...

It has become de rigeur in economics circles (word to the wise - always avoid such circles if you wish to retain your ability to think independently) to bemoan the death of the “Phillips Curve.” The Phillips Curve supposedly describes an inverse relationship between inflation and unemployment. "Supposedly”? In this succinct episode, the Inflation Guy explains why poor William Phillips' good name h...

When is a perfect forecast not a perfect forecast? When you got the reasons wrong. This ain't hurling hand grenades, where only the result matters - if you made a bunch of positive mistakes and a bunch of negative mistakes and they happen to offset, you're not a genius; you just got lucky. So today, Wall Street economists forecast 0.39% on Core CPI. That was exactly what they got. But for all the...

The Inflation Guy doesn't understand why some people love to be the smartest person in the room. That's not fun at all! The Inflation Guy wants to be no better than the second-smartest, so he can always be learning. This is the first episode where he achieves this goal in a podcast format, with a real live guest who is deeply experienced in how insurance companies evaluate and address inflation ri...

In this episode, the Inflation Guy presents an introductory-level discussion of the concept of "delta," applying it to securities and explaining how the concept is used (in fairly plain English), but also applying it to exposures outside of the finance world. If you are someone who agreed with the tenor of a recent news article referring to the "arcane area of trading known as delta-hedging," you...

In this episode, the Inflation Guy discusses how volatility is a feature, not a bug - and how the Silicon Valley Bank debacle is not likely to lead to lower inflation at all. He also tells an interesting story about how deposit interest rates used to be capped, and how uncapped deposits have often been associated with bad outcomes at poorly-managed banks (and lots of them). Some sources for this p...

On Friday, the Inflation Guy thought no one would care about this month's CPI given the bank failures starting with Silicon Valley Bank. But actually, this number turns out to be quite important - the Fed needed a soft report, so that there would be no conflict between the rate trajectory needed to calm markets and support banks (lower) and that needed to quell inflation and inflation fears (highe...