Inflation: This Week’s CPI Numbers

Posted by T.W. Hanson - Feb 21st, 2008 at 21:02

cpi

Earlier this week, the Bureau of Labor and Statistics released data on the change in the prices for goods and services for the month of January. The numbers showed the continuation of a disturbing trend. Prices continue to rise at uncomfortably high rates.

There are two numbers cited in the CPI (consumer price index) to which economists pay attention: the “CPI” and the “Core CPI”. The CPI is a measure of the prices of a fixed basket of goods and services, and it rose 4.3% from January 2007 to January 2008. The Core CPI is a measure of the prices of a fixed basket of goods and services excluding food and energy, and it rose 2.5% in the past twelve months.

People will use both numbers to try to convince you of different things. Some will say that inflation is wildly out of control because it is increasing at 4.3%. Others will say that 2.5% inflation isn’t that far from historical levels and is perfectly tolerable and healthy.

Know the difference between the numbers and interpret what they mean for yourself.

There are good things and bad things about using both numbers. Historically, people have followed the Core CPI more closely. Energy costs are historically volatile and can skew data from month to month. Another reason why people look at the ex-energy number is the potential for double counting its effects. When you buy almost any good, energy was used in its production and transportation. This is being reflected in its final price. Food is another volatile commodity with a long term stable trend. Panic over inflation because droughts in Australia moved U.S. grain prices for a season aren’t necessarily warranted.

However, there are changes in the global economy such that there is a very credible case to be made that there has been a secular shift in energy and food price trends. Increasing demand and the realization that there is a finite supply of these commodities is distorting long term historical trends, meaning that ignoring food and energy price appreciation is no long an option.

This means that average prices for goods and services increased on average somewhere between 2.5% and 4.3% in the past year. Keep this in mind when people are citing these numbers. Know when they are taking them out of context to further their own agendas.

Refurb Bargains

Posted by Tad Johnson - Feb 21st, 2008 at 10:02

Refurbished (adjective): industry parlance for new-but-not-quite-new products. See also, fantastic bargain.

If you’re in the market for a new pricey tech gadget (computer, HDTV, iPod, etc.) you can find some great bargains by shopping refurbished. Companies like Apple, Dell, and Klipsch, all have online clearance or refurbished sales. Look around the websites of other companies as well, as they usually offer some sort of discount selection.

Refurbished simply means that a product has been remanufactured and sold again as like-new. These are usually returns from store inventory (often unopened) and are always inspected and freshened up to ensure they’re in pristine condition. Most companies will honor the same product warranty as well.

For a vicenarian who’s looking to upgrade some equipment, shopping refurb can be a great way to save 15-30% off the cost of new, and without the risk of buying something used. The only downside is you’ll be buying last season’s hot product. I think the savings are worth it.

http://store.apple.com/1-800-MY-APPLE/WebObjects/AppleStore.woa/wa/RSLID?nnmm=browse&mco=44BD9AA6&node=home/specialdeals

The Apple Store (U.S.) - Special Deals via kwout

Sharper Image K.O.

Posted by T.W. Hanson - Feb 20th, 2008 at 22:02

sharper image

Sharper Image, the maker of massaging chairs, digital clock thermometers, nose hair trimmers and other fine products, filed for protection under chapter 11 of the bankruptcy code today. Liquidation is a possibility, meaning their assets may be sold to pay off creditors. I fear this is a sign of things to come. Companies, like some homeowners, have lived beyond their means for the past few years. In coming months, it is highly likely that corporate default rates and bankruptcy filings will increase. This is not good for the stock or bond market and is a factor you should consider when investing in any company with a significant debt burden.

In the meantime, get whatever you need from Sharper Image, as its doors may close forever. Hopefully you will be able to live with other gadget stores like Brookstone.

Do this today : renter’s insurance

Posted by Tad Johnson - Feb 20th, 2008 at 12:02

As a vicenarian, chances are that you’re renting an apartment. If you’re like me, you keep some pretty valuable stuff in that apartment. Are you insured?

rivedge1.jpg

Many young adults don’t realize that they need renters insurance. After living at home as a youth, on a college campus, and then in your own apartment, it’s easy to forget these little details. But make no mistake–if you don’t have renter’s insurance, buy it today.

Here’s what you need to know:

  • Yes, you need it. Don’t let theft, fire, or disaster ruin your finances as well as your stuff. Buy some insurance.
  • Renter’s insurance is inexpensive. For most of you, it will be under $10/month. Buy it from the same insurance company that you use for auto insurance and you’ll get a discount.
  • Inventory your stuff. Take a few moments to write down the serial numbers and approximate value of your expensive stuff (computers, cameras, HDTVs, etc.) For a quick & easy inventory, walk around the apartment with a digital camera, then upload the photos to a secure online site (such as Flickr). For a slightly more time consuming but thorough inventory, use an online tool such as StuffSafe.
  • Read the first point again. Insurance is the best piece of mind you can buy.

It’s not the most glamourous purchase, but a little insurance can go a long way in recovering from an unfortunate disaster.

Coping with $100.01 Oil

Posted by T.W. Hanson - Feb 19th, 2008 at 21:02

oil

Today, crude oil prices closed above $100 a barrel for the first time ever. Increasing global demand, a debauched U.S. currency, hostilities between ExxonMobil and Venezuela and a refinery explosion are some of the macro and micro factors driving the current price appreciation. The short term catalysts will likely dissipate, but factors like Chinese and Indian demand will not. To help cope with higher fuel prices most effectively, manage your life in the most fuel efficient manner possible.

  • Fill up your gas tanks soon. $100.01 dollar crude oil will translate into higher gasoline prices in the weeks ahead. As you know, gasoline is a refined product of crude so increases in gasoline prices will lag until existing inventories are replaced.
  • Keep your car parked as much as possible. Be efficient with your grocery shopping. Don’t make 12 driving trips to Trader Joe’s every week.
  • If you’re in the market for a car, choose a more fuel efficient vehicle. It may be tempting to trade up to the 6 cylinder engine, but 4 is likely more than enough to get through life.
  • Take public transportation or car pool. Save money, save fuel, save the environment and listen to people serving up their life stories to complete strangers.
  • If you are in the market for a new apartment or home, choose to live close to convenient public transportation. It takes me the same amount of time to drive to work as it does to take the bus that stops right across the street. An added benefit is that I can make it through a few sections of the paper on the way into town, a dangerous task when driving.
  • Inflate your tires to their proper level. Little things like maintaining your automobile and its parts can reduce fuel consumption and save you money.

If you don’t believe me, consult a higher authority.

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