PPI Hedonic Adjustments

With CPI coming out at 8:30 this morning, I wanted to take a few moments to note some of the oddities and aberrations in the Producer Price Index (PPI).

A nagging thought about PPI: It is like a ratchet wrench, one that can only torque in a single direction. When we have Energy price spikes, there’s seems to be no impact on producer prices; yet when Energy prices come down, we see a huge drop. One would imagine these things were somewhat symmetrical (but apparently, not). Something doesn’t compute.

Consider this quandry: How is it possible that prices throughout the entire pipeline, from raw materials to finished goods, managed to stay tame no matter how high energy prices went during the past 3 years? The riddle is answered by observing that government models are gamed to show as little inflation as possible; Otherwise, the COLA obligations would be going through the roof.

Bill King (of The King Report) makes a similar observation: "Isn’t it interesting that PPI didn’t surge when oil did, but when oil declines sharply PPI plunges?"

Consider his observations on the BLS PPI data:

“Prices for light motor trucks fell 9.7 percent following a 3.5-percent gain in the preceding month. From October 2005 to October 2006, the index for light motor trucks dropped 12.4 percent…In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October. (See Report on Quality Changes for 2007 Model Vehicles, USDL 06-1973.)” Quality changes produce hedonic adjustments to prices. Ergo the large drop in vehicle prices is fiction. It’s the work of BLS bureaucrats, the Winston Smiths from “1984”.

The ‘quality’ or hedonic adjustment to light vehicles is $392.10/vehicle. The BLS reduced the actual costs of these vehicles by $392.10 ERV. For autos the BLS adjusted the real price $139.96 lower. So as we have maintained for years, PPI and especially CPI are constructed so that they can’t show actual inflationary changes or pressure." (emphasis added)

So the anti-inflation question at hand is simply this: Did real prices fall, or was this  function of statistical sleight of hand? You may recall the headlines for October Retail Sales noted the role of autos and light trucks: Autos Save Retail Sales From Sharp Decline.

Let’s take a closer look at PPI and Oil (continuous futures contract) again, courtesy of Bill King:

"Economist Bob Brusca on CNBC yesterday noted that the PPI report has light vehicle prices down almost 10%. Brusca added that no one believes this is reality. He added that the index has ‘a problem’ because we have a strong labor market with wage inflation.



The ridiculous PPI reading induced buying of bonds and selling of stocks."


And today, we get CPI. At least we are never wanting for riddles to unravel . . .


UPDATE November 16, 2006, 10:23am

BLS inflation reporting is what it is. We can take it at face value, or try to figure out what is really going on. 

As noted above, I have a problem with the entire "Inflation Ratchet." If its not inflation when energy prices are rising, how can it be proof that inflation pressures are easing when energy comes down? That’s inconsistent.

Look no further than today’s CPI for an example: Apparel was called down 0.7% in CPI, along with the following explanatory BLS note:  "Prior to seasonal adjustment, apparel prices rose 1.3%, reflecting the continued introduction of fall-winter wear."

Look at Hotels also, down 0.5%.  BLS explanation?  “Prior  to seasonal adjustment, the index for lodging away from home increased 0.5  percent.”

All Items less food and energy was up but 0.1% on a monthly  seasonally adjusted basis. Year-over-year comparisons, however don’t get "adjusted. All Items (ex food and energy) were up 2.6% from October 2005.  That’s EX food and energy.

So you can look at the hedonically altered, seasonally adjusted, inflation ex inflation headline spin — or you can look at reality.

If identifying the data before it gets tortured is "zealotry," then so be it. . . 


Census Bureau, Service Sector Statistics Division
TUESDAY, NOVEMBER 14, 2006, AT 8:30 A.M.

Consumer Price Index Summary
U.S. Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes

What's been said:

Discussions found on the web:
  1. Uncle Bob commented on Nov 16

    Maybe there ought to some way to reduce the “quality” of our paper cuurency to offset the increase in “quality” of vehicles!

  2. Mike M commented on Nov 16

    It blows me away that the Fed still maintains credibility. We’ll certainly get a soft landing, on paper anyway.

  3. V L commented on Nov 16

    I see two possible explanations for this discrepancy (the magnitude of PPI drop cannot be explained by the drop in oil prices alone; there should be other factors):
    1. Our government manipulates the data (less likely but possible).
    2. We are already in a recession (very much likely, considering that two major sectors of the economy like housing and auto have been already in a recession).

  4. Vega commented on Nov 16

    V L, if you are interesting in learning more about how the gov’t has ‘adjusted’ its methodology for calculating jobs, inflation, and other econ data, you might want to check out 1) Kathryn Welling’s interview with John Williams @ Shadow Stats (just Google it) or 2) John Williams’ Shadow Stats website. Both are excellent reads.

  5. MJ commented on Nov 16

    BR: Normally you are a smart, interesting guy. But your now a zealot on inflation. It seems you don’t pay attention to good counter-arguments.

    I happen to be in the opposite camp and I do not think you are making quality adjustments in any of your price assessments. “Inflation” is about prices increasing for the SAME goods – i.e. a purely monetary phenomenon. It seems that everything I buy today — car, Ipod, TV, mobile-blackberry-service, HD cable, JetBlue flight, organic hormone-free beef, Starbux latte, etc, etc, etc… Everything, when you consider the quality, service, availability, and experience (all part of the product) are LESS then they were 5, 10, 15 years ago.

    What would TODAYS Toyota Camry have cost in 1990? I want side-curtain airbags, leather interior, anti-locks brakes, GPS nav system, satelite radio, and the reliability. It would cost MORE.

    Yes, home prices have gone up — but have you seen the kitchens and bathrooms? Who had multi-head showers in 1990? Marble counters? Stainless steel appliances?

    What would todays computer, TV, healthcare, education, boutique hotels, etc, etc… have cost in 1990 if they were the SAME!

    So, yes, I agree there is alot of money out there. And there is no denying the prices of basic commodities have gone up. But the fundamental use of MORE wealth is not to buy MORE gruel, MORE cars, and so on — but to buy better QUALITY.

    Any assessment of inflation must be focused on trying to quality adjust consumption baskets.

  6. 4merRepublican commented on Nov 16

    jmf: Inflation is more than cars, latte and electronic gadgets.

    Every trip to the grocery store, I see increases on at least one item. The gasoline I bought in 1990 was ~$1.00 per gallon. The house I bought in 1991 costs more than double today. Natural gas bill last winter was nearly double, even with a new, more efficient furnace.

    If you fall into the trap of gubmint stats and exclude food, energy and housing (buy, not rent) then everything ig great. But WHO can live without food, energy and a house??

  7. Andrew commented on Nov 16

    Interestingly enough…. BR has stepped up the PR campaign. I’m betting that we are close to a top……

    When the bears come out of hiding they are usually getting ready to strike. There is no doubt there is excess bullishness right now, and there will be lots of profit taking…..

  8. jmf commented on Nov 16

    hi 4mer reb,

    was the response to me?

  9. Barry Ritholtz commented on Nov 16

    BLS inflation reporting is what it is.

    If identifying reality is “zealotry” then so be it

  10. blaze@blaze.com commented on Nov 16

    There is nothing wrong with hedonic pricing.

    An 80GB hard drive is not the same thing as a 40GB hard drive, no matter how much tin foil you put around your head.

  11. blaze@blaze.com commented on Nov 16

    That being said, I’d sure as hell wish that land prices could work their way into CPI.

  12. cButler commented on Nov 16

    mj: But that argument only make sense if spending is primarily discretionary. I liked the 1990 Camry and I’d love to buy another one, especially at a price that discounts 16 years of improvements. Unfortunately, I can’t and if I need a new car (i.e, a transportation device) I have to pay the asking price – and it’s higher than it was.

  13. Eddie commented on Nov 16

    I’ve been reading this blog for almost a year now, and I have to say, this is becoming more of a conspiracy blog than a financial one.

    I can accept that fact, but let’s all be clear about what’s being disseminated here, both by the author as well as the commenters…pure speculation, massive conspiracy theories, etc. I think that if this keeps up, Barry himself will lose legitimacy.

    We can all agree that the housing market sucks, that the twin deficits are scary, that outsourcing takes its toll, etc., but what we’re talking about lately has gone far beyond that.

  14. Craig commented on Nov 16

    Once again…….

    Personal attacks reveal a weak or non-existent argument.

    First, Barry is ASKING more than he is stating.
    Second, if you can’t answer the question yourself, then please refrain from personally attacking those who can or YOU are clearly risking looking the Alcoa Hat King.

    It isn’t conspiracy theory to ask where this rather sizeable discrepancy/imbalance comes from.

    It’s kinda important to seeing where the economy REALLY is instead of where that ring in your nose takes you……..

  15. John F. commented on Nov 16

    Just to be clear, I agree that inflation is understated and that hedonic adjustment is a satanic art. However, you dismiss the ratcheting effect too quickly. Industries are constantly adjusting to higher input costs of all kinds, and when they make structural adjustments–such as retooling plants to use less energy–they damp costs on price upswings and reap the benefit on the downswings. The time scale is important here and may be immaterial to the latest PPI, but I’m afraid your ideological zeal is causing you to overgeneralize.

  16. Ricardo commented on Nov 16


    IF NOT, WHY?

  17. Les commented on Nov 16

    the BLS also keeps down the weights of components that go up in price so they don’t exert a larger influence on the PPI or CPI. an example of this is this is the category for education and communication. even though the cost of tuition and books now far exceeds the cost of computing and phone service, the latter still has a weight that’s nearly 50 percent higher than that for education. granted that most people don’t have to pay for their kid’s college every year, but that cost should be incorporated into most families’ budgets each year as if a portion of the cost were being set aside to be paid out in the future.

  18. V L commented on Nov 16


    It appears there are other components (in addition to drop in oil prices) responsible for the decline and we are trying to figure it out.

    For example, apparel was down -0.7% and Wal-Mart cannot keep up with cutting prices? Why? Why folks are not buying? They should have more cash according to Wall Street cheerleaders. Why?

    What is your explanation as to why when oil prices were spiking the government inflation numbers had only a modest increase but when oil prices retreated (note that oil prices are still very high as compared to a couple of years ago) the inflation is in free fall (according to government estimates).

    If you look at the graph above you can see that the last time we had such a sharp drop in inflation was during a recession.

  19. bodanker commented on Nov 16

    I formerly worked at a Federal Reserve Bank as a research analyst for two economists. Many times there was discussion of what measures of inflation were most suitable.

    There was consensus among many of the economists that the common inflation measures (CPI, PPI, even PCE) were not the best measures of core inflation – for many of the reasons stated above.

    I recall two alternate measures that were discussed:
    (1) Trimmed Mean PCE
    (2) Median CPI

    I’m not suggesting that these measures are by any means perfect – as I remember discussions of their methodology and limitations – but they do provide alternative measures of core inflation beyond simply ex-food/energy.

    Barry, I (and I’m sure others) would be interested in your take on these measures, as some have previously asked you to suggest better measures of inflation.


  20. 4merRepublican commented on Nov 16

    Eddie: Your conspiracy statement is tantmount to looking at the BLS data in a vacuum, closing your eyes, covering your ears and yelling “Blah blah blah.” The hedonic adjustments are fact, not conspiracy. They are all there in the fine print at the BLS site. Every crroked tactic they use is documented in the fine print. Open your eyes and read the fine print before writing it off as conspiracy theory.

  21. Macro Man commented on Nov 16

    If you want a real conspiracy theory, ask how or why the Philly Fed survey was leaked (to the decimal point) 5-10 minutes early for the second month in a row.

  22. Hockeyman77 commented on Nov 16

    I am an average middle class worker and whenever i go to the store for groceries, out to eat, clothes stores etc, I see prices rising all over not falling. Sales are posted but the sales arent like they were and in many cases the new listed sales price is higher then just a few months back. Its absurd that the BLS adjusts prices as noted, all they have done is produce headline numbers whether its Employment or Inflation that keeps foreigners buying our debt. And maybe thats the goal here, because if any of these foreigners in China, Japan etc asked the middle class of america about inflation they woul d get the true story and start selling their US assest. Which in turn would be bad for the country, what I am seeing now is with the premature rally in the bond market, based on the fact that housing is about to fall off a cliff is acutally having the opposite effect. Housing is picking up again as rates stay low, no not booming but picking up which means the cliff fall will not happen as long as they act like the fed is cutting rates tommorow. I live in Bubble central in California, when the bond market gets a clue and yields rise the market will slow and eventually pop i dont think it has, i see that as a year from now. Then i think the fed starts cutting.

  23. Mr. Beach commented on Nov 16

    News crossing the wires: Milton Friedman has died.

  24. muckdog commented on Nov 16

    Rising energy prices came at a time when GDP was racing. They acted like a tax on consumers, and helped to keep the economy from overheating and also kept the core rate of inflation down.

    Energy prices have fallen at the same time we’ve seen a slowdown in GDP. The slowdown in GDP is most likely responsible for the lower inflation numbers, while lower energy costs are probably helping consumers deal with higher interest rate payments on credit accounts.

    The Fed is right to worry about wage inflation in this tight labor market. But I think they’re in a tough spot because they can’t raise rates while the economy is cooling, and cutting rates in a tight labor market doesn’t make much since.

    I think they’ll “stay the course” for now.

    The stock market is as good of a crystal ball as anything, and I think it appears as if the Fed has achieved their soft landing. Gridlock in the Federal government should be a good thing for the next few years, as not much legislation will come out of Washington DC.

  25. Mike M commented on Nov 16

    Hedonic Pricing is a scam! An improved car, computer, or whatever is a result of productivity improvements. Companies improve products and services over time and this improves the standard of living for all of society. Without loose monetary policies, everyone’s standard of living would improve over time due to lower cost goods/services. This is the primary benefit of capitalism. For the last several years, improved living standards are a fallacy. There has only been higher debt levels.

  26. jkw commented on Nov 16

    One problem is that we shouldn’t compare hedonically adjusted inflation to non-hedonically adjusted inflation. 2-3% sounds like a reasonable rate of inflation, but if you put in hedonic adjustments, then the average inflation right for most of history has been at most 0 (probably slightly negative). So if the Fed is going to use hedonically adjusted inflation rates, they should set their target inflation rate at 0 rather than 3%. The problem isn’t that they are reporting lowered inflation numbers. It’s that they are reporting lowered inflation numbers and then asking everyone to act as though they are the same as the non-lowered numbers.

    The other problem is that you don’t have the option of staying at a fixed lifestyle. Which means that COLA should not be hedonically adjusted. As someone else said, you can’t buy a new 1990 car anymore. If you want a car, it will cost more than it used to. If your COLA adjustments don’t reflect that, you can’t buy a car anymore.

  27. MJ commented on Nov 16

    So, I am happy to see such a variety of viewpoints.

    I appreciate that Barry supports the basic notion of quality adjustments (as opposed to the individual that thought latte = drip). Once you except this you realize that inflation is pretty subjective. What was that “unavailable” quality worth 5 years ago?

    And inflation is about the entire consumption basket. What does a healthy economy look like — winners and losers. Prices up (oil, metals, real estate) and prices down (clothing, computers, cars).

    I reiterate, as people get more money they do not want more of the same good at higher prices. They want higher quality goods. This is what we see.

    Too many people like to say “all this debt” is BAD. Who cares? All the borrowing is balanced by the savings (at least in the mid/long end of the curve). So the bargain is fair. If the Fed takes rates higher this really benefits the low-risk or no-risk saver. If the balance needs to tip that way, good — but if not — why?

    Interesting Idea #1
    If we assume monetary policy is run diligently – say, to the best of our ability — what causes inflation? 1) War, taking the shovel and offering a gun is not productive. 2) Crime and violence, what a waste. 3) Population increases, errode fundamental resource productivity and spreads our investment in human capital thinner.

    All 3 of these are on a grand, decades long decline. While improvements in technology and productivity seem to be doing fine.

    Interesting Idea #2
    Where does this all end? Does it end in very high interest rates and a re-cycle of the 70s? Only if there are not enough low-risk savers. The cash saver makes a killing in the 1929 or 1975 scenario. And flat out there are just too many of those – both here and in Japan!

    IMHO, the end is far more likely to be very wealthy capital base, earning very little on their assets, thus balancing the wealth/labor equation. Consider what is $50M in capital worth with 10% rates? Never have to work again. What is it worth at 1% rates (see JPN) — you have money, but you are either giving it back to us (i.e. spending it) or you only have the eqivalent of 1-good job.

    Final thought — unless you are out buying canned goods, it is all a bubble.

  28. Francois commented on Nov 16


    Isn’t interesting that it is not only Barry that is asking some questions about the reliability of the BLS?

    Do you consider Bill Gross a lunatic prone to conspiracy theories too?

    Do you have ANY good arguments backed up by data that can explain the discrepancies posted above?

    …I’d like to read them.


  29. Estragon commented on Nov 16

    Bodanker – I think inflation definition has to incorporate asset prices.

    Money is a form of deferred consumption, and inflation arises when the value of money drops relative to the consumption deferred. People may react to this by not deferring consumption (i.e. by increasing current consumption), causing the current cost of consumption to rise. This is the traditional way of looking at inflation, and is captured (however imperfectly) through traditional measures of prices of current consumption.

    Other assets can be thought of as forms of deferred consumption in competition with money. If the price of other assets is rising relative to money, money is obviously losing value in terms of deferred consumption. In other words, expected future consumption prices are increasing in current money terms. Asset prices will tend to reach equilibrium with money in terms of the value of deferred consumption. If expectations of inflation increase, either consumption will no longer be deferred (putting upward pressure on traditionally measured inflation), or other asset prices will be bid up further.

    30 years ago, ordinary people had more limited access to other assets as a store of value to defer consumption, so they chose to stop deferring consumption when inflation expectation rose. Everything from mortgage innovation to online trading has made other assets more accessible. Instead of reacting to inflation expectations only by increasing current consumption, people are now also reacting by bidding up other asset prices. By ignoring asset prices, the fed is also ignoring information regarding expectations for the value of money relative to deferred consumption and is doing so is increasing the risk of a policy mistake.

  30. howard commented on Nov 16

    as the former fed reserve analyst noted up above, i have no doubt that serious-minded people are doing their best to understand “inflation” in a vast economy comprising multiple means of acquiring goods and services. i don’t envy them their job.

    what i do find interesting is this: core inflation over the last 12 months = 2.6%

    as i recall, TIPS forecasts for inflation 12 months ago ranged from roughly 2.25 – 2.50; i’m pretty sure that at no point in october, 2005 did TIPS forecast 2.6….

  31. scorpio commented on Nov 16

    yes, Milton Friedman, patron saint of right-wing kooks, has died. CNBC now showing U Chicago prof saying Milton’s great contribution to policy the notion that inflation caused by “quantity of money”, just a few months after the FRB decided to stop publishing those quantities. wont stop the kooks from venerating him, of course, because all he really was was apologist for wealth and capital, just like them.

  32. david foster commented on Nov 16

    “There is nothing wrong with hedonic pricing…An 80GB hard drive is not the same thing as a 40GB hard drive”–of course not, but what if I don’t *need* an 80GB hard drive? What if my applications would be perfectly happy with a 1999-era PC, with 1999 software prior to 7 more years of software bloat? How many people really need the full capability that is used to justify the hedonic adjustments?

    Also, there must be something similar to the hedonic adjustments at the producer level–if I pay the same for a CNC milling machine that is 30% faster, then it is reasonable to include the 30% reduction in the index *if I really need more capacity.* But if milling isn’t my bottleneck, then the 30% reduction doesn’t really do me any good, and applying the reduction to the index would be miseleading.

  33. mla commented on Nov 16

    You’re anti-wealth and capital? So now right-wing
    kook means you aren’t a socialist. Heheh. Count me in.

  34. david zaitzeff commented on Nov 16

    A few weeks ago I did a small simple study of the stock market and some additional factors over the last 13 years. Part of the data I gathered was the 12-month rolling inflation rate, as measured by the seasonally adjusted CPI at the end of each quarter, compared to the same measurement 12 months previous. I decided at one point to check the average of those numbers and the average surprised me at 2.6%.

    Since CNBC and other news sources are in the background, I constantly hear that the Fed supposedly has an inflation target of 2% a year. If the Fed has a target of 2% inflation, why has the average been more than 2.5% over the last 13 years?

    Or, is it that has a 2% “target” for the sake of public consumption? Suppose the Fed were to say that 2.5% annual average inflation was to be expected, given their behavior. What would happen? Well, inflation expectations might actually correspond better to reality. And, the US gov might have to pay more in interest.

  35. Cherry commented on Nov 16

    Sorry, Muck, but the Stock Market is not a good outlook giver. I don’t see a soft landing either. The Philly report was worse than the last one. Time to dump the headline. BLS created inflation numbers are BS. Use pre-Clinton era numbers and you get the “understanding” of the mass liquidity trap and deflation it could spin or vice versa.

    I predict even more signifigent production losses in November and especially December. The labor market has weakened as well, with claims starting to rise and may pass 350 in the March/May timeframe when the actual recession is likely to begin(but maybe later).

  36. zell commented on Nov 16

    H edonics is aptly named. Part of advancing in the gov’t sector is the ability to say black is white and believe it. Gov’t agencies have agendas and company lines- be it the military,the CIA, the VA, BLS, TReasury, FEMA, whatever. Hedonics is cut from the same cloth as the unified budget or ignoring legacy costs. The 1990 Camry example is a good one. Marketting Loves “New and Improved”. It took gov’t a while to learn that one. ……Remember the gov’ts favorite medication is anesthesia…….Hedonics is not a plot, it’s a way of life. Were any of you in grade school when “Duck and Cover” was practiced as if that would save you from a nuclear blast? I’m sorry, but politicians and gov’t are in the business of hedonics in it’s various forms………..Barry’s suspicions are not paranoia but a sign of health.

  37. PiehGuy commented on Nov 16

    Love the commentary, this blog, this website. Watched BR many times and KUDOs to you.

    Just a couple points to ponder for the active readers –

    Thankfully, someone stepped up to the plate and reflected that hedonics and substitutions to the government numbers began under Greenspans watch. Without these adjustments – inflation would be higher. Once considered a sacred number tying retirements to cost of living adjustments year over year, this fell by the wayside in the mid 90’s. After all, some method needed to be in place to reduce the impact of rapidly increasing money supply.

    Simply put – these “adjustments” needed to be in place and FORGOTTEN by the time the baby boomers retire. Otherwise, the boomers would be noticing a disparity in the rise of the 16,000 item basket of goods that the government tracks and their experiences at a local grocery store.

    Funny how my Mom, that is on a fixed income from RR retirement, doesn’t understand why her check doesn’t increase at the rate of grocery bills and actually has to make “substitutions” to her standard of living (Don’t worry, I am a good son, I don’t let her buy dog food yet). I would think that if AARP understood the implications of Hedonic and Substitution adjustments, the “boomer generation” might cry foul and ask the government to revert to the true CPI that was in place for nearly 100 years.

    Granted, I understand the differences of using an old TRS-80 with a 5 1/4 inch floppy drive in 1984 to my 2 GB RAM, 160mb hard drive Sony VAIO of today which could be considered “hedonically” adjusted due to improved productivity. However, I would submit that my friend’s 1967 Ford Mustang is worth more now than a new Mustang can be purchased, and if I were to EBAY, my guess is that I might have to pay considerably more now for a TRS-80 than what I paid for my new computer of today. Does “hedonics” account for that?

    In short, Hedonics and Substitutions should not have been adopted by BLS and the numbers should not be adjusted due to improved “productivity.” If I go to Circuit City, I will still pay $1,000 to $2,000 for a computer regardless of the improved memory, speed, and storage space. For those that still believe in Hedonics – try to find a computer program to load on a computer without using half the hard drive on memory for the program.

    Why aren’t the hedonic adjustments made for increased amounts of memory required to run applications? In fact, if I keep my current computer for two years, I would need a reverse Hedonic adjustment due to the increased amount of programming to run these new applications…

  38. whipsaw commented on Nov 16

    per zell:
    “Were any of you in grade school when “Duck and Cover” was practiced as if that would save you from a nuclear blast?”

    rather OT, but hell yes I was, most notably during the Cuban Missile Crisis. I remember watching the Civil Defense Turtle (what was his name?) narrate a film about what to do during “an emergency” and then having “tornado drills” twice a day for a week while the adults bumbled thru a resolution of things. The highlight during all of this was seeing two dozen B-47s pass over my house in Atlanta in an echelon of V’s at about 10,000 ft. heading south- I asked my father if they were going to the tornado and he said no, those planes are bombers and are going to be fighting in a war in Cuba soon. At that point, I came to appreciate what you guys are calling hedonics.

  39. Mark commented on Nov 16

    wannabe socialcomms on a stock market/econ blog, hilarious. why couldn’t scorpio have died instead of milton

  40. johnnyrocket commented on Nov 16

    Don’t get mad, get rich.

    If you really believe that hedonics skews inflation data (which I do), why spend so much time bitching about it…Instead, why not just recognize it and profit?

    Buy hard assets. Gold, energy, etc. That’s what I’ve been doing for the past 5 years and will continue to do.

    There’s always a hedge…you just gotta look for it.

  41. cm commented on Nov 17

    MJ: If products don’t improve over time, then what’s the point of millions of workers showing up 40+ hours for work every week? Running on the spot, like the Red Queen?

    As a hedonics-related cartoon referred by Barry some time ago (that I am unable to find so I have to paraphrase) states, “do we also have to discount for the transition from the stone age to the iron age?”.

    My employer will convert my 100% coverage healthcare insurance to 90% next year. Where’s that gonna show? In unrelated news, we are more productive, and our greatly improved products command a declining share of our customers’ revenue as well as business spending. Perhaps I should buy me a few new computers or flatscreen TVs to “offset” that in my “spending basket”. Healthy amounts of Starbucks lattes are not going to do the trick.

  42. Barry Ritholtz commented on Nov 17

    Awesome set of comments — you guys do me proud . . .

  43. Anon commented on Nov 18

    Please, take a simpler solution before finding a conspiracy theory. Or at least learn some basic economics.

    PPI not spiking with oil is simply due to two things. One, producers can’t pass on increased costs to consumers. I see this in my business. Costs go up? So what – with so much competetion I can’t pass it on, sorry charley. This is due to global competetion in a deflationary environment.

    The other reason is just that we are less energy dependent these days. What does the price of oil have to do with Microsoft? Very little.

    I’m disappointed though, sloppy thinking on your part.

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