# US Inflation Erased



## vishaldon (19 October 2006)

The 110-year-old Dow average exceeded its all-time high, in the fourth quarter rally, stock market helped Dow Jones industrial average towards 12000. Inflation remains under control and it looks like earnings for the most part are pretty good. International Business Machines Corp., the biggest computer-services company, rallied as earnings beat analysts' estimates. Whereas, Johnson & Johnson also rose after Prudential Equity Group LLC said the outlook for its drug unit improved. The gains sent the Dow average above the milestone as trading started.
Intel Corp., the world's largest chipmaker, cut its 2006 budget for plants and equipment. Declines in chip-equipment shares hurt the NASDAQ Composite Index
Adding to that ASML Holding NV, Europe's largest maker of semiconductor gear, forecasted slower orders. 
The Federal Reserve will be keeping interest rates unchanged at its next meeting on Oct. 24-25. Economist’s forecast that there will be no change in borrowing costs. The central bank left the benchmark overnight lending rate unchanged at 5.25 percent in the past two meetings after 17 straight increases.


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## wayneL (19 October 2006)

vishaldon said:
			
		

> The 110-year-old Dow average exceeded its all-time high, in the fourth quarter rally, stock market helped Dow Jones industrial average towards 12000. Inflation remains under control and it looks like earnings for the most part are pretty good. International Business Machines Corp., the biggest computer-services company, rallied as earnings beat analysts' estimates. Whereas, Johnson & Johnson also rose after Prudential Equity Group LLC said the outlook for its drug unit improved. The gains sent the Dow average above the milestone as trading started.
> Intel Corp., the world's largest chipmaker, cut its 2006 budget for plants and equipment. Declines in chip-equipment shares hurt the NASDAQ Composite Index
> Adding to that ASML Holding NV, Europe's largest maker of semiconductor gear, forecasted slower orders.
> The Federal Reserve will be keeping interest rates unchanged at its next meeting on Oct. 24-25. Economist’s forecast that there will be no change in borrowing costs. The central bank left the benchmark overnight lending rate unchanged at 5.25 percent in the past two meetings after 17 straight increases.




Inflation erased? This is actually a Freadian slip, because it has indeed been erased.

But only from the official statistics. Real people can tell you the real inflation.


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## patanx (20 October 2006)

U.S. stocks traded mixed Thursday as the market struggled to extend record highs even as investors welcomed a raft of upbeat earnings reports led by Apple Computer Inc., Pfizer Inc and Coca-Cola Co.,

The Dow industrials was last up 0.48 point at 11,993 after spending most of the session above the 12,000 mark. 
The Nasdaq Composite Index was off 2 points at 2,335 while the S&P 500 Index put in a fractional loss, down 1 point at 1,365. 

We're a little bit tentative around 12,000 because I do think the market is a little overdone in the near term, but a lot of companies are beating expectations giving us the likelihood of double-digit earnings growth in the third quarter, and possibly another quarter of double-digit growth in the fourth.

My optimism is based on the recent performance of the bond market where benchmark yields have been rising. This suggests the economy is not weakening as much as people expected and that we may get something a little bit better than a soft landing which will help to power earnings.

*The latest data, however, did appear to confirm a slowing trend in the economy*.

The behavior of the leading index so far suggests that economic growth should continue at the slow rate in the near term.


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## Milk Man (20 October 2006)

The US Fed. wants inflation to carry on its merry way so it can pay off its massive foreign debts with worthless paper. Since all bets are settled in USD, all the SOB's have to do is supercharge their printing presses and churn out more Benjamin's. When Pauline Hanson said "just print more money" it was the most laughable thing ive ever heard a politician say. Its a bloody good idea if you're an *American* polly though!


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## wayneL (20 October 2006)

Milk Man said:
			
		

> The US Fed. wants inflation to carry on its merry way so it can pay off its massive foreign debts with worthless paper. Since all bets are settled in USD, all the SOB's have to do is supercharge their printing presses and churn out more Benjamin's. When Pauline Hanson said "just print more money" it was the most laughable thing ive ever heard a politician say. Its a bloody good idea if you're an *American* polly though!




Yes! That's all any government does these days "just print more money". The cardinal sin apparently, is in admitting it, hence no more M3 stats.


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## avio (20 October 2006)

The US market is boosting with positive earnings by corporates , a potential shown for further earnings and signs of easing inflation . 

Moreover, it is also felt that the Federal Reserve may not actually change the interest rates showing a positive sign. 

Even though it may look that the US market is slowing down, but the corporate earnings show a different story and so I think it is a good reason to be positive about the market.


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## patanx (21 October 2006)

U.S. stock futures slipped into negative territory ahead of Friday's open, erasing earlier gains, after disappointing results and outlook from blue chip industrial equipment maker Caterpillar and rising oil prices in the wake of production cuts offset strong results from Internet bellwether Google.

S&P 500 futures eased 1.60 points to 1,372.70 and Nasdaq 100 futures gave up 0.75 of a point to 1,722.00. Dow industrial futures shed 34 points to 12,025. 

U.S. stocks ended higher Thursday, with the Dow Jones Industrial Average closing above 12,000 for the first time after a raft of upbeat earnings reports led by Apple Computer Inc., eBay Inc and the Coca-Cola Co. eased concerns about a slowing economy.

The Dow industrials rose 19 points, the Nasdaq Composite ended 3.8 points higher and the S&P 500 rose 0.9 of appoint.


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## bvbfan (3 June 2008)

Great article from Bill Gross of Pimco about US inflation.

http://australia.pimco.com/LeftNav/...O/2008/Investment+Outlook+June+2008+Hmmmm.htm



> Let me reacquaint you with the debate about the authenticity of US inflation calculations by presenting two ten-year graphs – one showing the ups and downs of year-over-year price changes for 24 representative foreign countries, and the other, the same time period for the US. An observer’s immediate take is that there are glaring differences, first in terms of trend and second in the actual mean or average of the 2 calculations. These representative countries, chosen and graphed by Ed Hyman and ISI, have averaged nearly 7% inflation for the past decade, while the US has measured 2.6%. The most recent 12 months produces that same 7% number for the world but a closer 4% in the US






> The US seems to differ from the rest of the world in how it computes its inflation rate in three primary ways: 1) hedonic quality adjustments, 2) calculations of housing costs via owners’ equivalent rent, and 3) geometric weighting/product substitution. The changes in all three areas have favoured lower US inflation and have taken place over the past 25 years, the first occurring in 1983 with the BLS decision to modify the cost of housing. It was claimed that a measure based on what an owner might get for renting his house would more accurately reflect the real world – a dubious assumption belied by the experience of the past 10 years during which the average cost of homes has appreciated at 3x the annual pace of the substituted owners’ equivalent rent (OER), and which would have raised the total CPI by approximately 1% annually if the switch had not been made.
> 
> In the 1990s the US CPI was subjected to three additional changes that have not been adopted to the same degree (or at all) by other countries, each of which resulted in downward adjustments to our annual inflation rate. Product substitution and geometric weighting both presumed that more expensive goods and services would be used less and substituted with their less costly alternatives: more hamburger/less filet mignon when beef prices were rising, for example. In turn, hedonic quality adjustments accelerated in the late 1990s paving the way for huge price declines in the cost of computers and other durables. As your new model MAC or PC was going up in price by a hundred bucks or so, it was actually going down according to CPI calculations because it was twice as powerful. Hmmmmm? Bet your wallet didn’t really feel as good as the BLS did.





Seems that the desire to never have deflationary periods or any lengthy recessions which would normalise mean reversion og the Core CPI has made Core CPI redundant and would justify it's ignorance.

The periods of deflation or lengthy recession are exactly the times that high underlying (Headline) inflation would be offset to make Core a useful measure at all.

No wonder GDP figures are still failing to show a recession when CPI is artificially so low that it wouldn't drag the figure into the negative.

Interesting to think that the one country facing currency weaknesses issues happens to be the one country that doesn't officially have an inflation problem.

Seems the majority of fools are those in the US that think they are doing ok compared to the rest of the world. Wow shock horror


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