March 31, 2023

Graphs - latest PCE, CPI, PPI (both regular and core). And rolling 3 mo, 6 mo, 12 mo of core PCE

From the news release, http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

And they show the last 5 months. I found the latest 12 months (and way beyond) at FRED:

PCE: https://fred.stlouisfed.org/series/PCEPI
CORE PCE: https://fred.stlouisfed.org/series/PCEPILFE

PCE Inflation (just came out today, March 31):


What a difference a month makes. Before today's report, when the last bar was January, it looked like a rewarming of core PCE inflation. With February's 0.3% number, it looks quite a bit better, maybe roughly a flat-lining with with wiggles.

PCE, rolling 3 month averages, annualized
7.25% 7.42% 6.17% 4.75% 2.10% 4.21% 3.81% 3.22% 3.85% 4.23%

CORE PCE, rolling 3 month averages, annualized
4.30% 5.39% 4.40% 5.13% 4.45% 5.45% 4.08% 3.71% 4.56% 4.88%

Consumer Price Index (CPI)

CPI - https://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
CORE CPI - http://data.bls.gov/timeseries/CUSR0000SA0L1E&output_view=pct_1mth
(Choose "More Formatting Options" at the upper right of the page for other views such as rolling averages of past 12 months, past 6 months, past 3 months)
Updated 4/12/23 to include March:

Producer Price Index (PPI)

OLD CORE PPI - Producer Price Index, seasonally adjusted - Final demand goods less foods and energy -
http://data.bls.gov/timeseries/WPSFD413?output_view=pct_1mth

CORE PPI - Producer Price Index, seasonally adjusted - Final demand less foods. energy. and trade services - This is the core measure that the BLS features, so I will follow their lead
http://data.bls.gov/timeseries/WPSFD49116?output_view=pct_1mth
(Choose "More Formatting Options" at the upper right of the page for other views such as rolling averages of past 12 months, past 6 months, past 3 months)



Why the Fed thinks core is better for forecasting future inflation: https://www.democraticunderground.com/10143025190#post10

3 months annualized: Core CPI: 5.11%, Core PCE: 4.88%, Core PPI (wholesale prices): 3.74%
(Core CPI above updated 4/12/23 to include the March data)

I chose 3 months for its recency, but that it's still a longer period than one month, so less likely that one can dismiss it as a "one off", as some try to do when the last month is bad (and make it THE only data when the last month is good)

Back to the CORE PCE 3 months, 6 months, and 12 months rolling averages (all are annualized rates)



Looking at 3 month and 6 month rolling average, it looks like a flat-lining with wiggles for several months -- we're at the same place we were several months ago. The 12 month shows only the slightest decline.

Edited to add 405 PM ET on seeing some comments

The Fed has long targeted 2%. Did people really expect they'd just declare that the target was always there just for shits and giggles and they were content now with inflation rates more than twice as high as that, and were just going to sit on their rusty dusties and "wait" for inflation to come down when it has been essentially flat on a rolling 3 month and 6 month basis; when they made their last rate hike decision March 21, the recent trend of those had been going up). My big song and dance about what I think of using the rolling 12 month inflation to gauge RECENT or CURRENT inflation: https://www.democraticunderground.com/10143045881#post6 .

My harangue about not only was Powell renominated by President Biden, but the vast majority of Democratic senators voted for his confirmation. And that it's not just Powell, but the rest of the Federal Open Market Committee (FOMC) that is voting unaminously for rate hikes. And a reminder that last June, when inflation was 8.9%, continuing at that rate would cut the purchasing power of the dollar in half in just 8.1 years, and down to a quarter in 16.2 years. And that historically, in relatively high inflation periods, wages don't keep up with prices. And the purchasing power of savings and investments tend to be devastated (as opposed to the nominal dollar figure, which might actually look pretty good - fool's gold). https://www.democraticunderground.com/10143049684#post7

At the core PCE inflation rate of 4.88% (3 month average, annualized), the purchasing power of the dollar is halved in 14.5 years, and quartered in 29 years. That isn't OK with me.

Edited 529p ET- Stocks, Treasury yields, and more (the S&P 500 closed up 1.4%, and a scroll through the financial headlines credits the tamer-than-expected PCE inflation report. The S&P 500 has now had two positive quarters in a row, but is still 14.3% below its 1/3/22 all-time high) : https://finance.yahoo.com/

March 12, 2023

"Vegas slot machine ... a tiny 'I told you so.'"

Yes, the market periodically goes down, some times very steeply. To take the 3 steepest pullbacks since WWII: In '73-'74 we had a 48% drop from peak-to-trough, and it took 7.5 years to recover from that and reach a new high. In the Dotcom bust we had a 49% drop and a 7.2 year recovery time. In the Housing Bubble bust it fell 57% and took 5.5 year to recover.

I guarantee plunges of this depth will happen again. Crashes happen and will continue to happen. I too will join you in telling anyone who doesn't think a crash will ever happen again, "I told you so".

I don't think predicting a crash is any more insightful than predicting that some day there will be a solar eclipse. I don't know anyone who thinks a crash will never happen. Everyone knows it will happen. Personally I think stock valuations are way high and we're plenty ripe for one.

But even after a 50% or 60% plunge, I will still have a bigger nest egg as a long-time buy and hold equity investor. Why? Because after 2 or 3 doublings (meaning a 4 fold or 8 fold increase), a 50% plunge still leaves me with a 2 fold or 4 fold increase.

Nothing holds up as well in the face of withdrawals and inflation than does equities, except perhaps real estate. In other words, it's an even bigger gamble to not have a sizable proportion in equities.



Over the past 20 years, it has grown 6.37 fold, an average annual increase of 9.7%/year
(had the market crashed 60% in 2022 -- a worst crash than any of the post WWII crashes -- then it would have still grown 3.11 fold, an increase of 5.8%/year)

Over the past 50 years, it has grown 131 fold, an average annual increase of 10.2%/year
(had the market crashed 60% in 2022, then it would have still grown 64 fold, an increase of 8.7%/year)

and so on. I'd go to Vegas a lot if I could average these kinds of returns.

This is from the below link, which also has similar for bonds, Treasury bills, and gold. These don't come close to matching the increase in equities.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

And I'm not just cherry-picking the boom periods. The above is inclusive of all periods, down, up, flat.

And when the market recovers and goes on to set yet more new all time highs, I will say "I told you so" to anyone who thinks it will never recover.

The market periodically sets new all time highs. It has never set an all-time low.

Yes it goes up and down and up and down and ... but the pattern is that new lows are higher than the previous lows and new highs are higher than the previous highs.

What really matters as far as risk is the risk of running out of money in retirement, and that risk is much higher for people who don't have any equities and only rely on "safe" fixed income investments, which don't even keep up with inflation. Innumerable historical simulations in innumerable studies have shown that. IOW its a bigger gamble not to be in the market. I don't wish to take that gamble.

I hate to see my fellow progressives misled by anti-equity JackPineRadicals-style "progressive" malarkey and end up having to live a very financially constrained old age, not to mention having very little or nothing to give to Democratic candidates or progressive causes. And by default having to accept the minuscule interest that the banks usually dole out in savings and CDs and so on.



Only a fool gambles with their retirement security -- And it makes DU investors out to be fools because only a fool would wager their retirement security on a Vegas slot machine. We are not fools. In the face of inflation and withdrawals, it's an even bigger gamble to NOT have a sizable proportion in equities.



Yes, a lot of people. 58% of American adults own stock according to a Gallup Survey, 3/5/23 https://www.msn.com/en-us/money/savingandinvesting/only-15-of-american-families-directly-own-stock-and-that-s-okay/ar-AA188NL7
pointing to the detailed report at https://www.fool.com/research/how-many-americans-own-stock/

And if the big crash happens on President Biden's watch, it will be super-painful for everyone to the left of Attila The Hun come the next election and the 4 years after.

Edited to add 1205pm ET: I wish someone could tell me which "Indian casino" gives its clients on average a 223% cumulative return over 10 years, a 537% cumulative return over 20 years, a 1,444% cumulative return over 30 years, a 6,759% cumulative return over 40 years, a 13,016% cumulative return over 50 years, a 33,400% cumulative return over 60 years, and a 120,090% cumulative return over 70 years, because I sure would like to "gamble" there. The equity market is AN INVESTMENT.

What drives the market is earnings (not "luck" or the pull of a slot machine handle ). This from Peter Lynch in 2001: