Did you feel last year's 3.85% inflation rate? Not me. I felt something worse than that. Last January my budget sheet showed I spent $300 a month in groceries. At 3.85%, that would make this year's monthly grocery bill $311.55 but it isn't. It's closer to $400.
So it may be the government's inflation index, but it's not mine. And probably not yours either. The Bureau of Labor Statistics consider the regular price in the index, but many people don't shop that way. We use coupons, hunt for sales, stock up on specials, and browse resale shops and Craig's List.
Example: I keep a supply of Coca Cola in the house -- 1/2 liter 6-packs. For years I stocked up on sale, and there was always a sale somewhere. I rarely bought the product for more than $2.50 a pack. Early last year my limit had to increase to $3.00, then later in the year I couldn't find Coke 6-packs on sale anywhere. Saturday I got some at Kroger's for $4.25, and that was a deal.
The same thing is happening with dishwasher detergent, cheese, orange juice, eggs, and some of the frozen meals I keep on hand for when I'm too tired to cook.
My biggest concern is that even if we experience deflation this year, is there motivation for food and household goods companies to lower their prices? I don't have to buy a new couch but I do have to eat. Moreover, I'm worried that some of my favorite foods will disappear -- the ones that cost more, but are made with real ingredients and no chemicals.
Sunday, February 22, 2009
Friday, February 20, 2009
Are you impressed?
The experts don't impress me. They didn't when 98% of stocks had "buy" ratings (which we now know was often to influence sales), and they didn't when we were told this fall that stocks are a bargain. Experts have too much reputation at stake, and too many friends in high places.
For instance, when gold was in the $800's an ounce range, most experts predicted it would go up this year but few offered a target higher than $1,050. Meanwhile the non-experts I read were predicting $1,500 to $10,000. Those are outrageous targets. If an expert goes that high and it doesn't come to pass, he or she will look like a fool. But, if the expert calls $1,050 and gold goes to, say, $2,000, the expert can say they called it, but didn't go high enough. Now they are still a genius.
Philip Tetlock has some similar views of experts. The professor of organizational behavior at the University of California was interviewed for a CNN article titled: Why the experts missed the crash. So why was it, Professor Tetlock?
Greed and arrogance.
Wow. Who would have thought.
The websites I follow largely belong to people in the business who offer the insider opinion. Listening to these folks, I moved out of equities in December/January and into mining stocks. Maybe I just got lucky this time around, but my 401k recovered 40% of what it lost from its peak in 2007, and did it in about 7 weeks.
Not everybody with a blog deserves to have you listen to their advice. Tell us, professor, what do we look for?
"The better forecasters were . . . self-critical, eclectic thinkers who were willing to update their beliefs when faced with contrary evidence, were doubtful of grand schemes and were rather modest about their predictive ability."
"The less successful forecasters . . . tended to have one big, beautiful idea that they loved to stretch, sometimes to the breaking point. They tended to be articulate and very persuasive as to why their idea explained everything."
To our detriment, it's the second type of forecaster that the media likes to quote.
Tetlock said he likes Mark Zandi (Economy.com), and Larry Summers (head of the National Economic Council. I'll be looking these guys up.
And by the way, we should all temper our own enthusiasm when we pick investments so that we ourselves don't fall into the less successful forecaster group.
For instance, when gold was in the $800's an ounce range, most experts predicted it would go up this year but few offered a target higher than $1,050. Meanwhile the non-experts I read were predicting $1,500 to $10,000. Those are outrageous targets. If an expert goes that high and it doesn't come to pass, he or she will look like a fool. But, if the expert calls $1,050 and gold goes to, say, $2,000, the expert can say they called it, but didn't go high enough. Now they are still a genius.
Philip Tetlock has some similar views of experts. The professor of organizational behavior at the University of California was interviewed for a CNN article titled: Why the experts missed the crash. So why was it, Professor Tetlock?
Greed and arrogance.
Wow. Who would have thought.
The websites I follow largely belong to people in the business who offer the insider opinion. Listening to these folks, I moved out of equities in December/January and into mining stocks. Maybe I just got lucky this time around, but my 401k recovered 40% of what it lost from its peak in 2007, and did it in about 7 weeks.
Not everybody with a blog deserves to have you listen to their advice. Tell us, professor, what do we look for?
"The better forecasters were . . . self-critical, eclectic thinkers who were willing to update their beliefs when faced with contrary evidence, were doubtful of grand schemes and were rather modest about their predictive ability."
"The less successful forecasters . . . tended to have one big, beautiful idea that they loved to stretch, sometimes to the breaking point. They tended to be articulate and very persuasive as to why their idea explained everything."
To our detriment, it's the second type of forecaster that the media likes to quote.
Tetlock said he likes Mark Zandi (Economy.com), and Larry Summers (head of the National Economic Council. I'll be looking these guys up.
And by the way, we should all temper our own enthusiasm when we pick investments so that we ourselves don't fall into the less successful forecaster group.
Wednesday, February 18, 2009
Less can be more, so relax.
An article in Yahoo Finance by Aaron Task warns: "Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed. I beg to differ. Our standard of living will only go down if all you count is number of possessions, bells and whistles, and the level of pampering from service reps. In other words, the "spoiled" factor.
(I am aware this pertains mostly to the middle and upper classes. I can't estimate about the working or working poor. Will they be in for more of a struggle, or will the lessening of the wage gap actually help by lowering prices and evening out the playing field?)
Even the article's interviewee, Howard Davidowitz of Davidowitz & Associates said that the end of rampant consumerism is ultimately a good thing. We all recite the mantra that money doesn't make you happy. Then we put our blinders back on and plow ahead into the material world trying to gain more ground. Maybe once the high standards of the American dream relax, we all can too.
I forget where I read it, but a social scientist wrote that we set our standard of living according to what the others around us have and do. Apartment living was fine with me when I lived in Toronto, was younger, and all my friends lived that way. When I moved to Raleigh and was older I wanted a house. My first house was surrounded by young Yuppies who tried to convince me to buy a Lexus. My second house was surrounded by old downsizers who knock on my door to tell me when CVS has a sale on toilet paper. I do see a difference in the things I thought I needed between neighborhood 1 and neighborhood 2.
Okay, one more story. Years ago an acquaintance told me she spent a summer in eastern Europe helping in a relief program. She lived out of a backpack with one pair of jeans and two tee shirts and by summer's end she didn't know why she ever needed more than that. Then she came home and didn't know how she got along without an ever expanding clothes closet.
I hope to all reading this, you'll stay solvent and find the tons of joy in the non-material.
(I am aware this pertains mostly to the middle and upper classes. I can't estimate about the working or working poor. Will they be in for more of a struggle, or will the lessening of the wage gap actually help by lowering prices and evening out the playing field?)
Even the article's interviewee, Howard Davidowitz of Davidowitz & Associates said that the end of rampant consumerism is ultimately a good thing. We all recite the mantra that money doesn't make you happy. Then we put our blinders back on and plow ahead into the material world trying to gain more ground. Maybe once the high standards of the American dream relax, we all can too.
I forget where I read it, but a social scientist wrote that we set our standard of living according to what the others around us have and do. Apartment living was fine with me when I lived in Toronto, was younger, and all my friends lived that way. When I moved to Raleigh and was older I wanted a house. My first house was surrounded by young Yuppies who tried to convince me to buy a Lexus. My second house was surrounded by old downsizers who knock on my door to tell me when CVS has a sale on toilet paper. I do see a difference in the things I thought I needed between neighborhood 1 and neighborhood 2.
Okay, one more story. Years ago an acquaintance told me she spent a summer in eastern Europe helping in a relief program. She lived out of a backpack with one pair of jeans and two tee shirts and by summer's end she didn't know why she ever needed more than that. Then she came home and didn't know how she got along without an ever expanding clothes closet.
I hope to all reading this, you'll stay solvent and find the tons of joy in the non-material.
Tuesday, February 10, 2009
Monitoring the DEW-Line
Because that's just the kind of nice guys we are:
Starbucks realizes how hard these economic times are on the customer so they are offering special two-fers. $3.95 will get you a tall latte with a coffee cake, or, a regular coffee with a breakfast sandwich.
That's a good deal. We'll probably take advantage of it soon. But come on, isn't Starbucks itself the real economic victim that this new deal is trying to help?
We honestly thought you wouldn't notice:
Beware of ads sprinkled in with your CitiBank Account Activity. The Consumerist reports a user who saw line items which looked liked charges, but were really links to advertisers. Ninety-one percent of their readers who voted in a mini poll thought it was "very uncool". The other 9% are probably Nigerian telemarketers.
Why don't Saskatchewaners like summer?
If you're looking for one place where the economy has actually been growing, try www.saskjobs.ca . The Premier of this western Canadian province is calling Canadians to come for the jobs. I checked, and lots of those jobs are in mining, agriculture, and places named "Moose Jaw". But if you can stand the cold and like living in sparsely populated places, give it some thought. Oh, and Saskatchewaners don't like summer because it's two weeks of bad snowmobiling.
Starbucks realizes how hard these economic times are on the customer so they are offering special two-fers. $3.95 will get you a tall latte with a coffee cake, or, a regular coffee with a breakfast sandwich.
That's a good deal. We'll probably take advantage of it soon. But come on, isn't Starbucks itself the real economic victim that this new deal is trying to help?
We honestly thought you wouldn't notice:
Beware of ads sprinkled in with your CitiBank Account Activity. The Consumerist reports a user who saw line items which looked liked charges, but were really links to advertisers. Ninety-one percent of their readers who voted in a mini poll thought it was "very uncool". The other 9% are probably Nigerian telemarketers.
Why don't Saskatchewaners like summer?
If you're looking for one place where the economy has actually been growing, try www.saskjobs.ca . The Premier of this western Canadian province is calling Canadians to come for the jobs. I checked, and lots of those jobs are in mining, agriculture, and places named "Moose Jaw". But if you can stand the cold and like living in sparsely populated places, give it some thought. Oh, and Saskatchewaners don't like summer because it's two weeks of bad snowmobiling.
Wednesday, February 4, 2009
Side 2 - From the Folks who Love Reagan
If you missed the beginning of this discussion, you may want to read the Jan 30 and Feb 2 entries first. We're talking about opposing views on how to fix the economy -- ultra hands-on vs. ultra hands-off.
There's a blog I like to read by a guy who's so libertarian, I think he has a picture of Ron Paul under his pillow. What exactly does the Libertarian Party profess? You can look it up on Wikipedia, but personally *I* get the image of Jack Palance in City Slickers: a gun, a dog, and a "no government" wanted sign.
At the risk of talking about politics, to the left is the Nolan Chart, (courtesy of www.neo-libertarian.com) which may help to explain where we are on libertarianism.
Now erase politics from your mind and get back to economics. (Which is much more relaxing, anyway.) We simply want to find how a libertarian would fix this economy.
Don, my libertarian blog guy, calls the bailout, the power given to banks, and the government takeover of banks a "crime". I'm not sure which of them bothers him more. He calls our reliance on government an addition. He is bracing for hyper inflation. Here's his recipe for relief:
Get rid of most of government, stop all subsidies, and repeal all laws that allow off shoring (notice he didn't say make new laws to stop it). Don believes if we let the financial crises burn itself out, we can start anew.
Again, I like some of the things he says, but I'm of the school that not doing enough during the 1930s was what prolonged the anguish. I also do believe in regulations. Left to their own self interest people too often screw others over. Sorry, but it's true.
There's a blog I like to read by a guy who's so libertarian, I think he has a picture of Ron Paul under his pillow. What exactly does the Libertarian Party profess? You can look it up on Wikipedia, but personally *I* get the image of Jack Palance in City Slickers: a gun, a dog, and a "no government" wanted sign.
At the risk of talking about politics, to the left is the Nolan Chart, (courtesy of www.neo-libertarian.com) which may help to explain where we are on libertarianism.
Now erase politics from your mind and get back to economics. (Which is much more relaxing, anyway.) We simply want to find how a libertarian would fix this economy.
Don, my libertarian blog guy, calls the bailout, the power given to banks, and the government takeover of banks a "crime". I'm not sure which of them bothers him more. He calls our reliance on government an addition. He is bracing for hyper inflation. Here's his recipe for relief:
Get rid of most of government, stop all subsidies, and repeal all laws that allow off shoring (notice he didn't say make new laws to stop it). Don believes if we let the financial crises burn itself out, we can start anew.
Again, I like some of the things he says, but I'm of the school that not doing enough during the 1930s was what prolonged the anguish. I also do believe in regulations. Left to their own self interest people too often screw others over. Sorry, but it's true.
Monday, February 2, 2009
Side 1 - From the folks who love Roosevelt
I promised I'd write about two opposing views of the economy.
On one side are the people who want the government to be so small, that they could hold their Christmas parties in someones mom's basement. I follow a lot of sites run by people who subscribe to this feeling. To these writers, Ron Paul is a white-hatted underdog, Reagan was a genius and Roosevelt ruined the country with his social programs. This is the maximum free-market, minimum regulation credo.
On the other side are folks like Thom Hartmann, radio host and author of Screwed: The Undeclared War Against The Middle-Class, which I am currently reading. Hartman gushes in almost every chapter how Roosevelt's amazing foresight led us to be "a Great" nation, until Reagan killed the good thing and planted the seeds to kill America as we know it. Hartman isn't anti-free market. He argues that there is no such thing as a free market, and, if government didn't intervene in the economy, there'd be no such thing as a middle class either. We'd be back in the days where there were only the very rich and the very poor. Mind you those very rich today would not be royalty or the elite, they'd be corporations.
A quick look at Hartman's blog and you'll see his cure for the "financial crisis" is to tax stock buys and sells. Let Wall Street fund their own bailout. Let speculation be dampened and investing regain it's rightful place.
He also wants America to go back to the regulations we abandoned - the Sherman Act, Glass-Stegall, and to return to the roots of trade laid down for us by the founding fathers. He would like us to quit this "service economy" we have; it doesn't produce anything -- doesn't build real wealth, and return to the industrialized nation we used to be.
I do like a lot of things he says. But maybe I'm just a Baby Boomer longing for the simpler times of the 60s and early 70s. I would always like to see corporations held to better moral standards. I can't, though, get myself to agree with imposing limits on wealth, particularly for individuals as Hartmann states in his book. If someone is a billionaire, shouldn't they be able to leave that money to their children instead of having it taxed away to keep dynasties from developing?
Otherwise, I think Hartmann has some good ideas. And, being middle class myself, I sure would like to win this war.
Next: Details on the other side -- from the folks who wish Ron Paul were president.
On one side are the people who want the government to be so small, that they could hold their Christmas parties in someones mom's basement. I follow a lot of sites run by people who subscribe to this feeling. To these writers, Ron Paul is a white-hatted underdog, Reagan was a genius and Roosevelt ruined the country with his social programs. This is the maximum free-market, minimum regulation credo.
On the other side are folks like Thom Hartmann, radio host and author of Screwed: The Undeclared War Against The Middle-Class, which I am currently reading. Hartman gushes in almost every chapter how Roosevelt's amazing foresight led us to be "a Great" nation, until Reagan killed the good thing and planted the seeds to kill America as we know it. Hartman isn't anti-free market. He argues that there is no such thing as a free market, and, if government didn't intervene in the economy, there'd be no such thing as a middle class either. We'd be back in the days where there were only the very rich and the very poor. Mind you those very rich today would not be royalty or the elite, they'd be corporations.
A quick look at Hartman's blog and you'll see his cure for the "financial crisis" is to tax stock buys and sells. Let Wall Street fund their own bailout. Let speculation be dampened and investing regain it's rightful place.
He also wants America to go back to the regulations we abandoned - the Sherman Act, Glass-Stegall, and to return to the roots of trade laid down for us by the founding fathers. He would like us to quit this "service economy" we have; it doesn't produce anything -- doesn't build real wealth, and return to the industrialized nation we used to be.
I do like a lot of things he says. But maybe I'm just a Baby Boomer longing for the simpler times of the 60s and early 70s. I would always like to see corporations held to better moral standards. I can't, though, get myself to agree with imposing limits on wealth, particularly for individuals as Hartmann states in his book. If someone is a billionaire, shouldn't they be able to leave that money to their children instead of having it taxed away to keep dynasties from developing?
Otherwise, I think Hartmann has some good ideas. And, being middle class myself, I sure would like to win this war.
Next: Details on the other side -- from the folks who wish Ron Paul were president.
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