3 ms·

Lots of people/businesses have a need to know if they’ll be able to meet their future expenditures with current savings. The issue is the generic basket of good

by acover 5y ago

Lots of people/businesses have a need to know if they’ll be able to meet their future expenditures with current savings. The issue is the generic basket of goods isn’t relevant for all people. For example, a condo with a reserve fund only really cares about construction costs in a single city. A retiree cares a lot about the price of nursing homes and in home care but may not even realize it. I expect if you can help people/financial advisors understand their future expenditure needs there is a lot of value in it.

gruez 5y ago
>The issue is the generic basket of goods isn’t relevant for all people. but the BLS puts out figures for each category? https://www.bls.gov/news.release/cpi.t02.htm https://www.bls.gov/news.release/cpi.t02.htm
- acover 5y ago
  Yes, I agree it’s not as useful if you trust government sources. I’m not that familiar with USA inflation but with Canadian inflation statistics, certain categories feel way off - such as housing. As someone who is considering buying a house their measure is useless. BLS numbers are also controversial - https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex....
  - gruez 5y ago
    >certain categories feel way off - such as housing. As someone who is considering buying a house their measure is useless. Because it's based off "owners equivalent rent", not the sticker price of a house. The latter is somewhat problematic because a house is an investment, not an expenditure (unlike an apple or a doctor visit).
    - acover 5y ago
      > Its purpose is to determine changes in the cost of using a stock of dwellings. https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001-eng.htm https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001... This is difficult for me to understand as there is no market price for what they are trying to estimate. They have a thousand knobs to guess at. It reads a bit like they are grouping people who’ve own their home for 50 years in with those who just bought - similar to how they calculate rent. For example, they weight mortgage interest at less than utilities. For a new homeowner, mortgage interest is probably 5-10x utilities. Regardless, they explicitly ignore the experience of a first time home buyer, who are pretty trapped into renting. A house is not just an investment, it’s a different experience owning versus renting.
      - gruez 5y ago
        >It reads a bit like they are grouping people who’ve own their home for 50 years in with those who just bought - similar to how they calculate rent. >[...] For a new homeowner, mortgage interest is probably 5-10x utilities. Sounds like you're upset that the index is an average of everyone, and therefore doesn't recognize your individual struggles? >A house is not just an investment, it’s a different experience owning versus renting. Eating food grown yourself is a different experience than shopping at the supermarket. Should we factor farm land cost into the CPI?
        acover 5y ago
        When measuring the price index of natural gas should you average in contracts written 50 years ago but still active, regardless of whether that price is currently available on the market? > Eating food grown yourself is a different experience than shopping at the supermarket. Should we factor farm land cost into the CPI? If 70% of the population paid for a "gardening experience" like they do for gym memberships, etc then yeah I would expect that to be in CPI.
      - lottin 5y ago
        I think, you're missing the point. Houses are consumed over very long periods of time, which means the price at which you're purchasing your home today is going to affect your future cost of living for many, many years. Therefore, if we are trying to measure the current cost of living, current house prices are pretty much irrelevant.
  - perl4ever 5y ago
    >certain categories feel way off If you live in Vancouver, it's easy to forget 93% of the country doesn't. From 1995 to just pre-pandemic, my home (in the US, far away from California) appreciated significantly less than inflation.
    - acover 5y ago
      I was looking at a city specific inflation measure.
      - perl4ever 5y ago
        I believe the standard inflation measures in the US are based on people living in cities, as I do.
        acover 5y ago
        Sorry, what I meant was I was looking at the data for my specific city. For some indicies statistics Canada has a breakdown to specific cities.

by acover 5y ago

gruez 5y ago

>The issue is the generic basket of goods isn’t relevant for all people. but the BLS puts out figures for each category? https://www.bls.gov/news.release/cpi.t02.htm https://www.bls.gov/news.release/cpi.t02.htm

acover 5y ago
Yes, I agree it’s not as useful if you trust government sources. I’m not that familiar with USA inflation but with Canadian inflation statistics, certain categories feel way off - such as housing. As someone who is considering buying a house their measure is useless. BLS numbers are also controversial - https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex....
- gruez 5y ago
  >certain categories feel way off - such as housing. As someone who is considering buying a house their measure is useless. Because it's based off "owners equivalent rent", not the sticker price of a house. The latter is somewhat problematic because a house is an investment, not an expenditure (unlike an apple or a doctor visit).
  - acover 5y ago
    > Its purpose is to determine changes in the cost of using a stock of dwellings. https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001-eng.htm https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001... This is difficult for me to understand as there is no market price for what they are trying to estimate. They have a thousand knobs to guess at. It reads a bit like they are grouping people who’ve own their home for 50 years in with those who just bought - similar to how they calculate rent. For example, they weight mortgage interest at less than utilities. For a new homeowner, mortgage interest is probably 5-10x utilities. Regardless, they explicitly ignore the experience of a first time home buyer, who are pretty trapped into renting. A house is not just an investment, it’s a different experience owning versus renting.
    - gruez 5y ago
      >It reads a bit like they are grouping people who’ve own their home for 50 years in with those who just bought - similar to how they calculate rent. >[...] For a new homeowner, mortgage interest is probably 5-10x utilities. Sounds like you're upset that the index is an average of everyone, and therefore doesn't recognize your individual struggles? >A house is not just an investment, it’s a different experience owning versus renting. Eating food grown yourself is a different experience than shopping at the supermarket. Should we factor farm land cost into the CPI?
      - acover 5y ago
        When measuring the price index of natural gas should you average in contracts written 50 years ago but still active, regardless of whether that price is currently available on the market? > Eating food grown yourself is a different experience than shopping at the supermarket. Should we factor farm land cost into the CPI? If 70% of the population paid for a "gardening experience" like they do for gym memberships, etc then yeah I would expect that to be in CPI.
    - lottin 5y ago
      I think, you're missing the point. Houses are consumed over very long periods of time, which means the price at which you're purchasing your home today is going to affect your future cost of living for many, many years. Therefore, if we are trying to measure the current cost of living, current house prices are pretty much irrelevant.
- perl4ever 5y ago
  >certain categories feel way off If you live in Vancouver, it's easy to forget 93% of the country doesn't. From 1995 to just pre-pandemic, my home (in the US, far away from California) appreciated significantly less than inflation.
  - acover 5y ago
    I was looking at a city specific inflation measure.
    - perl4ever 5y ago
      I believe the standard inflation measures in the US are based on people living in cities, as I do.
      - acover 5y ago
        Sorry, what I meant was I was looking at the data for my specific city. For some indicies statistics Canada has a breakdown to specific cities.