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August 14, 2008 – Comments (4)

Bad, really bad..

"The department's Consumer Price Index, the most commonly used inflation gauge, rose 0.8 percent in July and on a year-over-year basis jumped 5.6 percent, its strongest advance since January 1991 when the first Gulf War was occurring."

No question that I just shake my head by the prices I see.

What is really interesting to me is that going north gave me some price shocks at some of the differences, 4 liters of milk in Vancouver can be had for under $4.  It is $9 up north.  But a lot of other prices were within 10-20%.  My room mate who is from eastern Canada had huge price shock.  He'd describe prices at home and I'd shake my head at the difference compared to Vancouver.

When you have housing and real estate out of line with wages the rest also seems to get out of line with wages.  All that commerical property has higher carrying costs, so they do get passed on to the consumer.  

People that had a home before Vancouver's housing costs took off have only had to deal with consumer goods, but it has been brutal to those that weren't established.

I remember chatting with a woman about 10 years ago who had an office job and owned a two bedroom condo.  She was probably 5 years older then me.  I remember her saying that she'd always managed but in the past couple years it had gotten very hard.  That would have been the period that our 93 real estate bubble and carrying costs were working their way into the economy.

So, I suspect there will be very unequal increases in the cost of living.

Also, I did a post about where the consumer price index is set to 100.  When I went back and looked at the data, well, it made no sense, but I didn't understand why.  Every year in BC they'd be feeding us this garbage that our price increase rate was less then other places in Canada.  This was huge in making it so that unions had reduced negotiating power.  Dumb unions had poor economists.  But, when I really studied how those numbers came out, well, the standard was set when BC was at a top.  All of our enormous increase were just kind of tossed.  So, set price increase comparison for Canada after we've seen, like double, and yes the price increases slow down.  Manitoba was at a low, so they were showing 3.6% where BC was showing 1.7% kind of thing.

That is another reason why the price increase data is garbage.  Local economies are not rising and falling in sync.  If your city is at a top when the numbers are reset, well, they will lie more.

4 Comments – Post Your Own

#1) On August 14, 2008 at 10:40 PM, DemonDoug (72.59) wrote:

Still think we're in "deflation" deb?

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#2) On August 14, 2008 at 11:27 PM, hansthered0 (< 20) wrote:

The company I work for was recently purchased by a canadian firm. Some of the stories I heard from there sounded just like here in the USA, except housing prices went up almost twice as fast in places.

Can you confirm this rumor I heard, that McDonalds was paying as much as $15/hr just to get employees because of worker shortages?

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#3) On August 15, 2008 at 3:16 AM, dwot (45.98) wrote:

Doug have read my stuff? Price increases are lagging to increases in money supply.  Prices haven't gone up any where near what the money supply has done, but I don't think they will go up as much as the money supply has because the money supply is contracting through credit contraction.

hansthered0, I have heard of places like McDonald's paying more in some places, but I don't specifics.  Fort McMurray would be a place where they couldn't get enough workers.  But tnen I also heard $2000 for rent wasn't uncommon either...

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#4) On August 19, 2008 at 5:19 PM, dexion10 (27.69) wrote:

dwot - I saw your post to doug but I am still confused do you think there will be deflation ?   I understand that you see two moving pieces to the puzzle but what is your ultimate conclusion based on what you've read... will we see inflation beyond these levels or

 

The other reason I am writing is to thank you for posting and to get your take on shorting consumer companies.

At this point I am more inclined to go long consumer facing companies given the current multiples... granted I have no interest in many of the mid-tier or high end discretionary names but names like LOW, JBX, HBI all appeal to me if they fall 10% further.

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