A Summary of My Post-CPI Tweets

By: Michael Ashton | Tue, Apr 15, 2014
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Below is a summary of my post-CPI tweets. You can follow me @inflation_guy, or see the twitter scroll on the right side of the page here :

It is worth pointing out that it was not particularly difficult to forecast that housing inflation would accelerate, and continue to accelerate, for a while. The chart below (source: Enduring Investments) is something I've been running for more than a year.

FHA versus Case-Schiller, EHSL Med price and OER

A simple blend of just these three components suggests a 3.3% rise in Owners' Equivalent Rent by the end of the year (our more-detailed model has it at 3.1%, so consider that the forecast range), with primary rents a few tenths above that. If all of the other core components inflate at just 1.2%, overall core would be above 2%.

The other components of core include Medical Care, which has been held down by unusual factors for the last year but has recently been rising again. It includes Apparel, which is only rising at 0.5%. It includes airfares, which have been declining at a 4% rate over the last year, and automobiles, which are unchanged over the last year. In short, there is a lot of upside in the non-housing core elements.

 


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Michael Ashton

Author: Michael Ashton

Michael Ashton, CFA
E-Piphany

Michael Ashton

Michael Ashton is Managing Principal at Enduring Investments LLC, a specialty consulting and investment management boutique that offers focused inflation-market expertise. He may be contacted through that site. He is on Twitter at @inflation_guy

Prior to founding Enduring Investments, Mr. Ashton worked as a trader, strategist, and salesman during a 20-year Wall Street career that included tours of duty at Deutsche Bank, Bankers Trust, Barclays Capital, and J.P. Morgan.

Since 2003 he has played an integral role in developing the U.S. inflation derivatives markets and is widely viewed as a premier subject matter expert on inflation products and inflation trading. While at Barclays, he traded the first interbank U.S. CPI swaps. He was primarily responsible for the creation of the CPI Futures contract that the Chicago Mercantile Exchange listed in February 2004 and was the lead market maker for that contract. Mr. Ashton has written extensively about the use of inflation-indexed products for hedging real exposures, including papers and book chapters on "Inflation and Commodities," "The Real-Feel Inflation Rate," "Hedging Post-Retirement Medical Liabilities," and "Liability-Driven Investment For Individuals." He frequently speaks in front of professional and retail audiences, both large and small. He runs the Inflation-Indexed Investing Association.

For many years, Mr. Ashton has written frequent market commentary, sometimes for client distribution and more recently for wider public dissemination. Mr. Ashton received a Bachelor of Arts degree in Economics from Trinity University in 1990 and was awarded his CFA charter in 2001.

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