ES Journal Archive (2006 - 2008)

[kinggyppo]

Things that make me laugh:

The seasonally adjusted consumer price index rose 0.6% in May, worse than the 0.5% gain expected by economists. The core CPI, which excludes food and energy prices, rose 0.2% as expected.

seasonally adjusted, no s**t!

 

[bighog]

Bulls need to find some friends before the shorts make like Boston Celtics and regroup.

 

[kinggyppo]

Quote from kinggyppo:

Things that make me laugh:

The seasonally adjusted consumer price index rose 0.6% in May, worse than the 0.5% gain expected by economists. The core CPI, which excludes food and energy prices, rose 0.2% as expected.

seasonally adjusted, no s**t!

Most of you traders know the weighting of CPI is bs. but for newer people:

"Shortly after Clinton took control of the White House, however, attitudes changed. The BLS initially did not institute a new CPI measurement using a variable-basket of goods that allowed substitution of hamburger for steak, but rather tried to approximate the effect by changing the weighting of goods in the CPI fixed basket. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Boskin/Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price.

Once the system had been shifted fully to geometric weighting, the net effect was to reduce reported CPI on an annual, or year-over-year basis, by 2.7% from what it would have been based on the traditional weighting methodology. The results have been dramatic. The compounding effect since the early-1990s has reduced annual cost of living adjustments in social security by more than a third. "

 

[ammo]

b1s2 for your style of trading i am looking at the spx 1350/1240 put sprd long and ride it into oct with a roll down each month

 

[tommymoose]

I never knew that kinggy, thanks for posting it. Was the sole reason for this to make the numbers look "prettier"? That seems nuts to me.

 

[OldTrader]

Quote from tommymoose:

I never knew that kinggy, thanks for posting it. Was the sole reason for this to make the numbers look "prettier"? That seems nuts to me.

I don't know much about the arithmetric versus geometric adjustments. But in terms of seasonal adjustments, the purpose was so that economists could measure one period versus another without getting distortion due to the time of year. The idea was that over the year these adjustments would wash, but again, allow a real comparison between periods.

I think the principle of seasonal adjustments made some sense. Whether it worked out though is another question. I don't know the answer to that one. It does seem pretty clear that the CPI understates what most of us experience.

It wouldn't be all that surprising that the government officials made a few changes so they could underpay the social security recipients.

OldTrader

 

[bighog]

But you would also not be at all surprised if it was planned that way, correct? ..

Many workers are tied to or at least used to be tied to the COLA figures. Many labor contracts also.

 

[lachie74]

Gahh! It's like watching paint dry.
Short 55
Stop 57

This is June ES

Out 54 +1

Don't like the looks of it.

 

[Renah]

SHORT @ 1358

STOP @ 1368

See you next week around 1310

A great weekend to all!

 

[blackchip]

Nice.

Also TIPS were first issued in 1997.

And -

As is discussed in the final installment on GDP, part of the problem with GDP reporting is the way inflation is handled. Although the CPI is not used in the GDP calculation, there are relationships with the price deflators used in converting GDP data and growth to inflation-adjusted numbers. The more inflation is understated, the higher the inflation-adjusted rate of GDP growth that gets reported.

shadowstats.com

So far down the rabbit hole...

Quote from kinggyppo:

Most of you traders know the weighting of CPI is bs. but for newer people:

"Shortly after Clinton took control of the White House, however, attitudes changed. The BLS initially did not institute a new CPI measurement using a variable-basket of goods that allowed substitution of hamburger for steak, but rather tried to approximate the effect by changing the weighting of goods in the CPI fixed basket. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Boskin/Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price.

Once the system had been shifted fully to geometric weighting, the net effect was to reduce reported CPI on an annual, or year-over-year basis, by 2.7% from what it would have been based on the traditional weighting methodology. The results have been dramatic. The compounding effect since the early-1990s has reduced annual cost of living adjustments in social security by more than a third. "