THE DON JONES INDEX… |
GAINS POSTED in GREEN LOSSES POSTED in RED |
4/30/14…
15,101.59 |
|
4/23/14…
15,101.59 |
|
6/27/13… 15,000.00 |
|
(THE DOW JONES INDEX: 4/30… 16,562.74; 4/23… 16,501.65; 11/19/12… 12,592.22)
LESSON for APRIL 30, 2014
The Consumer Price
Index (Don Jones Indices April 9th,
16th and 23rd) contains
nearly three hundred categories, sub-categories, sub-sub and
sub-sub-sub-categories of marketable foodstuffs, fuels, homes, services and
other commodities ranging from haircuts to bananas and, to keep matters in
perspective, assigns to each… as well as to each of the larger categories… an Importancy Index, one presumably designed to allow the
consumer to follow the markets (just as he or she might follow the Dow, or a
favorite baseball team) and either rejoice or take umbrage at the performance
of some favored item.
With a total
compilation aggregate of 100.000, the individual Importancy
Indices of the two main categories are…
Services - 61.058
Commodities - 38.942
Within these two, the
most Important sub-categories are…
Shelter…
including rents, owners’ equivalent rents (inc. mortgages), fuels and
furnishings - 41.448
Transportation…
including private (vehicle costs & repairs and gasoline) and public - 16.416
Food…
including beverages, alcohol (but not tobacco) and restaurant dining - 14.901
Medical
Care… commodities (1.704) professional services (doctors, dentists, hospitals -
5.847) - 7.551
Education
& Communication… tuition, schoolbooks, telephones, computers - 7.087
Recreation…
including audio & video hardware/software, pets, toys - 5.793
Apparel…
including men’s, boys, women’s, girls and infants’ clothing, shoes - 3.437, and
Other…
including personal care products, tobacco - 3.365
The
mathematically-inclined nitpickers will
quickly point out that the Importancy Index still
shows a deficit of .272… perhaps this fraction having been absorbed into some
black ops non-category like Area 51 or determining the whereabouts of Jimmy
Hoffa. The more ideological nitpicker
will address the glaring lack of consideration for government expenditures
(drivers’ license and auto tag fees aside) in such categories as taxes,
corruption or the ever-present “stupid tax” which Don Jones pays whenever he
does something stupid. Or maybe the problem
is just that Importancy, like the dollar, just ain’t what it used to be.
(And, in fact, it would be nice if the value of the dollar had declined by only about a quarter of
a percent per year.)
The pure, demonic
genius of the CPI lies, however, in its assigning Importancy
to the sub-sub and lower categories… as if America was a unified whole of
one-mind consumers. Thus, Don’s haircuts
(a sub-category of personal care in the catch-all
Other) have an Importancy Index of .633. Of course, in the case of Hollywood actors
and politicians like John Edwards, both cost and Importancy
would be higher, but we must allow for those exceptions and exemptions that
prove the rule. There are a few regional
variations noted by the BLS and CPI… highest prices are in the Northeast,
followed by the West, South and, cheapest, Midwest… and variations are noted montly among three major metropolitan centers (New York,
Los Angeles, Chicago) and eleven more (bimonthly).
The Dons of New
York and Boston appear to be running neck and neck towards the cliffs of
bankruptcy by paying the highest prices in the U.S.A. Those in Houston get the most for their
money… followed by those in Detroit and Atlanta.
Bananas, now… a
subcategory of Fresh Fruits (I.I. of .560 of Don’s dollar), which is a
subcategory of Fresh Fruits and Vegetables (I.I. 1.042), itself a subcategory
of Fruits and Vegetables (I.I. 1.346… the difference being attributed to
canned, dried and otherwise processed produce)… have an Importancy
Index of .088 (three one-hundred-thousandths more important than apples, but
one one-hundred-thousandth inferior to tomatoes). Theoretically, they would have to be a
sub-sub-sub-sub-category of Foods, a five-sub subordinate to Commodities and a
six-sub slice of the whole, but who cares anymore? Let’s just say that Don Jones likes his
bananas, perhaps because they have no bones.
You see… we,
frankly, do not get the Importancy Index.
The Don Jones Index does assign value to categories (some of which are
similar or even identical to those in the CPI and/or the Bureau of Labor
Statistics), but we also include what might be termed “intangibles”… things
like crime and the environment and the one great milk carton baby of the CPI:
government. Not only in cost, in
effectiveness… as measured in the national honor, in trade policy, in fiscal
responsibility.
By whom, and how,
is the Importancy Index compiled?
In actuality, CPI’s
terminology for said categories is Relative Importance (RI). From http://www.bls.gov/cpi/cpiriar.htm
... “The relative importance of a component is its expenditure or
value weight expressed as a percentage of all items within an area. When the
value weights are collected—most recently during the 2003-2004 Consumer Expenditure
Survey—they represent average annual expenditures, and their relative
importance ratios show approximately how the index population distributes
expenditures among the components. Relative importance ratios represent an
estimate of how consumers would distribute their expenditures as prices change
over time.”
Relative
importance ratios change from year to year… those which see marked increases in
the CPI see the II (or RI) go up; items whose prices are stagnant or deflated
lose value.
Of all categories,
sub-categories and so on down the line, that with the greatest Importancy Index ranking is “owners’ equivalent rent” which
is largely composed of homeowners’ mortgages.
Following are food… all categories and all cuisines… motor fuel
(gasoline) and cars, trucks and SUVs themselves, tuitions and childcare
expenses, medical care and all non-motor fuels (gas, electricity, even
firewood).
What are the least important products that Don Jones
opens his wallet to buy?
That distinction
belongs to “nonfrozen, noncarbonated drinks and
juices” – in other words, your typical cardboard box of Minute Maid, or a
house-brand generic from your local grocery (a, below)… measuring .014 (unless you’ve caught a cold, and then,
substantially higher). Rugs and dishes
are the least important component items of Shelter, watches of Apparel
(coincidentally, the Importancy of women’s clothing
is nearly twice that of men’s) tailoring services are Unimportant and delivery
services rank as low as the frozen OJ.
Video hardware sits at the bottom of the Recreational category, just
beneath… the horror, the horror in River City!...
musical instruments.
Turning to
inflation… only slightly over eight years’ worth… the CPI of Services and
Commodities categories has been 17.1 percent but, taken yearly, just a little
north of 2% per year. Those Don Jones
who were of age in the 1970’s would certainly agree… inflation has been
whipped. Fears that Obamite “stimulus” programs would spin us off into an
Argentine-like crisis, or that the Fed’s bond-buying spree would do likewise
have proven unfounded. (Their
efficacy is quite another matter, but will be taken up at another time.) It has never been so apparent that whatever
problems America faces, these days, they are supply-side ills… there are plenty
of consumables out there on the demand side and, with a few exceptions, most
are reasonably priced (thanks, in part, to the cheap Asian imports). The problem is supply side… Don Jones (at
least the 99% of Dons) just doesn’t make enough money to satisfy his
demands. Even the more outrageous
sub-categories… medical care and the “other” commodities (driven by tobacco
prices, legal and financial fees and the cost of funerals) have been out of
control for many years, well before 2006.
By category, the
rise in CPI has shown these sub-category items to all have become more
expensive by one to about one and one half percent per year since 2005 (even
medical care, which was, even then, on the way up…
CATEGORY (1982-4 = 100) |
December, 2005 |
March, 2014 |
Inflation (8¼ year
period) |
All Items |
201.800 |
236.293 |
+ 1.42% |
Shelter, Fuels
and Furnishings |
204.800 |
231.968 |
+ 1.37% |
Transportation
(inc. gasoline) |
175.400 |
218.435 |
+ 1.51% |
Foods and
Beverages |
197.400 |
240.226 |
+ 1.48% |
Medical and
hospital care |
340.100 |
433.369 |
+ 1.54% |
Education
& Communication |
118.000 |
137.125 |
+ 1.41% |
Recreation
(inc. pets) |
110.800 |
115.763 |
+ 1.27% |
Apparel (inc.
footwear) |
118.600 |
128.888 |
+ 1.32% |
Other |
326.700 |
406.715 |
+ 1.51% |
As
you see, the price of every category has gone up… sometimes modestly, sometimes
barely… but calmly and predictably, between one and a quarter and one and a
half percent. (Rather like the interest
rates on John’s CDs… if he’s stupid enough or scared enough to still have
any!) However, there are always the
anomalies… individual sub-categoryitems whose prices
have either soared or crashed… and here are a few of these, beginning with the
cheaper…
ITEM (1982-4 = 100) |
December, 2005 |
March, 2014 |
Value
Deflation (8¼ year
period) |
Value
Deflation (30 year
period) |
All Items |
201.800 |
236.293 |
+ 1.42% |
|
Televisions |
18.800 |
4.194 |
- 77.69% |
- 95.81% |
Other vid.
hardware |
25.300 |
11.013 |
- 56.47% |
- 89.99% |
Photographic eqpt. |
45.500 |
24.453 |
- 46.26% |
- 75.55% |
Telephone
hardware |
40.300 |
28.597 |
- 29.04% |
- 71.40% |
Computer
software |
54.200 |
36.726 |
- 32.24% |
- 63.29% |
Toys |
72.700 |
49.075 |
- 32.50% |
- 50.92% |
Clocks and
lamps |
77.600 |
49.652 |
- 36.02% |
- 50.35% |
Personal
computers |
115.800 |
50.477 |
- 56.41% |
- 49.52% |
Dishes &
flatware |
74.200 |
57.980 |
- 21.86% |
- 42.02% |
Ship fares |
71.300 |
61.920 |
- 13.16% |
- 38.08% |
Men’s
shirts/sweaters |
87.800 |
81.748 |
- 7.20% |
- 18.25% |
Appliances |
88.000 |
84.945 |
- 3.47% |
- 15.06% |
Women’s suits (a) |
87.600 |
89.835 |
+ 2.55% |
- 10.16% |
Juices &
drinks (a) |
110.700 |
115.659 |
+ 4.48% |
+ 15.66% |
And the dearer (the
last named excepted)…
ITEM (1982-4 = 100) |
December, 2005 |
March, 2014 |
Inflation (8 year
period) |
Inflation (30 year
period) |
All Items |
201.800 |
236.293 |
+ 17.09% (+1.42% per
year(g)) |
+ 136.29% About 3% yearly(g) |
Tobacco
products |
527.300 |
895.841 |
+ 69.89% |
+ 795.84% |
College
tuition/fees |
527.200 |
749.950(b) |
+ 42.25% |
+
649.95% |
Hospital
services |
477.200 |
731.958(c) |
+ 53.39% |
+
631.96% |
Edu.
books/supplies |
399.500 |
602.091 |
+ 50.71% |
+ 502.09% |
Housing at
school |
362.900 |
489.877 |
+ 34.99% |
+ 389.88% |
Water and
sewage |
302.500 |
462.214 |
+ 52.80% |
+
362.21% |
Oranges/tangerines |
370.700 |
459.633 |
+ 23.99% |
+
359.63% |
Prescription
drugs |
362.300 |
452.120(d) |
+ 24.79% |
+
351.12% |
Motor vehicle insur. |
335.200 |
430.163 |
+ 28.33% |
+
330.16% |
Garbage
collection |
337.200 |
423.413 |
+ 25.57% |
+
323.41% |
Cable/satellite
svcs. |
344.700 |
416.841 |
+ 20.93% |
+
316.84% |
Misc. personal
svcs. |
318.700 |
388.609(e) |
+ 21.94% |
+
288.61% |
Propane,
firewood |
271.900 |
387.559(f) |
+ 42.54% |
+
287.56% |
Bananas |
174.500 |
202.051 |
+ 15.79% |
+ 102.05% |
(a) Women’s
suits declined in price for over twenty years, but inched upwards since. Juices and drinks are the food item showing
the least inflation, over both eight and thirty years. (This may not change, despite weather damage
to the Florida orange crop, since citrus is a high-inflation item and
manufacturers have increasingly turned to chemical substitutes.)
(b) Elementary
and secondary private school tuition and fees were only a tenth of an index
point lower in December, 2005, and had risen to “only” 710.282 by this March.
(c)
All
medical care services clocked in at 356.000 by the end of 2005 and rose to
“only” 463.678 by March. On the other
hand, health insurance had barely risen to 106.4 eight years ago and, though it
has increases more rapidly, still stood at 122.801 last month, trembling at the
precipice of Obamacare. (The first law
of medicine, as well as mechanics, is “if it ain’t
broke, don’t fix it!”)
(d) Nonprescription
drugs have only been tracked since 2009… their base of 100.000… and, since,
have actually fallen to 98.159. It is
obvious that this form of protectionism is highly profitable, but a reform of
this and other glitches in the abominable U.S. healthcare industry would be a
far more useful policy than has been Obamacare.
(e) “Miscellaneous
personal services” include both high and low-inflation entries… the most
expensive of which have been legal and financial services and funeral expenses.
(f) Fuel
oil, actually cheaper in 2006 at 240.900 was, at 393.705, slightly more
expensive than the named alternatives by last month. Men’s sweaters, on the other hand, were
actually cheaper than three decades ago, having fallen to 82.733.
(g) Compounded
interest.
THE DON JONES INDEX
CHART of
CATEGORIES w/ VALUE ADDED to EQUAL BASELINE of 15,000.00
(REFLECTING…
approximately… DOW JONES INDEX of
June 27, 2013)
The sum of good things, less the sum of bad things, equals
the gain (or loss) to Don Jones.
DON JONES’ PERSONAL ECONOMIC
INDEX (45% of total Index points) |
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DON 4/23/14 |
DON 4/30/14 |
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1513.96 |
1513.96 |
1513.96 |
http://www.tradingeconomics.com/united-states/wages 10.34 nd 10.31 |
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http://stats.oecd.org/Index.aspx?DataSetCode=IDD .038 nd
(2010) |
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Official # |
http://www.usdebtclock.org/ 10282 10251 10406 10383 |
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http://www.usdebtclock.org/ 19329 19279 19450 19402 |
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Dow Jones index 16424.85 16501.65 16562.74 |
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http://www.realtor.org/topics/existing-home-sales -0.2 (4.59M) nd
http://www.realtor.org/research-and-statistics
189 nd
198.5 |
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http://www.newyorkfed.org/research/data
indicators/household index.html
and http://www.usdebtclock.org/ 51696 51746 nd |
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http://www.bls.gov/news.release/cpi.nr0.htm +0.2 (mar) nd |
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http://www.usdebtclock.org/ 17581 17546 17554 |
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http://www.usdebtclock.org/ 2897 2902 2907 |
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http://www.usdebtclock.org/ 3523 3525 3528 |
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http://www.usdebtclock.org/ 61456 61483 61507 |
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4/16/14 |
153.83 |
153.83 |
http://www.census.gov/foreign-
trade/statistics/highlights/congressional.html 190.4F nd |
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http://www.census.gov/foreign-trade/statistics/highlights/congressional.html
2327F nd |
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141.55 |
141.55 |
http://www.census.gov/foreign-trade/statistics/highlights/congressional.html 423F nd |
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http://www.usdebtclock.org/ 5908 5965 nd 5975 |
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The usual suspects are arguing that the
end of the world is at hand. The other
usual suspects say El Nino’s to blame. |
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Is the bug that’s eating up Florida
orange crops natural or not. (Like
many other things, it’s an Asian import.) |
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Celebrations
all around as the Boston Marathon concluded without incident. |
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Finally, the President showed a little testicular
fortitude in sending paratroopers to Poland… which is, at least, nearer to Ukraine than Georgetown. |
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Primary
season is underway and, fueled by the Koch Brothers and Citizens United, so
is the morbid fun. Do Republicans
really hate other Republicans more than they hate Democrats |
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Mr. Putin denies that Russia
has a hand in the pro-Russian militia attacks in Donetsk & environs. But what’s that purple on his fingers? Africa?
Shhhh! |
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Bad news confined to the wage
inflation front as Don Jones experiences sticker shock on food, gas &
just about everything else with lower pay.
But hey!... they finished the Boston
Marathon. |
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The Don Jones Index for the week of
April 24th through April 30th was DOWN 6.25 points.
Comments, complaints, donations (especially SUPERPAC
donations): feedme@generisis.com
Inflation at 2% 1.42% Inflation at 4% At 8%
0 100.0 100.0 100.0 100.0 100.0
1 102.0 101.42 104.0 108.0 110.00
2 104.04 102.86 108.16 116.64 121.00
3 106.12 104.32 112.49 133.10
4 108.24 108.83 117.0
5 110.40 110.37 121.67
6 112.61 111.94 126.54
7 114.86 113.53 131.60
8 117.26 115.14
9 119.50 116.68
10 121.90 118.43
11 123.00 120.11
12 125.46
13 127.97
14 130.53
15 133.14
16 135.80
17 138.52
18 141.29
19 146.94
20 149.88
21
22
23
24
25
26
27
28
29
30
Relative Importance of Components in the
Consumer Price Indexes
This page contains
links to data on the relative importance of components in the Consumer Price
Index for All Urban Consumers (CPI-U) and the Consumer Price Index for Urban
Wage Earners and Clerical Workers (CPI-W). These data are to be used in
conjunction with the CPI-U and CPI-W released in that same year.
Table 1 contains data
for the U.S. city average. Tables 2 through 6 contain data for 27 metropolitan
areas, 4 regions, 3 population size classes, and 10 cross-classifications of area
and population size class. Table 7 presents the relative importance of the
individual area all-items indexes in the U.S. city average all-items indexes.
The relative
importance of a component is its expenditure or value weight expressed as a
percentage of all items within an area. When the value weights are
collected—most recently during the 2003-2004 Consumer Expenditure Survey—they
represent average annual expenditures, and their relative importance ratios
show approximately how the index population distributes expenditures among the
components. Relative importance ratios represent an estimate of how consumers
would distribute their expenditures as prices change over time.
Relative importance
ratios cannot be used as estimates of current spending patterns or as
indicators of changing consumer expenditures in the intervals between weight
revisions because consumption patterns are influenced by factors other than
price change. These factors include income, variations in climate, family size,
and availability of new and different kinds of goods and services.
Relative importance
ratios of components in the national or local area Consumer Price Indexes can
be used in the construction of indexes for special combinations of items. In
such instances, relative importance ratios are used as weights to combine
relative changes in prices of the selected components over specified periods.
For a description of
the procedure for deriving index weights from consumer expenditure data, see
chapter 16, Consumer Expenditures and Income and chapter
17, The Consumer Price Index in BLS Handbook of
Methods. BLS publishes the expenditure weight, or "relative
importance," of each component in the CPI once a year, using December
data. In fact, relative importances change every
month, reflecting the change in relative prices.
How to Estimate an updated relative importance
To estimate a relative
importance for a component for a month (other than December), one can use its
previous published relative importance and ‘update’ it by published price
changes. For example, suppose one wants to estimate the relative importance of
energy for the CPI-U in Sept. 2005. To answer this, one needs the published
relative importance for energy for December 2004. One also needs the Dec. 2004
and Sept. 2005 indexes for energy and for all items.
In this example, one
would enter the weights and indexes for these two item categories (see the
first 4 columns). The “updated weight” column is the December published weight
times the relative change between Dec. 2004 and Sept. 2005.
Specifically, in this
example, the updated weight for energy is 7.991 * (208.0/153.7) = 10.8141.
For all items, the
updated weight is 100.000 * (198.8/190.3) = 104.4666.
To calculate the
updated relative importance for energy where the weight for all items is
normalized to 100, just divide the updated weight for energy by the updated
weight for all items, times 100.
In this example, the
estimated relative importance for energy in Sept. 2005 is (10.8141 / 104.4666)
X 100 = 10.352.
Table 1.
Estimating an updated relative importance for energy for Sept. 2005
Item |
Published
relative importance, Dec. 2004 |
Index,
Dec. 2004 |
Index,
Sept. 2005 |
Updated
weight, for Sept. 2005 [Dec. 2004 rel. imp. X (Sept. 2005 index / Dec. 2004
index)] |
Updated
weight, Sept. 2005, normalized so that all items = 100.000 |
Energy |
7.991 |
153.7 |
208.0 |
10.8141 |
10.352 |
All Items |
100.000 |
190.3 |
198.8 |
104.4666 |
Normalized
to 100.000 |
How to estimate the contribution of a
component to the overall price change
Suppose that, in the
above example, energy prices increase 1.0 percent in October, while the All
Items index increases 0.2 percent. How does one figure out the ‘contribution’
of the Energy component to the All Items change? Asked another way, what
proportion of the All Items increase can be attributed to the Energy component?
The first thing one needs to do is estimate the updated relative importance for
Energy for Sept. 2005 (see Table 1 above, last column). One can then multiply
the updated expenditure weight of Energy times its relative price change in
October (10.352 X 1.01 = 10.456). Similarly, the updated expenditure weight for
All Items is 100 X 1.002 = 100.200.
The change in the expenditure
weight for Energy in October is 10.456-10.352=0.104.
The change in the expenditure
weight for All Items in October is 100.200-100.00=0.200.
The
contribution of energy to the All Items change equals the change in
the expenditure weight for Energy, divided by the change in the expenditure
weight for All Items. Specifically, the contribution of Energy to All Items in
this hypothetical example is 0.104 / 0.200 = 0.52 or 52
percent.
Said another way, slightly more than half the increase in the October index was
due to the increase in energy prices.
Table 2.
Estimating the contribution of energy to the All items
change in October. 2005
Item |
Normalized/updated
weight for Sept. 2005 (from Table 1) |
Price
change from Sept. 2005 to Oct. 2005, expressed as a relative |
Updated
weight, Oct. 2005 (updated weight X price change) |
Differences
in weights |
Energy |
10.352 |
+
1.0 percent, or 1.01 |
10.456 |
10.456
– 10.352 = 0.104 |
All items |
100.000 |
+
0.2 percent, or 1.002 |
100.200 |
100.200
– 100.000 = 0.200 |
Contribution of
Energy to All Items |
- |
- |
- |
0.104/0.200
= 0.52 =52 percent |
Relative Importance of Components in the
Consumer Price Index
·
December 2013
Table 1, U.S. City Average using 2011-2012 weights (TXT)
Table 1, U.S. City Average using 2009-2010 weights (PDF)
Tables 1 - 7, Relative Importance of Components in the Consumer
Price Index, all areas (PDF)