Maybe we’re not really connected. We may base our financial decisions on faulty economic data. And just because we’re all using the same false information doesn’t make it right. As someone trying to make sense of it all for club members, I find myself confused—not because the odds are so hard, but because the results are all wrong. On CNBC last week, I knew I was heading down an arrogant rabbit hole when I said that the Consumer Price Index (CPI), released on Wednesday, radically overestimated some of its inputs. (The Consumer Price Index collects data from retailers and condominiums to measure the change in the prices people pay for goods and services, including fuel, utilities, and food.) My partner David Faber was in disbelief and asked how you knew that. I told him it was because I did a better job than the US Bureau of Labor Statistics, which calculates the index. “Yes, absolutely,” David said, laughing. But I meant it. I explained I’m checking in with more people in stores and pulled down my top ten clothing outlets. I also incorporate e-commerce pricing and regularly check sales, even down to the Olli Outlet Level (OLLI), a retailer that I like a lot, especially my store in Quakertown, Pennsylvania. David pressed on, saying it was unbelievable that I knew better. I immediately came back and mumbled that one of the positives of not having real life is that I outperform those who actually have life, including the researchers who collect the data. Of course, you can see these researchers checking out a lot of areas. But the question is: do they do a good check-in? Have they read the research showing that this year is shaping up to be a more promotional year than last year (which means prices will come down, maybe even a lot)? Do they go to stores like I do and write down prices? Do they compare prices at Costco (COST) to those at the mall? of course not. What makes me insist on all this? Because when I was a little kid, my dad would pick me up every Saturday on sales calls. Sell boxes and bags to retailers, along with gift wrap, scotch tape, and elastic bands. Every week, we’d travel to the Philadelphia area, South Jersey, Allentown, Bala Cynwyd, New Hope, you name it. Bob was pulling into a mall and he had a bag of samples in one hand and my hand in the other. I still remember how much I loved it. I miss that strong hand in the little paw. I didn’t really understand what my dad was doing, or why everyone seemed so mean to him when he was so nice. But that’s a lot for a salesperson, then and now. We went everywhere: T-shirt stores, menswear, jewelry stories, hobby shops. The pop was not really a success at selling, probably because he loved Shakespeare, Renoir, and opera so much. He viewed a job as something he had to do to get what he needed. He was probably trying to show me that there’s more to life than having your head pushed in by every cashier, assistant store manager, and stockbroker. As I got older, it taught me more about what sells and why. He would take me to Kmart and Sears and Caldor and Bradlees and explain why every one of them would never be able to. Then he took me to Walmart (WMT) and explained, one by one, why his customers weren’t so successful. When he took me to Costco (COST), he said Walmart had finally met his match, and worth it considering how many customers Walmart has wasted. If I had to sum it all up, I learned two big things. One is that my father really loved me, something that was suspected when we clashed politically and after my mother’s early death. And secondly, you learned how to spot a bargain. You see, my father did not take me to these places, he taught me about his first job when he returned from the war. He sold Gimbels’ shorts and got fired for not selling enough of them. He’s priced everything in this loser shop too. Bob knew who had the lowest prices because we needed the lowest prices. Do researchers know the lowest prices? Did a man who spent his entire life studying prices and thousands of hours driving them into his son’s head with the precision of a Black & Decker drill teach them? no. While I don’t know some of these inputs as well as some others, I know they aren’t always right. They could be more wrong than right, even. I’ve owned a restaurant for twelve years and have studied prices endlessly, trying to determine exactly what will bring people in and what might put them out of business. I know how to talk to people in restaurant chains. Same with liquor stores. In the end, I got my way around the CPI which is a sloppy way to see prices. I’m not saying this means CPI gets it wrong about everything. I am saying that those who care about it will be better served by focusing on wages. At least they are scheduled better – not faster but better. Of course, wage data is also old data. Think about it: The most important data on wages is collected once a month, and that’s good enough for the US government. Advertisers and marketers collect data every second. Do we really have to wait once a month for data? We could do it once an hour if we had to, but the government has been doing it the same way for as long as I’ve been in the business. Simply award the contract to Adobe (ADBE), Salesforce (CRM), Alphabet (GOOGL) or Microsoft (MSFT). We will be a better informed nation and not have nearly the guesswork we do now. But let’s step back from the broader concerns. I just don’t trust most government data, and I don’t think they apply well. We make many decisions based on how the Federal Reserve reacts to this data and we somehow think that’s good enough. Sure, this makes sense if you are trading futures. But it doesn’t make sense if you’re trying to invest for the long term. And here I am not talking about how massively buying Warren Buffett after the infamous Battle of Midway. I’m talking about how inflation can make or break your portfolio. For example, if you were to look at the price of clothing or rent, and then measure it against crunching mortgage rates (although only houses and rental apartments are in the CPI, not homes), you can’t just see the forest from the trees – you have the trees The error. This is because unlike the price changes on which the CPI is based, the bigger picture comes from the innovation that big companies had to innovate to deal with the big retirement and the big wall of immigration and yes, the big death of a pandemic that probably took as many as 4 to 5 million people out of workforce. Yes, we still lack real numbers on something that simple. Two years couldn’t have spurred enough innovation to keep track of everything — things like Chipotle’s invention of the “Chippy,” a tortilla-making robot, or companies figuring out how to do faster price checking and add more cashier-free machines. We just couldn’t get it done fast enough because the technology has a huge mismatch that it still doesn’t have – a love affair with enterprise software. We’ve had a generation of rich kids who became ultra-wealthy adults and then billionaire inventors and hedge fund managers because of the foundation’s programs. It just so happens to be the area where smart people have discovered money is. They are not there for productivity gains anywhere outside the office. Certainly not the factory floor. very pedestrian. Not for sale. Not disturb enough. If they were going to deviate from enterprise software, it would be for fintech because mutual fund managers loved those stories. HR automation, digitization of selling, and “buy now pay later” phrasing. But nothing about how to make food cheaper or clothes less expensive. Nothing about how to get imports cheaper to keep prices down and at the same time not wipe out the millions of higher paying jobs that made it possible for people to go to those stores that wiped out my dad’s customers and still have money to send kids to colleges they didn’t. It costs $90,000 a year. The mismatch of technological innovation and the welfare of our people is one of the most outrageous, sad, pathetic, greedy and disgusting trends of the past several years. That was until finally someone broke everything and crushed the model. Today we have Leonardo da Vinci’s Jensen Huang. This polymath and founder of Nvidia (NVDA) decided that if he broke the shackles of Moore’s Law—the observation that the number of transistors in an integrated circuit (IC) doubles every two years—he could create something that eliminated waste, making the planet better, faster, cleaner, and more productive, so it didn’t cost much to Too much for normal people like him. Seven years ago, Huang met a guy named Sam Altman and together they tinkered to come up with something called generative artificial intelligence. Finally, we’ve come up with something that can make things fair again, and a little less bloated. Of course, Jensen was a very lonely person telling people about all this. Maybe because I’m still the boy who holds Bob’s hand as he taught me, I understood what Jensen was saying. Maybe because he’s so patient with me, so much more than Bob, I can hang on to his every word. But here’s what I know now: Not only are the numbers the Fed is banking on more fantasy than fact, but we’re on the cusp of the biggest wage-deflationary spiral since NATFA and the open borders of China to the US we could We all get tired of the government shutdown and breach of covenant. We can worry about China, Taiwan and the presidential election. I? I’m just waiting for the real wave of deflation to hit us: wage deflation. Because of the absurd way the data was tabulated, that wave would not only crash into us, it would roll over us, driving our faces into the sand. it’s happening. Just jump over the wave. There will be people who worry that deflation is a precursor to a recession and that is why the 10-year and 20-year Treasury yields are reversing. Don’t be afraid of a downturn or misinterpret it as nothing great for investors. You should buy stocks at the ugliest of moments. We will have stock and we will do it together. (See here for a full list of shares in Jim Cramer’s Charitable Trust.) As a subscriber of the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim places a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charity fund portfolio. If Jim talks about a stock on CNBC, he waits 72 hours after the trade alert is issued before executing the trade. The above investment club information is subject to our terms and conditions and privacy policy, along with our disclaimer. No fiduciary obligation or duty will be created by the staff, or created, by virtue of your receipt of any information provided in connection with Investment Club. There are no specific results or guaranteed profit.
A shopper browses the meat section of a Los Angeles supermarket on February 13, 2023 in Los Angeles.
Mario Tama | Getty Images News | Getty Images
Maybe we’re not really connected. We may base our financial decisions on faulty economic data. And just because we’re all using the same false information doesn’t make it right.
As someone trying to make sense of it all for club members, I find myself confused—not because the odds are so hard, but because the results are all wrong.
“Extreme travel lover. Bacon fanatic. Troublemaker. Introvert. Passionate music fanatic.”
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