Inflation and Investments HOW INFLATION INDICES INDICATE DIFFERENT IMPACTS ON CONSUMERS
By Aaron Chapman, SecurityNational Mortgage
he last article discussed how inflation can benefit
economists that better illustrate the true change in cost of living for the average American. These consider a wider array of expenses that impact the consumer and how location effects expenses. For example, the PCE attempts to identify underlying inflation trends by excluding two cat - egories: food and energy. However, food and energy are two significant necessities for all consumers! Two places I refer to are John Williams www.shadowstats.com and Ed Bu- towsky’s www.chapwoodindex.com for comprehensive data on inflation.
Your eyes will be opened to the wizard behind the curtain and better understand how the placement of your investment capital is critical. The traditional options have not out- paced the true rate of inflation the way properly leveraged real estate has. Review the articles starting Sep- tember 2019. Although the current market is volatile, the real estate investor must stick with the basics and follow their plan. Times like these are when following a plan gets you ahead of those who don’t. •
the properly leveraged real estate investor. Now, let’s go deeper. I lead into every conversation regarding the benefits of inflation by asking investors what they think the current rate of inflation is. Often, I hear “two to three percent,” which is not really far off from “official” numbers. The Personal Consumption Expenditures Price Index (PCE) and the Consum- er Price Index (CPI) are the most common indexes for inflation. Each of these refers to specific items that are measured and tracked by items that can be most controlled by The Federal Reserve monetary policy. Each index is specific in its measurement and focus. The CPI is a statistical estimate construct- ed using the prices of a sample of representative items whose prices are collected periodically. The PCE price index is a narrower measure. It looks at the changing prices of goods and services purchased by consumers in the United States. It is similar to the Bureau of Labor Statistics’ consumer price index for urban consumers. However, if we view inflation as a reduction in buying power, oth- er indices have been created by
DISCLAIMER: SecurityNational Mortgage Company, and its loan officers, unless individually licensed and specifically denoted in their credentials, are not qualified to, and are prohibited from representing themselves as accountants, attorneys, certified financial planners, estate planners, investment specialists or tax experts, and will not advise you in those matters. Always seek the advice of a licensed professional. This article is for informational purposes only, contains the opinion of the author, not necessarily the opinion of SecurityNational Mortgage Company, and should not be construed as lending advice. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet LTV requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines, and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over life of loan. Reduction in payments may reflect longer loan term. Terms of the loan may be subject to payment of points and fees by the applicant. Equal Housing Lender. SecurityNational Mortgage Company Inc. NMLS# 3116. Any amounts, figures, payments or loan terms stated are based on continually changing markets, rates, loan programs and borrower specific qualifications, and subject to change without notice. See loan officers featured for a personal consultation and accurate pricing.
(The author consulted Dr. John A. Abernathy.) The above information is the sole intellectual property of the author. Any distribution without written consent of the owner is strictly prohibited ©.
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