Apr

8

I was thinking of designing a custom Consumer Price Index:

Oil
Copper
Wheat
Sugar

Anything important missing? or something that needs to be removed? My aim was to add something that is actually used everyday by ordinary people around the world.

Larry Williams asks:

Why? There are several very good ones already

https://doi.org/10.26509/frbc-ec-201002, Michael F. Bryan, and Brent H. Meyer

The Sticky Price Consumer Price Index (CPI) is calculated from a subset of goods and services included in the CPI that change price relatively infrequently. Because these goods and services change price relatively infrequently, they are thought to incorporate expectations about future inflation to a greater degree than prices that change on a more frequent basis. One possible explanation for sticky prices could be the costs firms incur when changing price.

Asindu Drileba responds:

Why a custom CPI? I honestly have no reason. It's more of a fishing expedition. The goal is to have a small list (under 10) of commodities and see if it produces some regularities.

It seems there are two kinds of commodities: Those that make people angry when the price goes up (life gets harder) like Oil, Sugar, Wheat. Those that make people happy (or indifferent), when the price goes up. Gold. I was thinking of making a small custom CPI based off 1). Which is why I excluded Gold. I was thinking of adding currencies to 1) like USD/EUR, USD/JPY & USD/CNY. Then maybe see what (this CPI) it may be good for.

Larry Williams contributes:

Add a booze stock.

Ed Kozun writes:

I agree in the past on the booze stock, but it sure seems like trends are changing and a lot of people are walking away from the sauce.

Larry Williams again:

Mary jane stock?

Zubin Al Genubi suggests:

Beer, wine, gas, hamburgers.

Ed Kozun ponders:

You’ve got my thinking about these indexes and what they are useful for and can you strip it down to essentials to think about pain points for “ordinary.”

1. any staple grain
2. residential energy per kWh.
3. cooking fuel(cost of making that grain into a meal)
4. Urban public transport ticket price.
5. Basic medicine. What cost does amoxicillin turn an infection into something that is not financially manageable.

Asindu Drileba continues:

Inflation usually doesn't affect wealthy people. (unless it's at levels of post WWI Germany, Mugabe's Zimbabwe & 1970s Cambodia). Petrol doubling in price may be annoying, but it won't change their behaviour.

As for the "others". Inflation causes 2 things. (these are untested suspicions)
Belt tightening. Spending on priorities first and less on luxuries. Will Live Nation stock be affected? Since less people go for concerts during periods of high inflation?
Will it still be worth it to buy the exact same iPhone as of last year that simply has a different name? Less visits to LVMH brands?

Red queen effects. People spending/borrowing more to stay in the same place. Payment processors collect more (since goods are the same, but transaction volume in $ goes up?)?

More leverage in markets (bigger "Open to High" & "Open to Low" ranges due to vol)? This may be more true in crypto where users are given up to 125x Leverage In some cases.

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