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2024-03-13 08:44 by Karl Denninger
in Consumer , 314 references
[Comments enabled]  

And here's the latest...

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in February on a seasonally adjusted basis, after rising 0.3 percent in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.

The index for shelter rose in February, as did the index for gasoline. Combined, these two indexes contributed over sixty percent of the monthly increase in the index for all items. The energy index rose 2.3 percent over the month, as all of its component indexes increased. The food index was unchanged in February, as was the food at home index. The food away from home index rose 0.1 percent over the month.

The index for all items less food and energy rose 0.4 percent in February, as it did in January. Indexes which increased in February include shelter, airline fares, motor vehicle insurance, apparel, and recreation. The index for personal care and the index for household furnishings and operations were among those that decreased over the month.

If you recall last month I noted that a serious ramp in gasoline prices started just after the survey week so it was definitely going to show up in the numbers this month.  It did.

But more importantly all items less food and energy, otherwise called "core" inflation, has begun increasing once again after coming down into the 0.2 - 0.3 monthly range for the back half of last year.  It now stands at 0.4% for the last two months which annualizes to 4.9%, or if you want a nice round number, 5%.  That is 2-1/2 times the Fed's alleged target.

The claim is that gasoline was up "just" 4.3% unadjusted.  That's garbage; most areas of the country I watch (including where I live, and I was traveling during the survey period too) saw double that rate of increase on the month, but heh, there's no reason to be honest, right?

The other interesting one, which does appear roughly correct, is piped gas.  It had a small spike last month but is now, as expected with the end of winter heating demand, coming down.

In the "big household" category of course rent remains extremely high in terms of the Fed's "target" as does auto insurance, which continues a 20% annualized increase rate.  Of course nobody cares about this when it comes to the basics of insurance companies and how they make money (and thus how we'll never take care of this problem in all insurance industries until we make any sort of collusive and "push" programs through government something that we actually punish under 15 USC) -- that is, since insurance companies are regulated as to their profit margin the only ways to grow are to either have more claims or more expensive claims.  This isn't a conspiracy -- it is just a basic economic fact of how insurance companies are regulated and thus what public policy has to do lest the cost of the underlying items insured against be forcibly ramped by collusion between said firms, the makers of same and government, particularly when said insurance companies are public entities.  The required laws to so-regulate conduct exist but, in the last 20+ years, it has become public policy to not enforce them at either the state or federal level no matter who or which party is in office.

The internals of the report do show one quite-concerning area -- beef products were up a lot over the month, 7.4%.  Beef is, of course, a primary and excellent source of human nutrition.  It isn't all meats, however, as pork products were down in price.  I guess I'll have to stick some baby backs in the smoker instead of a nice brisket.

A few other curiosities -- FCOJ (frozen concentrated orange juice), the subject of Trading Places, was up 27.2% on the month and fast food continued its ramp, up an astounding 5.2% on the month.  Another of serious impact was non-prescription drugs which were up 9.3% on the month (I don't know what drove that as I don't buy them in general) and medical equipment and supplies which were up 3.4%.  Hope you don't need any of those.....

In any event I see nothing in this report supporting lower interest rates anywhere in the horizon.

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2024-03-06 07:00 by Karl Denninger
in Consumer , 525 references
[Comments enabled]  

Biden continues to do destructive things; this one is particularly nasty and I predict it will hit people immediately.

The Biden administration announced a rule Tuesday to cap all credit card late fees at $8, or about one-quarter of the average late fee of $32. It's the latest effort from the White House to attack what it calls "junk fees," or excessive fees that can push up the end price of products.

The Consumer Financial Protection Bureau's new regulations will set a ceiling of $8 for most credit card late fees, or require banks to show why they should charge more than $8 for such a fee. The effort will save Americans up to $10 billion a year, the agency estimates.

Before this even goes into effect I know exactly what's going to happen: If you miss a payment date by even one day your credit line will be slammed down to your open balance immediately.

This effectively cuts you off from any further borrowing on that card and in addition it will wildly raise your utilization ratio so you are likely to take an immediate 100 point hit to your FICO score which will prohibit you from being able to roll it onto a new issuer at a reasonable rate.  Since most people who are running balances have more than one card within a month or so the other issuers will notice your FICO getting whacked and do the same thing, hitting your score again and entirely cutting you off from any additional consumer credit.

A late payment is occasionally due to unintentional foolishness (e.g. missing the statement by email or paper) but most of the time it indicates significant financial stress.  For the issuer to keep your line active under those circumstances exposes them to very significant default risk, and unlike a mortgage or car payment there is nothing to repossess so if you default they're going to eat some or all of the balance.

A $35 fee on a $3,500 credit line that's out is 1% of the balance.  That's not very much; if the fee was $300 it would be a different matter, but it isn't.  Yes, I understand that the issuers tend not to graduate that fee but on the other hand late payments involve more expense in tracking them down and attempting to collect them, all of which costs the issuer money (mostly manpower.)

If you prevent an issuer from balancing that cost back out on the person who imposes it on them they will both reduce that risk and impose on everyone else to spread it around.

The easiest way to limit that risk is to immediately cut the line of anyone who is late back to their open balance, which cuts off any further credit to that person and turns their balance into a quite nicely-yielding annuity, providing they can pay at all.  Since if they can't pay you're already in the hole by however much they owe there's no downside to the issuer doing this -- and they will.

I expect that to start quite-literally today.

Don't be in debt.  This spiral is going to get worse, not better, and quite-obviously the political aspects of this are way out over their skis compared to the financial ones.

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Here comes (much) higher auto insurance rates... and this should result in heavy consumer-protection related prosecuting aimed at carmakers -- but it won't.

If you own a new car, there's a good chance that it features some form of keyless security. Whether it helps unlock your car or lets you start it with the push of a button, it makes driving all that bit easier. That's unless it's the reason your car gets stolen. Police forces all over the UK are reporting a rise in keyless car thefts, but a new report released by the Metropolitan Police today suggests that it now accounts for over a quarter of all vehicle thefts across London.

How are they getting in the door?

The claim is that they're breaking in physically and then accessing the ECU via the OBD port, allowing cloning of the key.  I'm not sure I'm buying that, although with some vehicles it is probably possible.

Specifically, it is known that certain older VWAG vehicles can have their cluster broken into via a piece of software that is available from various places in China.  This results in returning the "secret key" necessary to program new keys into the cluster, and then Bob's Your Uncle.

I think it's reasonable to assume that our "friends" with "most-favored nation" status over in China have this software for other makes as well.  In fact, I'd bet on it.

But the simplest way to steal a car with so-called "advanced keys", that is those that you don't have to press a button on a fob to unlock the doors and which has keyless start, is as trivial a paired set of radios and a confederate that gets close enough to you (5' or so) to be able to excite your key in your pocket while his "buddy" stands outside your car's door and pulls the handle.  The car thinks the key is next to it and the key thinks the car is next to it; they transmit their coded handshake and voila!

Next said thief sits in the car and hits START.  Same thing -- the key talks to the car, the car starts.  So long as you don't turn it off you can drive it.

The ugly part of this is that the frequencies aren't secret -- nor can they be, since the fobs and the cars are both intentional transmitters and thus have to operate on specific authorized frequencies.  The coding can be secret but that doesn't matter since you don't need to break the code -- just make the key think it's next to the car and vice-versa.

I'll lay odds this is how they're being stolen and it's why when I bought mine I was ok with keyless start but not with a fob that didn't require a press of the button to unlock the doors.

If you have to bust the glass to get in, or use an airbag or other conspicuous tool, it gets a lot harder and greatly increases the amount of time that the confederate has to be near me while the other guy works my car over before he can start it and drive off.

This is what your "convenience" has gotten you folks -- a car that is trivial to rip off for anyone with a modicum of technical ability.

Oops.

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