You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. How I Learned to Stop Worrying and Love the Guy With a Clipboard Checking the Price of Tube Socks in ToledoI'm going to do my best not to lose it. But no promises.
Dear Fellow Traveler: We have AI that can write your college essays better than 90% of Americans. We have cars that can drive themselves and avoid ditches. And I have a computer in your pocket that tracks every burrito I’ve ever bought at Chipotle. But how does the United States government measure inflation? They send Dave from Omaha to Target (TGT) with a clipboard. This is the same nation that runs the world's reserve currency… I'm not making this up. Wish I were. American Price SafariAccording to the Wall Street Journal, our inflation data is less reliable. But not because of the reason you assume. Government officials say we don't have enough people to walk into stores and write down prices. Follow me here… The Bureau of Labor Statistics employs hundreds of "enumerators" who fan out across America monthly like some economic census taker from 1936. "Excuse me, sir, how much for the Wranglers?" Inflation is supposed to be how we measure the debasement of the dollar. This CPI figure is tied to $2 trillion in inflation-protected bonds. This idiotic process determines your grandmother's Social Security check. Remember… Visa processes 150 billion transactions a year. Amazon knows the price of every item sold in real-time. Walmart's inventory system, updated every millisecond, can tell you the inflation rate of bananas in Boston down to the penny. But America? America has Dave. With his clipboard. In Toledo. It’s Gonna Get WorseAccording to this report, the BLS had to "guess" 29% of their price data using "different-cell imputation" in April. To explain this in government terms… we couldn't find the price of cargo pants in Cleveland, so we used the price of pajamas in Phoenix and then had a beer. Twenty. Nine. Percent. That's not data collection. That's Mad Libs. What’s to blame… The government hiring freeze. We can't afford to pay people to collect the data that determines the price of money itself. Bartender!!! The Sacred ShamWhen I graduated from Purdue University’s Agricultural program, I applied for a job with the United States Department of Agriculture. There were three reasons why I didn’t take the job: First, I wouldn’t be allowed to write about the markets anymore. Second, my retirement fund would be Treasury Bonds because they were concerned about insider trading. Third… the guy in charge of calculating wheat prices… did it all by hand and didn’t know how to use a computer. Hand to God. So we have people who can’t use technology on one side. Then, you have Congress and the people in Washington. Nobody wants to fix this. You know why? Because the CPI isn't designed to measure inflation. It's designed to manage expectations. It's designed to keep Social Security payments low, to make GDP look better, and to ensure that when Jerome Powell says inflation is "transitory," he can point to numbers collected by Dave, who couldn't figure out how to use the self-checkout. Think I'm exaggerating? I want to introduce you to the CPI's key adjustments. These are real ways that CPI is measured, and they are economically insane. First, we have Hedonic Adjustments: Your laptop might cost twice as much, but it's "better," so we'll only count half the price increase. Don’t think about this too much, or your nose will bleed... Then there’s Substitution Bias: Is steak too expensive? We'll measure the price of chicken instead. Can't afford chicken? Here's the price of beans. The CPI assumes you'll eat worse food as prices rise, then measures that shift in expectations as "stable prices." Third, there’s Geographic Smoothing. Is Manhattan rent through the roof? They’ll say that it doesn’t matter, because apartments in Topeka are stable. Therefore, prices are just fine on average. People spend a lot of money on economics degrees. And they’re taught that this is rational mathematics. Nope… this is a social science with a logic problem. Someone Punch MeRemember, this CPI figure that we’re doing by hand… it influences…
We've embedded a broken thermometer into the heart of the American economy. And it’s nuts because we could fix this tomorrow… If we want to understand the real inflation rate… Here’s a radical idea: ASK VISA. Every single day, payment processors handle billions of transactions. They know what you paid for gas in Gasburg, groceries in Greensboro, and that questionable purchase from that website at 2 AM. ADP processes payroll for 20% of the U.S. workforce — they know wage inflation better than anyone. But we can’t let go of Dave. In Toledo. With his clipboard. The Political Protection RacketChanging the CPI would require admitting it's broken. If you admit the CPI is broken, you must admit:
No politician wants to be the one who "changed how we measure inflation." So, here’s what I recommend… First… Stop believing CPI data. It's not measuring what you think it's measuring. Instead, track your own inflation. You can measure what you spend. That would be your inflation rate. Second, use our Sovereign strategy… because this is insane. If the government uses Dave with a clipboard to measure currency debasement while running the money printer at warp speed, you should own some assets they can't print. Finally… Laugh. Because if you don't laugh at the absurdity of the world's largest economy measuring inflation like it's 1936, you'll cry. The CPI doesn't measure inflation… it manufactures consent. And it justifies how the money printer goes BRRR…. This is especially true when private data figures have put inflation well above the government numbers over the last decade… Much higher… But at least the guy with the clipboard says everything's fine. Stay positive, Garrett Baldwin Secretary of Toledo About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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