If I could exclude Oil from the title above, you would swear today痴 article was about a 1970痴 rock concert.
When the economy begins to hit the skids, Tobacco, Alcohol, and Drugs do very well. You may ask why; but when people are worried, they smoke, they drink, and the take medications.
Of course this is an over simplification, in reality, Tobacco, Alcohol, and Drugs have a steady stream of earnings, and are not really dependant on the economy for profits.
This morning we received even more evidence that the economy was beginning to crater.
United Parcel Service (UPS) is down over 10 points this morning after reporting lower profit margins. It is obvious that the company痴 profits were greatly affected by higher fuel prices.
To show you that UPS� problems are nor company specific, shares of FedEx (FDX) are down in sympathy with UPS. Now, FedEx may be doing a better job of hedging than UPS, but make no mistake, higher energy prices are affecting everything, and everyone.
This brings us to a point I was making with the unreliable CPI numbers.
The CPI is an Unreliable Measure of Inflation:
When the core component of the June CPI rose 0.3%, information manipulators were saying that the rents number overstated the core inflation rate. I told you yesterday that that statement was a bunch of hogwash.
In reality, the craftsmen of the CPI were taken aback that they left something in the CPI in error that could actually measure something inflationary.
We all know (without being told) that energy prices, housing, medical care, college tuition, and a host of other items have skyrocketed. We know that inflation is out of control by the actions of the precious metals as well as commodity prices. Who really cares about what an imported t-shirt made in the sweat shops of South America costs.
What is disturbing about the CPI is it excludes housing prices. Yes, it tracks rental costs (better known as rents), but not the price of housing.
So, here we have it. When the largest purchase most consumers make it excluded from the CPI, it really is not a reliable measure.
