About Tim McMahon

My grandfather lived through the Hyperinflation in Weimar, Germany--to say he was an original “gold bug” would be an understatement. I began reading his “hard money” newsletters at the age of 16 and the dividends from gold stocks helped put me through college.   

In 1995 the Financial Trend Forecaster paper newsletter was born upon the death of James Moore editor of Your Window into the Future and the creator of the Moore Inflation Predictor©. FTF specializes in trends in the stock market, gold, inflation and bonds.   

In January of 2003, we spun-off InflationData.com to specialize in all forms of information about the nature of Inflation.

In 2009, we added ElliottWaveUniversity.com to help teach the principles of Elliott Wave analysis and in 2013, we began publishing OptioMoney.

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Here are my most recent posts

Monthly Inflation Jumps for March 2014

The current CPI for the month of March was 236.293 which resulted in monthly inflation being up 0.64% in the month of March causing the Annual inflation rate to rebound from 1.13% up to 1.51% nearly reaching January’s 1.58%. And the Moore Inflation Predictor’s inflation forecast is for another huge jump this month taking the inflation rate to over 2%.

In other news:

We are in the process of upgrading and redesigning the site in an effort to make it easier to use and as my webmaster says “more responsive” which means that if you have a tablet or even a smart phone you should be able to read it easier. If you are on a full sized screen and want to see what happens you can drag the side of your window smaller and watch as the site adjusts to the smaller screen size. It’s not perfect but is kind of cool to watch. I guess I’m getting old. Another new feature is our scrolling ticker bar at the top of the page which takes the place of our inflation box. This should give us a bit more space.  We have also rearranged the navigation and pull-down menus so we apologize to our long time visitors it may take a bit of getting used to but hopefully it will make navigation easier in the long run. And you may still find some old style pages here and there but we are working on it, so give us time…

Back to Inflation News:

The big gainers in inflation this month were Energy with the cost of gas going up 5.1% in a single month and Natural Gas up a whopping 7.1% for the month and 16.4% annually.  Other big gainers were food items in the category of “Meat, Poultry, Fish and Eggs” which was up 1.2% for the month, and Dairy products which were up 1%. Airfares were up 1.6% and hospital services were also up 0.5%.

Annual_Inflation_chart_sm Looking at the Annual Inflation rate chart we can see the jump in the inflation rate. (Click the chart to see the full article and a larger version of the chart). From this chart you can see the effects of Quantitative Easing in the orange shaded regions and that although QE1 and QE2 resulted in a rebound in inflation so far QE3 has had little or no effect. Although as we mentioned above the Moore Inflation Predictor is forecasting a rather large jump over the next two or three months.

 

The Misery Index

US_Misery_Index_Mar_2014The misery index is up with the official unemployment rate flat for the month at 6.7% but the inflation rate is up from 1.13% to 1.51% taking the misery index from 7.83% to 8.21% although some recent research indicates that unemployment should be more heavily weighted than inflation. The recent report called “Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness found that unemployment causes 1.7 times as much misery as inflation and so the misery index should actually be calculated by multiplying unemployment by 1.7 and then adding it to inflation. This additional weighting would indicate why this recent recession with low inflation but high unemployment has been harder than the numbers would indicate.

 

NYSE ROC

Last month we said, “The New York Rate of Change chart has generated a sell signal which we are taking seriously.” And in the month since, the market has been quite volatile showing some weakness, so caution is still advised.

NASDAQ ROC

Last month, NASDAQ was still in buy territory and we said, “but the most recent  peak is looking very scary. Caution is advised.” and this month it has generated a sell signal and the similarity in the chart pattern is eerily similar to the peak in 2008. Sell signals are rare, so we definitely pay attention and so we  are out of the market and playing it cautious.

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Is the Federal Reserve Right About Inflation?

The Federal Reserve

The Federal Reserve serves as the Central Bank of the United States, and whether you realize it or not, it plays an active role in the lives of every American. It makes decisions about monetary policy and interest rates that have a direct impact on the market and an indirect impact on everyone. The FED uses inflation targets to determine how much they can devalue (inflate) the currency. Many people believe that they created a massive money printing scheme cryptically called “Quantitative Easing“since QE1 converted almost worthless mortgage backed securities into currency.

The Fed regularly issues statements about how inflation isn’t really as bad as everyone says it is. [Read more...]

Annual Inflation Down in February

Current Inflation Commentary-

The U.S. Bureau of Labor Statistics has released the Annual Inflation rate today. For the year ending in February, inflation was 1.13% down roughly 1/3rd from 1.58% for the year ending in January.

Monthly inflation was relatively high at 0.37% in January and the same again in February. This is consistent with the historical trend of low inflation in the 4th quarter and high inflation in the first quarter of the year.

Inflation ChartClick for larger image

The Consumer Price Index came in at 234.781 in February which was  [Read more...]

What is the Misery Index?

The misery index was created by economists in an effort to quantify how bad the economy is based on cold hard numbers. In many ways, it can be argued that suffering is not quantifiable, after all how do you measure the pain associated with starvation, sickness, disease, homelessness, war, lawlessness and all the evils of society?  But in economic terms economist Arthur Okun developed a simple but brilliant method of determining how miserable people were economically.

The Misery Index and Unemployment

US Misery IndexThe first component of the misery index is unemployment. Okun reasoned that if a lot of people were unemployed, that would make the country as a whole feel poorer and so they would be less well off. Also a side effect of just knowing that the unemployment rate is increasing is an increase in fear that people might lose their own job as well and this will cause them to cut back on their spending of discretionary items and to save more “just in case”. As a result, more businesses will be hurting from the lack of spending and the misery will compound.

The Misery Index and Inflation

The second component of the misery index is inflation. Inflation is an increase in prices. The primary cause is an increase in the money supply “Printing Money” at a greater pace than the growth of the “GDP” i.e. Gross Domestic Product. If prices increase  more rapidly than salaries individuals will have to reduce their consumption resulting in [Read more...]

U.K. Historical Price Converter Added

UK price conversionThis month as a service for our friends in the U.K. we have added a U.K. Historical Price Converter. This handy little calculator will tell you the equivalent value of any prices from 1751 to the present.

It is based on the “Retail Prices Index” which was instituted in Great Britain in 1947 in an effort to determine how much the war was affecting prices. The data was later “backdated” to include prices back to 1751 by Jim O’Donoghue, Louise Goulding, and Grahame Allen in a paper entitled ‘Consumer Price Inflation Since 1750’.

In it they state that, their article presents:
a composite price index covering the period since 1750 which can be used for analysis of consumer price inflation, or the purchasing power of the pound, over long periods of time.”

The Data  is a Composite of Several Data Series

They created this composite price index by linking together data from a variety of different sources. For the period of 1947 to the current day they chose the retail prices index (RPI).

1870-1947

Prior to 1947 since there was no national index they used [Read more...]

Inflation was Up Slightly in January 2014

Current Inflation Commentary-

The U.S. Bureau of Labor Statistics has released the Annual Inflation rate today. For the year ending in January, inflation  was 1.58% up very slightly from 1.50% for the year ending in December 2013.

Annual inflation is made up of 12 monthly inflation components and although monthly inflation was virtually Zero for December 2013 and rose to 0.37% in January. This fits well with the historical trend of low inflation in the 4th quarter and high inflation in the first quarter of the year.

Annual Inflation Chart

The Consumer Price Index came in at 233.916 in January which was actually [Read more...]

Current Inflation Commentary for December 2013

Current Annual Inflation Commentary

Annual Inflation:

Annual inflation rose was 1.24% in November and rose to 1.50% in December.  Monthly inflation for December 2013 was -0.01 or virtually Zero.

Going by the Consumer Price Index which was 233.049 in December, 233.546 in October and 234.149 in September prices were “rolled back” to below June levels when they were 233.504 but greater than May when they were 232.945. Annual Inflation was 1.50% in spite of the FED buying $85 Billion a month in Bonds lending more credence to Robert Prechter’s Deflationary scenario. You can get Robert Prechter’s 90 page deflation survival guide free here.

Historically monthly inflation rates tend to be lower in the second half of the year and often are negative ( deflation) in the fourth quarter (October, November and December) of the year. As a matter of fact, in the months since January 1954 there have been 47 negative months in the July through December months. So it appears that the majority of inflation occurs in the first half of the year and then moderates for the second half. One possible explanation is that during the fourth quarter many stores hold massive sales (think Black Friday) to reduce inventory before year end.

See our full Annual Inflation Commentary and Chart for more information. You also may be interested in Complete list of monthly inflation rates since 1913 . See the Misery Index for the combined effect of Unemployment and Inflation. If you are wondering how to Calculate the Inflation Rate ? Or you can simply use our Inflation Calculator to do the calculations for you. For more Inflation Calculators we provide a variety of  tools.

 

What Causes Unemployment?

I recently received the following question about unemployment from a gentleman in Tanzania and I thought it was a good question and I would share the answer with you.

What Causes Unemployment?

I have been thinking on that situation of unemployment. Why does the rate of unemployment increase day after day? Does it mean that people have decreased the rate of thinking on creating jobs or there is any other reason? ~ Lioba from Dar-es-Salaam Tanzania.

What causes Unemployment?Here is my Response:

Lioba, That is a very good question. Unemployment is a function of how efficient the marketplace is. In a purely agricultural economy, there is no unemployment, everyone has to work, if they don’t work they don’t eat. So everyone including children work. But as systems become more complex there is more opportunity for “friction” or market inefficiencies. Theoretically, an efficient market would support every person who could produce more than he cost. In other words, if someone could be paid $10 but produced $12 worth of goods, any business would be happy to hire them. On the other hand, if the government sets a minimum wage of $12 the market is no longer efficient and anyone who cannot produce at least $14 worth of goods would not be hired. Therefore after an increase in the minimum wage, those producing $10, $11 and $12 worth of goods would now be uneconomical for the employer so they would be fired.

So the first cause of unemployment is minimum wage laws.

But there are other inefficiencies as well. If the government [Read more...]

BLS Recovering From Shutdown

The government shutdown is over and the U.S. Bureau of Labor Statistics is recovering from their unscheduled vacation. The United States federal government shutdown of 2013, lasted from October 1 to 17, 2013. Unemployment data for the month of September was due to be released on October 4th i.e. four working days into the shutdown.

Capitol-SenateSo the employment data is now scheduled for release on October 22nd. And the Consumer Price Index which is used to calculate the September inflation rate, which was scheduled for release on October 16th is now scheduled for release on October 30th. Although the shutdown inconvenienced vacationers wanting to see National Monuments and the National Zoo, did it really save any money? If past shutdowns are any indicator… probably not. Government employees will probably…  Read More

A Reader Question About IRAs and Gold Stocks

I recently got an excellent question from a longtime reader named Bob and I thought I would pass along some of what I told him. Bob has invested a good portion of his IRA in shares of Randgold Resources. The NASDAQ symbol is GOLD. Randgold Resources is a gold mining business based primarily in Mali. Its headquarters are in Jersey, Channel Islands, it is listed on the London and the NASDAQ stock exchanges. Bob has been accumulating shares of Randgold because he feels that as a mining company it is a productive asset rather than physical gold (or paper derivatives of gold) which earns no interest (or dividends).

RandGold Chart1Randgold peaked at around $127 back in October 2012 and has been trending down ever since. During that time Bob has been averaging his costs down with a current average price of $92.00. When Bob wrote, Randgold was near its recent lows of $66. and  he was wondering if I thought he should cut his losses or hold on. Here’s my response: [Read more...]