Category: Inflation

Current prices at CVS and Walgreens

by philg

Our AirBnB didn’t come with shampoo or soap, so we hit the Walgreens in Gatlinburg, Tennessee. All of the travel items that I expected to cost $0.99 were $2.99 or more. Inflation? It then occurred to me that I had seen these prices back around 2018. The current Walgreens/CVS prices for stuff are the same as one would have paid in a resort hotel’s lobby boutique in 2018.

Given that nearly every drugstore seems to be either a Walgreens or a CVS, and there has also been a fair amount of consolidation among manufacturers/brands, could lack of competition also be a factor in why toothpaste, shampoo, and other basics are costly? (Walmart’s store brand equivalents are only about half the price compared to the name brands at CVS/Walgreens, right? That tells us it isn’t about the materials cost or the dreaded “supply chain”.)

Loosely related, a Rite Aid in downtown San Diego (June 2022). The precious deodorant is locked down and alarmed.

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Cost of luxury high-rise construction in Florida

by philg

A neighbor is a refugee from the Land of Lockdown (Illinois) and is a partner in a real estate development company. “We decided to stop doing projects in Chicago because so many people were leaving,” he explained. He’s finishing a sold-out project of $4 million Florida beachfront condos that will be ready for occupancy early in 2023. It is on the site of a former hotel. What does construction cost right now for a luxury concrete high-rise? “It is $450 per square foot,” he responded. Three years ago? “Mid-$200s.”

Here’s a new one near us, which was planned starting at $4 million per unit, announced at $6-10 million, and has apparently been selling for up to $18 million for a 5,000-square-foot unit ($3,600 per square foot): SeaGlass, Jupiter Island (it is not in Jupiter, but in the next town up: Tequesta).

Some friends in northeast Florida will be moving into their new 3BR house soon. They bought it 18 months ago, which is when the developer began work on design and construction (theirs is a tweak to a standard design within the development). It will cost just under $1 million and is a 20-minute drive to the beach. The developer complains that, due to inflation, this particular house will actually be unprofitable.

Related:

  • City rebuilding costs from the Halifax explosion, from 2019, in which I describe an affordable apartment construction project in Boston. Even with free real estate, the construction cost of each unit ($555,555 per) rendered them unaffordable, without taxpayer subsidies, to a dual-income couple in which both of the partners (who will, one hopes, come in a rainbow of gender IDs) worked full time at the median Maskachusetts wage. Presumably that construction cost has now also doubled, but the median wage won’t have followed.
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Bidenflation for HVAC

by philg

I just ordered a COVID-fighting air filter for the Carrier Infinity system that soldiers on in the War against COVID-19 in Cambridge, Massachusetts while we live in blissful freedom from anyone complaining about Long COVID (“Karen’s Disease”?), Short COVID, or Other COVID here in Florida. Pre-Biden, the filter was $86.51 (March 2020). In July 2022, it is $106.53:

That’s inflation of 23 percent over two years. What about the labor to slide it in? $195 per hour from the one company that didn’t simply refuse to work.

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How long before the typical American house price will be the cost of Diet Coke?

by philg

The median sales price of a house is about $400,000 (WSJ) currently. We can check inflation in the New York Times:

As with any NYT article, the above contains plenty of lies. The biggest lie is graphing the official government inflation data going back to 1965 without noting that the method of calculating the inflation rate has dramatically changed over time (to make it appear lower, e.g., by excluding the purchase price of houses and actual mortgage and property tax costs incurred). The next lie is that the current inflation rate is 9.1 percent. The actual current rate, according to the same government data release purportedly covered by the NYT, is 1.3 percent per month (CNBC), which works out to 16.7 percent per year (1.013 raised to the 12th power).

At the actual current rate of inflation, how long before $400,000 is the price of a Diet Coke? Let’s assume that we’re getting our refreshing sugar-free soda in a restaurant for $5 (including obligatory tip). Within one human’s COVID-19-shortened lifespan of 73 years, therefore, the $400,000 price of a house will become the price of a Diet Coke. From Wolfram Alpha:

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What are you paying for a haircut after Bidenflation?

by philg

A basic haircut at a barber shop in downtown San Diego was $40 plus tip earlier this month. What are you paying?

Based on limited experience, haircuts in the West are much more expensive than haircuts back east. It was $36 in Denver before coronapanic.

“Want to Understand Inflation? Check the Price of Your Haircut” (WSJ, June 22):

In San Francisco, Shorty Maniace raised prices at J.P. Kempt Barber Social from $55 to $65 in May and is considering another increase. When the barbershop opened in 2013, a standard cut was $45. He says people regularly walk out of the salon in a huff after hearing the price.

How do all of the San Franciscans living in tents afford haircuts? sfserviceguide.org:

YWAM SF offers free haircuts to homeless or low-income people who need it or are going to have a job interview.

I’m a little out of touch because we’ve had a micro barbershop running here at home starting in 2018 for the kids and then in 2020 for everyone except the barber herself.

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Inflation in New York City is only 2 percent

by philg

“Looming Rent Increase of Up to 9 Percent Tests Adams’s Housing Priorities” (New York Times, May 4, 2022):

The powerful Rent Guidelines Board, which the mayor controls, will take a preliminary vote on Thursday on proposed rent increases of 2.7 to 4.5 percent on one-year leases and 4.3 to 9 percent on two-year leases. A final vote is expected in June.

The annual decision by the Rent Guidelines Board, which affects more than two million residents who live in buildings built before 1974 that have six or more units, always ignites passionate debate and an intense lobbying effort from tenants and landlords.

Note that the headline is kind of a lie, implying that rents might be going up by 9 percent in one year (the standard period to look at).

The good news is that, if you are one of the two million people who live in an apartment whose rent is set by the central planners, your personal inflation rate, at least for housing, could have been as low as 2.7 percent. How does this compare to the official government CPI? The word “inflation” does not appear in the NYT article (see “Team Transitory”).

Just a day later, the horror of 2.7 percent inflation was averted. “Panel Backs Rent Increases for More Than 2 Million New Yorkers” (NYT, May 5, 2022):

The New York City panel charged with regulating rents across nearly one million rent-stabilized homes voted on Thursday to support the largest increases in almost a decade.

The move, which must be formally approved next month, would raise rents on one-year leases by 2 to 4 percent, and on two-year leases by 4 to 6 percent. The increases are another reminder of the affordability crisis the city faces as it emerges from the pandemic.

Related:

  • “‘They’ll have to carry me out in a box’: inside the apartments of the luckiest renters” (Guardian, February 2022): Growing up on the Upper West Side, Hattie Kolp, like any kid, didn’t think much about the apartment she and her family moved into in 2002, but the roughly 1,500-square-foot two-bedroom has become the center of the 30-year-old’s life as an influencer. She shares photos of the apartment’s details that hint at the building’s 1890 construction – like an original butler’s pantry and ornate fireplaces – with her 90,000 TikTok followers and 52,000 followers on Instagram. … “My parents knew this was not their forever home, so they didn’t really care to do any projects,” says Kolp, who assumed the lease from her parents in 2018. … For New Yorkers who are acutely aware of how much a place like this should cost, Kolp’s rent – $1,300 per month – is jaw-dropping. Plus, it’s rent-stabilized – meaning it can only increase in rent modestly once a year. There are only 1m such units in New York City.
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How is Berkshire Hathaway an example of investment genius if it holds cash while inflation rages?

by philg

Berkshire Hathaway has been holding roughly $140 billion during a period of raging inflation (source):

This is about 20 percent of the company’s market cap (about $700 billion). The standard explanation for this is that it gives Berkshire Hathaway the ability to pounce on great deals, but Elon Musk is managing to buy Twitter without having had to let inflation erode a substantial percentage of his portfolio for 2+ years. The company’s annualized operating earnings right now are about $22 billion (CNBC). Inflation has been 8.5 percent. So the company is losing $12 billion to inflation annually, more than half as much as its headline “earnings”.

Admittedly the S&P 500 is flat compared to a year ago as well, so if Warren Buffett had done the obvious thing of parking money in the S&P it wouldn’t have done significantly better. Gold didn’t rise smoothly as the dollar fell in purchasing power. Bitcoin is about 32 percent lower today in nominal dollars than it was a year ago. But isn’t there something better to do with all $140 billion rather than leave it for exposed to the depredations of the government’s money-printing operation?

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13 percent raise for Amazonians

by philg

A friend works as a “DevOps Engineer” at Amazon in Maskachusetts. She just got a 13 percent raise, not performance-based, to compensate her for inflation and prevent her from quitting.

State-sponsored NPR today says that the inflation rate is just 8.5 percent: “U.S. inflation rises 8.5 percent, sharpest increase since 1981”. Is that number consistent with our Lived Experience?

What if you want to buy a replacement rebuilt engine for your little airplane? There was a 14 percent price increase in July 2021. There was an additional 15 percent price increase in March 2022 (Rotorcorp). So prices are up 31 percent compared to a year ago? Not if we hold delivery time constant. The Rotorcorp article:

Perhaps the most challenging issue out of Lycoming is not just the spiraling prices, but the extended and growing lead times. At time of this writing, Rotorcorp is still waiting on Cylinder kit orders placed in July of 2021 and has had lead times “bumped” numerous times to in excess of 12 months for some parts. Engines are now in excess of 8 months.

Rotorcorp is responding with increased rolling inventory replenishment orders to maintain critical spares stock to support our customers, but we are HIGHLY encouraging customers approaching 2200 hour service, or needing engine overhaul/replacement to place their cylinder and engine orders up to 9 months ahead of anticipated delivery.

So the apples-to-apples price might be 50 percent higher (you’d have to buy out someone else’s order to get an engine within a few weeks as was previously standard).

Let’s try not to ask about the rebuild price on the engine in this P-40 (from Sun ‘n Fun 2022):

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Is a non-indexed-to-inflation capital gains tax Constitutional?

by philg

We’ve had runaway government borrowing and spending, plus money-printing by the Fed, for the past two years. Now we have runaway inflation, which has led to some eye-popping asset prices and a government eager to collect a share of these assets even before they’re sold (“unrealized gains”). See “Biden to Include Minimum Tax on Billionaires in Budget Proposal” (NYT, 3/26/2022):

The tax would require that American households worth more than $100 million pay a rate of at least 20 percent on their income as well as unrealized gains in the value of their liquid assets, such as stocks and bonds, which can accumulate value for years but are taxed only when they are sold.

Legal questions about such a tax also abound, particularly whether a tax on wealth — rather than income — is constitutional. If Congress approves a wealth tax, there has been speculation that wealthy Americans could mount a legal challenge to the effort.

Due to the threshold of $100 million in assets, I’m a huge supporter of this bill! (though I’m concerned that it won’t be long before either the threshold is reduced or $100 million is the price of a Diet Coke). But it makes me wonder about whether the whole framework of capital gains is Constitutional.

Let’s ignore the mechanics of taxing someone on gains that exist only on paper and just focus on traditional capital gains taxes on realized gains (i.e., money received after an asset sale). The government is mostly in charge of what happens to the value of money because the government can decide interest rates, money printing rates, and how much the government will borrow and spend. The Sixteenth Amendment gives the government the power to tax incomes:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

But it isn’t income when an asset goes up hugely in nominal dollars because dollars have been devalued by the government’s actions. This has been mostly ignored in U.S. history because mostly inflation hasn’t been too extreme (though, of course, for long-held assets, the cumulative effect could still be dramatic). Consider a person who hits 70 and sells some stocks purchased in 1972 to fund retirement. Let’s suppose that these shares were purchased for $10,000 in 1972 and sold for $65,000 today. According to the government’s own CPI calculator, the investor suffered a loss, not a gain, on these shares (no income). Yet, if he/she/ze/they lives in California, more than $20,000 in tax could be owed (20 percent federal long-term capital gains, 3.8 percent Obamacare federal tax, 13.3 percent state tax).

How has the current system persisted for so long without a serious Constitutional challenge?

Related:

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