Adam Patinkin
speaker
64 appearances
1 recordings
1 series
first heard Apr 2025
last heard Apr 2025
Adam Patinkin’s voice in public audio — every appearance, attributed to the second.
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You want to make sure that you use your team and the resources that you have to really do your best to understand How, you know, what the facts are. And ultimately, when you think about investing, the biggest mistakes that people tend to make in investing is when they allow, for example, their politics. They say, look, this guy got elected or that guy didn't get elected.
And therefore, I'm going to sell all my stocks or I'm going to buy all my stocks. That's a very bad way to approach investing. What you really want to do is look at the facts. be apolitical, look at the evidence, and then make your decisions.
And so when we were thinking about that inflation and really doing the deep dive into it, one of the things that we did was we built a model of CPI and how it works. And we found that the CPI calculation is kind of a mess. And there's all these disjointed things in it that you really have to dig in and do your work to understand. maybe just a couple of them to share.
So when you think about how the CPI is calculated, a lot of the categories are lagged. It's not a real-time measure. There's a lot of categories in CPI that are lagged by a year, two years, three years. So it's not a real-time measure of prices. Another issue is some of the categories are just blank.
There's one category called household operations, which is about 1% of CPI, has printed no reading in 15 of the last 18 months. That's crazy, right? But it's in there with CPI. And let me give you a third one. So Scott, how much do you think health insurance costs are up over the last five years, if you had to guess?
Yeah, I mean, I think you're probably right, but let me tell you what the CPI says. The CPI says health insurance costs over the last five years are down by 15%.
down by 15 percent and that's crazy that doesn't match any of our experience right and the reason is because they calculate it by looking at the retained earnings of the u.s health insurance industry based on uh data from a trade association and so when you look at all of this you got to really understand the model to get a view as to where inflation is and ultimately kind of here's the punch line it's that when you look at core inflation in the u.s and how it's calculated 45 of it is shelter
It's essentially your cost to be in your home. And it's rental costs. It's not the cost of a transaction. It's rental costs. And when you look at it, it's on a big lag. This rental costs are on a big lag, you know, a multi-year lag because it's in-force pricing, not current pricing.
And so if you look at data sets that are real time from Zillow, from apartment list, they show that rental prices are actually down slightly year over year. Apartment list is negative 0.4% year over year. but CPI is still showing it up over 4%. It was up over 8% at one point, but now it's up over 4%. It's coming down very rapidly. And I find it very hard for inflation to get out of control.
If you have your biggest input, shelter, 45% of core CPI, where it's catching down, it is catching towards that 0% or negative 0.4%, and right now it's sitting at 4%. So that's going to be a weight on inflation going forward.
Yeah, so if you look at the tariffs, just to size it, the U.S. economy is $30 trillion in GDP. Imports are about $3.5 trillion. Exports are $2.3 trillion, so just about 7.5% of GDP. These aren't big numbers. Canada exports are 25% of their GDP, right? So this is much more meaningful to other countries than it is for the U.S.
And then when you look at the tariffs that we have, so again, remember, it's 12% of GDP is inputs. The tariffs that were announced yesterday, they don't apply to Canada and Mexico, two of our three biggest trading partners that represent a third of our imports. They exempted pharmaceuticals, semiconductors, lumber, energy. steel, aluminum, copper, gold, like all these categories are exempted.
And so ultimately, what you're talking about is maybe a mid single digit percentage of GDP is even affected by these tariffs. It's a relatively small number in the grand scheme of things. And then I'll just say one thing to just bring it back to chicken. I've studied the chicken industry for a long time and followed it. And I remember, Russia was always a big importer of chicken from the US.
And every 12 or 18 months, there would be some diplomatic issue between the US and Russia. And Russia would pause its imports of chicken for some made-up reason, and the chicken markets would go haywire for a couple of weeks.
And then everybody would realize, wait a second, the amount of people eating chicken hasn't changed, the number of people producing chicken hasn't changed, and markets adapt, humans adapt, and we would start sending our chicken instead of directly to Russia, it would be sent to Hong Kong and relabeled, and it would end up in Russia anyways. People find ways around these tariff barriers.
And after a couple of weeks, it would settle down and the chicken markets would settle down. And we have many other examples of this, you know, washing machines in the first Trump administration in 2018 to 2020, the same thing happened. And so ultimately, like, yes, in the very short term, could there be additional uncertainty that could affect the economy? Of course. But I think that tariffs
over time, you know, you just, people adapt, businesses adapt, we figure out our way around it. And maybe a good way to end it, I just want to, I pulled this quote this morning. One of my favorite people who I follow on supply chains and logistics in the US is a guy named Craig Fuller.
And he tweeted this morning that it's far easier and faster to move a manufacturing supply chain to another country than it was 100 years ago. Things will normalize much faster than most people expect. Supply chain pros that have been paying attention have been making plans for an alternative to global sourcing for the past few years. And I think that's right, Scott.
I think that tariffs obviously capture a lot of headlines and will add to uncertainty, no doubt. But ultimately, in the long run, I think that we'll figure it out.
Well, I think, I'm not sure if you knew this, but my very first job was working at Wrigley Field as a seat vendor walking up and down the aisles selling peanuts and hot dogs, so I think that you will appreciate that I am a dive hard Cubs fan, and that's for sure where my allegiances lie. In terms of the Bears, invest in the trenches, man.
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