Adam Patinkin

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.

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 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.

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.

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?

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%.

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

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.

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.

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.

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.