Let me now shine a light on a second issue with the way we measure inflation. As you can see from the next chart provided by Bloomberg and RSM, the biggest weighting in CPI is something known as owner’s equivalent rent, 0ER, which makes up more than 23% of the index. Most people have never heard of 0ER.

The Bureau of Labor Statistics gets this number from doing a monthly phone survey. Respondents are asked if they rent or own their home. Renters are asked how much they pay each month. Homeowners are asked what they would charge somebody to live in their home if it were empty and unfurnished. This makes this number completely subjective. How many of you have thought what you would charge to let somebody rent your home? And how many of you have thought about when/if you would raise or lower rent on a regular basis? The answer to this question composes nearly a quarter of what we think of as inflation that is reported monthly by BLS.

To further show how much this number is disconnected from what is going on in the real world, please review our final chart of the day. It shows that rents have risen by more than 5%, on a year-over-year basis, according to Zillow. However, owner’s equivalent rent only went up 2.6%...nearly 3% less. This tells us that the largest component of CPI is being under reported by nearly 3% on a year over the last year.

We are hearing anecdotal stories from clients every week about how rising costs for many items, as well as supply chain disruptions on everything from technology devices, to home appliances, to especially automobiles, is impacting their lives. We also know that the Producer Price Index, PPI, rose to a record high last month. This tells us that producer prices, which eventually feed into consumer prices, are still running very hot.

We are not saying that there is anything unethical or nefarious about the way the government reports these numbers. We simply want you to know that in a very large and complex economy, there are substantial issues and distortions in the reporting of data. We want you to be informed as you read and hear about these issues in the media and online.

Keeping you informed is part of our mission as we continue “Moving Life Forward” together. Please continue to share your stories and let us know if you have questions. We are here for you.

The 2021 ranking of the Forbes’ Best–in–State Wealth Advisors¹ list was developed by SHOOK Research and is based on in–person and telephone due–diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, approximately 32,725 advisors were considered, and 5,000 (approximately 15.3 percent of candidates) were recognized. The full methodology² that Forbes developed in partnership with SHOOK Research is available at www.forbes.com.

¹ This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

² Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.