52%…
That’s how many Americans said the U.S. is too expensive to live in. The number comes from a USA Today/Suffolk poll.
Now, if we listen to the government’s official narrative, we might believe that inflation is cooling. And there’s some truth to that.
But if you’re like most Americans in that USA Today poll, you know something isn’t right.
I’m here to tell you your suspicions are correct…
High prices are actually a lot “stickier” than the government will have you believe. And if you’re finding it harder to make ends meet, you’re not alone.
In fact, 72% of middle-income families say their earnings are falling behind their cost of living. That’s up from 68% a year ago, based on a report by Primerica.
The good news is, there are steps you can take today to protect your buying power.
Let me explain…
The Cleveland Fed
I recently put my boots on the ground across the American Midwest.
I stopped in half a dozen towns and cities – including Cleveland, Ohio.
The city is home to the Federal Reserve Bank of Cleveland.
Nomi visits the Federal Reserve Bank of Cleveland, built in 1923
This Fed is in a gorgeous, fortress-like building dating back to 1923. And it contains the largest bank vault door in the world.
But as much as I love history, I wasn’t there for a tour.
It’s the research that goes on inside that building that drew me to travel all the way there from my home in Ojai, California – 2,400 miles away.
Beyond the Headlines
Wall Street uses Cleveland’s research to look beyond the headlines – and to understand real trends.
The Cleveland Fed serves the Fourth Federal Reserve District. This district is home to 17 million people. It covers a significant portion of America’s Rust Belt. And besides Cleveland, it represents big cities like Pittsburgh and Cincinnati.
The Cleveland Fed regulates the banks in its territory. Some of them have been around since the 1800s – like the National City Bank in the photo below, now owned by PNC.
Inside the National City Bank, the oldest bank in Cleveland
The Cleveland Fed also supports electronic payments to the financial institutions in its territory.
But what makes it so important to Wall Street is the bank’s inflation research. The Cleveland Fed is home to the Center for Inflation Research.
The Center publishes a monthly data series on alternative measures of inflation. This series digs beneath aggregate and generalized inflation figures.
As a former quant manager on Wall Street, I can tell you this kind of data is crucial.
See, Wall Street’s most important asset is information.
Paul Tudor Jones, one of the most celebrated hedge fund managers ever, put it best. He said the secret to success is to have an “undying and unquenchable thirst for information and knowledge.”
I couldn’t agree more.
This brings me back to the Cleveland Fed… and the key role its inflation research plays right now.
A More Accurate Inflation Reading
The Cleveland Fed examines an important metric called the median CPI.
You’re likely familiar with the headline Consumer Price Index (CPI) numbers reported in the media.
But the median CPI is different. It measures the one-month inflation rate. It’s often more accurate at forecasting inflation than the more common CPI.
That’s because it ignores short-term volatility.
Here’s what that means…
Let’s say big storms hit the Gulf of Mexico and Texas, and oil prices spike as a result.
Oil prices are a big part of the headline CPI numbers. But the median CPI won’t let those temporary price spikes have too great an impact on its results.
You can see how the median CPI stacks up compared to the headline CPI numbers in this chart…
At the last reading, headline CPI came in at 4.05% for May 2023. But the median CPI reading came in at 6.74%.
In April, headline CPI came in at 4.93%. But the median CPI stood at 6.98%.
Here’s what this means…
Yes, inflation might be cooling. After all, the Federal Reserve has been raising interest rates at the fastest pace since the ‘80s.
But the median CPI shows that inflation is still way higher than the Fed’s target rate of 2%. It also shows that Americans are feeling price squeezes much steeper than the official 4% rate.
What This Means for Wall Street and Your Money
The Cleveland Fed produces one more metric you should pay attention to.
It’s called “inflation nowcasting.”
And it predicts inflationary measures before all the official data is released. It provides estimates in real time for businesses and policymakers to use.
And it’s free for anyone to track on its website.
All these factors are ways to not only measure inflation but to understand coming trends.
For everyday people, these numbers can drive personal and business decisions.
As for Wall Street?
Watching data from places like the Cleveland Fed helps them avoid certain sectors at times that are too volatile.
And it helps them understand the real trends… without getting too lost or caught up in the headlines.
Savvy investors can do the same.
Regards,
 |
Nomi Prins
Editor, Inside Wall Street with Nomi Prins
P.S. I learned an important lesson during my 15 years on Wall Street… That is, the smart money always looks beyond the headlines. And right now, there’s a massive story that the mainstream media is missing.
By the end of this month, the Fed is set to unleash the foundation of an all-digital dollar. I believe it will mark the end of our money as we know it.
The good news is, I found one asset that will help you position yourself on the right side of this historic shift.
I put the details in a new video presentation I just released. I’ll also show you my No. 1 gold pick for 2023 and beyond… and three “unprintable” plays to take advantage of the Fed’s next major distortion of the financial system. Watch it here.