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Alternative Market Briefing

Comment: PIMCO’s Bill Gross expresses concern for inaccurate US inflation reporting, issues call to action

Monday, May 26, 2008

Kirsten Bischoff, Opalesque New York: One only needs to read a few paragraphs of Bill Gross’ Investment Outlook to feel the depth of his frustration about the current state of the United States. The Chief Investment officer of PIMCO writes his monthly outlook for June 2008 with no holds barred about the misplaced financial and moral priorities of his fellow citizens.

Citing the nation’s current obsessions with celebrity activity and the complete and utter disregard for such issues as the deteriorating quality of healthcare, or lack of alternative energy sources, Gross likens this time in America with the time immediately prior to the fall of Rome. And, if pointing out our moral shortcomings isn’t enough to spur us to action Gross then delves into the dismal facts of our finances.

Inaccurate inflation computing Gross points out how the US has changed its computing of the rate of inflation over the past few years. He cites how three specific changes have made our inflation seem to increase at a slower pace than the rest of the world.

  • Hedonic quality adjustments: “as your new model MAC or PC was going up in price by a hundred bucks or so, it was actually going down according to CPI calculations because it was twice as powerful”
  • Calculations of housing costs via owner’s equivalent rent: “It was claimed that a measure based on what an owner might get for renting his hous......................

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