Chain-Weighted CPI

Categories: Econ, Index Funds, Banking

The Chain Weighted CPI (Consumer Price Index) is a calculated measurement for gauging inflation. Unlike the standard CPI, which measures consumer spending within a specifically designated basket of consumables, commodities, etc. which people purchase, the Chain Weighted CPI takes into account changes in spending habits which may affect spending choices that may not be presumably inflationary.

Changes in prices or selections of certain goods that can be substituted based on new data concerning health, technological breakthroughs, and cultural trends are factored in to generate a more accurate picture of consumer spending that can indicate if inflation is truly becoming manifest.

For example, increased use of computers and internet shopping at virtual stores such as Amazon.com can result in lower retail spending at brick and mortar stores, but is not necessarily an indication of reduced consumer spending. Increases in beef prices due to disease or reduced herd sizes could make families choose greater sized purchases of chicken or pork as substitutes for protein, but would not necessarily reflect inflation.

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Finance: What is marginal cost?41 Views

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Finance allah shmoop what is marginal cost All right let's

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start with profits No different profits Gross operating net those

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kind of profits Those are the big three for now

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Anyway if you don't recall the income statement that gave

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you those margins well here it is in all its

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glory Our awesome lemonade stand So from a resource is

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allocation perspective margins drive everything you ever read Animal farm

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Well if you look in the very fine print you'll

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see that it really says high margins good higher margins

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better But margins are a contextual thing They're evaluated on

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a relative basis Basically the more of a commodity Something

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is generally speaking the more rivalrous the industry there in

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meaning tons and tons of sellers all competing on price

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for the same product and thus lower margins for that

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highly competitive industry Think about the very mature in declining

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paper in pulp industry long history tons of competitors They

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all sell the same old dead tree product There's almost

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no differentiation between one seller or another of paper and

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pulp And they're filled with unions Yeah way low margin

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world less and less demand for paper and paul peach

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Year is everything moves online Polluters mostly overseas have a

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structural advantage over non polluters because it's cheaper to make

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paper pulp when you could just pollute dump everything in

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the river right Well in the us where houser is

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the paper and pulp gorilla And in a great year

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this very commoditized company filled with union workers has only

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ten ish percent margins where houser sells a ton of

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pulp for some three grand or so which cost it

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just two grand and change to manufacture But then if

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you add in operating costs like shipping union pension funds

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senior management lawyers rent and more lawyers will even its

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scale that three grand of revenues from a ton of

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pulps sold cost warehouses something well over twenty five hundred

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bucks So that pretax they only make five hundred box

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or less from every three grand of revenues right that

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be their operating margin there Well compare warehouses with google's

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search business Google owns the world in the search category

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with over eighty percent of all searches going to its

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servers Essentially no riel competitors today Sorry microsoft Just keeping

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it real Google makes money by selling virtual real estate

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Or cliques and views a typical click on ah highly

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big keyword like taxes help or mesothelioma Ambulance chasing lawyers

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is something like fifty cents per click or more Well

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google's marginal cost for that click Well not a lot

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the electricity to serve the page but well that's about

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it Call it a penny So google search business alone

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is like a ninety percent plus gross margin kind of

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business Pretax They have almost no marginal cost of goods

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sold Really amazing business way different from twenty five hundred

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dollars to sell three grand worth of pulp Google has

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no cost of shipping and a small handful of highly

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paid engineers a call in a few hundred of them

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who actually matter to the process today Well they created

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a mathematical algorithm that truly scales meaning it gets bigger

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and more profitable The bigger it grows well the marginal

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additional cost of one more click to google is almost

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nothing and it's a vast contrast to that paper and

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pulp business where yet more forests have to be planted

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more lumberjacks need to be hired and then probably injured

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More trees need to be killed and shift and chemically

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altered with bleach and on and on and on so

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relative to its competitors wear hauser might be doing great

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with ten percent plus margins But the fact is the

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paper and pulp business is a lousy industry a lousy

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business when compared with the search industry Who's n plus

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one thor Additional units sold Cost google almost nothing The

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basic idea is that you have to understand margin in

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the context of an industry and in the context of

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an economic climate that could be good bad and or 00:04:09.298 --> [endTime] ugly

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