WOW: Government ADMITS it Rigs Inflation Data (Leaked Email)

wow I think we all expected to believe

that CPI data was rigged but I don't

think we thought on a month over Monon

basis the Bureau of Labor Statistics the

government agency responsible for

putting together us consumer prices also

known as the CP Li index I don't think

that they would usually be so blatant as

to send an email and basically go hey um

for everybody looking for the weird

thing that happened in January you're

right we screwed up uh and oh well maybe

we'll uh we'll we'll make some changes

but uh for now that's all we got for you

yeah that's literally what just happened

so let's explain this I'm going to show

you some screenshots here this is a big

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so let's get into this so the big issue

that they had here had to do with us CPI

being heavily tilted towards what's

known as owner's equivalent rent and a

large adjustment that occurred between

December and January now let me first

explain a little bit about how stupid

this thing is owner's equivalent rent is

basically a measure of rent that lags by

about 12 to 18 months the reason is you

basically got bureaucrats going

hey owner what do you think you can rent

your house out for oh well my neighbors

renting their house out for

$2,800 great so an example you know a

neighbor with a similar house whatever

that's just a rudimentary example and

purposfully S oversimplifying this so

let's say the rent was $2,800 then we

get a bunch of inflation that happened

after the insane money printing we did

of the 20120 2021 era well so you call

the owner in 2021 hey what's your rent I

don't know still 2,800 bucks it really

takes about a year for them to be like

man they just ran their place for $3,500

over there that's a 25% increase boom

that's where you get the skyrocketing

lag effect of of inflation basically

really hitting Us by storm in the summer

like June July of 2022 and then

obviously throughout 2022 and 2023 now

let's say that today the market rent has

actually gone from 3500 down to

3395 well does that owner go hey is that

what's the market right now you know

what's going on what's the market oh um

I don't know it's still rented for $3500

the next door neighbor so what good does

that do you is that tenant going to pick

up and move to find something else to

save $100 a month maybe but maybe not

because it's probably going to cost more

than $1,200 their annual savings to

actually pack their bags and move it's a

pain in the butt so now you get people

locked in at these higher rents and it

is really really sticky to get rents to

come down a lot of landlords instead of

actually lowering rents will just not

raise rents so when rents go up they

raise rents like crazy when rents fall

they just stop raising rents so you kind

of get stuck now that's not to say that

isn't the actual cost of what people

have to pay in rent it is but here's the

problem it's not the actual Market rent

you've got this skew built in the skew

between what somebody's currently paying

and what somebody should be paying this

is called gain or loss to lease that is

just a fancy phrase you don't really

have to know what that means but the

point is currently we're seeing a lot of

influx of Rental Supply at house Haack

for example every single Market we're in

and we're competing for properties in

whether they're single family or multif

family we're going in with the

assumption that what rents were 6 months

ago we're going to discount so we're

underwriting deals at a lower rent

because we expect to have to lower rents

to be able to maintain full occupancy we

like buildings operating at 100%

occupancy anyway this has been one of

the reasons we've seen such a Divergence

this is one of the reasons which you

could see this chart at e hack.com of

course this is one of the reasons you

can see that owner's equivalent rents in

January skyrocketed here for no reason

and they've kind of been sticky around

this four to five uh you know 40 or 50

basis Point per month levels been sticky

around here and actually increasing and

the real problem with this is that rents

are actually lowering but what did the

good old BLS just tell us well the BLS

just released this email they said the

following good afternoon super users the

weights for single family detached homes

increased materially from December to

January 2024 oh wait wait a minute

multifam doesn't have the 30-year fixed

rate mortgage lock in effect so that

actually means you have less price

Discovery in single family than in

multif family in English prices for

multif family rents are going to fall

more quickly than that of single family

rents because of that disparity we know

we deal with both at house hack okay

well that's a little problematic because

if now you're saying the one that's not

responding to the market you're going to

weigh more heavily well you're just

skewing the data you're literally

messing up the data and what's their

excuse for this all of you searching for

the source of the Divergence have found

it no additional information related to

this question will be disseminated we do

not do diagnostic analysis of Micro Data

in other words the Bureau of Labor

Statistics is straight up fullon

Cavalier here hey um yeah we don't

really have a reason why we just

increased or tweaked weaked up the data

for single family homes I don't even

know what would possess somebody to make

an adjustment in the waiting between

singles and multi especially when

singles should be weighted lower because

you're getting less of a market read

because there's less turnover in single

family it doesn't even freaking make

sense but all the explanation we're

going to get As Americans whose

livelihoods are affected by inflation

through higher interest rates credit

card rates car rates loan rates you name

it business loans what a freaking pain

in the freaking ass okay all of us who

have to deal with this crap this is all

we get yeah um we changed it and we're

not really going to speculate on why

okay how about actually trying to do the

job of an economist and actually look at

what's actually going on in markets how

about that here's Bank of America

shelter index they show you where

owner's equivalent rent is up here the

red line and for this one you have to

use the uh right side so you're sitting

at what is that about 6ish per over

there on the owner's equivalent rent

right side uh and then we pull over to

the left side over here for the others

the highest read is about Zillow sitting

about maybe

4.2% but if you actually look at

apartment list you're down at closer for

apartment list boy at apartment list

you're actually sitting at about -1% and

then when you look at new tenant repeat

index year-over-year you're at

-5%

this is a massive massive disparity in

what the Bureau of Labor Statistics is

using for a measure of inflation and

reality this is insane now what are the

implications of this okay well this

creates some problems first of all

somebody else at the Bureau of Labor

Statistics suggests that they're going

to look into the data they may have some

additional communication in the future

that's because a lot of people are

pissed off about this sort of rigging

that's going on here it's it's quite

frankly disgusting uh but beyond that

the question is is it good news if

single family gets weighed higher going

forward no it's bad it literally means

even if inflation is not staying higher

for longer it's going to seem like it's

staying higher for longer so it's bad

it's fugazi it's BS now we get pce data

but pce data which the FED prefers is

like based heavily on the CPI reads so

it's a complete disaster now another

thing you could do is you could jump on

over here and understand what happened

in January so we got a core inflation

read in January of

39% that was made up by 2% housing

heavily influenced by this screw up by

the Bureau of Labor Statistics 0.14% for

Medicare Services vehicle insurance and

vet services worth noting that Health uh

care related Services usually have an

unseasonable large increase in January I

guess that would be a seasonally large

anyway usually they have a big jump in

January okay and sometimes the

adjustments they make don't really

accurately capture that and vehicle

insurance is another sort of lagging any

kind of insurance is very lagging in

terms of how it affect is affected by

inflation because it takes a while for

cost to go up then the insurance

company's like oh my gosh costs went up

and then it takes a while for them to

actually charge people hire insurance

premiums to make up for that so really

really lagging kind of data that still

hot or just straight up rig data Goods

deflation is literally at .5% for the

month keep in mind small typo here this

I'm going to change it's 6% for negative

Goods inflation that way this adds up

correctly but anyway the point is yes

Goods deflation is occurring of course

we know that and it's been occurring for

a while we did have a jump in those core

Services heavily driven by these three

items Medicare Services vehicle

insurance and vet servic and yes housing

was adjusted up but the explanation we

got for housing moving up was yeah we

changed it deal with it and that is

probably the most concerning part is

that the explanation we get is yeah we

changed it deal with it there's no logic

to it there's no explanation to it it's

just basically rigging the data I don't

know maybe the person who's hitting

enter on this has certain political

persuasion and and want certain things I

don't know maybe they like high money

market rates which then again In

fairness who doesn't now we'll get pce

numbers tomorrow pce is expected to come

in month over month. 3 deflator 2.4

point4 on the month over month in

year-over year 2.8 if you have not

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thank you so much for watching and we'll

see you in the next one goodbye and good

luck why not advertise these things that

you told us here I feel like nobody else

knows about this we'll we'll try a

little advertising in CR go

congratulations man you have done so

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