Yes, the CPI index would be the best overall easy way of evaluating this. You could construct your own proxy index, but you have to be careful when looking back at what it “would have been” at certain times. Often components of things change over time so the “look back” for back testing relationships can lead to false conclusions.
I suggest keeping things as simple as possible, hence the CPI. I do agree it undermeasures true inflation, but still gives us an up or down trend. The trend is what matters more than the actual values themselves.
I do have currency trader friends, but they are very short term. They just keep the money in T-bills in between trades much like I do. Every trader has his own take on what relationships are causitive of price movements. I just urge two things. First, be careful of assumptions just based on an opinion or a belief in what will happen in the future. That belief could be wrong. Second, do your own research and be decisive. Once you make up your mind on something, take your course of action and do not listen to anyone else. It is easy to be dissuaded from your path on things. There will always be very bright people who disagree with your assesments. Stay the course, and go with your convictions.
If you are wrong, learn from it and do not make the same mistake next time. This is what I do. Here is a specific example. Through my research I had determined that a short position in bonds should be put on the very day the McCulley from PIMCO came out and said, “Do not short bonds.”
I never once considered not taking that trade due to this.
He has alot more money than I do, and is perceived as a bond guru by people around the world. How could I be short when he said that it the first thing not to do. Well, the market went on the next day to have 6 consecutive down closes. I was right, he was wrong. Now, if I had followed his advice I would have missed a profitable trade.
For those of you that think the dollar is going to get beat down heavily, and we are going into recession, have the conviction to place your money consistent with that outcome. I do not have any magic for this because I do not share that view. Who cares what I think.
Do not look back, do not be swayed by anyone who disagrees. Pull the trigger, and do not look for others to reinforce the view. You have done the research, take the trade!
