The Austin Country Club parking lot is crowded. But only a few tables in the dining room are occupied. I’m here on a fabulous sunny day. Most members aren’t eating. They are happily playing golf or tennis as their portfolios rise.
I’ve come here to listen to Lacy Hunt. He’s a world-class economist.
Precise. Careful.
In his mind there’s no place for hyperbolic thinking. He’s also a Milton Friedman monetarist. His take on the economy will be different from the view on popular media. If we want to understand the world around us, it’s important to listen to the Different Drummers.
Today, I sense an impatience in him. He’s frustrated with how our economic statistics are gathered, the inaccuracy that results and – far worse – the bad policy decisions that follow.
“The consumer price index (CPI) is a very flawed measure,” he declares.
“One problem is the measurement of the cost of shelter. It is 33 percent of the index. Exclude shelter, and the inflation rate is 2 percent.”
“Another problem is that both the CPI and non-farm payroll figures are based on a Gaussian distribution – a normal distribution.” He explained that a normal distribution is a mathematical ideal. It isn’t reality. It’s not representative of how actual events are distributed.
“So the inflation rate, in my opinion, is already 2 percent.” He says “in my opinion”distinctly, carefully making a distinction between how things appear to him and established fact.
This is not the higher inflation that most people, including me, seem to expect. I asked him to explain more.
“The CPI is based on a survey of prices in a few days in the middle of the month. Truflation is constant and significantly less costly,” he said.
If you haven’t heard of Truflation, it is a private, Internet-based service that measures inflation. According to their measure, we’ve been at a 2 percent inflation rate for several months.
The Bureau of Labor Statistics (BLS), the Census Bureau and the Bureau of Economic Analysis (BEA), he explained, all employed hundreds of people to gather information for their statistics. But we’d have better information if it was all contracted out to the private sector. And it would cost less.
“When you’re using a Gaussian distribution but getting a lot of fat tails, your whole approach is flawed,” he said.
Fat tails, if the term is unfamiliar to you, are extreme events that happen in the real world, events that cause big changes. They are often referred to as “Black Swans.” The problems he describes with government statistics – delay, inaccuracy and huge adjustments – result in numbers that don’t make sense. That, in turn, produces policies that are wrong.
Could he provide some specific examples?
“Here’s one,” he answered, “at the BEA they have a discrepancy between gross domestic product (GDP) and gross domestic income.” They’re supposed to be identical.
“We lost jobs, net, in the fourth quarter. Actually, the level of employment in December is lower than in May. And all the increased employment is in health services.”
The result? He sees more recession danger than boom.
To reinforce that view, he points to other measures. Such as declining bank lending. Such as the fact that lower interest rates on car loans don’t offset the higher prices of new cars so the monthly payment is still rising.
The list of recession signs doesn’t end here. You’ve probably got your own. Most of us have some kind of “walking around” evidence. In Texas Hill Country, where the Burns family lives, I’ve noticed the number of “For Sale” signs on land and houses is increasing.
A house across the street took more than a year to rent.
Or a boat dealership that suddenly closed in affluent Lakeway.
Or big discounts on used RVs, including an Airstream I recently checked out in Buda.
Or stories from friends about their recent college graduate kids who can’t find a job.
Or tech-sector friends in Texas and in California being laid off.
As someone with a nicely rising portfolio, I’d love to believe everything is hunky-dory. But if history teaches us anything, it’s that rising asset values are a lousy predictor of the future.
Tell me, what’s on your list? What’s your “walking around” evidence?
Related columns:
Earlier interviews with Lacy Hunt from 2/19/2002 to 5/30/2020:
Scott Burns, “The Next National Yard Sale,” 5/30/2020: https://scottburns.com/the-next-national-yard-sale/
Scott Burns, “The Iron Algebra of Diminishing Returns, 2/22/2019: https://scottburns.com/iron-algebra-of-diminishing-returns/
Scott Burns, “Lacy Hunt: Why Interest Rates Won’t Rise,” 8/30/2015: https://scottburns.com/lacy-hunt-why-interest-rates-wont-rise/
Scott Burns, “Lacy Hunt: The End of the Yield Famine Is Far Away,” 11/4/2012: https://scottburns.com/lacy-hunt-the-end-of-the-yield-famine-is-far-away/
Scott Burns, “The Constant Inquirer,” 9/25/2011: https://scottburns.com/the-constant-inquirer/
Scott Burns, “Interest Rates Can Go Lower, But You Won’t Like It, 7/25/2010: https://scottburns.com/interest-rates-can-go-lower-but-you-wont-like-it/
Scott Burns, “High Debt Means Deflation, Not Inflation, 6/7/2009: https://scottburns.com/high-debt-means-deflation-not-inflation/
Scott Burns, “Different Drummer Investing, 5/29/2005: https://scottburns.com/different-drummer-investing/
Scott Burns, “A Somber View to a Longer Recession, 2/19/2002: https://scottburns.com/a-somber-view-to-a-longer-recession/
Sources and References:
Truflation Website, “Truflation as a Leading Indicator of the Official US Inflation,” 2/17/2026: https://blog.truflation.com/truflation-leading-indicator-of-us-cpi/
Bureau of Labor Statistics, “Consumer Price Index News Release,” 2/13/2026: https://www.bls.gov/news.release/cpi.htm
Paul Krugman, “A Bad Heir Day at the Fed,” 1/30/2026: https://paulkrugman.substack.com/p/a-bad-heir-day-at-the-fed
Congressional Budget Office: “The Budget and Economic Outlook: 2026 to 2036,” 2/11/2026: https://www.cbo.gov/publication/61882
The White House website, “President’s Budget Historical Tables: https://www.whitehouse.gov/omb/information-resources/budget/historical-tables/
Hoisington Investment Management Company website, Economic Overview page: https://hoisington.com/economic_overview.html
Lacy Hunt bio on Wikipedia: https://en.wikipedia.org/wiki/Lacy_Hunt
Hoover Institution: “Inflation Is a choice: Kevin Warsh on Fixing the Federal Reserve,” 7/8/2025: https://www.hoover.org/research/inflation-choice-kevin-warsh-fixing-federal-reserve
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo: Scott Burns, Gale warning flags flying on Catalina Island, 5/22/2010
(c) Scott Burns, 2026
Everyone I talk to keeps saying the same thing: “These are strange times.”
No one seems to have a secure feeling about the future.
Real Estate seems frozen. Grocery prices, which skyrocketed in 2022, remain stubbornly high.
As a Boomer, I’d like to sell my big house and downsize- But with so much uncertainty, who’s going to buy at these rates?
Real estate is the heartbeat of the consumer economy.
Thankfully I live in Texas and feel Texas will continue to be a great place to live in the years to come.