Heading into the CPI print tomorrow, the market is firmly in “we don’t believe it” mode. Since the CPI report last month – which showed a third straight month of a surprising and surprisingly-broad uptick in prices – commodity prices are actually down 4% (basis the Bloomberg Commodity Index, formerly known as the DJ-UBS Commodity Index). Ten-year breakeven inflation is up 1-2bps since then, but there is still scant sign of alarm in global markets about the chances that the inflation upswing has arrived.
Essentially, no one believes that inflation is about to take root. Few people believe that inflation can take root. Indeed, our measure of inflation angst is near all-time lows (see chart, source Enduring Investments).
…which, of course, is exactly the reason you ought to be worried: because no one else is, and that’s precisely the time that often offers the most risk to being with the crowd, and the most reward from bucking it. And, with 10-year breakevens around 2.22%, the cost of protecting against that risk is quite low.
I suspect that one reason some investors are less concerned about this month’s CPI is that some short-term indicators are indicating that a correction in prices may be due. For example, the Billion Prices Project (which is now Price Stats, but still makes a daily series available at http://bpp.mit.edu/usa/) monthly inflation chart (shown below) suggests that inflation should retreat this month.
However, hold your horses: the BPP is forecasting non-seasonally-adjusted headline CPI. The June seasonals do have the tendency to subtract a bit less than 0.1% from the seasonally-adjusted number, which means that it’s not a bad bet that the non-seasonally-adjusted figure will show a smaller rise from May to June than we saw April to May, or March to April. Moreover, the BPP and other short-term ‘nowcasts’ of headline inflation are partly ebbing due to the recent sogginess in gasoline prices, which are 10 cents lower (and unseasonally so) than they were a month ago.
But that does not inform on core inflation. The last three months’ prints of seasonally-adjusted core CPI have been 0.204%, 0.236%, and 0.258%, which is a 2.8% annualized pace for the last quarter…and accelerating. Moreover, as I have previously documented the breadth of the inflation uptick is something that is different from the last few times we have seen mild acceleration of inflation.
None of that means that monthly core CPI will continue to accelerate this month. The consensus forecast of 0.19% implies year/year core CPI will accelerate, but will still round to 2.0%. But remember that the Cleveland Fed’s Median CPI, to which core CPI should be converging as the sequester/Medical Care effect fades, is at 2.3% and rising. We should not be at all surprised with a second 0.3% increase tomorrow.
But, judging from markets, we would be.
This is not to say I am forecasting it, because forecasting one month’s CPI is like forecasting a random number generator, but I think the odds of 0.3% are considerably higher than 0.1%. I am on record as saying that core or median inflation will get to nearly 3% by year-end, and I remain in that camp.
Following is a summary of my post-CPI tweets. You can follow me @inflation_guy!
- Well, I hate to say I told you so, but…increase in core CPI biggest since Aug 2011. +0.3%, y/y up to 2.0% from 1.8%.
- Let the economist ***-covering begin.
- Core services +2.7%, core goods still -0.2%. In other words, plenty of room for core to continue to rise as core goods mean-reverts.
- (RT from Bloomberg Markets): Consumer Price Inflation By Category http://read.bi/U60bLJ pic.twitter.com/R2ufMjVRRM
- Major groups accel: Food/Bev, Housing, Apparel, Transp, Med Care, Other (87.1%) Decel: Recreation (5.8%) Unch: Educ/Comm (7.1%)
- w/i housing, OER only ticked up slightly, same with primary rents. But lodging away from home soared.
- y/y core was 1.956% to 3 decimals, so it only just barely rounded higher. m/m was 0.258%, also just rounding up.
- OER at 2.64% y/y is lagging behind my model again. Should be at 3% by year-end.
- Fully 70% of lower-level categories in the CPI accelerated last month. That’s actually UP from April’s very broad acceleration.
- That acceleration breadth is one of the things that told you this month we wouldn’t retrace. This looks more like an inflation process.
- 63% of categories are seeing price increases more than 2%. Half are rising faster than 2.5%.
- Back of the envelope says Median CPI ought to accelerate again from 2.2%. But the Cleveland Fed doesn’t do it the same way I do.
- All 5 major subcomponents of Medical Care accelerated. Drugs 2.7% from 1.7%, equip -0.6% from -1.4%, prof svs 1.9% from 1.5%>>>
- >>>Hospital & related svcs 5.8% from 5.5%, and Health insurance to -0.1% from -0.2%. Of course this is expected base effects.
- Always funny that Educ & Communication are together as they have nothing in common. Educ 3.4% from 3.3%; Comm -0.24% from -0.18%.
This was potentially a watershed CPI report. There are several things that will tend to reduce the sense of alarm in official (and unofficial) circles, however. The overall level of core CPI, only just reaching 2%, will mean that this report generates less alarm than if the same report had happened with core at 2.5% or 3%. But that’s a mistake, since core CPI is only as low as 2% because of one-off effects – the same one-off effects I have been talking about for a year, and which virtually guaranteed that core CPI would rise this year toward Median CPI. Median CPI is at 2.2% (for April; it will likely be at least 2.3% y/y from this month but the report isn’t out until mid-day-ish). I continue to think that core and median CPI are making a run at 3% this calendar year.
The fact that OER and Primary Rents didn’t accelerate, combined with the fact that the housing market appears to be softening, will also reduce policymaker palpitations. But this too is wrong – although housing activity is softening, housing prices are only softening at the margin so far. Central bankers will make the error, as they so often do, of thinking about the microeconomic fact that diminishing demand should lower market-clearing prices. That is only true, sadly, if the value of the pricing unit is not changing. Relative prices in housing can ebb, but as long as there is too much money, housing prices will continue to rise. Remember, the spike in housing prices began with a huge overhang of supply…something else that the simple microeconomic model says shouldn’t happen!
Policymakers will be pleased that inflation expectations remain “contained,” meaning that breakevens and inflation swaps are not rising rapidly (although they are up somewhat today, as one would expect). Even this, though, is somewhat of an illusion. Inflation swaps and breakevens measure headline inflation expectations, but under the surface expectations for core inflation are rising. The chart below shows a time-series of 1-year (black) and 5-year (green) expectations for core inflation, extracted from inflation markets. Year-ahead core CPI expectations have risen from 1.7% to 2.2% in just the last two and a half months, while 5-year core inflation expectations are back to 2.4% (and will be above it today). This is not panic territory, and in any event I don’t believe inflation expectations really anchor inflation, but it is moving in the “wrong” direction.
But the biggest red flag in all of this is not the size of the increase, and not even the fact that the monthly acceleration has increased for three months in a row while economists keep looking for mean-reversion (which we are getting, but they just have the wrong mean). The biggest red flag is the diffusion of inflation accelerations across big swaths of products and services. Always before there have been a few categories leading the way. When those categories were very large, like Housing, it helped to forecast inflation – well, it helped some of us – but it wasn’t as alarming. Inflation is a process by which the general price level increases, though, and that means that in an inflationary episode we should see most prices rising, and we should see those increases accelerating across many categories. That is exactly what we are seeing now.
In my mind, this is the worst inflation report in years, largely because there aren’t just one or two things to pin it on. Many prices are going up.
The following is a summary of my post-CPI tweets. You can follow me @inflation_guy.
- Core CPI +0.12%, a bit lower than expected.
- Core 1.56% y/y
- Both core services and core goods decelerated, to 2.2% y/y and -0.4% y/y. This is highly surprising and at odds with leading indicators.
- Accelerating groups: Food/Bev, Housing, Med Care (63.9%). Decel: Apparel, Transp,Recreation, Educ/Comm (32.7%). “Other” unch
- Primary rents fell to 2.82% y/y from 2.88%, OER 2.51% from 2.52%.
- Primary rents probably fell mainly because of the rise in gas prices, which implies the non-energy rent portion is lower.
- …but that obviously won’t persist. It’s significantly a function of the cold winter. Primary rents will be well into the 3s soon.
- Household energy was 0.7% y/y at this time last year; now it’s 5.5%. Again, that slows the increase in primary rents
- Medical Care moved higher again, slowly reversing the sequester-induced decline from last yr. Drugs +1.86% y/y from 0.91% last month.
- Core ex-housing leaked lower again, to only 0.84% y/y. Lowest since 2004. If you want to worry about deflation, go ahead. I don’t.
- The Enduring Inflation Angst Index rose to -0.51%, highest since Nov 2011 (but still really low).
I must admit to some mild frustration. Our call for higher primary rents and owners’ equivalent rents has finally been shown to be correct, as these two large components of consumption have been heading higher over the last few months (the lag was 3-4 months longer than is typical). But core inflation, despite this, has stubbornly refused to rise, as a smattering of small-but-important categories – largely in the core goods part of CPI – are weighing on the overall number.
It is also almost comically frustrating that some of the drag on core CPI is happening because of the recent rise in Natural Gas prices, which has increased the imputed energy component of primary rents. As a reminder, the BLS takes a survey of actual rents, but since utilities are often included in rental agreements the BLS subtracts out the changing value of that benefit that the renter gets. So, if your rent last December was $1,000, and your utilities were $100, and your rent this month is still $1,000 but utilities are $125, then the BLS recognizes that you are really paying $25 less for rent. Obviously, this only changes where price increases show up – in this example, overall housing inflation would be zero, but the BLS would show an increase in “Household Energy” of 25% and a decline in “Rent of Primary Residence” of 2.78% (which is -$25/$900). But “Household Energy” is a non-core component, while “Rent of Primary Residence” is a core component…suggesting that core inflation declined.
There isn’t much we can do about this. It’s clearly the right way to do the accounting, but because utility costs vary much more than rental costs it induces extra volatility into the rental series. However, eventually what will happen is either (a) household energy prices will decline again, causing primary rents to recover the drag, or (b) landlords will increase rents to capture what they see as a permanent increase in utilities prices. So, in the long run, this doesn’t impact the case for higher rents and OER – but in the short run, it’s frustrating because it’s hard to explain!
Now, core inflation outside of housing is also stagnant, and that’s surprising to me. Apparel prices have flatlined after increasing robustly in 2011 and 2012 and maintaining some momentum into mid-2013. Ditto for new cars. Both of those series I have expected to re-accelerate, and they have not. They, along with medical care commodities, are the biggest chunks of core goods in the CPI, which is why that series continues to droop. However, medical care commodities – which was driven lower in 2013 due to the effect of the sequester on Medicare payments – is starting to return to its prior level as that effect drops out (see chart, source BLS).
We will see in a few hours what happens to median inflation. My back of the envelope calculation on the median suggests median CPI might actually rise this month in reverse of last month.
Here is a summary of my tweets after the CPI release this morning. You can follow me @inflation_guy.
- CPI +0.1%/+0.1% core, y/y core to 1.8%. Core only slightly weaker than expected as it rounded down to 0.1% rather than up to 0.2%.
- Housing CPI was weak, second month in a row. Rents will eventually catch up w/ housing prices…but not yet.
- Apparel CPI was weak after a couple of strong up months. I’ll have the whole breakdown in a bit.
- Core was actually only 0.13%, suggesting last August’s 0.06% and this August’s number might merely be bad seasonals.
- Market was only looking for 0.17% or so, so it’s not a HUGE miss. Still disappointing to my forecasts as upturn in rents remains overdue.
- Core CPI now 1.766% y/y. More difficult comparison next month although still <0.2%.
- Accelerating major grps: Apparel, Medical Care, Educ/Comm, Other (20.9%); decel: Food/Bev, Housing(!), Transp (73.1%), unch: Recreation
- Housing deceleration actually isn’t worrisome. Primary rents were 3.0% y/y vs 2.8% last. OER was 2.23% vs 2.19% last.
- Housing subcomponent drag was from lodging away from home, household energy, other minor pieces. So housing inflation story still intact.
- Core services inflation unch at 2.4% y/y; core goods inflation up to 0% from -0.2%. Source of uptick: mean reversion in core goods.
- So OER still reaches a new cycle high at 2.23%…it’s just not accelerating yet as fast as I expect it to. Lags are hard!
The initial reading of this number, as the tweet timeline above shows, was negative. The figure was weaker-than-expected, and Housing CPI decelerated from 2.26% to 2.17%. This seemed to be a painful blow to my thesis, which is that rising home prices will pass through into housing inflation (expressed in rents) and push core inflation much higher than economists currently expect.
Housing CPI is one of eight major subgroups of CPI, the other seven being Food and Beverages, Medical Care, Transportation, Apparel, Recreation, Education and Communication, and Other. Housing receives the most weight, at 41% of the consumption basket and an even heavier weight in core inflation. So, a deceleration in Housing makes it very hard for core inflation to increase, and vice-versa. If you can get the direction of Housing CPI right, then you’ll have a leg up in your medium-term inflation forecast (although it isn’t very helpful in terms of projecting month-to-month numbers, which are mostly noise). Thus, the deceleration in Housing seemed discouraging.
But on closer inspection, the main portions of Housing CPI are doing about what I expected them to do. Primary Rents (aka “Rent of primary residence”) is now above 3%, in sharp contrast to the expectations of those economists and observers who thought that active investor interest in buying vacant homes would drive up the price of housing but drive down the price of rents. Though I never thought that was likely…the substitution effect is very strong…it was a plausible enough story that it was worth considering and watching out for. But in the event, primary rents are clearly rising, and accelerating, and Owners’ Equivalent Rent is also rising although less-obviously accelerating (see Chart, source BLS).
So, it is much less clear upon further review that this is a terribly encouraging CPI figure. It is running behind my expectations for the pace of the acceleration, but it is clearly meeting my expectations for what should be driving inflation higher. As I say above, econometric lags are hard – they are tendencies only, and in this case the lags have been slightly longer, or the acceleration somewhat muted, from what would typically have been expected from the behavior of home prices. Some of that may be from the “investors producing too many rental units” effect, or it might simply be chance. In any event, the ultimate picture hasn’t changed. Core inflation will continue to rise for some time, and will be well above 2% and probably 3% before the Fed’s actions have any meaningful effect on slowing the increase.
In our business, one must be very careful of confirmation bias of course (as well as all of the other assorted biases that can adversely affect one’s decision-making processes). And so I want to be very careful about reading too much into today’s CPI report. That being said, there were some hints and glimmers that the main components of inflation are starting to look more perky.
Headline (“all items”) inflation rose in June to 1.75% y/y, with core inflation 1.64%. About 20% of the weights in the major groups accelerated on a year-on-year basis; about 20% declined, and 60% were roughly flat. However, two thirds of the “unchanged” weight was in Housing, which moved from 2.219% to 2.249% y/y…but the devil is in the details. Owner’s Equivalent Rent, which is fully 24% of the overall CPI and about one-third of core CPI, rose from 2.13% to 2.21%, reaching its highest rate of change since November 2008. Primary Rents (that is, if you are a renter rather than a homeowner) rose from 2.83% to 2.89%, which is also a post-crisis high. Since much of my near-term expectations for an acceleration in inflation in the 2nd half of the year relies on the pass-through of home price dynamics into rentals, this is something I am paying attention to.
This is what I expected. But can I reject a null hypothesis that core inflation is, in fact, in an extended downtrend – that perhaps housing prices are artificially inflated by investor demand and will not pass through to rents, and the deflation in core goods (led by Medicare-induced declines in Medical Care) will continue? I cannot reject that null hypothesis, despite the fact that the NAHB index today surprised with a leap to 57, its highest since 2006 (see chart, source Bloomberg, below). It may be, although I don’t think it is, that the demand is for houses, rather than housing and thus the price spike might not pass into rents. So, while my thesis remains consistent with the data, the real test will be over the next several months. The disinflationists fear a further deceleration in year-on-year inflation, while I maintain that it will begin to rise from here. I still think core inflation will be 2.5%-2.8% by year-end 2013.
In fact, I think there is roughly an even chance that core inflation will round to 1.8% next month (versus 1.6% this month), although the 0.2% jump will be more dramatic than the underlying unrounded figures. The following month, it will hit 1.9%. That is still not the “danger zone” for the Fed, but it will quiet the doves somewhat.
Meanwhile, the Cleveland Fed’s Median CPI remained at 2.1%, the lowest level since 2011. The Median CPI continues to raise its hand and say “hello? Don’t forget about me!” If anyone is terribly concerned about imminent deflation, they should reflect on the fact that the Median CPI is telling us the low core readings are happening because a few categories have been very weak, but that there is no general weakness in prices.
Although I maintain that the process of inflation will not be particular impacted by what the Fed does from here – and, if what they do causes interest rates to rise, then they could unintentionally accelerate the process – the direction of the markets will be. And not, I think, in a good way. We saw today what happens when an inflation number came in fairly close to expectations: stocks down, bonds flat, inflation-linked bonds up, and commodities up. Now, imagine that CPI surprises on the high side next month?
Speaking of the fact that commodities have had (so far at least) their best month in a while, there was a very interesting blog entry posted today at the “macroblog” of the Atlanta Fed. The authors of the post examined whether commodity price increases and decreases affect core inflation in a meaningful way. Of course, the simple answer is that it’s not supposed to, because after all that’s what the BLS is trying to do by extracting food and energy (and doing that across all categories where explicit or implicit food and energy costs are found, such as in things like primary rents). But, of course, it’s not that simple, and what these authors found is that when commodity prices are increasing, then businesses tend to try and pass on these cost increases – and they respond positively to a survey question asking them about that – and it tends to show up in core inflation. But, if commodity prices are decreasing, then businesses tend to try and hold the line on prices, and take bigger profit margins. And that, also, shows up in the data.
To the extent this is true, it means that commodity volatility itself has inflationary implications even if there is no net movement in commodity prices over some period. That is because it acts like a ratchet: when commodity prices go up, core inflation tends to edge up, but when commodity prices go down, core inflation tends not to edge down. Higher volatility, by itself, implies higher inflation (as well, as I have pointed out, as increasing the perception of higher volatility: see my article in Business Economics here and my quick explanation of the main points here). It’s a very interesting observation these authors make, and one I have not heard before.
The following is a summary and further explanation of my tweets following today’s CPI release:
- core #inflation +0.167, a smidge higher than expected but basically in line. Dragged down by medical care (-0.13%).
- Housing #inflation a solid 0.3%…this part is, as we expected, accelerating.
- Core commodities still dragging down overall core, now -0.2% y/y while core services still 2.3%.
- I still think Owners’ Equiv Rent will get to our year-end target but core goods not behaving. Have to lower our core CPI range to 2.5%-2.8%
- That 2.5%-2.8% still much higher than Street. Still assumes OER continues to accelerate, and core goods drag fades. Fcast WAS 2.6-3.0.
- Note that CPI-Housing rose at a 2.22% y/y rate, up from 1.94% last month. Highest since late ’08 early ’09. Acceleration there is happening.
- Major #CPI groups accel: Housing, Trans, Recreation (63.9%), Decel: Food/Bev, Apparel, Med Care, Educ/Comm (32.7%)
- Overall, IMO this CPI report is much more buoyant than expected. Core goods is flattering some ugly trends.
The important part of this CPI report is that CPI-Housing is finally turning up again, as I have been expecting it would “over the next 1-3 months.” Hands down, the rise in housing inflation (41% of overall consumption) is the greatest threat to effective price stability in the short run. Home prices are rising aggressively in many places around the country, and it is passing through to rents. Primary rents (where you rent an apartment or a home, rather than “imputed” rents) are up at 2.8% year/year, the highest level since early 2009, but not yet showing signs that it is about to go seriously vertical. Some economists are still around who will tell you that rapidly rising home prices are going to cause a decline in rents, as more rental supply comes on the market. That would be a very bizarre outcome, economically, but it is absolutely necessary that this happen if core inflation isn’t going to rise from here.
The last 7 months of this year see very easy comparisons versus last year, when CPI rose at only a 1.6% annualized pace for the May-December period. Only last June saw an increase of at least 0.20%. So, even with a fairly weak trend from here, core CPI will rise from 1.7% year/year. If each of the last 7 months of this year produces only 0.2% from core CPI, the figure will be at 2.2% by year-end. At 0.25% monthly, we’ll be over 2.5%; at 0.3% per month core CPI will be at 2.9% by year-end. So our core inflation forecast, at 2.5%-2.8%, is not terribly aggressive (and if we are right on housing inflation, it may be fairly conservative).
We have not changed our 2014 expectation that core CPI will be at least 3.0%.
Let the wailing and gnashing of teeth begin: the stock market is down almost 5% from the highs!
It was once the case that investors viewed equity market volatility with aplomb. When you could only check your stock prices daily in the paper, and when people were cautious and unlevered because they recognized that crazy things sometimes happened and they couldn’t count on the central bank to bail them out, a 5% setback was just part of the normal zigs and zags. But now we see the VIX rising into the high teens, and a bid developing in Treasuries.
The bid, however, is not as apparent in TIPS. Investors irrationally consider TIPS a “risk-on” asset, even though they are safer than Treasuries since they pay in real dollars. It’s a wonderful thing, because every time there is a market upset “risk-off” trade, TIPS and/or breakevens start to offer terrific value and instead of losing when the panic passes, as with normal Treasuries that slide back down when the flight-to-quality passes, TIPS valuations will snap back. In the meantime, they offer hard-to-miss entry points. For example, right now the 10-year breakeven is at 2.19%, which means expectations are that the Fed will miss its 2% target on PCE on the low side over the next ten years (since PCE is regularly around 0.25%-0.5% below CPI).
Even if that happens, the Fed surely will not miss it by very much (in that direction) – in the worst recession of our lifetimes, core CPI printed 1.8% for 2009, 0.8% for 2010, 2.2% for 2011, and 1.9% for 2012. Headline CPI was 2.7%, 1.5%, 3.0%, and 1.7%, so the average for core over the last four years of epic financial disaster has been 1.7% and for headline, 2.2%. So why in the world would someone buy a 10-year Treasury note at 2.09% when they can own 10-year TIPS for -0.10% + inflation? There seems to me to be mostly downside to holding nominal bonds relative to TIPS…but investors will consistently make this error, and it may get worse, if stocks continue to correct.
However, that error will not last for long, I suspect. CPI will be released on June 18th, and I expect everyone will expect a very soft core inflation number. I believe the housing part of inflation will start to heat up as soon as this month, and I would be very surprised to see inflation print below what will surely be very soft expectations. If core inflation prints 0.3%, rather than last month’s 0.1%, the market will be completely the other way.
That’s not the near-term concern, though. Near-term, investors are concerned that the weak economic growth we have seen for the last several years rolls over rather than continuing to accelerate. The weak ISM print on Monday (the first below 50 since 2009) and today’s modest downward surprise in the ADP employment number (135k new jobs, the weakest since September) has increased nervousness that a stock market which is currently trading at nearly 23 times 10-year earnings, in an environment of record gross margins, might not be able to handle an environment that is less than perfect. I don’t blame investors for that concern.
Another concern, which oddly seems to be vying for equal time, is that the Fed “sounds serious” about ceasing its program of securities purchases. I am highly doubtful that both the weak growth and the end-of-QE concerns can both come to fruition, but even if growth continued to bump along at soft, but not recession levels I doubt the Fed would be cutting QE very soon. The Fed speakers who “sound serious” about reining in QE are mostly established hawks like Dallas Fed President Fisher, who said on Tuesday that “we cannot live in fear that gee whiz, the market is going to be unhappy that we are not giving them more monetary cocaine.” Against that, set the people whose votes actually matter: Bernanke, who evinces few concerns that there’s anything negative about QE and so isn’t in any particular hurry to stop it, and Dudley, who said recently that it will be a few months before the Fed can even decide on a tapering strategy (which would presumably have to precede an actual taper). I side with Fisher on this one, but my vote counts just about as much as Mr. Fisher’s.
(However, I can’t wait to see what my friend Andy at fxpoetry.com does with the cocaine comment tomorrow).
My view has not changed much: I think growth is going to be slow, but we’re probably not going to slip back into recession although we are technically due for one by the calendar. I think inflation is going to rise, and keep rising, and I think the Fed will be very slow to stop QE. Even once it stops QE, it will be slow to remove the accommodation, and inflation will continue to accelerate while it does so. I think stocks are overvalued and offer very poor real returns going forward. I do think that TIPS are now a much better deal than Treasuries, and not a bad deal on an outright basis relative to equities – the first time in a while I could have said that. In fact, the expected 10-year real return on equities is less than 2% more than the expected 10-year real return on TIPS (the latter of which has no risk), which is the worst valuation for stocks relative to TIPS since August of 2011.
In fact, here’s a fact which is worth dwelling on for any investor who says that stocks are a good deal because nominal interest rates are low. Stocks, of course, are real assets (although they tend to do poorly in inflationary periods, as I have said), and if you want to compare them to an interest rate you ought to be comparing them to a real interest rate rather than a nominal interest rate. So, let’s do that. The chart below (Source: Bloomberg) shows the 10-year TIPS yield (in yellow, inverted) plotted against the S&P 500 for the period I just mentioned.
I think the conclusions are likely obvious. The last time real yields were at these levels, the S&P was between 1200 and 1400 (if you want to be generous about the early-2012 example). It’s over 1600 now.