Six predictions for 2012?

[eytonxav]

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Originally Posted by MichaelB Excellent reading for anyone interested in 2012 forecasts and predictions Investing in 2012: Get ahead of forecaster folly - The Washington Post Stocks will trounce bonds Housing has bottomed Election forecasts The economy is better than the data suggest The apocalypse is coming Banks will come roaring back Hyperinflation Buy gold Buy emerging markets

When I was scanning your list, I thought you would tell us who will win in November

[REWahoo]

Here's my favorite:

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The Apocalypse is coming! ... Yes, we know, the end is near. You tell us this year after year, and it is terribly tiresome. After the Apocalypse, you have full license to say “I told you so.” Until then, please go away.

I may ad this to my sig line..

[HFWR]

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Originally Posted by REWahoo "AA" = either Alcoholics Anonymous or Asset Allocation. Your choice.

I'm a member of Alcoholics Unanimous...

Granted I don't track as closely as some, but my expenses have been relatively stable for 10+ years...

[Koolau]

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Originally Posted by DFW_M5 Wow, I wish I was able to hold it down like that. Don't you consume gasoline, have healthcare insurance or have any college tuition to deal with in your household. Here in Texas, also seeing large increases in water bill.

Or state taxes (income bracket creep and sales tax increases)?
Or property taxes (rates AND increasing assessments)?
Or tires?
Or movie tickets?
Or air travel (including "fees" for baggage?
Or LTC insurance?
Or car batteries?
Or car repairs?
Or auto license "fees"?
Or milk?
Or canned/bottled soda?
Or professional services (attorney, tax professional, etc.)?
Or Dinty Moore beef stew
Or TP?
Or a bus ride?
Or etc.? etc.?

I know that each of us has a different "market basket" which can affect our personal rate of inflation. But I find it difficult to believe that there are any more than a few who have not experienced "noticeable" inflation of late. I won't dispute anyone's figures. They are what they are. Still, I go to almost any store and recall lower prices on MOST things a year ago. Don't have the figures to back that up, but on things I "need", it is most noticeable even if I haven't tracked it to the penny.

I'm truly happy for DoingHomework who's tracking of expenses indicates personal inflation to be in check for many years. (I'm only mildly jealous.) Still, I wonder if D.H. has made subtle changes (e.g., chicken vs steak, one car instead of two, warmer AC, cooler heating, Goodwill instead of Pennys, etc. etc.) without recognizing the "quality" issue that sometimes is talked about in these discussions. Absolutely no criticism intended, just personally do not see inflation as anything other than a current AND looming problem (to me). I do think inflation is more noticeable to those of us already retired and not in a position to increase our incomes via w*rk. YMMV

[DoingHomework]

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Originally Posted by DFW_M5 Wow, I wish I was able to hold it down like that. Don't you consume gasoline, have healthcare insurance or have any college tuition to deal with in your household. Here in Texas, also seeing large increases in water bill.

Ok, maybe I'm cheating. My 2007 car has less than 20000 miles on it. I live very close to w*rk and, though sometimes I walk or bike I usually drive. But the miles don't add up much. It's a gas guzzling SUV but I hardly notice.

My health insurance is paid mostly by my employer. I pay the same that I paid in the early 90s. They pay more but not by as much as people say. I left this employer in the early 90s and paid their share as I COBRA-ed. It was about $1200 a month for my wife and I. The full cost to do the same now would be $1600 a month, a 33% increase in ~17 years. But I don't dispute that health care inflation has been very high. My employer is huge and negotiates aggressively. I work for a state university.

College tuition - not so much. But I'll comment on that in another thread.

[DoingHomework]

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Originally Posted by Koolau Still, I wonder if D.H. has made subtle changes (e.g., chicken vs steak, one car instead of two, warmer AC, cooler heating, Goodwill instead of Pennys, etc. etc.) without recognizing the "quality" issue that sometimes is talked about in these discussions.

I'm sure I've made subtle changes, and I wasn't bragging. I was just commenting that I truly have a hard time seeing the rampant inflation that some people talk about. I know somethings have certainly gone up but many things have not.

We eat very little meat or processed food. A bag of chicken breasts lasts us a month or more. I haven't paid close attention but that bag might have gone from $6 to $7 in the last 7-8 years, which is consistent with 2-3% inflation. We don't eat steak but we do eat fish. Our veggies might have gone up a little, it's hard to say. What I can say for sure though is that our overall grocery bills have not gone up, that we do not skimp on buying what we like, and we're clearly getting enough calories because we need to go to the gym a lot more. Oh, and the gym was $55 a month in 2002 and is now $62 - an annual increase of 1.2%.

Still drive 2 cars, keep the heat up, and shop where we please.

I think the biggest factor is that we have most of what we need so we don't need to buy very much. That doesn't come from being frugal. Twenty years ago we had to buy a new appliance every time we needed something. But now we have all the stuff we end up needing.

I don't put much more faith in the government numbers than most people. My point is not that they are right. My point is that I think inflation for most things is highly personal. I have no doubt that when we ER and move to Hawaii that our "inflation" will be very high for a few years as we adjust to higher food costs, replace things that it didn't make sense to move, etc. But we'll be saving money on sweaters and heating so who knows. We already spend time there and have a place so we're not totally ignorant about what the costs will be.

[DoingHomework]

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Originally Posted by DFW_M5 When I was scanning your list, I thought you would tell us who will win in November

It will be a guy that about half the people are unhappy with, no one fully believes, and will get very little done.

[DoingHomework]

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Originally Posted by audreyh1 Insurance and education are in their own little worlds in terms of increasing prices. Apparently competitive pressures are almost non-existent in those areas.

I work at a state university. Here's my take on what is happening with education inflation.

Obviously the cost of tuition has gone way up in the last 25 years. The reasons probably matter very little to current students or their benefactors paying the bills. But the costs for universities have not actually been increasing very fast. The CPI is probably a good estimate for that. Costs are essentially the faculty and staff, utilities, and buildings. Those all track inflation reasonably well. Professors at my school do not make more, adjusted for inflation, than they did 20-30 years ago.

What has changed is the subsidy provided by the state. The Arizona Constitution requires the legislature to make university education "as nearly free as possible" to all residents of the state. You can argue with whether that should be the case but the fact is that it is. But the legislature recently, over the last couple of decades but especially in the last 10 years has focused on the "nearly" part and has increased the share that students must pay. The state used to pay 80-90% but it is now way down, possibly around 25%. So much of the "inflation" is simply a shift in who pays.

The way this is done though is concealed in some fancy accounting so that it does not look like the politicians are cutting funding.

Another factor is student loans. When the government makes loans easy to get by guaranteeing them, and through various other policies, students have the money to pay inflated tuition. Artificially created supply of students drives up prices. And it's a vicious cycle because the for-profit schools that compete with state schools can then make more money and that often leads to other problems.

If a kid has to work hard to pay $800 a semester at a state school, that's puts an economic barrier on who can afford the state school and it limits what a for-profit school can charge. Who would pay $2500 for a for-profit place when the state gives it to you for $800?

But give the kid $10000 in loans, raise state tuition to $4000 and you get a situation where every kid wants to go to school and for-profit schools can make a good profit by charging the same $4000.

Don't get me wrong, I'm all for everyone having an opportunity to better themselves and get an education. But I think the current situation is terrible. Taxpayers are being ripped off, students are being ripped off and put in financial shackles even if they manage to graduate, and society is really not benefiting from the improved human capital that the whole concept of state schools is premised on.

I don't know what the solution is. But my point as it applies to this thread is that tuition is going up because of a shift in who pays and there are loans available to offset the higher fees, as bad as that is. Once students are paying the full cost, I think it is unlikely that tuition will continue to increase at the rate it has.