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06-26-2018, 07:36 AM
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#41
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,139
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Quote:
Originally Posted by USGrant1962
I don't know the Fed's expectation of the future expectation, but the Fed uses the Personal Consumption Expenditures (PCE) index when it looks a inflation, including for its targets. PCE was 2.2% in May.
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+1
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Retired since summer 1999.
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06-26-2018, 07:36 AM
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#42
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Thinks s/he gets paid by the post
Join Date: May 2014
Posts: 1,390
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Quote:
Originally Posted by Cut-Throat
Most withdrawal schemes have already built into them 'inflation protection'. So this is 'doubling down' on the problem, and will result in even more money left on the table when you die.... Even the '4% rule' will usually leave a Pile on the table about 80% of the time. You are making this more complicated than need be....
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Maybe , maybe not. Retiring in your 40's is very young. Not many people can do it. Many that can are afraid to, I know I was, but did it anyway. It is true that a healthy stock allocation will provide some inflation protection, but nothing is guaranteed. If I was in my 50's or 60's perhaps I would feel differently about it, but I'm not, I am 48.
I know in time I will ratchet up spending. It has already begun and I am fine with it. I expect it, even welcome it. But I am still very, very conservative and that's my right . So far my plan is working, and if it ain't broke , don't fix it.
__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger
The first rule of compounding: Never interupt it unnecessarily. Charlie Munger
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06-26-2018, 08:28 AM
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#43
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2010
Posts: 5,911
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We expect inflation to tick up over the next 2 years because of the current trade wars.
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06-26-2018, 09:37 AM
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#44
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Thinks s/he gets paid by the post
Join Date: Jan 2007
Location: Minneapolis
Posts: 1,172
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Quote:
Originally Posted by UnrealizedPotential
Maybe , maybe not. Retiring in your 40's is very young. Not many people can do it. Many that can are afraid to, I know I was, but did it anyway. It is true that a healthy stock allocation will provide some inflation protection, but nothing is guaranteed. If I was in my 50's or 60's perhaps I would feel differently about it, but I'm not, I am 48.
I know in time I will ratchet up spending. It has already begun and I am fine with it. I expect it, even welcome it. But I am still very, very conservative and that's my right . So far my plan is working, and if it ain't broke , don't fix it.
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Well sure......But just understand that the more conservative you are, the bigger chance that you will leave more money on the table. The challenge for most retirees is to spend as much as possible and be assured that you don't run out of money.
I could probably 'survive' on 14K per year, but that would not fit my 'Retirement dream'. So, your plan works for you, but it would not work for Most people. I've been retired for 17 years now.
I employ VPW, which is a much safer withdrawal method than any fixed amount system. It accounts for Historical Inflation and Market downturns. It has been shown to be the most efficient withdrawal method in terms of spending down your portfolio. I invest in only 30% stocks and delay SS to age 70 to 'Buffer' withdrawal amounts.
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06-27-2018, 02:48 AM
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#45
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Full time employment: Posting here.
Join Date: Mar 2010
Posts: 889
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Quote:
Originally Posted by UnrealizedPotential
Yes, my expenses are 14K a year.
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That's awesome. Lifestyle creep has gotten me up to around $2,400 a month ($28,800) but half of that is for a one bedroom apt rent ($1,090) and a car lease ($260). The car lease was stupid in hindsight.
I have $500k in investments ($400k in taxable) and 17 years in a state gov pension. I'm 42 and make $72k w-2 income.
I was hoping to retire by 45 but I don't think I will make it. I have been incredulous about inflation, but not anymore with the way things are going. Tariffs will make everything more expensive. So I have bailed out of leveraged assets (CEFs) and put it all into VPGDX. So now I will have to wait for compounding to get me up to $750k, which will probably take a decade.
The only way to speed things up will be to decrease spending. I have been watching a lot of youtube videos on expating and living in a RV recently lol.
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06-27-2018, 04:51 AM
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#46
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Thinks s/he gets paid by the post
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,688
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Inflation protection for us is having a high allocation to equities and real estate + arbitrarily assuming our post-retirement expenses will be 20% higher than pre-retirement expenses.
Another inflation hedge is to take on some debt - at the moment we can borrow at or slightly below the local rate of inflation and invest in assets that yield more than the rate of inflation (with an acceptable level of risk). In addition to picking up a small carry each year, the real value of the debt declines. Over time, it's a meaningful addition to our finances.
__________________
Budgeting is a skill practised by people who are bad at politics.
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06-30-2018, 04:47 AM
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#47
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gone traveling
Join Date: Nov 2011
Location: The Deep South Bay
Posts: 744
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Can the trade wars be a catalyst for inflation? Cost of goods increase on their own accord, add tariffs to the mix and we’ll see goods inflate quite a bit.
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06-30-2018, 06:52 AM
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#48
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Moderator
Join Date: Nov 2014
Posts: 9,171
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You can stockpile non-perishable goods, locking in today’s price. That $135K Honda is only about $30K today. Of course holding costs and the advancement in technology then become your risk.
Agree with others. OP is worrying about something he already has under control. Stick with the current allocation and focus on spending reductions if it gets bad.
The worse thing about hyper inflation, IMO, will be the impact on the majority of people who were not able to be prepared at any level. When societies break down, holding tips isn’t going to be much comfort.
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Every day when I open my eyes now it feels like a Saturday - David Gray
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06-30-2018, 07:02 AM
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#49
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Full time employment: Posting here.
Join Date: Jun 2018
Location: Brisbane
Posts: 855
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i bought a block of land in 1975 and the interest was 17.5% p.a. ( because i was classed as sub-prime aka no credit history )
oh the joy i get now from watching the mess G.E. Finance is in now
it wan't instant but karma DID get them
however i quickly learned about inflation ( and that block of land did increase in value )
__________________
i hold the Australian listed versions of AU ( Anglo Ashanti ) , BHP , and JHG .
You must learn from the mistakes of others. You can't possibly live long enough to make them all yourself.
Samuel Levenson
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06-30-2018, 08:43 AM
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#50
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,351
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Quote:
Originally Posted by 97guns
Can the trade wars be a catalyst for inflation? Cost of goods increase on their own accord, add tariffs to the mix and we’ll see goods inflate quite a bit.
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Not just a catalyst, but a direct cause. A self-inflicted wound, really, but the resulting inflation is not something that the Fed can affect very much with monetary policy.
The more serious, and also uncontrollable, risk is a decline in the value of the dollar. Unlike tariffs, which are sort of rifle shot attacks on specific imported products, a decline in the dollar hits the majority of the economy. In addition to direct imports like tv sets, clothing, etc. it also drives up the prices of internationally-traded commodities like oil and agricultural products --- even if they are produced in the US.
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06-30-2018, 08:45 AM
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#51
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,351
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Quote:
Originally Posted by traineeinvestor
... at the moment we can borrow at or slightly below the local rate of inflation and invest in assets that yield more than the rate of inflation (with an acceptable level of risk). ...
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And what would those assets be?
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06-30-2018, 09:03 AM
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#52
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Full time employment: Posting here.
Join Date: Jun 2018
Location: Brisbane
Posts: 855
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i have been expecting a credit crunch since 2013 ( and tweaked my investments towards that scenario )
will that credit crunch trigger runaway inflation , i think it might
after Cyprus ( and Greece ) i have very little in interest bearing securities much that is offered at acceptable returns is 'dressed up ' junk debt
or worse still ETFs which are 'sausage debt ' securities chopped up finely with no product disclosure on the individual debts
__________________
i hold the Australian listed versions of AU ( Anglo Ashanti ) , BHP , and JHG .
You must learn from the mistakes of others. You can't possibly live long enough to make them all yourself.
Samuel Levenson
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07-01-2018, 12:48 AM
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#53
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gone traveling
Join Date: Nov 2011
Location: The Deep South Bay
Posts: 744
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Trade war could turn into a currency war with China, they are the largest holder of our bonds and debt. A currency war will crunch credit for sure
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07-01-2018, 01:10 AM
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#54
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Full time employment: Posting here.
Join Date: Jun 2018
Location: Brisbane
Posts: 855
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97guns,
yes i agree , although i suggest China will be discrete about it ,
perhaps , not bother to rollover maturing debt , and just take cash ( or buy gold with it )
__________________
i hold the Australian listed versions of AU ( Anglo Ashanti ) , BHP , and JHG .
You must learn from the mistakes of others. You can't possibly live long enough to make them all yourself.
Samuel Levenson
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07-01-2018, 05:15 AM
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#55
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Thinks s/he gets paid by the post
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,688
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Quote:
Originally Posted by OldShooter
And what would those assets be?
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Probably of little interest to those on this forum, but there are some unrated USD bonds issued by small HK/PRC property companies and REITS with maturities of around 3-4 years with yields around 5%.Lai Sun Development's 2022 bond is one example. With debt ratios less than 50% and the underlying assets being real estate, I am comfortable with the associated credit risk. Liquidity sucks on these though.
If I want to take on more risk, Hua Xian REIT (HK87001) currently offered a dividend yield of 8.4% but is in RMB so I am taking FX risk.
__________________
Budgeting is a skill practised by people who are bad at politics.
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07-01-2018, 05:26 AM
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#56
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Full time employment: Posting here.
Join Date: Jun 2018
Location: Brisbane
Posts: 855
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i did very nicely with Australian corporate bonds ( and preference shares ) from 2011 to 2015 , but then the quality and discounts declined so i let them mature and invested elsewhere ( including the last solar array )
i am not completely against international investments but it is hard to be able to research them properly , i normally use them to offset movements in the Australian Dollar
__________________
i hold the Australian listed versions of AU ( Anglo Ashanti ) , BHP , and JHG .
You must learn from the mistakes of others. You can't possibly live long enough to make them all yourself.
Samuel Levenson
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07-01-2018, 07:19 AM
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#57
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Thinks s/he gets paid by the post
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,688
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Quote:
Originally Posted by Oz investor
i did very nicely with Australian corporate bonds ( and preference shares ) from 2011 to 2015 , but then the quality and discounts declined so i let them mature and invested elsewhere ( including the last solar array )
i am not completely against international investments but it is hard to be able to research them properly , i normally use them to offset movements in the Australian Dollar
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Pretty good yields on the big Australian banks at the moment + franking credits for onshore investors.
__________________
Budgeting is a skill practised by people who are bad at politics.
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07-01-2018, 07:52 AM
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#58
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Full time employment: Posting here.
Join Date: Jun 2018
Location: Brisbane
Posts: 855
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i entered investing ( i inherited 4 stocks ) in 2011 and knew i wanted to retire in 2020
so i knew i had to HURRY ( and take sensible risks )
so i looked at the Australian banks ( all of them not just the big 4 ) and asked myself a question where can the big 4 grow sensibly ( not just cut costs ) my conclusion was NOWHERE
.... so i bought a handful of Westpac ( WBK for the US ) as the best of them in my opinion but bought HEAVILY MacQuarie Group ( MQBKY for the US ) AND the MacQuarie preference shares ( now redeemed , sadly )
i was hoping MacQuarie Group would grow about 50% by now , instead it grew 330%
but the issue with the big 4 remains where can they grow sensibly they are probably a bit risky as a bond proxy ( a straight div. yield play )
but wise people will crunch their own numbers on that .
international investors will face some currency risks as well
maybe something to watch if there is a big downturn
the Australian dollar should get hammered at the same time
__________________
i hold the Australian listed versions of AU ( Anglo Ashanti ) , BHP , and JHG .
You must learn from the mistakes of others. You can't possibly live long enough to make them all yourself.
Samuel Levenson
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07-03-2018, 04:05 PM
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#59
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Recycles dryer sheets
Join Date: Aug 2011
Posts: 106
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Quote:
Originally Posted by Cut-Throat
Most withdrawal schemes have already built into them 'inflation protection'. So this is 'doubling down' on the problem, and will result in even more money left on the table when you die.... Even the '4% rule' will usually leave a Pile on the table about 80% of the time. You are making this more complicated than need be....
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That is it, in a nutshell! You either believe the (extensively researched) withdrawal schemes or you don't. All those 30 year periods that still made a 4% withdrawal adjusted for inflation safe, included the high inflation periods. Same for the 40 year periods that still result in a safe withdrawal rate of 3.1-3.7%.
It is hard to imagine a long-term scenario where equities would not go up with inflation, after all, the same companies will be selling the now more expensive products. It can of course happen over the short or middle term, but again, it is a question of whether you trust the 30 or 40 year calculations. TIPS offer good protection (not perfect because of the capital gains on inflation that you pointed out, sounds like you know your stuff ), but as with any insurance, that comes at a price in terms of lower yields. Bond yields reflect the current view of the market about future inflation, which of course is just a forecast and could be wrong.
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07-03-2018, 06:41 PM
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#60
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Recycles dryer sheets
Join Date: Feb 2017
Location: Kula
Posts: 158
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Frankly it may depend on who is the next President and his/her trade policies. If tariffs continue to be enacted worldwide then inflation will rise. If the present policy changes, and tariffs are frozen or reduced, inflation will moderate, due to the influence of huge sovereign funds, especially Chinese, buying US treasuries.
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