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Re: The "perfect storm"?
Old 10-19-2005, 04:46 PM   #21
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Re: The "perfect storm"?

At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash.
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Re: The "perfect storm"?
Old 10-19-2005, 06:53 PM   #22
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Re: The "perfect storm"?

Quote:
Originally Posted by Zipper
At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash.
Buy Roche.
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Re: The "perfect storm"?
Old 10-20-2005, 11:16 AM   #23
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Re: The "perfect storm"?

Quote:
Originally Posted by Zipper
At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash.
Cash? Hell, I'll be going short.
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Re: The "perfect storm"?
Old 10-20-2005, 12:19 PM   #24
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Re: The "perfect storm"?

Sorry guys, I have to admit a little inflation would almost be a good thing for us young dreamers who are stuck in huge mortgages and in COLA'd jobs. Rumors are the raise pool next year will be the largest in a decade...
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Re: The "perfect storm"?
Old 10-20-2005, 12:30 PM   #25
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Re: The "perfect storm"?

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Originally Posted by Laurence
Sorry guys, I have to admit a little inflation would almost be a good thing for us young dreamers who are stuck in huge mortgages and in COLA'd jobs. Rumors are the raise pool next year will be the largest in a decade...
Inflation is one way to repay mortgages and student loans!
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Re: The "perfect storm"?
Old 10-20-2005, 12:31 PM   #26
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Re: The "perfect storm"?

Quote:
Originally Posted by Laurence
Sorry guys, I have to admit a little inflation would almost be a good thing for us young dreamers who are stuck in huge mortgages and in COLA'd jobs.* Rumors are the raise pool next year will be the largest in a decade...
The national average is around 3.4% for wage increases next year. *Ours are in line with that. *Maybe in 2007 we will see a larger slice of the pie but 2006 raises are already set in the budgets.

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Re: The "perfect storm"?
Old 10-20-2005, 01:20 PM   #27
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Re: The "perfect storm"?

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Originally Posted by SteveR
The national average is around 3.4% for wage increases next year. Ours are in line with that. Maybe in 2007 we will see a larger slice of the pie but 2006 raises are already set in the budgets.

Last year our raise pool was 3.75% and the rumor is next year will be in the 4.5% ball park. Maybe we'll see a real increase in 2007 like you said.
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Re: The "perfect storm"?
Old 10-20-2005, 01:55 PM   #28
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Re: The "perfect storm"?

Quote:
Originally Posted by Laurence
Last year our raise pool was 3.75% and the rumor is next year will be in the 4.5% ball park.* Maybe we'll see a real increase in 2007 like you said.* *
We got 1.7%, so double to you sir!

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Re: The "perfect storm"?
Old 10-20-2005, 02:10 PM   #29
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Re: The "perfect storm"?

Quote:
Originally Posted by Laurence
Sorry guys, I have to admit a little inflation would almost be a good thing for us young dreamers who are stuck in huge mortgages and in COLA'd jobs.* Rumors are the raise pool next year will be the largest in a decade...
And how is this good for you? This is called the wage-price inflation spiral, and you can ask anybody who worked during the 70's -- it ain't good for you. Higher prices mean higher wages, but higher wages mean more pricing power for producers and ultimately higher prices, and thus the spiral begins....
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Re: The "perfect storm"?
Old 10-20-2005, 02:23 PM   #30
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Re: The "perfect storm"?

Wab,

Simple math. Let's say I'm 25, I have a total of $400,000 in mortgage and student loan debt (fixed interest rate). Inflation hits 7%/yr for the next 10 years. Assuming I pay interest only on the loans, then in 2015, the loan balance will still be $400,000 in 2015 dollars, but around $200,000 in 2005 dollars. Half of the debt would be gone without making any principal payments to reduce the debt.

This works out great for debtors with fixed rates - assuming wages keep up with inflation and the economy doesn't crap out completely due to high inflation.

Another way of looking at the effect of inflation on debt is this: my monthly payment now on my 30 year student loan is around $250. Imagine how little $250/month will be when I make that last payment in 2035. Assuming 3.5% annual inflation, my last payment in 2035 will only be $89 in today's dollars.
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Re: The "perfect storm"?
Old 10-20-2005, 02:29 PM   #31
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Re: The "perfect storm"?

You're right, fixed rate loans are immune to inflation.* *You're basically shorting a long-term bond with a free put.* *Always a good deal.

But inflated wages also mean you'll probably spend more rather than save more.* *It means your company will have to raise prices to pay your inflated wages.* It means your expectations of inflation will be higher, and you'll want to bargain for even higher increases to keep up.* *It's classic.

Ultimately, the fed will convince you to save more by cranking rates through the roof.* *You'll say "hmm, with money market rates like those, I'll put some more money in the bank."* *And then the economy will hit a screeching halt.* * Your stocks will tank, inflation will come back into check, but you'll still have that nifty fixed rate loan.*
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Re: The "perfect storm"?
Old 10-20-2005, 02:33 PM   #32
 
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Re: The "perfect storm"?

That 1.2% month-to-month inflation was due largely to increases in the cost of gasoline. * Since then, the price here has gone from $3.20/gal to $2.83/gal, a decrease of over 11%. *So the next monthly inflation number may look pretty good.
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Re: The "perfect storm"?
Old 10-20-2005, 02:34 PM   #33
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Re: The "perfect storm"?

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Originally Posted by wab
Ultimately, the fed will convince you to save more by cranking rates through the roof.* *You'll say "hmm, with money market rates like those, I'll put some more money in the bank."* *And then the economy will hit a screeching halt.* * Your stocks will tank, inflation will come back into check, but you'll still have that nifty fixed rate loan.*
Only the the chairman has the balls to stand up to politicians and do what's necessary- ala Volkner.
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Re: The "perfect storm"?
Old 10-20-2005, 02:54 PM   #34
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Re: The "perfect storm"?

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Originally Posted by TromboneAl
That 1.2% month-to-month inflation was due largely to increases in the cost of gasoline. Since then, the price here has gone from $3.20/gal to $2.83/gal, a decrease of over 11%. So the next monthly inflation number may look pretty good.
Yeah, I'm expecting Oct CPI to be negative month-to-month, with the core rate going up a little. Maybe. That is what the crystal ball says.

Wab, your predictions may come true re: inflation and economic crash. Even with mild 3.5% inflation, holding long term debt at great interest rates is very appealing to me. I don't think 3.5% inflation will cause our economy to collapse in to a Great Recession. Maybe. I'm not praying for high inflation at night, but I'm well positioned to benefit from it given the structure of my financial affairs.
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Re: The "perfect storm"?
Old 10-20-2005, 02:59 PM   #35
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Re: The "perfect storm"?

Yup, 3.5% is a nice sustainable rate.* *Current run rate for CPI this year is 5.7%, but I do expect that to drop a bit by end of year, and then heat up again next year as the core inflation picks up.* * Just another one of those risks with multiple possible outcomes.* *Worth hedging a bit,* but I wouldn't move a large position into gold or beanie babies.
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Re: The "perfect storm"?
Old 10-20-2005, 06:22 PM   #36
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Re: The "perfect storm"?

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Only the the chairman has the balls to stand up to politicians and do what's necessary- ala Volkner.
"Volkner" ??

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Re: The "perfect storm"?
Old 10-20-2005, 07:48 PM   #37
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Re: The "perfect storm"?

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Originally Posted by Marshac
We got 1.7%, so double to you sir!

Well, in 2002 and '03 I got 0.0% and 0.0% again, if it makes you feel any better. Megacorp giveth and Megacorp taketh away...

Wab, yah, it's the long term fixed debt, I've got a lot of it. In fact, my mortgage payment equals 75% of my take home pay (thank goodness DW works...for now), so yeah, while my raises will only keep up with price increases (I hope), I could have that mortgage become less and less of a problem....shorting a long term bond with a free put, that just rolls right off the tongue.

5.7%? So my 5.125% mortgage rate is actually causing me to get a discount on the price of my house, yes?
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Re: The "perfect storm"?
Old 10-20-2005, 08:32 PM   #38
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Re: The "perfect storm"?

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Originally Posted by Laurence
5.7%?* So my 5.125% mortgage rate is actually causing me to get a discount on the price of my house, yes?*
Yes, this year, you get a discount. In fact, if you increased your loan amount and stuck the money in i-bonds you would make a free 2% from your loan. That's the reason I still have a mortgage. And if that scheme stops working for me, I can just exercise my free put option.
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Re: The "perfect storm"?
Old 10-21-2005, 04:38 PM   #39
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Re: The "perfect storm"?

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Originally Posted by Laurence
In fact, my mortgage payment equals 75% of my take home pay (thank goodness DW works...for now)...
Yikes!! Is DW planning to read "All Your Worth" BEFORE she hangs up her cubicle?

Or is she counting on you to get raises & overtime to cut that mortgage back to 50% of your take-home?
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Re: The "perfect storm"?
Old 10-21-2005, 04:46 PM   #40
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Re: The "perfect storm"?

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Originally Posted by Nords
Yikes!! Is DW planning to read "All Your Worth" BEFORE she hangs up her cubicle?

Or is she counting on you to get raises & overtime to cut that mortgage back to 50% of your take-home?
Well, as soon as I move to my new job, it will become a smaller percentage, and we are living in hope about my future raise potential. But she won't entirely halt her income. She has lined up a job at her old graduate school facilitating the on line classes, which will bring in about 12k, all from home, and she is negotiating with her boss right now to see if she can get about 10hrs/week consulting from home. That will put her in the high 20's/low 30's range with only about 15 hours a week, and keep her skills and certifications up to date. Just in case the stay at home thing gets old...

....you know, come to think of it, sounds like an ideal semi-retirement plan!

BTW, what is "all your worth"?
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