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Anyone here concerned about inflation?
Old 02-19-2018, 07:14 AM   #1
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Anyone here concerned about inflation?

It's all the rage in the news these days. To be clear, I don't think we're going into an inflationary supernova (thanks to new government spending plans and tax cuts), but I'm wondering what others on the board think of this issue.
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Old 02-19-2018, 07:25 AM   #2
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Sure I'm concerned, but not in the current environment.
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Old 02-19-2018, 09:29 AM   #3
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I assume we will have inflation, and that's why we keep some money in equities as a hedge. Since I have no control over it I see no purpose in worrying about it though.

I've always said that owning a home is a great hedge against inflation since nobody can raise your rent, which is typically your largest budget item. And in California property tax increases are capped at 2%, so no real worries there. If the price of gas goes up, it's not going to break my budget.
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Old 02-19-2018, 09:39 AM   #4
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I assume we will have inflation, and that's why we keep some money in equities as a hedge. Since I have no control over it I see no purpose in worrying about it though.

I've always said that owning a home is a great hedge against inflation since nobody can raise your rent, which is typically your largest budget item. And in California property tax increases are capped at 2%, so no real worries there. If the price of gas goes up, it's not going to break my budget.
As an aside, property taxes in California are not capped at two percent per year. Politicians have learned that the voters will support all kinds of parcel taxes and special assessments if they are for schools, parks, libraries, or wetlands protection. And people will provide the necessary two thirds majority to pass new bonds if the story is good. The base tax rate is one percent of assessed value. Existing bonded indebtedness raised that to maybe 1.1 percent in my area when I bought my house. Instead of paying a decreasing percentage as bonds were paid off, the parcel taxes and the bond issues approved by more than two thirds majorities have driven my taxes up to over 1.8 percent of the assessed value. The assessed value still goes up two percent per year. Howard Jarvis is spinning in his grave.
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Old 02-19-2018, 09:47 AM   #5
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I was only referring to tax increases, not base tax rates, which vary by locality.
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Old 02-19-2018, 09:48 AM   #6
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We hold a bunch of TIPS as a hedge against 70s/80s kind of inflation. Low probability, high impact type event.
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Old 02-19-2018, 12:26 PM   #7
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We hold a bunch of TIPS as a hedge against 70s/80s kind of inflation. Low probability, high impact type event.
Smart, that's a good way to sleep well at night. I should consider adding some to my portfolio as well.
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Old 02-19-2018, 12:30 PM   #8
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I was only referring to tax increases, not base tax rates, which vary by locality.
The assessed value can only go up by two percent compounded annually. The tax rate goes up every time a new general or parcel tax is voted in. My taxes have gone up a lot more than two percent every year.
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Old 02-19-2018, 12:46 PM   #9
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Mine too. Of $2100 in property tax, I pay $150 in extras;

Mosquito control, hazardous waste, water quality, but mostly schools and the local community college.

I enjoy paying these taxes, they make life better here.
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Old 02-19-2018, 12:59 PM   #10
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Smart, that's a good way to sleep well at night. I should consider adding some to my portfolio as well.
Yeah. One of life's little mysteries for me is why someone would segregate part of a portfolio to be "safe" fixed-income and then immediately charge off simultaneously in all directions seeking risk and volatility in junk, emerging markets, etc. It makes no sense. TIPS make sense to me; I pay only a very small "insurance premium" for the inflation protection compared to what treasury bonds or high-grade corporates might yield.
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Old 02-19-2018, 01:24 PM   #11
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It's all the rage in the news these days. To be clear, I don't think we're going into an inflationary supernova (thanks to new government spending plans and tax cuts), but I'm wondering what others on the board think of this issue.
I think inflation will be higher than it is today, particularly with recent moves by this administration which serve to further juice an already strong economy.

Hopefully, it won't get out of control. I don't think it will, and I'm not yet doing anything special in anticipation of that happening, but I am concerned.

Sometimes politicians focus on the short-term at the expense of the longer-term.
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Old 02-19-2018, 02:09 PM   #12
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Not yet, but the day may come.
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Old 02-19-2018, 02:29 PM   #13
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No, I used up all my worry about inflation over the last 10 years that it was supposed to happen.
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Old 02-19-2018, 02:39 PM   #14
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I'm not particularly worried about inflation. In the 21st century I think technology (and it's enabled wicked stepsister globalization) will keep a damper on it.

The only time the U.S. has had sustained inflation above 3-4% is during major wars - WW1, WW2, and late Cold War/Vietnam. In any case, FIRECalc and similar historical studies cover those periods and I'm >100% in FIRECalc, so good to go.
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Old 02-19-2018, 03:05 PM   #15
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the only time the u.s. Has had sustained inflation above 3-4% is during major wars - ww1, ww2, and late cold war/vietnam.
1973 - 1982.
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Old 02-19-2018, 03:10 PM   #16
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Sure I'm concerned, but not in the current environment.
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Old 02-19-2018, 03:12 PM   #17
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1973 - 1982.
Yes, that was late Cold War.
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Old 02-19-2018, 03:48 PM   #18
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1973 - 1982.
That's been in the back of my mind all along my path to ER. Sure, I have a plan, but it's more of "pull out all the stops" plan. Hoping I never have to use it!
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Old 02-19-2018, 04:06 PM   #19
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It's a good thing the elected officials know their stuff, or I'd be worried...
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Old 02-19-2018, 04:18 PM   #20
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It's a good thing the elected officials know their stuff, or I'd be worried...
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