Anyone here concerned about inflation?

Sometimes I confuse inflation with Supply and Demand. For instance, my wife and I take a cruise once a year. Over the better part of the last eight years, Celebrity Cruise prices have more than doubled. Not the teaser rates, but the upgraded accommodations, etc. I'm not sure if this is reflective of inflation or just greater demand - since the number of cruise ships seems to be a relative constant.

I guess I am seeing more pricing power with respect to discretionary goods and services, but this could also be attributable to more baby boomers taking advantage of items (via their bucket lists.)

I
 
haha said:
A few weeks ago I bought one of these at auction, and thought I was lucky to get 2%. Definitely a move, but I think it may be hard to predict how much it backs and fills. Out economy and demographics are far different now from what they were in the 70s.

Ha
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It's too early to worry about 70-style of inflation. There were things back then that are not happening now.

I am thinking that just the normalization to where we were in 2007 may be enough to bring some discomfort.
 
Not at this juncture, our personal level of inflation based on 10 years of expenditure tracking has remained the same. It is subjective though. Pro-consumers will experience a lot more than us Early Retired Plebs.... ;)
 
Here are some things to consider:

1. Many have heavily allocated to stocks over the last 5+ years as interest rates have been super low. This includes individuals and institutional investors.
2. FAANG stocks have driven Vanguard Growth and other growth funds to huge returns during this time.
3. Valuations on the S&P aren't crazy (17.5 times forward S&P earnings of $155 or so) if interest rates stay low.
4. The fed has stopped quantitative easing and the feds portfolio is being reduced at an increasing rate.
5. Other central banks will stop quantitative easing this year, maybe sooner than expected. Short term rates are still negative in Germany. I believe this will quickly change.
6. The U.S. budget deficit is increasing and there will need to be more buyers of U.S. bonds.

I don't see a crisis, but I do see interest rates going up and valuations coming down. I can see the S&P with a forward p/e of 14. That would put it at around 2200.

Many investors are on cruise control and don't realize how much Amazon, Apple, etc are dominating their portfolios. Many don't realize valuations are quite high due to low interest rates, IMO.

Personally, I've moved much of my money out of the market since January. It's always dangerous to market time. Even if you get out around the right time, when do you get back in? It's a very emotional think to do....think FOMO. Still, I believe it's the correct call for now, but it's a very personal decision.

If I were to stay invested, I'd reduce my FAANG exposure.
 
copyright1997reloaded said:
I just went to my favorite lunch time pizza place. For years now they've had two slices (any kind) + soda for $5.00. Today I found out the prices are now $5, $6, and $7. $5 for 2 plain cheese + soda, $6 for one-topping, $7 w/multiple toppings. So, using my pizza sample, inflation is here. :mad:
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I guess if that's the only option then perhaps. But then consider what's happening in other casual dining driving prices down, here's some examples:

Not sure I'm seeing inflation across the board in casual dining pricing.
 
Some of the above posts endorse the point I made earlier that we can control our own inflation rates. If Potatoes go up to $10 a pound and we do NOT buy them. That metric does not affect us. If our Favorite Pizza place puts the prices up, and we change out favorite Pizza place, it does not affect us.

Costco still has a Dog & Drink for $1.50. The BEST deal on the Planet bar none.
 
ShokWaveRider said:
Some of the above posts endorse the point I made earlier that we can control our own inflation rates. If Potatoes go up to $10 a pound and we do NOT buy them. That metric does not affect us. If our Favorite Pizza place puts the prices up, and we change out favorite Pizza place, it does not affect us.
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Control our own inflation rates?

If gasoline prices go up we can stay home.
If heating oil prices go up we can stay cold.
If electricity prices go up we can stay in the dark.
If healthcare prices go up, we can stay sick.
If clothing prices go up we can go naked.
If food staple prices go up we can just eat less.

Prices of discretionary items usually have simple alternatives. But the effects of inflation aren't limited to the cost of our favorite pizza. There's only so much you can do to mitigate the effects of inflation. Better to prepared to just spend more.
 
joeea said:
Control our own inflation rates?

If gasoline prices go up we can stay home.
If heating oil prices go up we can stay cold.
If electricity prices go up we can stay in the dark.
If healthcare prices go up, we can stay sick.
If clothing prices go up we can go naked.
If food staple prices go up we can just eat less.
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Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.
 
ShokWaveRider said:
Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.
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Good for you! I hope you somehow manage to keep your personal inflation at 1% by changing where you eat pizza forever.

But your facts clearly don't translate to everyone else. For many, healthcare costs alone mean that they could not keep their personal inflation rate at 1%, even aside from the fact that the past 10 years have seen below-average real, non-personal inflation rates (about 1.14% over that time period).

And the discussion wasn't really about the low rates everyone has been experiencing for the past 10 years anyway.

Yes, you can mitigate the cost increases of a few things for a while (like pizza), but you will be affected by real inflation - you cannot avoid all of it.

If you managed to keep your personal inflation rate at 1% through the high-inflation periods of the 70s and early 80s, you should write a book. You'd earn enough so that you could get your personal pizzas wherever you choose.

Long term, I continue to believe that we all need to keep an eye on inflation - particularly those retired or on a fixed income. In the long run, it will affect us all.
 
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Ha Ha, I have only been tracking it since I retired. honestly, I did not really care when we were both earning a good wage. We were getting 8% on CDs in those days (90's) and our home was paid for.

For the record I do not really even like Pizza LOL, unless my DW makes it and then I just tolerate it for obvious reasons. However, hers is way better than the mass produced rubbish you get at a Pizza store, I do not know what the fuss is about.

FTR, in the last 10 years, our house taxes have gone down, We do not but that many Clothes anymore, Utilities are about the same. Do not use Oil, would never buy a home that does. HC is an issue, but there are ways to keep costs manageable and everyone on Medicare has the same issue. Perhaps I am wrong but I do not count healthcare in my inflation number, perhaps I should.
 
kcowan said:
Wow I would not rely on your budget projections for us. What about dental and pharmacy costs?
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Keith: Honestly coming right from my budget sheet. Dental costs for 2017 $497 for 2 of us. RX = $19.90 Copays = $930 (I had major Eye Surgery x2) HC Premiums = $751 All these are for 2 of us.
 
ShokWaveRider said:
Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.
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Good for you! But your post made me think of Taleb's turkey:

38349-albums210-picture1469.jpg


If the big one comes, IMO there will not be very many places to hide.
 
OldShooter said:
If the big one comes, IMO there will not be very many places to hide.
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Yes I agree, BUT, I am basing it in 10 years of PERSONAL HISTORICAL experience. Just because one perhaps has a surprise medical condition after ~40 years of being healthy, the costs are not a true measurement of overall inflation. Because if one did, there would be no accelerated costs. Should one not divide current healthcare cots by those 25 years to get an accurate expenditure. That is why I have difficulty in calculating healthcare inflation. OK for a given year it may be accurate.

Say this year one has $25k bill (I am inventing this) divide that by 30 and it is $833 per year. I think it is hard to measure. At least for me.

If a tree falls on your house and it cost $15k to fix. Should that also be included?
 
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REWahoo said:
And by the time it happens (jumps that high) it will likely be too late to do anything about it.
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Seems most comments are on the defensive side. My dad must have gone on the offensive because for decades after the wild inflation of the 70's, I recall him thanking "the 70's" for the 14% coupons he was cashing from the load of bonds he bought during the ferver.
 
ShokWaveRider said:
Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.
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Of course, that's during a time when the national inflation rate was around 2%. That makes it easy to manage your personal inflation rate. However, when rates are normal (3%) or high, you won't be able to do that, at least not without making major sacrifices (cold, dark, and hungry). Don't let recency bias make your decisions.
 
ShokWaveRider said:
Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.
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+1. My experience parallels yours. I've been keeping track of every single expenditure via Quicken and our personal inflation rate is very minimal since ER back at the end of 2002. Our average annual expenditures have remained pretty much level and our standard of living feels about the same i.e. travel about as much, eat out as often, buy pretty much the same things. Note that both of us have been on medicare for a while so health ins costs increases are mitigated.

I don't really know if we subconsciously substitute one thing for another if the price increase of A vs B is substantial but as I mentioned before our standard of living feels about the same.

Looking at individual items, our grocery bill has remained pretty much constant. I just bought a very nice rear wheel drive Husqvarna lawn mower for $380. The recently deceased Yard man (cheaper front wheel drive) was $300 back in 2004. That same model is not available but I see many listed at Walmart of a comparable quality at the same $300 price. Electronics are considerably cheaper now.

Some line items have varied substantially spent $4,647 for gasoline in 2013, $2,335 last year. Electricity was $1,296 in 2003, $3,129 last year.
 
ShokWaveRider said:
Yes I agree, BUT, I am basing it in 10 years of PERSONAL HISTORICAL experience. Just because one perhaps has a surprise medical condition after ~40 years of being healthy, the costs are not a true measurement of overall inflation. Because if one did, there would be no accelerated costs. Should one not divide current healthcare cots by those 25 years to get an accurate expenditure. That is why I have difficulty in calculating healthcare inflation. OK for a given year it may be accurate.

Say this year one has $25k bill (I am inventing this) divide that by 30 and it is $833 per year. I think it is hard to measure. At least for me.
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I have posted this scenario here before, but I'll do it again just to illustrate what I think is a possible "big one."

The world financial community finally succeeds in knocking the US dollar off its pedestal as the world's reserve currency. Most of the world wants to do this just because they hate us, but also because our status allows our banking system to be used as a tool to beat up people we don't like. Also, many other countries aspire to this status. Finally, our national debt is starting to look like Greece and other spendthrift, deficit-addicted countries. Short term probability of this is admittedly low but it is not zero. Intermediate/long-term probability is definitely not zero.

Dollar declines by 20% so anything bought overseas now costs 25% more. Think electronics, clothing, etc. Margins of companies in the consumer staples and consumber durables markets are crushed, so most have no choice but to respond by raising prices close to the 25% level. Internationally priced commodities also go up 25%. Think oil, soy beans, metals, etc. Consumers react by cutting back spending, further hurting US economy. Little things like trying to extrapolate personal costs based on personal history are completely swept away. Over the long term the change makes US products more competitive on the international market, so US manufacturing starts to rise and the economy starts to recover. But we are all dead by that time.
 
I seem to remember reading in the OP, that the question was "Anyone here concerned about inflation? " My answer is still the same, based on our last 10 years of PERSONAL historical data. NO!!!! We have been within ~1%.

Why others seem to have to turn the post around into a discussion about how everybody else is incorrect, never seems to amaze me. Just answer the question. Maybe it is a result of being old and cantankerous. I think some folk just look for things to argue about.
 
The past doesn't provide justification as to what to the future will be. Let's be honest and realize that the last year has been substantially different than the 8 years prior brought on by change in the Administration(s). The next couple years will not necessarily reflect what to the prior 10 have been. That said an increase in prices with offset in wages doesn't mean that inflation will be out of control. Interest rates are getting back to a norm, the past 10 years have not been the norm there either. Prices may increase but as long as wages and rates move along in similar tend then little too worry about, IMHO.
 
We planned for the possibility of high inflation before we retired using matching strategies. I ran scenarios of high inflation in my spreadsheets and we would tend to come out ahead as we have non-COLA pensions offset with fixed rate mortgage from when rates bottomed out + Prop 13, stable value and floating rate funds, TIPS ladders, I-bonds, CD ladder (average rate on ladders will increase over time). Our housing expenses will not change much but if there is high inflation our home value or what we could charge for rent, if we decide to keep the house when we eventually downsize, will go up.

Plus we keep our essential expenses relatively low compared to our retirement income, so even if our essential expenses do go up we have lots of pad in the budget to allow for that, so it would just reduce our savings rate in retirement, not our lifestyle. I have not tracked our inflation rate in retirement, but usually our expenses drop year after year as I have the free time to get more efficient in my price shopping and buying habits, we implement strategies to save money like making the house more water and energy efficient and we do more urban homesteading kind of projects.
 
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bobandsherry said:
Prices may increase but as long as wages and rates move along in similar tend then little too worry about, IMHO.
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Of course since retirees don't have wages, their problem is different.
 
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