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Old 05-10-2021, 09:28 AM   #121
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Originally Posted by sengsational View Post
Good point, but lumping tactical and strategic moves together muddles things; preparing for inflation is more slowly moving than many other threats...it doesn't hit all at once like a storm. It's more like a pandemic...you know it's coming, don't want to think about it, not a lot of agreement about how best to prepare, and afterwards, you have 3 liters of hand sanitizer that you don't need
^this lol

Although the price of copper soaring as it is ($4.72 this morning) has me thinking this is a bit more than a rain shower coming.

I still don't want to think about it though. Where is that nice soft sand...
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Old 05-10-2021, 09:31 AM   #122
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^this lol

Although the price of copper soaring as it is ($4.72 this morning) has me thinking this is a bit more than a rain shower coming.

I still don't want to think about it though. Where is that nice soft sand...
...or is this another head-fake doom and gloom that never materializes?

Along with many others, I was absolutely certain that the money we had pumped into the economy in 2008 was going to inflate us to the moon but it never happened.
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Old 05-10-2021, 09:52 AM   #123
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Covered calls, something favored by NW and a few others, might be the correct play. The premium is pretty good right now for selling calls because of the hype and money in the market (people looking to get rich quick)...
It's not easy.

While I made a lot of money selling out-of-the-money calls for semiconductors, all tech stocks have been declining and the call premium does not make up for the drop in the stock.

I believe in semiconductor stocks, and not the vaporware stocks, and would sell put options to buy them even lower, but I already have too much of these stocks. So, I couldn't. Pigs get slaughtered.

And then, while I generally refrain from selling options on commodity stocks like mining, industrial metals, agricultural products, because I feel they have a lot more to run, I did a few and ended up losing the fast climbing stocks.

The problem with selling calls is that you may end up losing all your good stocks, and keeping all your losers. It has to be done in moderation, like adding salt to a dish.
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Old 05-10-2021, 03:11 PM   #124
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Not surprised many poster here commenting "I'm not worried". But inflation is what keeps most working class Americans in poverty generation after generation.

McD Hashbrown that used to cost $0.50 last year is now $1.99
McD Apple Pie that was $0.69 last year is now $1.29
Organic milk that was $5.99/g is now $7.99/g
A house that was $350k last year is now $500k
You could buy a decent new car around $17-18k. Now Dealers (once they ask you to come in) will not have anything under $22-$25k that is decent.

It hurts people on fixed income the most. It's sad. But yeah.. there is no inflation. Just keep believing propaganda.


Exactly! The CPI and other “inflation indicators” leave out a lot of categories, especially what we seem to consume. Our mortgage and gasoline are about the only things I can think of that went down the last couple of years. Groceries, eating out, travel, and healthcare are all up double digits. We used to be able to have a casual meal out at a nice but not fancy restaurant for $60-80 including a couple of drinks. Now even a casual meal out with water or soda costs $50-$70, usually over $100 if we have a drink or two. Our health insurance premium is over double what it was 4 years ago, and our grocery spending has gone from around $700/month to $900-$1K for two people.
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Old 05-10-2021, 03:17 PM   #125
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I think it's widely known that most economists lurk on this forum to harvest information they later present as their own. If forum members don't "come up with a number," then economists won't have anything to say. Come on ExFlyBoy5, get with the program and contribute!


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Old 05-10-2021, 03:21 PM   #126
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The above numbers are bad, but I am going to check them against their pre-Covid values.



Many commodities went down because of lack of demand, and their recovery may make the price increase looks bad.


I agree, some of this is demand booming after falling steeply during COVID. However that is not the case for food. That seems more driven by labor costs and supply chain disruptions. I am not worried that these kind of increases will continue, but I do think inflation is increasing. I don’t feel I can quote a number either because I’m not aware of what is included vs excluded when the Fed or the media quotes inflation rates. All I know is our personal rate of inflation has far exceeded CPI since retirement, but luckily so has our portfolio growth.
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Old 05-10-2021, 03:35 PM   #127
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I recall it was widely reported that groceries and housing prices both accelerated dramatically during COVID. That was certainly our experience. Healthcare also went up for us, perhaps a lower double digit increase, but still a double digit increase.
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Old 05-10-2021, 03:45 PM   #128
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Exactly. Chronic inflation, the kind the Fed policy makers fear, isn't consumer price change, it’s when across the economy prices rise for everything, including wages / labor, so there’s no real gain. Once wage and price increases begin feeding into each other inflation becomes chronic and is very difficult to stop without a major contraction or Fed reset a la Volker ‘79.

If producer and consumer prices rise but wages don’t, a recession is almost inevitable, as purchasing power has fallen.

If the current surge in some prices holds indefinitely, we will have either a serious inflation problem and/or a collapse in demand. The Fed view is these price jumps, especially in commodities like lumber, will fade quickly once supply kicks in. Greenspan described those price increases as “once offs”, meaning they did not contribute to sustained inflation.
Exactly. All of the anectdotal "price increase horror stories" do not constitute inflation from an economists point of view (coming from an actual economist). All of the "sky is falling" reports are nonsense IMHO. Inflation is a sustained increase in prices across the economy over a long period of time (3-5 years). If your asset allocation philosophy didn't account for 3-5% inflation for 10+ years, then you shouldn't be retired.

Now if hyperinflation hits (50%+ increase in prices per annum for 3-5 years), then that's a different ballgame. Anything other than that is just a serious failure to plan for normal events.

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Old 05-10-2021, 05:20 PM   #129
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I suspect there are several countervailing forces that will work to hold down inflation.

1. The national eviction moratorium will end, either in June as currently scheduled or perhaps sooner if Judge Freidrich's decision yesterday is not stayed. Once people have to pay rent, they will no longer have funds to drive up the price of other things.

2. COVIS stimulus will end and enhanced unemployment benefits will end, which means people will need to return to work. That should help on the supply end.

3. Raw material shortages and supply chain disruptions caused by COVID will work themselves out as restrictions are lifted.

4. While there may be some pent up demand for a bit, a lot of people have discovered new ways of living in COVID that simply involve buying fewer things. For example, I don't expect to spend as much on restaurant dining as we did before COVID. I'm sure others have discovered there are many spending items that they previously took for granted but have discovered they can easily forgo.

5. There also will be structural changes to the world of work. People have discovered the joys of working from home, and companies may have discovered financial benefits from encouraging that. Since probably 2010 we haven't really needed to travel across country to have in-person work meetings (with all the associated spending), but it took a pandemic to break old habits. When I was with the big law firm in NYC, the two biggest cost drivers were associate salaries and rent. If you can minimize the amount of Class A office space you need in midtown Manhattan, you can greatly cut costs. Also, if associates don't have to commute into the City, you may be able to pay them less. Hence, lower spending on clothing, lunch at a restaurant, hotels, transportation, etc. And maybe lower legal costs (or, cynically, richer partners)



I could be wrong about all of this, but it is something to consider.


What happens to all the office space? How will that factor into inflation? Will they be converted into residential space? In the meantime how will the mortgages on these be paid if they’re left empty and fall into disrepair and what impact will that have on the real estate market?
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Old 05-10-2021, 05:36 PM   #130
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How worried am I about inflation?

Worried, as I already know home prices have skyrocketed, gas is up sharply, used car prices are up steeply, building materials are way up, healthcare costs are up (just visited dentist!). So, as to the original question, yes I am worried.
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Old 05-10-2021, 05:48 PM   #131
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I saw this informative guide on inflation posted in another forum. It includes some nice charts, such as showing how common costs far exceed the government CPI figures.

https://www.lynalden.com/inflation/
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Old 05-10-2021, 06:18 PM   #132
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What happens to all the office space? How will that factor into inflation? Will they be converted into residential space? In the meantime how will the mortgages on these be paid if they’re left empty and fall into disrepair and what impact will that have on the real estate market?
I would expect rents to decrease in response to lower demand. It may not be immediate, because those leases typically have very long terms, but I'm sure it will happen eventually. Banks may get stuck with non-performing mortgage loans, which they probably will restructure. I would think that would be deflationary as well.
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Old 05-10-2021, 07:03 PM   #133
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Not worried about inflation. Have lots of equities as compared to bonds and lots of dividends.
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Old 05-10-2021, 08:05 PM   #134
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I like the inflation of my home value, approximately 8-10% last year and the same predicted again for this year. And that growth is on the whole home value, not just the half I have in equity. Leverage, Baby.
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Old 05-10-2021, 08:24 PM   #135
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Now if hyperinflation hits (50%+ increase in prices per annum for 3-5 years), then that's a different ballgame. Anything other than that is just a serious failure to plan for normal events.
Hacksaw

Sounds about right to me. For the things that we purchase most often (groceries, gas, utilities), I personally have not noticed much of an increase so far. I know that lumber, steel, etc are way up, but that has not impacted us (at least not yet), so I'm not going to lose any sleep worrying about it. With regard to groceries (food), I have a certain amount of flexibility in what I buy (as we all do), and I shop for items on sale as well, so my grocery budget has not gone up much in the last year or so, if at all. And I don't feel like I have reduced the quality of my diet at all.



I don't disagree that serious inflation that lasts for a while can really hurt people, especially younger people that are still working. It remains to be seen how long this blip of inflation will last, and since I have been retired for a while now (and have planned for some inflation), I just can't get too concerned about it at this point - it's way down on my list of items to worry about.
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Old 05-10-2021, 08:28 PM   #136
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It seems like all my adult investing life investors have been worried about inflation. Especially after 1999 when I retired and it kept dropping, everyone expected it to pop back up. And after 2008 when deflation was experienced around the world, many thought much higher inflation was right around the corner.

I'm not saying it can't pop back up. I'm just saying that I have heard these concerns and all these reasons that much higher inflation is imminent for a very long time now. Inflation is dependent on many factors, and the global economic situation is a big one.

ECRI reports that 10 year inflation expectations have risen to about 2.5% and that is the highest it's been in 8 years. note: 2.5% - that seems rather "normal".
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Old 05-10-2021, 08:56 PM   #137
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The above numbers are bad, but I am going to check them against their pre-Covid values.

Many commodities went down because of lack of demand, and their recovery may make the price increase looks bad.
THIS! The deals are tougher to be found, and in less traditional avenues. Check the price of car rentals...eeek! Talk about making up for some lost mileage... they are all gouging to cover lost pandemonium dough
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Old 05-11-2021, 06:27 AM   #138
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I saw this informative guide on inflation posted in another forum. It includes some nice charts, such as showing how common costs far exceed the government CPI figures.

https://www.lynalden.com/inflation/


This is an excellent article. Long, but explains a lot of concepts really well and makes a good case that inflation is likely to be somewhat higher in the next decade, while hyperinflation is not likely.
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Old 05-11-2021, 08:11 AM   #139
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I've enjoyed the many thoughts on this.

DW just mentioned inflation the other day. I know it is happening to so many people and items. Us personally...

I just told her that we spend $700/mo on average for food, so expect to see a $70 increase for this. Insurance costs may increase $50-100 (we can modify the coverage if needed). Those are the bulk of expenses for us. Consumers are going to be paying the bulk of this IMO.

Capital preservation, inflation adjusted, is my only concern. But right now, not very worried.

Side note, DW works for a very large commercial lines insurance company and they just had a discussion on inflation (upper-crust meeting) and are forecasting 10-15% in the near-term. Quite pessimistic, but planning on it...
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Old 05-11-2021, 08:21 AM   #140
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Not worried. I am in this for the long haul, am 75/25 and have more than enough cash to weather years of turbulence. I learned from 2000, 2008 and 2020 that staying in the market, like I did, was way more fruitful than screwing with my long term plan. All our friends who kept bailing always regretted it as the markets moved forward.
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