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Old 05-11-2021, 08:30 AM   #141
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Haven't seen too many people comment on what significantly rising inflation will do to portfolios that are heavy (50-100%) stocks.

Inflation will typically hit stocks pretty hard. In fact, we're already seeing that yesterday and today with many analysts commenting that the selloffs are due largely to inflationary fears.
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Old 05-11-2021, 08:39 AM   #142
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The Schwab article, posted a few pages back, had S&P 500 doing well (in the top 3) in low, medium and high inflation. I commented on that earlier. If we have "stagflation", that's usually bad for stocks. But I think we're in for another "roaring twenties". It may include inflation, but if the economy is doing well, I'm not too concerned about moderate inflation on a stock-heavy portfolio.
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Old 05-11-2021, 08:50 AM   #143
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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/
Her conclusion is real inflation has been higher for 3 decades by about 0.5% per year. The math of that claim means that the US GDP in 2020 of $21T was overstated by $3.2T in real terms and over $20T cumulative over the past decade. How can that much real economic activity simply not exist without affecting employment, profits, labor productivity, international trade? (Rhetorical question). This would require a huge decline in standard of living over that period, to which there is no evidence.

This is the logical failure common in these inflation skeptic models. John Williams Shadow Stats is the most well known, and he has acknowledged the conclusions donít hold up when applied to real life.

Beware people selling newsletters and investment products and services.

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Think of it like this. CPI says that price inflation averaged about 2.5% per year for the past three decades. Factoring out some questionable parts of the model, a number of around 3% seems more realistic.
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Old 05-11-2021, 09:27 AM   #144
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Not worried about inflation. Have lots of equities as compared to bonds and lots of dividends.
Higher interest rates depress prices of both.

I am also not worried, but with different reasoning.
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Old 05-11-2021, 11:39 AM   #145
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What does Dr. Copper have to say about inflation?

https://www.macrotrends.net/1476/cop...cal-chart-data

Above link to 45 year chart.

My observations: copper has broken out to a new all time high; copper dropped during every economic downturn, except the COVID induced one.

Wish Iíd have doubled up on my FCX when it was a hat size a year or so ago. Hit $42 today.

My core belief is that when you increase the supply of something, itís price/ value goes down. Value of the dollar ( most other fiat currencies?) would seem likely to decline with the recent fiscal and central bank policies.

Go Dogecoin? Lol.
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Old 05-11-2021, 02:57 PM   #146
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But what can we do about it, though? I'm not being snarky, I'm genuinely asking. Let's say we're looking at a period of elevated inflation. What do we actually do about that, as individuals?
As others have said, assess, plan, and prepare ahead of time.

Assess your expenditures and see how exposed to various categories of inflation you might be. Plan and prepare by considering substitutionary goods if such exist, or ways to just not buy whatever it is (again, if possible). Position your portfolio as you see fit.

Or one can also try to avoid it. Get involved in the governmental processes that might drive inflation, such as working to reduce your property tax burden, writing your representatives, running for election, and voting. Consider moving somewhere with lower inflation. (Where? I dunno. Places in recession tend to have low inflation, so maybe somewhere in Europe?)

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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
I've heard that the rental car companies reduced their fleet sizes in response to the lack of travel during the pandemic. Now that pent up travel demand is reemerging, the car companies must raise prices to ration their limited supply against an onslaught of demand.

I'm not sure why car companies did that rather than just park a bunch of their fleet as the airlines did. Probably were in worse financial straights than the airlines and/or it's easier to sell a Dodge minivan than a slightly used 757.

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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...
Are they planning to raise their pricing by 10-15%, or are they expecting their costs to rise by 10-15% (or both)?

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Haven't seen too many people comment on what significantly rising inflation will do to portfolios that are heavy (50-100%) stocks.

Inflation will typically hit stocks pretty hard. In fact, we're already seeing that yesterday and today with many analysts commenting that the selloffs are due largely to inflationary fears.
Stocks and leveraged real estate seem to be the only real plays to beat inflation over the long run. Gold/PMs, commodities, unleveraged real estate, and bonds all seem to be around +1% over inflation over the long run (decades, not days).

GLD is a bit down over the past two days, which doesn't really match the analysts' explanations. I suspect the drop is due to other things - perhaps a bit of a minor tech bubble bursting causing a bit of fear.
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Old 05-11-2021, 03:22 PM   #147
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GLD is a bit down over the past two days, which doesn't really match the analysts' explanations. I suspect the drop is due to other things - perhaps a bit of a minor tech bubble bursting causing a bit of fear.
This is one of my concerns. Itís perplexing that gold isnít going through the roof. I have a friend who is a gold bug and heís so convinced that thereís too much money in the system that heís going 25% gold. Not sure what heís worth, but Iím sure heís talking about something like 3/4 million in gold. But in the past year, gold has decreased, though the last six months its been rebounding. Still, it seems like it should be soaring and itís not really doing that. If itís the inflation hedge and inflation is real, shouldnít gold have already taken off?
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Old 05-11-2021, 03:25 PM   #148
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Try buying plywood or a new car right now if you enjoy sticker shock...
We just got a great deal on a new car. They wanted our car on the lot. It was a 19 with low miles, they’re asking 2000 less than we paid for the new one. Used cars are at premiums never seen.

Now if there’s fuel to put in it, well, that’s a different story.
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Old 05-11-2021, 03:31 PM   #149
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I guess it depends on how much inflation. The stock market can do pretty well even under moderate inflation. The scary thing is the fed does not have a lot of arrows left in its quiver to deal with a large spike in inflation, and that scares me more than the inflation itself.
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Old 05-11-2021, 03:37 PM   #150
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DW tells me that I'm a bit of a curmudgeon.
But, man, could we have used all you inflationistas in the war against deflation for, oh, the last 30 years or so.

Again, I'll believe it when I see it.

It is amusing to see the deficit scolds re-emerge after four years of slumber. I myself was terrified of inflation in 2009, so I'm making fun of myself and I'm a very big target, so shoot away!
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Old 05-11-2021, 03:47 PM   #151
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I guess it depends on how much inflation. The stock market can do pretty well even under moderate inflation. The scary thing is the fed does not have a lot of arrows left in its quiver to deal with a large spike in inflation, and that scares me more than the inflation itself.
I'm sorry--the Fed could raise rates 2-3% and we and CNBC would wail, gnash our teeth, and beat our breasts like Job.
More accurately, the Fed has not a lot of arrows against deflation, since interest rates are... almost zero. Congress has arrows with further fiscal policy, but won't do much.

Come on, people. This is almost comical. And yes we will probably see some inflation over the next year as economies recover. Get over it.
This is my last word of mockery on the inflation Sasquatch, I promise. But it does remind me of my grandparents talking about how expensive Hershey bars have become versus the good old 1930s.

And yes copper and lumber are expensive. That's a good thing.
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Old 05-11-2021, 03:48 PM   #152
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The scary thing is the fed does not have a lot of arrows left in its quiver to deal with a large spike in inflation, and that scares me more than the inflation itself.
The Fed may not have many good tools to battle deflation, but it is a proven inflation killer. Just remember back to Paul Volker in Ď79. Itís painful but effective.
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Old 05-11-2021, 03:53 PM   #153
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While I'm not concerned about inflation, I'm thinking the average retiree should be. Those of us on the forums here are in a position to absorb 10%/year inflation, but those living on just social security are going to have a hard time when they find their SS is worth less than the new minimum wage.


Some will say that since the fed has kept interest rates low that there is room there to fight inflation by moving interest rates. That might have been true a few years ago, but with ~80% of all USD being created in the last 18 months and the debt that has gone with it, a small increase in interest rates can make servicing the debt difficult.


Decades ago there used to be a saying about being able to retire - a person could retire and have steaks every night, but that inflation would drive them to only being able to afford hamburger after 20 years. *Know I don't have that exactly right.* It may take only 5 years now to go from steaks to hamburger.
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Old 05-11-2021, 03:55 PM   #154
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The Fed may not have many good tools to battle deflation, but it is a proven inflation killer. Just remember back to Paul Volker in Ď79. Itís painful but effective.
Exactly!
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Old 05-11-2021, 03:56 PM   #155
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Are they planning to raise their pricing by 10-15%, or are they expecting their costs to rise by 10-15% (or both)?
Commercial lines insurance is a funny thing. They were making the comment to prepare for it. They typically don't make their profits on policies. Their profits are more tied to investments and downstream insurance (think catastrophic secondary). Also on being efficient in handling claims properly. I'm sure they'll take advantage of the situation...

Just interesting they mentioned it. Got DW thinking about it...
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Old 05-11-2021, 04:17 PM   #156
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The scary thing is the fed does not have a lot of arrows left in its quiver to deal with a large spike in inflation.
You may have that turned around 180 degrees.........
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Old 05-11-2021, 04:20 PM   #157
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Decades ago there used to be a saying about being able to retirement - a person could retire and have steaks every night, but that inflation would drive them to only being able to afford hamburger after 20 years. *Know I don't have that exactly right.* It may take only 5 years now to go from steaks to hamburger.
I actually like hamburger.

Not a big fan of ramen though...
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Old 05-11-2021, 04:22 PM   #158
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I actually like hamburger.

Not a big fan of ramen though...
Or cat food I presume.
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Old 05-11-2021, 04:24 PM   #159
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Or cat food I presume.
I think ramen is a lot cheaper....cat food is like $0.30 a can for the good stuff with lots of melamine in it.
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Old 05-11-2021, 04:26 PM   #160
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DW tells me that I'm a bit of a curmudgeon.
She would know. It's really just speculation for us. So, OK, you're a curmudgeon.
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But, man, could we have used all you inflationistas in the war against deflation for, oh, the last 30 years or so.
Since we haven't had any appreciable deflation in the last 30 years or so, it appears the war went well! Of the last 30 years, only 2009 was deflationary at -0.36%.
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