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Old 05-11-2021, 04:34 PM   #161
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Sometimes I think too much media coverage isn’t that good for us.

This afternoon I had a Drs appt and passed by several gas stations. The lines were nuts (granted, I live in the Southeast but still…).
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Old 05-11-2021, 05:28 PM   #162
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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'd speculate it will become multi-use(residential-commercial) R.E.
Most commercial R.E has certainly become unessessary after C19's work from home experiences for both employers and employees.

Where as IIRC I saw residential R.E adopt a downward slope last few yrs. from numerous sources analysis.

Good luck & Best wishes...
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Old 05-11-2021, 05:31 PM   #163
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Thankfully, I already own my house and cars but some of the items on this list are definitely concerning with regards to inflation that impacts my budget. Gas, certain meats, truck driving (shipping in general). I find it hard to believe that inflation is going to remain low, at least in the near term.

https://www.businessinsider.com/why-...t-paper-2021-5

I am not worried about inflation because last year I re-allocated my portfolio to approximately 25% equities, 25% treasuries, 25% income producing rental real estate and 25% precious metals and rare earth material needed for the green economy. Inflation can be triggered by mass hysteria....if everyone believes inflation will occur. When some prices of goods and services do start to rise, people will start buying BEFORE the prices continue to rise. When public demand exceeds supply, greedy sellers raise prices and the cycle continues. Prediction of this occurring is difficult but it made sense for me to be cautious and re-structure my portfolio to account for inflation. I belong to the camp who believes that inflation is more likely than the other camp who believes it is less likely.
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Old 05-11-2021, 05:35 PM   #164
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I remember the inflation of the late 70’s early 80’s. It was scary stuff! We bought a house in early 80’s at 16.5% interest. That hurt.
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Old 05-11-2021, 06:30 PM   #165
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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?

The “official” numbers are not meant to reflect what individuals experience. Individuals should assess their specific needs and act accordingly. It’s too late if you need to buy a home but refi rates are still fantastic.
Maybe you could buy several years worth of consumer products with long shelf lives. Paper, cleaning, personal hygiene products, etc. Buy 2 or 3X what you’d normally buy. Go very short on all fixed income assets in anticipation of higher rates on CDs and bonds.

I’m not worried and don’t feel we are going to have an inflation problem but these are things I’d be comfortable doing anyway.
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Old 05-11-2021, 06:32 PM   #166
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With stocks, we on this board generally do not try to "time the market".

Inflation seems even more unpredictable than the stock market.

So I don't see how/why one would do a whole lot of "inflation precautions". Financially, the times I've been "sure about something" have been the times I've been proven clueless....
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Old 05-11-2021, 11:10 PM   #167
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Here are some sobering YTD inflation stats..

Beef: + 12.40%
Poultry: +18.80%
Lean Hogs: +58.52%
Canola: +59.35%
Wheat: +19.48%
Coffee: +16.57%
Sugar: +13.49%
Corn: +57.02%
Wool: +12.64%
Lumber: +90.47% (!!) after a crazy 2020 on top of that..roughly triple 2 years ago
Milk: +21.20%
Gas: +50.03%
Heating Oil: +34.35%

...etc. More at https://tradingeconomics.com/commodity/gasoline

Pretty much, no matter WHAT any of us do with our portfolios or investing strategy, we're all pretty much in a heap of trouble with numbers like that.

And with that many moving pieces and parts, predicting an "average" future rate - or even a range - becomes darn near impossible, IMHO.

In terms of actionable to-dos..I recently bought PIMCO's Inflation Protection (Instl) fund and some IAU (Gold-backed ETF), but wish I bought more of both as they've both increased in price quite a bit since I bought and I'm now wishing I had more than I do of both. I also have little faith in US growth going forward and am pretty convinced we're going to be looking at the mother of all market meltdowns in 2021 or 2022..so am investing in International Value, US Value, China, Utilities and other areas to diversify away from US large-cap growth.

I heard a good analyst say the other day that his strategy (and one he advocates for clients) is to shift from capital growth to capital preservation given what he anticipates coming (also huge market melt-down in the near term). I personally think there's a lot to be said for that and plan to shift my own assets largely this way..
I see food prices up but can tell you absolutely that coffee what I'm buying for years (Illy, Lavazza) so far didn't go up. My family consumes 1 can per week so I'm watching prices very closely.
In terms of actionable to-dos.. I don't know. How good TIPS in 5-10% inflation we don't know. I read that good inflation protection are small caps and value funds, but how good? Basically all companies who can pass prices to consumer should be ok - food, utilities, basic necessity.
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Old 05-11-2021, 11:31 PM   #168
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Personally, while ordinary inflation is expected I am terrified of hyper-inflation. We have also been seeing slimflation a lot with the repackaging of stuff at lower quantities in the same containers for higher prices. This is "hidden" inflation. We see it here in things like sour cream that used to be 1 kg container but now only has 800g in it but for the same price. Butter was 250 grams and is now 180 grams in a pack. I bought chlorine and acid for our pool and the muriatic acid last year was 50% strength but now it is 15% but the same price. I recall before leaving the US in 2009 that a 2x4 was actually a 1.5x3 so this has been going on for a while now.

The Fed has pumped more than $9 trillion into the economy at a rate of $160 Billon a day which is the only reason we are seeing the market at record highs.

https://needtoknow.news/2020/03/the-...-1-5-trillion/

At some point, the music has to stop and interest rates must go up. The only result that is possible is a massive devaluation of the US dollar. We live in Europe and all our income is US dollars (4 pensions and all our money is tied into the market as equities or cash). With that in mind, we are moving half our cash to Swiss Francs which are the only actual stable currency in the world. However, we cannot open any accounts in Switzerland as it is only for Swiss citizens living inside Switzerland. But, we can have local accounts that are in foreign currency (we already have a US dollar and Euro account).

Oil is already back at highs of $70 a barrel and is expected to go up to $100 a barrel later this year. The interest on the debt will be unsustainable. MMT is a farce and economic gravity will force things to re-balance. The US still imports the vast majority of manufactured goods and the money the Fed is pumping generally ends up in China and Russia (as well as other Asian manufacturing countries).

So, we have put ourselves into the same economic position as the Weimar Republic before its collapse. It is very scary to me and there is not much we can do about it.
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Old 05-12-2021, 04:54 AM   #169
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The “official” numbers are not meant to reflect what individuals experience. Individuals should assess their specific needs and act accordingly. It’s too late if you need to buy a home but refi rates are still fantastic.
Maybe you could buy several years worth of consumer products with long shelf lives. Paper, cleaning, personal hygiene products, etc. Buy 2 or 3X what you’d normally buy. Go very short on all fixed income assets in anticipation of higher rates on CDs and bonds.

I’m not worried and don’t feel we are going to have an inflation problem but these are things I’d be comfortable doing anyway.


I thought about this some more and realized it’s a terrible idea. If everyone buys 2-3X what they normally buy it will only increase inflationary pressure which judging buy this thread may already be a self fulfilling reality for some. I was looking at pressure treated lumber and noticed prices have retreated 25% from a recent peak.
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Old 05-12-2021, 06:24 AM   #170
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When the Fed cranked up the (figurative) printing presses to deal with the 2008 Global Financial Crisis to pump trillions of dollars into the economy through quantitative easing, we saw the same predictions of runaway inflation. Why did that never happen? Because in 2013, the Fed responded to signs of rising inflation by "tapering" -- taking money out of the economy to counter inflationary pressure. Inflation in the US never rise above 2.5%.

Why would the Fed not do the same thing again?

It is easy to cite examples of prices going up without mentioning prices that are going down, but that doesn't give a true picture of inflation, does it? The plural of 'anecdote' is not 'data'. Your personal inflation rate will differ from the consumer price inflation depending on your spending patterns, of course, but statistics are not propaganda.

The sky has never fallen before, and it isn't falling now, now matter how much some people enjoy getting worked up about the idea that the sky could fall.
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Old 05-12-2021, 06:34 AM   #171
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OK, consumer prices up 4.2% over past 12 months so I’m sure there will be a lot of market buzz today. From CNBC:
Quote:
Inflation accelerated at its fastest pace in more than 12 years for April as the U.S. economic recovery kicked into gear and energy prices jumped higher, the Labor Department reported Wednesday.

The Consumer Price Index, which measures a basket of goods as well as energy and housing costs, rose 4.2% from a year ago, compared to the Dow Jones estimate for a 3.6% increase. The monthly gain was 0.8%, against the expected 0.2%.

Excluding volatile food and energy prices, the core CPI increased 3% from the same period in 2020 and 0.9% on a monthly basis. The respective estimates were 2.3% and 0.3%.
It’s a very noisy signal.
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Old 05-12-2021, 06:52 AM   #172
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Fair point. Let's see how the Fed responds. In the 1970s, 4.2% would have been considered to be very low inflation.
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Old 05-12-2021, 07:00 AM   #173
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Oh, the Fed is not going to respond to one month of data other than answering questions. They are playing a longer game and seem to be mostly focused on the continuing economic disruption from the pandemic.
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Old 05-12-2021, 07:08 AM   #174
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Fair point. Let's see how the Fed responds. In the 1970s, 4.2% would have been considered to be very low inflation.
True, but compared to the very low inflation of the past 40 YEARS, 4.2% is a pretty big deal.

PS: for those that may still be thinking inflation won't negatively affect equities, futures are once again (not surprisingly, IMHO) cratering on the news.
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Old 05-12-2021, 07:20 AM   #175
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True, but compared to the very low inflation of the past 40 YEARS, 4.2% is a pretty big deal.

PS: for those that may still be thinking inflation won't negatively affect equities, futures are once again (not surprisingly, IMHO) cratering on the news.
What? At 10 mins to open Dow futures down ~0.3%, S&P down ~0.6%. Cratering?
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Old 05-12-2021, 07:22 AM   #176
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What? At 10 mins to open Dow futures down ~0.3%, S&P down ~0.6%. Cratering?
More like pockmarking
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Old 05-12-2021, 08:26 AM   #177
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The last four months have seen month over month increases of:

January 0.3%
February 0.4%
March 0.6%
April 0.8%


Total Increase April 2021 over December 2020 2.1% annualized rate of increase for the 4 month average 6.3%. However the inflation is as the numbers show accelerating and trending. The interest on a 10 year treasury presently pays about the last 2 months of inflation increase so anyone that bought a 10 year treasury will lose out by 0.6% plus whatever inflation hits in the next 8 months. The biggest beneficiary? The entity that has to pay back the trillion of dollars in 10 years. To expect an effort to slow this down anytime soon does not seem reasonable. Portfolio's that hold long term government debt will not beat inflation unless the economy where to implode and the government is doing everything to make sure that does not occur so I do think it is reasonable to assume that will not happen so that owning long term treasuries is a loser, as is the total bond market.

In the meantime calls for pay increases for workers to $25 an hour for most jobs actually was trending for 2 days on Twitter.
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Old 05-12-2021, 08:32 AM   #178
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Sure seems like gold should be catching a bid but it isn't.

I'm going to fill up the pole barn with copper :-)
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Old 05-12-2021, 08:42 AM   #179
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One month does not a trend make, but what worries me is the Fed folks seem to be totally discounting the frightening speed with which inflation can get out of hand. Whistling past the graveyard IMHO.
Recall that (US) inflation spiked from 3.4% in 1972 to 8.7% in 1973 DESPITE Fed Funds rate being actively raised (5% in '71 up to 9% in '73). In '74 inflation jumped further to 12.3%. And multiple other instances where inflation doubled (or more) in a year (inc recently as '15-'16).
https://www.thebalance.com/u-s-infla...recast-3306093

Most have forgotten just how devastating inflation can be to those whose income/investments are relatively fixed (e.g. fixed annuities, soc sec (whose inflation adjustment FAR understates reality), after-tax bond returns, etc.). Even equities often do not keep up, sometimes for prolonged time periods. For example Dow Jones was actually DOWN on inflation-adjusted basis from Jan '73 to Jan '93 while overall inflation was over 500% over that span. Poor folks who retired in '73 counting on a fixed pension or annuity were looking at surviving on a shrinking fraction of their initial purchasing power.

https://www.macrotrends.net/1319/dow...storical-chart
https://www.usinflationcalculator.com/

It's a shame iBond purchases are so limited.....
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Old 05-12-2021, 08:44 AM   #180
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People will call for anything they like on social media, and others will "validate" them by re-posting.

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In the meantime calls for pay increases for workers to $25 an hour for most jobs actually was trending for 2 days on Twitter.
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