How worried are you about inflation?

[rk911]

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Originally Posted by skyking1 Not worried about something I cannot change. Not concerned, not bothered, not staying up at night. ...

This ^

[Montecfo]

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Originally Posted by yhoomajor Treasury yield is controlled around 1.6% because Federal Reserve keeps buying it. It's not a rate that correlates to real inflation in real world out there. At least not in this era of Fed managed economy. In other words - don't expect (this time) to get 10%+ on your CD deposits even when real inflation rate is much higher than that. That's like a kick to the guts of Savers of modest means. They get crushed by real inflation, yet have no other way but to risk it in more risky assets. "But they can eat cake".. aka invest in equities.

10 year Treasury is up about a point in the last 9 months so it seems to not be sufficiently "controlled". And of course there are corporates and the CPI.

But of course none of these data points defeat anecdotes.

[yhoomajor]

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Originally Posted by Montecfo 10 year Treasury is up about a point in the last 9 months so it seems to not be sufficiently "controlled". And of course there are corporates and the CPI. But of course none of these data points defeat anecdotes.

More power to you if you think treasury moved to 1.6 percent from 0.6% against Fed's will and/or against Fed's intention. Or that if you think Fed can't bring Treasury yield down to 0.6% or even lower if it wants to.

CPI number doesn't put food on most american people's dinner table. The actual inflation is much higher. They have to source that food with "anecdotal" priced groceries. New Corporate bonds issuance is minuscule compared to Treasury market.

[Montecfo]

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Originally Posted by yhoomajor More power to you if you think treasury moved to 1.6 percent from 0.6% against Fed's will and/or against Fed's intention. Or that if you think Fed can't bring Treasury yield down to 0.6% or even lower if it wants to. CPI number doesn't put food on most american people's dinner table. The actual inflation is much higher. They have to source that food with "anecdotal" priced groceries. New Corporate bonds issuance is minuscule compared to Treasury market.

It does beg the question how would you ever know anything factual about inflation? All real data is judged to be eerily suspect, and can simply be dismissed. Corporate bond issuance is "miniscule", therefore the low low rates buyers are willing to accept can be ignored, apparently.

If anecdotes and emotion are your measure, then we certainly have massive inflation already.

Otherwise, not or at least not yet.

[DawgMan]

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Originally Posted by Montecfo It does beg the question how would you ever know anything factual about inflation? All real data is judged to be eerily suspect, and can simply be dismissed. Corporate bond issuance is "miniscule", therefore the low low rates buyers are willing to accept can be ignored, apparently. If anecdotes and emotion are your measure, then we certainly have massive inflation already. Otherwise, not or at least not yet.

While general inflation at the macro level generally starts to "shift the boat" of the national economy, I tend to believe it really boils down to "personal inflation" and how that ends up affecting our buying decisions. Most of us here are perhaps exposed mainly to increase in property taxes, food, clothing, and transportation... which you could argue the last 2/3 items we have some control over. In my case, 10 years ago, I would have been subject to much more personal inflation with 4 kids in the nest, college/private school, and the general cost of food/clothing/shelter for 6 people. Today, with everything paid for, kids on their own, I perceive my biggest risk of personal inflation to be my discretionary expenses (i.e. travel, home improvement, entertainment, buying cars sooner than normal)... this I can manage and helps reduce my concerns of inflation.

All this said, I do realize there is a whole world out there living paycheck to paycheck and in most cases over extended with no margin, who are much more exposed to general inflation. The question is when/what buying changes do they make in mass that shifts the boat? Or, do they just borrow their way to the next Big Short??

[Gumby]

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.

[jollystomper]

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Originally Posted by skyking1 Not worried about something I cannot change. Not concerned, not bothered, not staying up at night.

Agree. It is simply something we will plan for and deal with as best as possible. I do not see it instantly evolving into a zombie apocalypse type scenario that many seem to fear.

[Out of Steam]

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Originally Posted by dm I’m concerned, but I retired in 2007 and survived that stretch. What bothers me now is things are not available. I ordered some reloading tools in March, the company said it may be 6 months to fill the order.

The supply chain things are really unpredictable right now. There's a Hyundai dealer at the exit to our neighborhood, and their storage lot is back to being almost empty, as it was earlier in the pandemic.

I'm looking at replacing some hiking gear with lightweight items from smaller manufacturers, and many of my choices are out of stock because of fabric shortages.

[Out of Steam]

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Originally Posted by Gumby 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.

Since workman's compensation for COVID has proven to be almost impossible to get, I believe that people would have decided that very low-wage work wasn't worth the COVID risk whether there was stimulus/enhanced unemployment or not. Dumpster diving and food bank lines are probably not high-risk.

Similar to firefighters and cancer, a legal presumption that any case of COVID in someone with a public-facing job was caught because of work would have been a huge help.

[Gumby]

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Originally Posted by Out of Steam Since workman's compensation for COVID has proven to be almost impossible to get, I believe that people would have decided that very low-wage work wasn't worth the COVID risk whether there was stimulus/enhanced unemployment or not. Dumpster diving and food bank lines are probably not high-risk. Similar to firefighters and cancer, a legal presumption that any case of COVID in someone with a public-facing job was caught because of work would have been a huge help.

That makes sense, but I think the end result is the same; as the risk abates, those people will return to work, labor costs will ease and more stuff will get produced.

[Out of Steam]

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Originally Posted by Gumby That makes sense, but I think the end result is the same; as the risk abates, those people will return to work, labor costs will ease and more stuff will get produced.

I agree, I'm not especially worried about inflation in the long term.

I do believe that we are seeing a step increase in pay at the bottom of the wage scale that will be permanent, though it may have as much to do with a leveling-off in immigration than anything else. Increasing immigration doesn't appear to be an issue that the administration is willing to take on.

[Running_Man]

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Originally Posted by Out of Steam Since workman's compensation for COVID has proven to be almost impossible to get, I believe that people would have decided that very low-wage work wasn't worth the COVID risk whether there was stimulus/enhanced unemployment or not. Dumpster diving and food bank lines are probably not high-risk. Similar to firefighters and cancer, a legal presumption that any case of COVID in someone with a public-facing job was caught because of work would have been a huge help.

This is deceptive, the FMLA provided under the Families First act PAID leave for 2 weeks for anyone with COVID or having to care for someone with COVID got up to $5,111 for sick leave. On top of that someone couild get paid if child care was not available. "Emergency Family and Medical Leave Expansion Act (EFMLEA), which requires that certain employers provide up to 10 weeks of paid, and 2 weeks unpaid, emergency family and medical leave to eligible employees if the employee is caring for his or her son or daughter whose school or place of care is closed or whose child care provider is unavailable for reasons related to COVID-19."

However a year at $930 a week, the amount of unemployment someone in Indiana was able to get, present $690 by saying you are afraid of getting Covid (you are not required to take a job offer if you are concerned about your health), is far better than making $600 a week at a $15 an hour job. Even at $25 an hour having tax free 35K-45K 70-90K if a couple and getting $6,000 in stimulus money as a couple, means getting that job at a restaurant can wait. With the new $300 a month for each child tax credit paid monthly there is incredible disincentive to work and instead stay with unemployment as long as possible especially in families where both parents were working. At present in Indiana someone on unemployment in a family with a child is getting about $3,300 a month more than twice what the average retiree receives from Social Security. It is simply the logical best decision made possible by present laws.

[HoneyBadger]

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Originally Posted by Fermion I don't know the answer to how to combat inflation with one's portfolio, especially with interest rates at 1% to 2% for short term. Eventually, stocks *should* catch up with inflation but a lot of stocks are pretty dang pricey right now. I guess gold is still relatively cheap, if gold even still works.

Well, real estate was once a great way to beat inflation, especially with 80% leverage...rents go up with inflation, while the mortgage stays the same, and the value of the property goes up with the rent. But with real estate prices skyrocketing and cap rates falling, even that doesn't work right now.

[FIYes]

I remember the 70’s and early 80’s so I recognize what impact inflation can have. I won’t say that I am worried, but I do realize the potential impact of inflation. We have been lulled into complacency by recent years of low inflation.

[ExFlyBoy5]

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Originally Posted by youbet I was curious about job demand around here and signed up with a couple of those on-line job services. Being a long retired geezer who hasn't had a penny of earned income in 16 years, I checked some boxes indicating I'd be willing to work as a driver. I wasn't thinking CDL, just delivery or something. My inbox has been flooded with invitations to come in for an interview, many for high paying CDL jobs (for which I'm not qualified). Nothing at $14,000 a week though! It's rare you drive by a store or restaurant or through the local industrial park that you don't see "help wanted" signs around here. At the Home Depot yesterday, the geezer employee who was helping me (another geezer ) get a heavy object off the shelf apologized for my long wait and said they are less than half staffed. Interesting times in the economy!

I can't speak as to the need for CDL drivers, but I know that the legal/lawyer headhunters are blowing up my email. Bonuses, excellent wages, etc...all while we have been told for years that there are WAY TOO many lawyers (jokes not withstanding)

[ExFlyBoy5]

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Originally Posted by NW-Bound Instead of YTD increase, I wanted to know the price increase since pre-Covid time. I went to the above Web site to look at the current prices of the above commodities, plus their prices on Jan 2020 (pre-Covid). I then computed the price increases shown in the table below. It is bleak, unless you are a user of wool and heating oil. Commodity Price 5/6/2021 Price 1/1/2020 % Increase Beef 20.39 14.21 43% Poultry 7.14 5.35 34% Lean Hog 111.4 68.55 63% Canola 1003 545 84% Wheat 765 554 38% Coffee 149 103 45% Sugar 17.58 13.31 32% Corn 760 392 32% Wool 1319 1558 -15% Lumber 1645 407 304% Milk 23.57 16.93 39% Gasoline 2.1171 1.7155 23% Heating Oil 1.989 2.02 -1.5% Crude 64.93 63.54 2.2%

Another one that a friend that is in the manufacturing business shared with me. This is price of hot rolled, cold rolled, galvanized and plate steel from 9/20 to 5/21.

[youbet]

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Originally Posted by FIYes We have been lulled into complacency by recent years of low inflation.

Yes indeed.

Lots of folks seem to underestimate how early inflation can be more detrimental to FIRE portfolios than early poor performance of the markets. Once general price levels rise, there is very seldom a recovery. That is, there is very seldom deflation. Once up, general price levels tend to stay high. But markets seem to always recover....... at least eventually.

[34rlsa]

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Originally Posted by youbet Yes indeed. Lots of folks seem to underestimate how early inflation can be more detrimental to FIRE portfolios than early poor performance of the markets. Once general price levels rise, there is very seldom a recovery. That is, there is very seldom deflation. Once up, general price levels tend to stay high. But markets seem to always recover....... at least eventually.

And why I'm not buying the FEDs opinion this is transitory.

[stepford]

Those of us with no heirs have a secret weapon against inflation - our impending deaths. I'm actually semi-serious. In my 60s, every year I age means my savings has to last roughly 3% less long. So that means I have 3% more spending power, right? Automatic inflation protection.

Heck, if I get a terminal illness then I'll really have it made.

[NW-Bound]

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Originally Posted by ExFlyBoy5 Another one that a friend that is in the manufacturing business shared with me. This is price of hot rolled, cold rolled, galvanized and plate steel from 9/20 to 5/21.

Holy mackerel!

Iron ore price has been going up, but "only" to 2.1x the price on Jan 2020!

My mining stocks have been doing so well, I wish I bought more.