How worried are you about inflation?

[Fermion]

What? At 10 mins to open Dow futures down ~0.3%, S&P down ~0.6%. Cratering?

More like pockmarking

 

[Running_Man]

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.

 

[Fermion]

Sure seems like gold should be catching a bid but it isn't.

I'm going to fill up the pole barn with copper

 

[ERhoosier]

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-inflation-rate-history-by-year-and-forecast-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-jones-100-year-historical-chart
https://www.usinflationcalculator.com/

It's a shame iBond purchases are so limited.....

 

[Amethyst]

People will call for anything they like on social media, and others will "validate" them by re-posting.

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

 

[sengsational]

This is one of my concerns. It’s perplexing that gold isn’t going through the roof. I have a friend who is a gold bug and he’s so convinced that there’s too much money in the system that he’s going 25% gold. Not sure what he’s worth, but I’m sure he’s 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 it’s not really doing that. If it’s the inflation hedge and inflation is real, shouldn’t gold have already taken off?

Sure seems like gold should be catching a bid but it isn't.

I'm going to fill up the pole barn with copper

Maybe the gold buyers are instead buying crypto currency.

 

[Amethyst]

Indeed...my Dad retired early in '73. By '76, his pension had eroded to the point that he went out and found a full-time job, which he hung on to for 6 or 7 more years.

I remember shopping with my Mom, and seeing 3 layers of price labels on canned goods etc. People would try to peel them off to show the original price, and the store employees would scold them.

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.

.

 

[eytonxav]

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 ‘79. It’s painful but effective.

Right I did a brain dump and mixed deflation fighting instead of inflation fighting tools

 

[ivinsfan]

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..

Well as a grain farmer I can tell you that corn is coming off a 2 year cycle where it was literally selling at below the cost of production. Same story on the price of hogs. All the ag and food products mentioned are subject to huge up and down swings. I don't hear people complaining when the price goes down.



As to milk the yogurt, half and half and cottage cheese we buy haven't gone up at all in at least the last 6 months. Half and half is the exact same price I paid in March of 20.

 

[Perryinva]

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...

Most Commercial R.E. ... Get a grip. Most work places I know of are nowhere near ready to embrace the work at home movement long term. Where are you located that this is even a movement? Here in central VA, they are still building CRE, and it is filling quickly. Locations that closed during C19, which were often poorly run, barely hanging on businesses, are being scooped up already in anticipation of post C19 recovery.

Residential RE in a downward slope the last few years I sold my home in early 2018 for 30% more than I paid in early 2007. Except for 2008-9, where it dipped some, (less than 10%) by 2010 it had been on a steady rise. The housing shortage now will keep prices increasing for a few years before it drops and levels to a normal. ROI.

 

[Running_Man]

People will call for anything they like on social media, and others will "validate" them by re-posting.

Chipotle this week raised it's starting wage nationwide 37% because they had 20,000 unfilled positions out of total of 65,000 normally filled. Minimum starting wage in some cities is now $18 per hour up from $9 average just 3 years ago. That increase is $650,000 per hour Chipotle average employee works 20 hours per week 50 weeks a year = 650 million dollars in increased wages. For one fast food restaurant chain, which competes for workers everywhere in that space.

 

[Running_Man]

Well as a grain farmer I can tell you that corn is coming off a 2 year cycle where it was literally selling at below the cost of production. Same story on the price of hogs. All the ag and food products mentioned are subject to huge up and down swings. I don't hear people complaining when the price goes down.



As to milk the yogurt, half and half and cottage cheese we buy haven't gone up at all in at least the last 6 months. Half and half is the exact same price I paid in March of 20.

Between 2016 and 2020 corn prices fluctuated between $3.25 and $4.50 Corn price today is $7.63 per bushel.

Milk prices are far more volitale and have fluctuated between 12 and 24 presently sitting at 19.

I don't think it is a complaint about the farmers as a complaint about the rapidity of the move. Commodities have been as you probably know in a 20 year downtrend and at the start of the year reversed that trend and it is now exploding out, the AVERAGE commodity over the past year as measured by the Bloomberg Commodity index is up 53% as of today.

The sustained trend of this raw material input is just now only beginning to hit the end stage of consumer prices. The FED has no appettite to slow this and risk the economy, they will not move unless inflation is really out of hand, which of course is too late, but they are willing to take that risk because of the 2007-2010 FED experience and the taper tantrum.

Since there has been almost no serious inflation for most adults in their lifetime (54% of the US population was born after 1980 and about 70% will start their adult working life after 1980) and so have only known inflation to be less and less of a threat, something you read about occassionaly on your phone in your facebook newsfeed, but nothing you ever witnessed.

 

[38Chevy454]

In spite of the recent inflationary news and all the discussion on the forum here, I'm still eating avocado toast

 

[ivinsfan]

Between 2016 and 2020 corn prices fluctuated between $3.25 and $4.50 Corn price today is $7.63 per bushel.

Milk prices are far more volitale and have fluctuated between 12 and 24 presently sitting at 19.

I don't think it is a complaint about the farmers as a complaint about the rapidity of the move. Commodities have been as you probably know in a 20 year downtrend and at the start of the year reversed that trend and it is now exploding out, the AVERAGE commodity over the past year as measured by the Bloomberg Commodity index is up 53% as of today.

The sustained trend of this raw material input is just now only beginning to hit the end stage of consumer prices. The FED has no appettite to slow this and risk the economy, they will not move unless inflation is really out of hand, which of course is too late, but they are willing to take that risk because of the 2007-2010 FED experience and the taper tantrum.

Since there has been almost no serious inflation for most adults in their lifetime (54% of the US population was born after 1980 and about 70% will start their adult working life after 1980) and so have only known inflation to be less and less of a threat, something you read about occassionaly on your phone in your facebook newsfeed, but nothing you ever witnessed.

Illinois extension says the average cost of production of 200 bushel corn is around 3.76 a bushel ..


Did you hear about the huge windstorm that flattened the corn in Iowa? New crop corn is at around 6 bucks. the 7.63 is the price for cash delivery of corn today, since it is self rationing until combining of 21 crop.



Sometimes things happen for a reason and when they happen together it's no picnic. I did not take it as complaining about farmers at all. But is it the beginning of systemic inflation that's the question?

 

[Running_Man]

10 year Treasury vs CPI Long Term Chart

 

[Running_Man]

40 year high in Core Inflation in April less Food and Energy

 

[MichaelB]

I don't think it is a complaint about the farmers as a complaint about the rapidity of the move. Commodities have been as you probably know in a 20 year downtrend and at the start of the year reversed that trend and it is now exploding out, the AVERAGE commodity over the past year as measured by the Bloomberg Commodity index is up 53% as of today.

it’s still below its level of 20 years ago and less than half it's peak of 2008.

 

[Perryinva]

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.

Exactly. Always nice to pay off rock bottom mortgage interest with inflated dollars.
SS is COLA adjusted and so is about 1/3 of our pensions. Not one LIKES inflation but as Alfred E Neuman said “What me worry?”

 

[brett]

Decided to have our roof done next month instead of waiting until next year when it will have to be done.

No difference to us but the quotes are good. Could be more expensive next year.

 

[GenXguy]

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.

Sadly, while my assessed value keeps going up, and my property taxes and homeowner's insurance have doubled over the last 18 years, with homeowner's insurance going up over 12% this year alone, my home's true market value is about same as what it was when I bought it 18 years ago - this just isn't a good area for home values, hasn't been for years, and it seems to be getting worse, but that doesn't prevent the taxes and insurance from skyrocketing. It's the worst because it makes me feel more stuck here knowing how little I'll have to sell my house for vs. buying a very similar one about anywhere else I would rather live. They say it's a buyer's market.

Looks like the stock market is getting pretty worried about inflation now. It will be interesting to see how bad it gets.

 

[tenant13]

I try not to overthink the future which in most cases is unknowable but rather tackle issues at hand. My current issue was: do I keep long term US treasuries that have already lost 15% of their value since I bought them? No. I sucked up the loss and dumped them. So in that sense I do worry about inflation. I did what I thought was a prudent move (I also bought some bitcoin last year which is worth 5x of its purchase price - but that was less about inflation and more about BTC properties)

 

[daylatedollarshort]

What I try to do is keep our average retirement budget under SS and pension income, so if we have some expense go up a lot, I try to find some painless way to offset that. Last year our earthquake insurance went up quite a bit. This year it was our homeowner's insurance due to the increases in rebuilding costs. To offset that we are refinancing at a lower rate, closing down a side business we no longer work on but had some lingering overhead costs and selling the assets, and reviewing our energy usage. We also made a bunch of other little changes, like making my own vegan nut milk and installing new low flow shower heads, that combined together really added up. So far I have been lowering our expenses more each year than the previous year, making our personal inflation rate low compared to CPI inflation.

 

[NW-Bound]

Data supposedly shows that poultry price has gone up 34% since pre-Covid time.

Yet, I just saw a local grocery store advertise chicken legs and thighs for $0.77/lb. That's way too cheap, and reflects no price increase. What's going on?

My wife said, oh but that's frozen stuff from long ago. I don't think they keep this stuff frozen for 2 years, or do they?

 

[audreyh1]

I seriously doubt they keep it frozen that long. 6 months maybe?

 

[Car-Guy]

Between 2016 and 2020 corn prices fluctuated between $3.25 and $4.50 Corn price today is $7.63 per bushel.

We buy 500lbs of deer corn each month. (DW likes to feed the deer every day all year) We have 6 to 8 deer out there everyday and sometime I've seen as many as 18 to 20 around dinner time . (Gets hard to count that many as they wander around.) Anyway, the feed bill is usually about 55 dollars for 10 bags or $5.50 a bag... It's been that way for years now. Today, I just paid $97.50 for 10 bags... "Almost" double the cost in one month...

Well on the positive side, I'm sure I see a huge increase in next years SS payments.