Wow, inflation has been low!

[Meadbh]

Below is a chart showing inflation in Europe...well actually, the onset of deflation. The ECB is about to do some QE.

And in other news, the Bank of Canada yesterday shocked everyone by dropping its prime lending rate by 25 basis points, to 0.75%. It had been steady at 1% since 2010. Inflation data for Canada are here: http://www.bankofcanada.ca/rates/ind...on-cpi-graphs/

[Gatordoc50]

Inflation been berry berry good to me. It's like a beautiful wave to ride to the shoreline!

[imoldernu]

Quote:

Quantitative easing (QE) is monetary policy where a central bank creates new money electronically to buy financial assets. The aim is to stimulate an economy when standard monetary policy has become ineffective.

Where does the (creates new money electronically) come from?

... does anyone else see a relationship between low CPI and this?

[audreyh1]

Europe just announced a major QE effort to combat deflation, projected to last until Sept 2016.

[Mulligan]

Quote:

Originally Posted by Sunset We dropped cable 8 years ago by switching to the free HD over the air plus netflix. We get about 25 HD channels, and have in Netflix over a 100 shows and movies lined up to watch. Too much really. So our viewing cost is $7.99/mo

Sorry I wasn't clear. The 250% increase in one month was the health insurance. The cable bill I will complain and pay as I watch too much regional sports that require it.


Sent from my iPad using Tapatalk

[eytonxav]

I've said this before, but will say it again, now is a good time to buy tips given the low inflation forecasts, just in case the forecasts are wrong sooner, rather than later.

[Amethyst]

Have tracked expenses carefully for 6 years. Groceries have gone up 50% in that time. Insurance has risen from 30% to 100% depending on type. Cost of having repair person come out has gone from $95 to $145. Lawn tractor service (pick up drop off) costs twice what it cost in 2009.

Amethyst

[rbmrtn]

Quote:

Originally Posted by NW-Bound Just out of curiosity, I look at Japan's M1 and M2. Holy money! Between 1980 and now, its money supplies grew several fold. Add deflation on top of that, and that's a lot of cash sitting there. Cash that people hoard and not used for anything. Cash that is hoarded the same way that gold is hoarded by some people. You keep it just because it's good to have, and not because you want to exchange it for something else that is truly useful. Hmmm... Why does that ring a bell? Is it because that's what we misers often talk about in this forum; hoarding money just for the pleasure of counting it?

The demographics in Japan is part of the issue. Large and growing elderly population that doesn't spend money. It's pushing on a rope.

US maybe going the same as the wave of boomers head into reduced spending years

I was always a Scrooge Mcduck fan myself

[audreyh1]

Quote:

Originally Posted by DFW_M5 I've said this before, but will say it again, now is a good time to buy tips given the low inflation forecasts, just in case the forecasts are wrong sooner, rather than later.

From what I read it's better to wait until inflation raises it's head before buying TIPs. You don't get an advantage buying ahead of time.

[eytonxav]

Quote:

Originally Posted by audreyh1 From what I read it's better to wait until inflation raises it's head before buying TIPs. You don't get an advantage buying ahead of time.

Possibly, but price can move up very quickly unless you are paying close attention or your clairvoyant. Probably not something that should be market timed, but if your port is devoid of tips, now is a good time to allocate as part of your bond mix.

[audreyh1]

Quote:

Originally Posted by DFW_M5 Possibly, but price can move up very quickly unless you are paying close attention or your clairvoyant. Probably not something that should be market timed, but if your port is devoid of tips, now is a good time to allocate as part of your bond mix.

Personally, I don't invest in TIPs. Or any long-term bonds.

TIPs are quite vulnerable to rising long-term interest rates.

Why TIPS Won't Protect Against Rising Rates

[Lsbcal]

If TIPS were to offer 2% or higher real yields, I'd consider them strongly. But right now the 10 year TIPS are at 0.27% : United States Government Bonds - Bloomberg

I might even get a bit of them if they were at 1%.

Even with rising rates, I think it's possible to make over 1% real over the coming years. That's what my data shows for the 1954 to 1977 rising rate period using a variable maturity strategy.

[rodi]

This thread made me look at my personal spending from an inflation spending POV.

Groceries - steady for 3-4 years. This despite the increasing appetite of 2 boys in middle school - one who seems to directly convert caloric consumption to growth in height and shoe size. (Kid's in size 14 shoes and already 6' at age 14 - but skiiiiiiinnny). I expected to see some increase since we're cooking from scratch more now that I'm retired, and we're buying more high end/organic ingredients. But... nope. Spent $200 less last year than the year before.

Autos - 2014 saw a big tick down - mainly in gas consumption. We also had fewer repairs to our older cars. Probably because I dropped my commute mid year. We still schlep our kids to school and/or the bus stop for their non-neighborhood magnet school.

Insurance - 1% uptick for homeowners/auto. Added umbrella last year so that's new. Had a HUGE increase in health insurance... Went from employee subsidized to cobra mid year. I am paying full freight for an exchange coverage this year (because covered CA would not let me have 2 plans - one for hubby, one for kids & me if we took subsidy). I'll get the subsidy back in the form of a tax refund in 2016. If I apply that tax refund to the 2015 year, it would show rates similar to my employer provided coverage.

Shelter. Maintenance is on budget. We had some big spikes (remodeled kitchen, new windows) but that's all paid for.

Utilities. Phone went down. Cable went down. (changed cell carriers, switched to VOIP, downgraded cable package.) Gas and lights - slightly up. New windows reduced consumption, increased rates took that savings. Expect increase this year since rate increases kicked in 1/1/2015.

Overall - our spending is where I expected, with no inflation adjustments. I accounted for increased healthcare, less driving, etc.

[audreyh1]

Our living expenses in 2014 were lower than 2013, in spite of a rather pricey European trip. We had trimmed some of our monthly expenses (which included dropping cable early in the year - yeah!), so that was part of the difference.

[eytonxav]

Quote:

Originally Posted by audreyh1 Personally, I don't invest in TIPs. Or any long-term bonds. TIPs are quite vulnerable to rising long-term interest rates. Why TIPS Won't Protect Against Rising Rates

I think tips may be more sensitive to raising inflation expectations than rising interest rates, and they provide a diversifier to ones bond holdings. Rick Ferri, Larry Swedroe and others were always proponents of maintaining some allocation to tips. Right now inflation expectations are almost non-existant, so it seems they might out perform other treasuries if inflation picks up and rates increase. I guess that assumes one would want to have some position in US treasuries vs other types of bonds.

[Options]

Quote:

Originally Posted by rodi This thread made me look at my personal spending from an inflation spending POV. Groceries - steady for 3-4 years. This despite the increasing appetite of 2 boys in middle school - one who seems to directly convert caloric consumption to growth in height and shoe size. (Kid's in size 14 shoes and already 6' at age 14 - but skiiiiiiinnny). I expected to see some increase since we're cooking from scratch more now that I'm retired, and we're buying more high end/organic ingredients. But... nope. Spent $200 less last year than the year before. Autos - 2014 saw a big tick down - mainly in gas consumption. We also had fewer repairs to our older cars. Probably because I dropped my commute mid year. We still schlep our kids to school and/or the bus stop for their non-neighborhood magnet school. Insurance - 1% uptick for homeowners/auto. Added umbrella last year so that's new. Had a HUGE increase in health insurance... Went from employee subsidized to cobra mid year. I am paying full freight for an exchange coverage this year (because covered CA would not let me have 2 plans - one for hubby, one for kids & me if we took subsidy). I'll get the subsidy back in the form of a tax refund in 2016. If I apply that tax refund to the 2015 year, it would show rates similar to my employer provided coverage. Shelter. Maintenance is on budget. We had some big spikes (remodeled kitchen, new windows) but that's all paid for. Utilities. Phone went down. Cable went down. (changed cell carriers, switched to VOIP, downgraded cable package.) Gas and lights - slightly up. New windows reduced consumption, increased rates took that savings. Expect increase this year since rate increases kicked in 1/1/2015. Overall - our spending is where I expected, with no inflation adjustments. I accounted for increased healthcare, less driving, etc.

+1 to above posters who state spending hasn't increased in years.

Groceries - Haven't calculated exactly, but is probably lower than in the past.

Auto - Will experience a big uptick this year as I replace my auto with another, but am looking forward to it.

Shelter - No increase in years, except property tax has increased by a few percent in the past 10 years

Healthcare - Employer's healthcare premium has increased from zero monthly premium (single employee only) to about $100 monthly and increased office copay amounts.

Utilities - Unchanged, even after adding increased DSL speed (costs have come down)

Entertainment - fallen substantially over the past 10 years as I almost never go to movies anymore, after having gone 1-2 x per week for more than a few decades. With Hulu and youtube I find the expense/hassle of going to the movies absolutely not worth it anymore.

Cost of personal care and clothing has fallen as well. Overall, personal budget has not increased in over 10 years.

[HFWR]

Information on the various CPI numbers, and how they're calculated, are available here.

Though there may be ulterior motives, it's not really a "secret"...

[MooreBonds]

Quote:

Originally Posted by rodi Groceries - steady for 3-4 years. This despite the increasing appetite of 2 boys in middle school - one who seems to directly convert caloric consumption to growth in height and shoe size. (Kid's in size 14 shoes and already 6' at age 14 - but skiiiiiiinnny). I expected to see some increase since we're cooking from scratch more now that I'm retired, and we're buying more high end/organic ingredients. But... nope. Spent $200 less last year than the year before. Insurance - 1% uptick for homeowners/auto. Added umbrella last year so that's new. Had a HUGE increase in health insurance... Went from employee subsidized to cobra mid year. I am paying full freight for an exchange coverage this year (because covered CA would not let me have 2 plans - one for hubby, one for kids & me if we took subsidy). I'll get the subsidy back in the form of a tax refund in 2016. If I apply that tax refund to the 2015 year, it would show rates similar to my employer provided coverage. Utilities. Phone went down. Cable went down. (changed cell carriers, switched to VOIP, downgraded cable package.) Gas and lights - slightly up. New windows reduced consumption, increased rates took that savings. Expect increase this year since rate increases kicked in 1/1/2015. Overall - our spending is where I expected, with no inflation adjustments. I accounted for increased healthcare, less driving, etc.

Groceries - when you mentioned you cook from scratch more, I would expect that to reduce costs, not increase. I see that you are buying more 'organic/high-end' ingredients, but you'd be surprised how cheap things are when you aren't paying for convenience.

Health Insurance - but are you comparing apples to apples, once you factor in deductible, network, co-pays, etc.?

Utilities - You mention that you reduced your phone to VOIP - that's a reduction in the 'quality' of the service you are paying for. It would be incorrect to label that deflation, since the 2 products are not the same. And with your cable, you say that you downgraded your cable package and you are paying less. Again - if you switch to a lower quality product/service and it's the same or lower price, that's not automatically deflation. You could actually be paying MORE for the lower quality service/product compared to the prior year's price of that lower quality product/service.

It's fine to cut corners and substitute products/services, but don't confuse that with price stability/offsetting, or deflation.

[rodi]

I see your point MooreBonds - but I was looking at it from a personal POV - like Mulligan was with ACA changing his health insurance premium.

I tried to note what I considered factors in changes. (Changed providers, changed commute, changed energy rating of the house, etc.)

[Meadbh]

My expenses have decreased quite a bit since ER, mostly due to lifestyle changes rather than inflation rates.