Latest Inflation Numbers and Discussion

[Montecfo]

I guess you missed those12 years of 1.5% average inflation. 2008-2020.

 

[GenXguy]

I guess you missed those12 years of 1.5% average inflation. 2008-2020.

I didn't miss what started in 2020 through now!

How many years of 1.5% inflation will it take to get the 10 year average down to 2% average inflation starting next year? And no, I don't believe that's going to happen, but it shows the hole we are in.

 

[Chuckanut]

I guess you missed those12 years of 1.5% average inflation. 2008-2020.

Sadly those years were a big part of the War on Savers. For most of that time earning a positive real return after taxes on secure savings was difficult if not impossible. Think Ibonds with a 0% fixed rate. After the taxes are paid, a net loss in real terms. Not so good.

 

[audreyh1]

Sadly those years were a big part of the War on Savers. For most of that time earning a positive real return after taxes on secure savings was difficult if not impossible. Think Ibonds with a 0% fixed rate. After the taxes are paid, a net loss in real terms. Not so good.

Maybe, but I enjoyed tremendous inflation adjusted gains on my investments overall over that time period. So I was happy about it.

I never expect traditional very safe savings to beat inflation after taxes.

 

[GenXguy]

Sadly those years were a big part of the War on Savers. For most of that time earning a positive real return after taxes on secure savings was difficult if not impossible. Think Ibonds with a 0% fixed rate. After the taxes are paid, a net loss in real terms. Not so good.

Well my CDs took a real hit in purchasing power after that stretch. I had CDs paying around 1% while inflation jumped to 9%. That felt like a war on savers. And even my equities dropped significantly with the S&P 500 still below it's record high as of today, although it's getting closer after about 2 years!

 

[aja8888]

Who are these "savers" that the war was on? No one here, I suspect!

 

[Montecfo]

I didn't miss what started in 2020 through now!

How many years of 1.5% inflation will it take to get the 10 year average down to 2% average inflation starting next year? And no, I don't believe that's going to happen, but it shows the hole we are in.

We have been over this. Last decade is already at or below long-term averages.

Recency bias is real.

 

[Chuckanut]

It appears my skepticism regarding fighting inflation was unwarranted. I am thankful for that.

From today's WSJ:

The Fed’s preferred inflation measure, the personal-consumption expenditures price index, fell 0.1% in November from the previous month, the first decline since April 2020, the Commerce Department said Friday. Prices were up 2.6% on the year, not far from the Fed’s 2% target.

https://www.wsj.com/economy/what-to...g-in-on-feds-target-0778037d?mod=hp_lead_pos2

Consumer spending, meanwhile, was up 0.2% on the month in November, higher than 0.1% in October and a sign of confidence in the economy on the part of American households. Overall personal income was up 0.4%, better than 0.3% in October.

Friday’s improvement in the University of Michigan consumer sentiment measure snaps four straight months of declines and indicates that people are starting to believe inflation can be sustainably brought down, said Joanne Hsu, director of the survey.

 

[Montecfo]

I understand what you are saying but we'll agree to disagree. I think normal interest rates are the best overall for most folks. As an equity investor, you have your own bias.

Why not just normalize interest rates near to their historical averages? That would be fair to both savers and borrowers, whereas abnormally low interest rates are beneficial to borrowers (and perhaps investors) but detrimental to savers and vice versa.

BTW, while I would benefit from normal interest rates compared to 2008-2022, I also paid normal mortgage rates during my working years (higher than 2008-2022).

I guess everyone would like to peg rates at their favorite level. I do not think I am biased. But I understand that low rates are best for the overall economy. This works best for the nation, even folks who wish interest rates were higher. It is a war on sluggish growth I guess!

And I have a balanced portfolio, so I certainly feel the effects of lower rates on the fixed side. But interest rates affect a lot more than the investment side of things.

 

[GenXguy]

We have been over this. Last decade is already at or below long-term averages.

I didn't ask about being below the long-term average. That is still too high. I'm asking about how many years of 1.5% inflation it would take to bring the 10 year average inflation down to the TARGET rate of 2%. And again, not that it would happen, but it's just an exercise that shows the hole we are in.

 

[Montecfo]

I just hope this "cease fire" in the "war on consumers" holds.

 

[Koolau]

Or you could avoid the tax by conserving energy.

Yeah, I've been doing that for 40 years. Anyone here (heh, heh, other than NW-Bound) who uses fewer than 4KWh of electricity/day? Or who uses fewer than 10 gal/month of gasoline? No natural gas/fuel oil/heat/AC?


I'm sure that are a few here who use less. Probably not too many, though. I personally just do not like things like "carbon tax" or "incentives" to buy green. I understand that many people consider these things valuable to the planet. I've done my own numbers and disagree. No need to argue as I'm sure all our minds are made up and Porky has been relatively quiet of late so let's just say YMMV.

 

[Koolau]

Ah… a joke! I get it.

I live int he same state. I bought a hybrid a few years ago. My reward for conserving energy was to have a $75 fee added to my yearly tags. The fee is to help build out a state charging system I can plug my hybrid into. No, I don’t drive a plug-in hybrid. It’s primarily about raising revenue, not climate change or conservation.

Yeah - kinda like Big Tobacco paying for fire trucks and green spaces (and administrator's salaries and every other thing besides anti-smoking stuff.)

Oh, I guess they did do a few commercials about smoking cessation. Amazing how much air time you can buy with half a trillion dollars. I think we'd still be watching nothing but smoking cessation commercials even now, if Big Tobacco's penance money had gone to that instead of every other whim that folks could think of to buy votes with the windfall.

 

[Koolau]

New - Global inflation warning - related to shipping:

https://www.cnbc.com/2023/12/21/con...freight-inflation-soars-in-red-sea-chaos.html

Trust me, we here in the Islands KNOW about shipping costs. We're 2500 miles from ANYTHING and shipping is a big portion of the price of virtually everything we buy. One of our big shipping companies threatened bankruptcy a year or two back if they could not raise rates even more. Funny how, when fuel costs go up, shipping costs go up. When fuel costs go down, shipping costs go up. Something wrong with the picture - but no one is surprised, though YMMV.