Inflation

[Fermion]

I do think some stuff will come back down. 1/2" OSB for instance, which was $6 a sheet and is now around $48 a sheet. I do not think it will stay at that level long term.

But the hammer that was $15 and is now $17 will probably not come down in price.

 

[daylatedollarshort]

We come out ahead with high inflation, but I modeled that on 0 - 2% real interest rates. Real interest rates on the 1 year Treasuries are currently -6.5%. Yikes! But hopefully the Fed raising interest rates will close that gap with higher returns and lower inflation. My plan for this year is to continue to optimize expenses, like get the monthly gas and electric to zero with some energy projects and solar panels, and when rates go up, buy more TIPS. If I can keep the annual budget to be less than or equal to our Social Security, pensions, and TIPS income (without the inflation adjustment), then our portfolio should at minimum, keep its current value for as long as we live, or need to draw down for LTC eventually.

 

[cyber888]

I think my real estate Tax bill will go up by $300-$400

 

[Sunset]

We come out ahead with high inflation, but I modeled that on 0 - 2% real interest rates. Real interest rates on the 1 year Treasuries are currently -6.5%. Yikes! But hopefully the Fed raising interest rates will close that gap with higher returns and lower inflation. My plan for this year is to continue to optimize expenses, like get the monthly gas and electric to zero with some energy projects and solar panels, and when rates go up, buy more TIPS. If I can keep the annual budget to be less than or equal to our Social Security, pensions, and TIPS income (without the inflation adjustment), then our portfolio should at minimum, keep its current value for as long as we live, or need to draw down for LTC eventually.

If you have some Treasuries/bonds earning 0% or 1% interest, it could be worth it to cash them in (don't know if possible) and buy the I-bond , and gift to spouse.
We have bought the limit in I-bonds, plus gifts to each other for 2023->2025 inclusive.
It's our only inflation killer investment

 

[youbet]

Anybody believe that greed will win and prices will just stay sticky where ever they end up? The new cost of everything in other words is here to stay.

That's generally how it's worked in the past. Deflation has been almost non-existent in our lifetimes.

It's not really greed that causes prices to be "sticky." Sellers like to charge as much as buyers are willing to pay even if seller's costs decline. As long as the price drives volumes that clear the market that is.

 

[VFK57]

The difference between previous inflation and the current one is that most past inflation were triggered by overheated economy. We have many mid class earnings vs lower (for some goods) supply vs demand. Current inflation is more related to a break up of supply chains due to the COVID pandemic, Russo-Ukraine war, a Geopolitical split between China-Russian block vs USA-EU led block. Competing with the West, China-Russian block is shifting their payments to their currencies, tied to Yuan instead of US$. On the top of it: we printed too much US$ vs goods and services we produce. Finally if we aggressively start lifting the rates, it might lead directly to a Recession. Just what I think.

 

[youbet]

I do think some stuff will come back down.

Absolutely. But in aggregate, I'm planning on needing to spend more to maintain my current lifestyle than before. FireCalc testing accounts for that so we should be OK if the future stays within the bounds set by the past.

I'm in mid-FIRE (16 years) so the sequence risk of this isn't too bad. For those just beginning FIRE, it's a bit of a kick in the butt from a sequence perspective.

 

[daylatedollarshort]

If you have some Treasuries/bonds earning 0% or 1% interest, it could be worth it to cash them in (don't know if possible) and buy the I-bond , and gift to spouse.
We have bought the limit in I-bonds, plus gifts to each other for 2023->2025 inclusive.
It's our only inflation killer investment

I just used the 1 year Treasuries as a benchmark to illustrate the current real return issue. We have a large allocation to TIPS now with a yields of 0% to over 2% plus the inflation factor, so more than current I-bond returns since I-bonds yield portions right now are 0%. I'm waiting until rates get back to 1 - 2% real returns before buying more TIPS. There is no annual limit on those.

 

[Rustic23]

We have an old Ritz Cracker tin. It holds four stacks of crackers. However, they now have more room to move around! The crackers have shrunk in size. I guess they are happy for the freedom to move around!

 

[npage]

It's not really greed that causes prices to be "sticky." Sellers like to charge as much as buyers are willing to pay even if seller's costs decline. As long as the price drives volumes that clear the market that is.

Fair enough, sellers will continue to charge more even if technically they could lower prices and still make a profit. No one ever says hey we could just make $1 billion and not $2 billion. Instead it is, the consumer must pay more. I don't blame them but need to prepare for it. Cost of living just shut up real fast.

 

[aja8888]

Walmart medium house pizza (meat lovers) was $5.00 last year, now $7.50. The stack is tall in the case.

 

[Closet_Gamer]

Fair enough, sellers will continue to charge more even if technically they could lower prices and still make a profit. No one ever says hey we could just make $1 billion and not $2 billion. Instead it is, the consumer must pay more. I don't blame them but need to prepare for it. Cost of living just shut up real fast.

True ... but the invisible hand still exists. If there is $1B of excess profits in the system, someone will enter the market and be willing to capture $1.5B instead of $2B.

 

[pjigar]

I do think some stuff will come back down. 1/2" OSB for instance, which was $6 a sheet and is now around $48 a sheet. I do not think it will stay at that level long term.

Amen. Man, I miss those OSB prices.

 

[JoeWras]

We have an old Ritz Cracker tin. It holds four stacks of crackers. However, they now have more room to move around! The crackers have shrunk in size. I guess they are happy for the freedom to move around!

At least my crackers stayed the same size, just less of them.

I am pretty sure Oreos have gotten smaller in diameter with many of the new single serving packaging.

 

[Amethyst]

This reflects the company's concern with our health, by reducing the package's calorie count.

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I am pretty sure Oreos have gotten smaller in diameter with many of the new single serving packaging.

 

[Gumby]

At least my crackers stayed the same size, just less of them.

I am pretty sure Oreos have gotten smaller in diameter with many of the new single serving packaging.

This reflects the company's concern with our health, by reducing the package's calorie count.

​

I'm so happy that a big company like Mondelez International is taking the time to protect my health. They must be just the nicest people.

 

[JoeWras]

This reflects the company's concern with our health, by reducing the package's calorie count.

Might as well reduce it to a 2 grams of dust. Very healthy. Just don't inhale it.

 

[Magus]

I'm so happy that a big company like Mondelez International is taking the time to protect my health. They must be just the nicest people.

Believe it or not, many food companies are getting some pressure via ESG to reduce calories per package/unit. Bloomberg may ultimately get his way via ESG nationally what he ultimately couldn't do in NYC (Not that he personally is leading that charge, just the outcome)

 

[JoeWras]

Believe it or not, many food companies are getting some pressure via ESG to reduce calories per package/unit. Bloomberg may ultimately get his way via ESG nationally what he ultimately couldn't do in NYC (Not that he personally is leading that charge, just the outcome)

Yeah, well, I disagree with the ESG people on this matter. Is that allowed?

 

[Magus]

Yeah, well, I disagree with the ESG people on this matter. Is that allowed?

Yell at Blackrock, Vanguard and State Street all you want from my POV (they're driving most of the ESG push)! Those three are ~30% of the market. Their ESG / proxy voting teams are some of the snobbiest people I've ever interacted in my career.

 

[Sunset]

Amazon Fresh sent me some coupons by mail and email, they must know I'm on a fixed income.

So in my quest to fight inflation I figured $10 off a $20 purchase would be a fun way to see their store.

We go and look around the high priced items and were surprised to find boneless, skinless chicken breasts 1/2 price at $1.50/lb.
That is a good deal, so I bought 10 lbs and a couple of other things.

I don't think I'll see the effective rate of $0.75 /lb for chicken like that again.

 

[Turbo29]

As a connoisseur of peanut butter (well maybe not as I am buying house brand) I am extremely troubled that many stores have sneakily shrunk the jars from 18oz to 16oz.

The Walmart brand is still 18oz but the Kroger brand has shrunk to 16oz. The lids are the exact same size and interchangeable (I think that helps the illusion that nothing shrunk) and the jars look identical, but upon very close examination, the 16oz jar is indeed smaller.

 

[aja8888]

As a connoisseur of peanut butter (well maybe not as I am buying house brand) I am extremely troubled that many stores have sneakily shrunk the jars from 18oz to 16oz.

The Walmart brand is still 18oz but the Kroger brand has shrunk to 16oz. The lids are the exact same size and interchangeable (I think that helps the illusion that nothing shrunk) and the jars look identical, but upon very close examination, the 16oz jar is indeed smaller.

I shop Walmart for groceries as DW can't handle the effort with her COPD. These guys are very sneaky with house brand stuff. My favorite item to report on is their Great Value yogurt in the 4 pack of 6 ounce containers. Last year, the 4 pack was $1.24 and now it is $1.82 (up 47%). There's more, way more.....

 

[Gumby]

As a connoisseur of peanut butter (well maybe not as I am buying house brand) I am extremely troubled that many stores have sneakily shrunk the jars from 18oz to 16oz.

The Walmart brand is still 18oz but the Kroger brand has shrunk to 16oz. The lids are the exact same size and interchangeable (I think that helps the illusion that nothing shrunk) and the jars look identical, but upon very close examination, the 16oz jar is indeed smaller.

It's the deception that really annoys me. As I recall from my economics course long ago, in an efficient market, consumer demand drops when price increases and the market reaches a new equilibrium of price and amount produced. But that assumes consumers have full knowledge of what they are getting. If they are deceived about the unit price because the container has been modified, then you get an improper demand signal and the amount produced and price will both be too high. Maybe people should pay more attention, but the producers take advantage of the fact that they don't.

 

[Magus]

It's the deception that really annoys me. As I recall from my economics course long ago, in an efficient market, consumer demand drops when price increases and the market reaches a new equilibrium of price and amount produced. But that assumes consumers have full knowledge of what they are getting. If they are deceived about the unit price because the container has been modified, then you get an improper demand signal and the amount produced and price will both be too high. Maybe people should pay more attention, but the producers take advantage of the fact that they don't.

Yup, basic capitalism economics assumes both perfect information and many buyers and many sellers. Generally is always many buyers in the US, but not always many sellers and definitely isn't perfect information. The more frequent the purchase (eg: Gas, Milk) the more informed they tend to be and the opposite is true for less frequently purchased.