Finance Dave
Thinks s/he gets paid by the post
- Joined
- Mar 29, 2007
- Messages
- 1,864
I have never had anywhere near enough money to buy myself a politician, even an ineffective one.
The ineffective ones cost more.
I have never had anywhere near enough money to buy myself a politician, even an ineffective one.
I have never had anywhere near enough money to buy myself a politician, even an ineffective one.
I have never had anywhere near enough money to buy myself a politician, even an ineffective one.
Here in Illinois, voters don't buy politicians, politicians buy voters. And they are very, very good at it!
Why are you so obsessed with inflation? I just avoid buying when goods and services are overpriced. Most people do the same. This is why inflation is self-correcting. Look at the price of PCs, TVs, and other electronics compared to a year ago. They are crashing fast. Go visit your local Home Depot and you will see that prices have dropped substantially for building products and people are still not buying. It's not like people are starving today because they can't afford to buy food. I just focus on preserving capital and generating as much income as possible.
This is why i don't like to weigh inflation too heavily in my planning. Literally every single human experiences a different "blended" inflation rate.
I posted an excerpt in another thread recently from The Bond Book by Annette Thau. She said, "For reasons that escape me, individual bonds and bond funds are treated in the financial press as interchangeable instruments. But they are not." Individual bond holders are having a pretty good year with rising yields and $0 loss of capital. But you wouldn't know any of that from the financial article headlines.
Sell your individual bond held for a year or more and see if you have a capital loss.
Sell your individual bond held for a year or more and see if you have a capital loss.
I giggle when someone says why accept X% on a bond when inflation is X% plus. Because life is fair sometimes and the bond market that used to pay a $100k a year on my bond ladder now pays me $150k a year. I can absorb a lot of inflation with that extra money and with little or no tweaks to my lifestyle.
And what are the alternatives? If there are no other higher paying alternatives, then 4% to 6% in bonds and 10% in TIPS look pretty good compared to losing -17% in a bond fund or making 1.6% in a stable value fund.
We've gone over this a lot, but I'll bite and say it one more time, individual bonds held to maturity have no market risk. You have to be able to hold your bonds to maturity to not risk a loss, which is what everybody in the Golden Period thread for bonds is doing. Nobody there is buying bonds to trade or sell prior to maturity.
Posters here holding bonds to maturity, especially inflation protected bonds, are experiencing the best returns we've had in years and no losses. If you don't believe Ms. Thau, it is literally on the Fidelity web site comparing bonds to bond funds Bonds vs Bond Funds - Fidelity, under market risk.
You missed the point of my post. I never said anyone was trading bonds. But if you did, you would experience a loss just like the bond fund loss if you sold shares of a bond fund.
That was my point, not that anyone here was trading individual bonds.
W
True.
But one buys these assets that trail the inflation while being in tears, not giggling.
You don't win. You only try to minimize the loss.
I'm not really sure what your point is. Those of us who sold our bond funds and moved to individual bonds, are not selling prior to maturity, so we aren't suffering from any losses nor are we subject to market risk. Who else but a bond trader would need to sell early?
Ok, nothing to see here, I'll move on......
VW
We've gone over this a lot lately. Many of us have pretty low expenses compared to our incomes and low personal inflation rates, so it is still a lot of extra money making 4% to 6% instead of 1% on nominal bonds and 8% or more on TIPS and I bonds. Plus the negative real rates are being corrected monthly by The Fed. Even if they aren't bringing inflation down yet, raising the rates is still narrowing the gap.
Most of us are buying bonds to hold to maturity, including buying the bonds the funds are selling at a loss because they are forced to sell them early because of redemptions or their own fund rules.
Check out the original coupons on the bonds Freedom56 finds that funds were previously buying and then what the new YTM is in the secondary markets - https://www.early-retirement.org/fo...d-income-investing-114400-39.html#post2843227.
One more time - if the inflation beast isn't tamped down soon, almost all will be losers, not winners.
History has shown this over and over.
Now you might just be that special one in a hundred that magically has no "personal" inflation, that magic low rate massive fixed mortgage, and living high on the hog as a result of rampid inflation. Some people in the Weimer republic did well even as the German people got wiped out.
However, the net result of that (hyperinflation) and in many other places (including just bad inflation) like Argentina, the French Revolution, during our own revolutionary era, during the civil war, Greece, Yugoslavia, Zimbabwe and Hungary...the results for the vast majority were not good.
So keep [-]fooling[/-] telling yourself that it is a positive thing.
And what are the alternatives? If there are no other higher paying alternatives, then 4% to 6% in bonds and 10% in TIPS look pretty good compared to losing -17% in a bond fund or making 1.6% in a stable value fund.
Financially, I come out ahead with high inflation. It is simply math. I have gone over this many times, in various threads, with many math examples in the past few months of how this occurs. My inflation adjusted income is much higher than my expenses subject to inflation. I have a low fixed rate mortgage, capped property taxes and a house in a HCOL area. My posts have included an article by an economist, citing inflation winners and losers, who also laid out the math on the house and mortgage part. If you have an issue with my math calculations, or the economists' calculations, please point it out. Otherwise math calculations aren't opinions, open to debate, whether you personally understand the math or not.
Here is one of my many past examples - https://www.early-retirement.org/fo...-boost-in-40-years-113988-12.html#post2839555
Let me make an even more extreme example to illustrate my point. If someone has a $5M home, and inflation goes up 10%, their house will likely increase $500K. If they have a fixed rate mortgage at 2.5% for $3M, and they can get 10% returns in inflation adjusted bonds, the spread is 7.5%. 7.5% X $3M is $225K. A net gain of $775K, $500K on the house and $225K income with 10% inflation.
If inflation and interest rates are 0%, they still have a 2.5% mortgage to pay, are losing money on the arbitrage and the house goes up 0% in value. So they are out $3M X -2.5% = -$75K.
At 0% inflation they are down -$75K, at 10% inflation they are likely up $775K, and that is just for one year. It gets better and better for Mr. Fancy Pants $5M homeowner the more years inflation is high and the more years he makes the $775K because now he has even more money to reinvest. Plus this doesn't even cover the inflation adjusted income vs. expenses part, but I have covered that in other posts.
Related link: Inflation Winners and Losers: Who Benefits When Inflation Rises? - There are a few winners when it comes to inflation,” said Adam Deady, CFP. “Examples include governments with high debt levels and borrowers on fixed repayment plans. Think of someone with a 30-year fixed rate mortgage with a set payment each month.” ...Also winning, to an extent, are “debtors, investors in stocks, real estate, and physical assets such as gold and collectibles benefit from increasing inflation,” Thompson said. - https://www.gobankingrates.com/mone...ers-losers-who-benefits-when-inflation-rises/
History does show that inflation has winners and losers. Google " inflation winner and losers". There are tons of articles on the topic.