Future of Economy and Inflation

[COcheesehead]

Interesting tweet…

David Rosenberg
@EconguyRosie

8h
Some nifty math. When you strip out of the CPI all the items that are linked to energy (air fares, moving/freight, rental cars, delivery services, new and used vehicles), the core was +0.36% and the YoY steadied near 4%. The truth beneath the veneer.

 

[Koolau]

I had I bonds with 5% base rate and sold them 6 months later.

AAAAHHHHHHHhhhhhh!

 

[NW-Bound]

You made me look.

My I bonds are currently 5.43% of investable assets. I have had them since early 2000s.

They used to be a higher percentage, perhaps close to 10%. They could not keep up with the rest of the stash. Yes, that's the price to pay for low risks.

Well, just for my own curiosity, I looked up the records. At the bottom of the market in March 2009 after the subprime burst, my I bonds were 12.85% of total investable assets.

I kinda envy you having that much in I-bonds from the early 2000s. That was the sweet spot for buying them since they actually paid some interest beside the inflation. Good on you!

Well, don't be so envious. I learned about I bonds late, the fixed rate had gone down, and I got a measly 1.x% above inflation. I stopped buying when it went to 0.

I never did get any of the juicy 3.x% above inflation. Darn, you would be golden.

PS. The limit per individual was higher than $10K too. But I have forgotten what it was. My darn "superior" memory has declined.

 

[Magus]

Interesting tweet…

David Rosenberg
@EconguyRosie

8h
Some nifty math. When you strip out of the CPI all the items that are linked to energy (air fares, moving/freight, rental cars, delivery services, new and used vehicles), the core was +0.36% and the YoY steadied near 4%. The truth beneath the veneer.

Only if you actually believe housing (buying or renting) has only gone up 5.5% in the last year and 7.5% in the last two years, which is about half the index excluding the items you mentioned. But services are going up 0.6% a month now (last severalmonths) which are in no way tied to those items either.

 

[Chuckanut]

In a bear market for nearly all assets, the guy who loses the least wins. Heh heh heh...

The only asset that has gone up is oil. And I neglected to fill up the 55-gallon tank of my RV. As if it would make a difference. Hah.

It would probably just have gotten your RV stolen just for the gas.

The other day my car was stolen and left completely unharmed a few blocks away. But, $400 in groceries were stolen from the glove compartment

 

[NW-Bound]

Darn, my memory is slipping.

My records show that I sold and redeemed some I bonds in 2007.

If I did not sell, the total I Bonds would have been 6.2% of total investable assets by now, instead of 5.42%.

It's good to have records to look up. All on my laptop.

 

[NW-Bound]

It would probably just have gotten your RV stolen just for the gas.

The other day my car was stolen and left completely unharmed a few blocks away. But, $400 in groceries were stolen from the glove compartment

$400 in groceries in the glove compartment?

You forgot the Wagyu beef order in the glove compartment?

 

[copyright1997reloaded]

Interesting tweet…

David Rosenberg
@EconguyRosie

8h
Some nifty math. When you strip out of the CPI all the items that are linked to energy (air fares, moving/freight, rental cars, delivery services, new and used vehicles), the core was +0.36% and the YoY steadied near 4%. The truth beneath the veneer.

That tweet is gone, after getting a slaughter of a ratio.

 

[madatrub]

Well, just for my own curiosity, I looked up the records. At the bottom of the market in March 2009 after the subprime burst, my I bonds were 12.85% of total investable assets.





Well, don't be so envious. I learned about I bonds late, the fixed rate had gone down, and I got a measly 1.x% above inflation. I stopped buying when it went to 0.

I never did get any of the juicy 3.x% above inflation. Darn, you would be golden.

PS. The limit per individual was higher than $10K too. But I have forgotten what it was. My darn "superior" memory has declined.

ive heard it mentioned around here that the iBond limit used to be $30k

 

[Koolau]

ive heard it mentioned around here that the iBond limit used to be $30k

Yep. That is correct.

 

[NW-Bound]

ive heard it mentioned around here that the iBond limit used to be $30k

Yep. That is correct.

Thanks.

Yes, I checked my records, which confirmed it.

The total balance of my and my wife's accounts went up a bit more than $60K each year in the mid-2000s. The excess over $60K was due to the interest paid. I was transferring the max at that point for a few years.

 

[11522914]

Well, just for my own curiosity, I looked up the records. At the bottom of the market in March 2009 after the subprime burst, my I bonds were 12.85% of total investable assets.





Well, don't be so envious. I learned about I bonds late, the fixed rate had gone down, and I got a measly 1.x% above inflation. I stopped buying when it went to 0.

I never did get any of the juicy 3.x% above inflation. Darn, you would be golden.

PS. The limit per individual was higher than $10K too. But I have forgotten what it was. My darn "superior" memory has declined.

You could also buy them with a credit card and no fees. That was the beginning of my credit card reward points journey. [emoji16]

 

[Koolau]

You could also buy them with a credit card and no fees. That was the beginning of my credit card reward points journey. [emoji16]

Ahhhhh! The good old days. Next we'll be talking about titrating spousal SS benefits and File-and-Suspend. Or Zwei Bode's Tips ladder paying 3.3% above inflation. In my case, too soon old and too late smart but YMMV.

 

[Koolau]

Oh, one more time - for the young'uns. The main reason I wasn't jumping on the I-bonds, back when they were paying real interest - I was stuffing every dollar I could into my 401(k)! Now I regret that. I'd have been much better off paying the taxes and having the cash to put into I-bonds (probably Tips too, but I was even more ignorant about them than I-bonds.)

What I'm saying is not to be too quick to grab tax savings at the expense of other possible investments. It's a big world out there - experience it all! Diversify! But YMMV.

 

[NW-Bound]

You could also buy them with a credit card and no fees. That was the beginning of my credit card reward points journey. [emoji16]

The above, I did not know until now!

 

[Chuckanut]

Oh, one more time - for the young'uns. The main reason I wasn't jumping on the I-bonds, back when they were paying real interest - I was stuffing every dollar I could into my 401(k)! Now I regret that.

Don't regret it. Given what we knew at that time it was, and still is, a wise decision. Making the right decision is hard. We are usually stuck making the best decision we can. If you had crystal ball, or if my time machine was working, that would be another story.

 

[NW-Bound]

Don't regret it. Given what we knew at that time it was, and still is, a wise decision. Making the right decision is hard. We are usually stuck making the best decision we can. If you had crystal ball, or if my time machine was working, that would be another story.

I bonds bought in May 2000 paid 3.6% above inflation! With inflation of 9.62%, the total rate is 13.22%. Oh là là!

Now, history says stocks over the long term pay only about 4% over inflation.

But did I know about I bond then? Noooooo.... Not until the fixed rate has gone down to 1.2%.

And even if I did, would I care? I am not sure.

Heck, back then people were expecting some stocks to pay 4%/week. It's the new economy, stupid. Bitcoin was not invented yet, and dotcoms were all they had.

 

[USGrant1962]

I
...
Now, history says stocks over the long term pay only about 4% over inflation.
...

I think you are subtracting inflation twice. The real return of equities over time has been 6.5-7.0%. The nominal return before inflation has been around 10%.

 

[NW-Bound]

I think you are subtracting inflation twice. The real return of equities over time has been 6.5-7.0%. The nominal return before inflation has been around 10%.

Thanks. I stand corrected. Darn "superior" memory.

From the Web:

From 1825-2019, the average total annual return was 9.56%.

 

[pb4uski]

You meant regular unleaded?

Yes, regular unleaded.

 

[Montecfo]

I guess it depends on how much of this is self inflicted.

p.s. I just heard on the news that they are reprogramming the pumps to accommodate $10 on up gas prices.

That last comment got my attention. Anyone remember the oil crisis, when pumps only had 2 digits?

My recollection is they would tape a "1" to the left of the price on the pump and you would pay the pump price plus $1 a gallon. Have not thought about that in a while but it is all still vivid since I was in hs and college then and those dollars and cents were dear.

Never filled the tank in those days. I think the least amount of gas I bought was 25¢ worth.

 

[Montecfo]

I was speaking to a real estate agent in the area where my summer home is located (NC mountains) and she says they are seeing a fairly significant downtown in housing prices and demand. This is a resort area, mainly second homes. She also told me that vacation rentals for this summer are off by about 25% over last summer at this time. In the 2008 recession real estate sales and prices dropped in resort areas first, I wonder if that is happening now.

That would be a silver lining for people in the market for a vacation home.

 

[Helen]

Never filled the tank in those days. I think the least amount of gas I bought was 25¢ worth.

Wow, you'd need an eye dropper to buy that amount now!

 

[Koolau]

That last comment got my attention. Anyone remember the oil crisis, when pumps only had 2 digits?

My recollection is they would tape a "1" to the left of the price on the pump and you would pay the pump price plus $1 a gallon. Have not thought about that in a while but it is all still vivid since I was in hs and college then and those dollars and cents were dear.

Never filled the tank in those days. I think the least amount of gas I bought was 25¢ worth.

I remember those days. I was in NYC just when prices there topped $1. When I got back home, I think we were around $.80. SO, I got to watch prices top $1 again a few months later (IIRC). Not a great time since there was talk of rationing and buying on certain days, etc. In those days, I was still driving long distances and I just couldn't imagine the delays such ridiculous "solutions" would bring. I hate high prices, but I hate shortages even more.

Back then, I would only buy a standard transmission car. I could squeeze 25% or more beyond the EPA estimated mileage. I "invented" pulse and glide (just kidding) but I did discover it on my own. Now that my cars are auto, the "tricks" are fewer and less effective. Wish I owned a Miata 5 speed. Fun and 40+ mpg if you're dedicated.

YMMV

 

[Montecfo]

I never said it was not disruptive, it obviously is as many folks here are not used to the prices and simply cannot afford it.

My point is that a lot of other countries have had way higher prices than ours for a long time and seem to manage. Their cars typically get a lot better gas mileage.

As far as oil company subsidies, they must be getting some kind of benefits as folks in power are always talking about how the oil companies do not pay their fair share of taxes, we hear about it enough, probably not zero though.

This link is not naked, it is to corroborate the above paragraph regarding subsidies.

https://grist.org/accountability/follow-the-money-us-subsidizes-oil-and-gas-so-investors-never-lose/

I highlighted the part of your post that seems to be tripping you up. As far as the link, intangible drilling costs (IDCs) are costs that might otherwise be deductible as capital expenditures. They represent expense timing, not really very different than capital cost expensing which is done periodically for all businesses (and currently).

The US oil and gas industry is heavily taxed not just through income taxes, but through severance taxes, federal excise taxes and others. The idea that the oil and gas industry is heavily subsidized is just false, though popular in some quarters.