Inflation

[Malvern]

Inflation is happening globally, we have a different political system to the US, so I don't share the mantra, that it's all Dem vs Rep politics. 

 

I would concede that there is a group think dynamic amongst central bankers and would lay a fair percentage of blame at their feet, for many years inflation was curtailed, the legacy of the present group is that whilst governments were handing out Covid money like candy (some justified,,,,,some not) they released the monetary brakes, we all cranked along and only now when it's too late are they starting to hit the anchors.

 

Rampant house price rises have been all too common across the place, I think Aust/NZ were trailling only Turkey is the "competition".

 

The Australian Reserve Bank (your Fed) has never been more negligent in my 30 plus years in the markets. The resultant outcomes are woeful and hit the least able the hardest. Pile on a tumbling currency and the picture gets bleaker.

 

 

[bcjim]

I'm doing my part,  which, it's to just not buy overpriced things I don't actually need.  

 

My barometer is Coke at Costco. I used to buy coke zero 35 packs for 11.59. Now they're 16.89. Sorry,  I'll drink water for now. 

[GingerBubba]

Inflation is absolutely rampant from my perspective in the UK.

 

I used to shoot high 70s, but recently I've seen many scores in the 90s.

 

Absolutely terrifying.

[smashdn]

16 hours ago, vandyfan said:

I think the key number that policy makers are looking at (beyond inflation) is unemployment. Unemployment fell back to 3.5% which is around the post-pandemic low. Unemployment probably needs to be close to 4% before that signals positive changes (remember 3.5% is basically "full employment" by Moody's standards).

 

What role, if any, do you think under-reporting of unemployment has?  My understanding is that after a time you "fall off" the unemployment count and my own suspicion is that with the rise of the "gig economy" and various and sundry other ways to make money without being "employed," the unemployment percentage is off (for the US).

[vandyfan]

10 minutes ago, smashdn said:

What role, if any, do you think under-reporting of unemployment has? 

 

Oh, I don't have a ton of confidence that it reflects the ACTUAL employment in the country. Same with the ADP data. Your comment about "fall off" is correct about how there are "discouraged workers" etc that no longer figure into the calc but are often, in fact, unemployed. All that said, I think policy makers put a great deal of importance on this number -- whether it is correct or incorrect. 

[jerebear21]

Should have eaten more back then had I know cost of food was going to go up so high. 

[Petethreeput]

On 10/20/2022 at 11:23 AM, Dpavs said:

I can't even begin talk about the current inflation without getting into politics so I guess I can't comment.

Wait... as I look over the market, there is one thing I can say...

 

The idea of politics as the driver is a fallacy.  If we want to consider policy, most oftentimes it starts with a lobbyist and ends with a tax attorney as it pertains to the twisting of policy to make it an anathema to the populace (see PPP, lumber embargo, insulin, etc).

 

I have to say, I don't shop for food, I rarely buy anything, and I drive a Prius so I can't really say I have noticed inflation, but my wife tells me it is shocking.

 

I pick draft Bud Light as my indicator because it is everywhere, it is a total extra in relation to spending, and really fluctuates.  In my area of the country I used to get pissed if they charged more than $2.50, but now they are charging $4.00 and then when I go to cities and they charge $8.00 I am shocked, but still reach into my wallet.

 

I suspect we have 2 more years of inflationary forces before the supply chains and the unemployment gets sorted back out, and of course, everyone runs out of the gifts they have received from various governments (not just the US).  Until then, for me anyway, my '11 Prius is magic, my golf clubs are great, my diet is eating at home, and my Holidays will be parsimonious.  

[smashdn]

I happened to have been watching a little news blurb about the mississippi river just now and an economist was on there talking about the impact of the low levels choking barges getting out a bit.  He mentioned that we just experienced the greatest year over year increase in grocery prices since 1979 and that it would be months before we saw the impact of the effect the low Miss would have but there would be a negative effect from it.

 

So I guess we have that to look forward to.

 

Pork remains surprisingly affordable when compared to other meat in the store.  You can still get a pack of five or so boneless pork chops for around $4.

Edited October 26, 2022 by smashdn

[GooseHook]

It's kind of a bizarro world problem to even see headlines that unemployment may indeed be too low, even though it probably does need to rise to show any signs of the current situation slowing down. Interest rates were ridiculously low for far too long, combine that with a once in  a lifetime public health event, and then throw an insane amount of money into the mix to pump up demand try to prevent said public health event from triggering a depression and....boom, here we are. Same thing but a couple years later and maybe just a big recession (even though no one can predict when it's coming or how bad). 

 

I feel fortunate that my wife and I chose to stay patient- we refi'ed our house instead of engaging in the insane bidding wars for subpar home listings, and I finally made a big job change that boosted our household earnings. If I wasn't paying for infant daycare we'd be sitting very pretty. We're not rich enough to have the tax code written in our favor, weren't eligible to line up for the PPP teat, and made too much to receive any stimulus. 

 

There are tons of other factors at play that got us here, but it's too convenient for everyone to point a finger at one thing or person. Nuance is dead and we consume news like a bunch of spoiled toddlers. 

[TwistedSister]

On 10/24/2022 at 5:29 PM, vandyfan said:

If I can be a (somewhat) positive light here, the US dollar is powerful at moment. It is receiving a boost from tightening monetary policy (obviously) but also the flight to (relative) strength in US assets as a result of what we can politely call "global unrest" elsewhere(s). Most analysts lean towards the dollar's value staying strong as long as pandemic and Russia fears/threats remain. 

 

I think the key number that policy makers are looking at (beyond inflation) is unemployment. Unemployment fell back to 3.5% which is around the post-pandemic low. Unemployment probably needs to be close to 4% before that signals positive changes (remember 3.5% is basically "full employment" by Moody's standards).

 

Likely there will be intense competition for deposits at the banks (already starting) which intensifies in 2023 as the money supply gets reduced (M2 for you nerds). Currently we are seeing rapid loan growth AND M2 decreases which is a tough capital ratios and liquidity situation for banks to be in. 

 

Also, just thinking out loud here, the speed of this run up in mortgage rates is....concerning:

 

When one figures all those that choose not to work into the unemployment rate it is well over 4% right now.  But inflation has hardly budged.  Once the world price of oil goes back to 100 which it likely will when the OPEC cuts fully hit the market the inflation rate will be back over 9%. If you were not alive and aware in the late 70's and 80's you have seen nothing yet in regards to either the interest rates and or inflation.  

Edited October 26, 2022 by TwistedSister

[me05501]

When you recognize inflation as a global phenomenon it's much easier to see it apolitically, IMO. It's everywhere all at once. 

 

It's hard to talk realistically about inflation without also looking at how much better the average person's lifestyle is today compared to every prior generation. Almost everyone owns or has access to information and technology that would have made a 1980's corporate executive blush.

 

Wal Mart, Target and Amazon have thrived for the last couple decades by consistently offering consumers increasingly appealing merchandise at prices that have held steady or declined until very recently. I can't remember the last time I saw a television that wasn't flat or a phone that wouldn't fit in a pant pocket. 

 

YouTube, TikTok and other communications tools give the average person access to information and knowledge that was once protected as trade secrets. If you want to fix your own washing machine or program your own key fob there's a 95% chance you can learn to do it in about ten minutes. 

 

The average cup of coffee, the average automobile, the average piece of clothing, etc. are all much higher quality than twenty years ago. 

 

I don't believe in trickle-down economics but trickle-down lifestyle seems very real to me. 

[Wooley12]

On 10/21/2022 at 10:40 AM, smashdn said:

My inflation barometer is Arby's roast beef sandwiches.  How many will $5 buy?  Once upon a time there was five for five and life was good.  Then it became four for five mix and match with the beef and cheddar sandwich.  It has since continued to decline.  I just checked and a classic roast beef at the location nearest my present location is $4.19 sans tax.

 

Sad times indeed.

FWIW, my barometer has always cheap hamburgers. When gas was $.25/gal and my minimum wage job flipping burgers paid  $1.65/hr I could buy 12.6 $0.13 burgers or 6 gallons of gas with 1 hours pay. Today the cheapest burger at Mickey D's is $1.89 in Utah. $7.25/hr min wage buys 7.9365 burgers or 1.746 gallons of gas. So yeah, inflation. Anybody remember when you could only buy gas every other day to combat inflation?  I do. BTW, tough to get an Arby's here. The can't hire enough workers at $17/hr and only open when they can. 

Edited October 27, 2022 by Wooley12

[bladehunter]

On 10/20/2022 at 3:17 PM, larrybud said:

Speaking strictly of numbers: The numbers reported are BS. It's much higher. They have changed the formula over the years which make it look lower than it is.

 

Using the same formula as they did in 1980, we are around 16-17% YOY.

Yep . Pushing 20 % now.  
 

my wife’s funds have lost every cent she’s gained since 2012.   Mine only slightly less because I invest in my own business at a 1-1 ratio of outside investment…and ive simply retained.  Meaning. A hole in the backyard was a safer bet.  .

 

 And I average $300 a week in the grocery store.  Yes I have a giant 14 year old and a 110lb  dog. But I’m not counting the dog food. It’s not from the local store.  
 

when I was 25 I couldn’t imagine making enough to retire.  I built a business and made more and more.  At 35 I could almost see it as possible.  At 39 I was optimistic…. At 42 now , I know I’ll never retire.  Period.  I stopped thinking that way.  I in turn have focused on giving my boy a head start in whatever field he chooses , and keeping him on a tight track to academic excellence so his options remain open.    
 

it’s just math.  If you wipe out everything you gain from 25 years work in 2-3 years.  And you don’t have 25 more years to go as hard.  Well. It’s just math.  

[me05501]

17 minutes ago, bladehunter said:

Yep . Pushing 20 % now.  
 

my wife’s funds have lost every cent she’s gained since 2012.   Mine only slightly less because I invest in my own business at a 1-1 ratio of outside investment…and ive simply retained.  Meaning. A hole in the backyard was a safer bet.  .

 

 And I average $300 a week in the grocery store.  Yes I have a giant 14 year old and a 110lb  dog. But I’m not counting the dog food. It’s not from the local store.  
 

when I was 25 I couldn’t imagine making enough to retire.  I built a business and made more and more.  At 35 I could almost see it as possible.  At 39 I was optimistic…. At 42 now , I know I’ll never retire.  Period.  I stopped thinking that way.  I in turn have focused on giving my boy a head start in whatever field he chooses , and keeping him on a tight track to academic excellence so his options remain open.    
 

it’s just math.  If you wipe out everything you gain from 25 years work in 2-3 years.  And you don’t have 25 more years to go as hard.  Well. It’s just math.  

 

If this is true, your wife might be the world's worst investor. The S&P 500 has tripled since 2012. An all-bond portfolio could be lower after this year but just about anything else should be up if left alone for the last ten years. 

Edited October 27, 2022 by me05501

[vandyfan]

6 minutes ago, me05501 said:

If this is true, your wife might be the world's worst investor. The S&P 500 has tripled since 2012. An all-bond portfolio could be lower after this year but just about anything else should be up if left alone for the last ten years. 

 

Yep, even just looking at the 5 year on S&P 500 it is basically this trend until we had that POP in 2021:

 

[bladehunter]

53 minutes ago, me05501 said:

 

If this is true, your wife might be the world's worst investor. The S&P 500 has tripled since 2012. An all-bond portfolio could be lower after this year but just about anything else should be up if left alone for the last ten years. 

Maybe so.  Her whole 82 person office is in the tank.    They all use the same firm As a group and get matched contributions from the company.    So it’s not just her.  She truly has not touched it or made a decision on it in years.  And it grew until 4th quarter 2019 first quarter 2020. Somewhere in there.   So there was no reason to question it.  

Edited October 27, 2022 by bladehunter

[Petethreeput]

From a financial perspective, this whole thing is (hopefully) the needed correction of the markets and sign of a healthy economy overheated.  Since there are no politics to be discussed, there were many actions by all governments to save the economy which infused a boatload of money into all the economies.  Couple that with pent up demand and you have the makings for what we are seeing.

 

Until recently, there has never been this type of recession with unemployment at record lows, the economists have no idea what is happening because the indicators don't match up.

Having said this, until the fed started to exercise their power, the US economy would slow every 10-12 years, we were experiencing the longest bull market in ages when this happened.  The over-reaction to the market downturn is the result of the 24 hour cycle and the talking heads telling us over and over how awful things are.  Bad news brings in eyeballs, good news doesn't.

 

This downturn, assuming we don't over react on monetary policy could well be recovered in the next 18-24 months.  The inflation, based on what little I know of macro economics will be with us for a couple of years as well.

 

Let's face it, and while I disagree with most everything coming out of Iran, I think they are right on this.  The rich western world has become complacent in the last 75 years.  Prior to WWII the American/European populace valued ideas, freedom, and right to fair elections.  Today we value material goods and are willing to give up those freedoms for the chance to buy more stuff.  McMansion?  Everyone should have one.  Expensive vehicle?  Check.  Regularly eating out?  Yes please.  Luxury goods?  If you don't have Coach bags you aint got sh*t.

 

Think about it.  All over the world we are seeing a dramatic increase in populism to make things affordable again, and many are willing to give away the rights we have garnered over the last 100 years to do it.  I have no idea how much I have paid into the US Social Security office over the last 40 years of my working life, but I can assure you that investment is more important to me than getting a $1.59 Big Mac, and some folks are promising me the Big Mac in exchange for the security of my paid in account.

 

Finance is finance, politics is politics, and while they should meet every once in a while (and must truthfully) we are conflating politics and economics too much... all for the burger and gasoline.  

[jerebear21]

Lots of tech are down 80% since October all time high.  (Ahem META) so I don’t doubt a fund could tank as much without proper balance. 
 

At the risk of coming off as a donkey. I actually hope the feds rip this bandaid off. The sooner the better. Of course half the country would be screaming for my head. But rich people need to feel poor and poor people need to feel desperate. Go back to fundamentals and work “together” harder. 

[Wooley12]

Im curious. Are you one of the rich or poor? I've been rich and I've been poor and rich works better for me. 

[jerebear21]

2 minutes ago, Wooley12 said:

Im curious. Are you one of the rich or poor? I've been rich and I've been poor and rich works better for me. 

I don’t value money. Inflation doesn’t affect me. But it does affect the least fortunate. Private balances are still positive for almost all segments except the lowest quintile of Households. It should always be about the greater good. 

[GooseHook]

On a related (and unifying note), who else is feeling like we just get absolutely shafted with the amount of streaming services and their diminishing quality?

 

Netflix has not done a single thing to earn my $21 per month in the last few years, and they're on the verge of jacking with the profiles on my account (which is saved on a TV at her family's vacation house). The sheer amount of new services popping up is diluting the content on each one, it's like getting nickled-and-dimed for lower quality just so they can report earnings. 

 

That being said, big props to SiriusXM for having infinite content, and always being willing to give the promo discount when you threaten to cancel. And Spotify for being actually worth the money. 

[Petethreeput]

21 hours ago, Wooley12 said:

Im curious. Are you one of the rich or poor? I've been rich and I've been poor and rich works better for me. 

I can't get a feel for what you are saying?  Are you saying with inflation you are no longer rich and therefore unhappy, or are you just referring to ripping off the band aid and curious about socio-economic status of the poster?

 

21 hours ago, jerebear21 said:

I don’t value money. Inflation doesn’t affect me. But it does affect the least fortunate. Private balances are still positive for almost all segments except the lowest quintile of Households. It should always be about the greater good.

Personally I do value money, but I also don't let it define me.  For a fat, drunk, and stupid person I am incredibly fortunate to have my wife who should remind all of the "Up on Cripple Creek" by the Band.

16 hours ago, GooseHook said:

On a related (and unifying note), who else is feeling like we just get absolutely shafted with the amount of streaming services and their diminishing quality?

 

I agree, but you touch on one other important point, which actually goes back to politics in a way, and I do believe this.  In the 60's LTCG (long term capital gains) started at 60 months.  By 2004, it was 1 year, and if memory serves it even dipped to 6 months (but I could be wrong).  The average CEO made 40X the average wage and stayed for 15 years, and today the CEO makes 142X and lasts 4-6 years.  The earnings reports, which used to be a huge nothing burger all the sudden predicted the beginning and the end of each business because each quarter is an entity to itself, whereas it used to be measured in annuals.  I oftentimes wonder if we put the LTCG tax back at 60 months if we wouldn't see an uptick of service and/or product offering.  Thomas Friedman, whom I don't really love, said in the World is Flat, large corporations have transferred their jobs to us, and we did it because we were saving money.  Most notably, there used to be airline ticketers, now we do it online.

[rd1959]

The only thing I can contribute to this subject without getting political is, when I started working in the 70s gas was 50 cents/ gal., eggs were 60 cents/ dozen, a nice 1 bedroom apartment was around $400/ month. 
Needless to say, every day of my life since then has been nothing but inflation.

[jerebear21]

we can probably extend gimmes from 3 ft to 9 ft to match up with the current inflation rate.  it's only fair.  =P

[Wooley12]

 Observational non political comment. The year my father started his job as a caddy so he could have money for clothes, inflation was Minus 8.89%. The year I was born, inflation was Plus 8.07 and a 60 year run of the  greatest economic growth for a country in the history of the modern world started. 

[Krt22]

The McDonald's $1 menu is actually the $2.49-$3.49 menu in my neck of the woods. Crazy! 

[Petethreeput]

7 hours ago, Wooley12 said:

 Observational non political comment. The year my father started his job as a caddy so he could have money for clothes, inflation was Minus 8.89%. The year I was born, inflation was Plus 8.07 and a 60 year run of the  greatest economic growth for a country in the history of the modern world started. 

Exactly. Contractions happen, but since 1947 this world is on a tear with a few blips, ‘01, ‘08, most recently.

[Wooley12]

In my personal humble opinion,  that that 50 year long party of middle class expansion and growth is over. Past performance does not indicate future results as they say.  There are other economic disfunctions that concern me more. 

[dan360]

The USD is powerful at the moment. 

 

One would assume that means American manufacturing has the advantage over the rest of the world.   However, since America is now a nation of "consumers" and those American companies who manufacture abroad are seeing their offshore enterprises spending more for less, as those currencies devalue to the USD, the accountants have figured out the advantageous leverage of increasing the price due to the increased 'cost' of the product's manufacture, in those foreign currencies.

 

It's magic.

[me05501]

On 10/27/2022 at 11:48 AM, Petethreeput said:

Until recently, there has never been this type of recession with unemployment at record lows, the economists have no idea what is happening because the indicators don't match up.

 

 

We aren’t in a recession. A recession is a very specific situation defined by two or more consecutive quarters of negative GDP. 
 

We’re in a bear market for both stocks and bonds, and we’re suffering from high inflation, but we aren’t in a recession.