Originally Posted by
Edwin Santos
Inflation? What's that?
Seriously though, inflation is a bit of a chameleon. On the one hand it has been a long long time since we've seen meaningful inflation as reported in the CPI figures. Like since the early 80s. On the other hand, we've seen so much asset price escalation for things like real property, higher ticket durable goods like vehicles. But for everyday items and disposable consumer goods, many things are not really any more expensive than they were decades ago. I think this is in large part due to the diffuse benefits of global trade and low cost manufacturing in places like China. And then tech items and electronics have actually deflated in price, significantly. To your point though, future purchasing power of your money is an important thing to be aware of.
Like I commented earlier, it is unfortunate that so many people who have not been in a position to invest or benefit from asset appreciation in some other way have been left behind due to their wealth either stagnating, or moving backwards in relative "real" terms.
Interestingly even though we haven't had a lot of "official" inflation, gold has been a very good speculative investment since 2000.
However timing is everything. If you bought gold in 1980, you would still be waiting to break even.
On the other hand, if you had invested $10,000 in Microsoft in 1989 and either forgot about it or had the discipline to not touch it, today you would have over $2.5M, a return of almost 25,000%. And the best part is after writing the initial check to buy it in 1989, you would never have to write another check again. A real estate investment will usually involve writing checks perpetually until the day you sell it, and even then the selling costs will usually be about 5-7% of the total sale price. The selling cost of the Microsoft stock would be about $10 in exchange costs at a no trade fee broker like Schwab.
Some of the price escalation you mention is a real driver of inflation.
A low inflation rate is kind of like the story of a frog in a pot on the stove. A little every year can occur without notice:
Inflation 2006-2019.png
This is from > https://inflationdata.com/Inflation/...Inflation.aspx
The rate is from the same month a year earlier.
Here it is calculated:
Infation calculator.png
This was from > https://data.bls.gov/cgi-bin/cpicalc...1&year2=202001
It looks like the money folks stashed in their mattresses lost a chunk of value.
Just like so many other things, if you decide to buy when the price is taking off like a rocket, you likely waited too long:
Gold Chart.png
In many markets, timing is everything.
Originally Posted by
Ole Anderson
Anybody here bold enough to get into the market as it bottomed out in 2008, not knowing if it was going to totally crash?
In early 2008 about a years salary worth of my retirement investment account was used to purchase 'time served' with the agency governing my retirement system. It increased my retirement payment by about 11%. So my defined retirement has paid this back since leaving service. My retirement was also in 2008. My investment account has been mostly untouched. We did make a withdrawal to fix a couple of roofs. It is better than double the size than it was in 2008 before withdrawing for the new roofs in 2016.
Having investments in diverse funds with professional management is somewhat safer for the average person than trying to pick your own investments unless you are an investment guru.
jtk
Last edited by Jim Koepke; 02-13-2020 at 2:01 PM.
Reason: clarifications
"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
- Sir Winston Churchill (1874-1965)