Beating Inflation - Page 3

On January 04 2012 02:46 EternaLLegacy wrote:


I wouldn't do that, because the inflation adjustment is not going to match real inflation. You can look at the numbers governments come up with versus numbers older metrics and private sources come up with, and they don't match. I don't know much about the UK, but in the US real CPI for the last 3-4 years has been over 9% (last I looked) whereas reported CPI is somewhere in the ballpark of 3-4%.

It's safe in terms of you pretty much know the yield and there's little to no risk of getting nothing back. I'll give you that. I would never buy them so long as we continue to keep interest rates too low and print money. The fundamentals are bad and the numbers are bad. It might've been good 10 years ago, but not anymore.

On January 04 2012 03:14 Glacierz wrote:


Where the hell did you get 9% CPI???? Credible source pls, don't post false information to people who are not well versed in the markets.

On January 04 2012 03:33 EternaLLegacy wrote:


I've seen the numbers referenced all over the place, and there's a lot of bogus information out there, but that was the number Peter Schiff referenced.

I did a simple Google and came up with these links:
http://www.neuralnetwriter.cylo42.com/node/200 - no idea who this guy is but those charts are really good at showing exactly what I'm referring to, and I've seen similar reproduced in other places.

http://www.investopedia.com/articles/07/consumerpriceindex.asp#axzz1iQ8z3Kjj - has a good explanation as to why some people think CPI is stupid and why it's probably inaccurate or at least way too dynamic to be a good indicator.

In short, the weightings assigned to various categories seem to be a source of great dispute. Personally, I think real inflation is probably higher than reported, but maybe not as high as some of the claims of 9-10%. However, anything over 4% was considered an emergency 35 years ago. Lets just say, it's not looking too good.

And additionally, on another note, I think if you're going to hold currency take a look at the singapore dollar, australian dollar, or swiss franc, to name a couple. Hell, even canadian dollars aren't bad. USD only looks good cause Euros really suck, but they're not so hot and haven't been for some time.

Edit: http://www.schiffradio.com/blog?action=blogArchive&blogTag=CPI is one article talking about CPI from Peter Schiff

On January 04 2012 04:10 Glacierz wrote:


Your first link contains a chart that has data dated back to the 1700s. I'm no expert in the CPI index, but I'm pretty sure it did not exist back then. He made up the line that shot up beyond belief with no indication of the weightings he used. Based on his charts, the cost of a big mac would have more than tripled over the course of the last decade? If you only used food/energy prices to come up with that, I might have believed it. Also anything drawn on a timescale that long should be in log scale to avoid this kind of visual deception.

Of course the methodology and weights on the basket of goods would change as technology progresses (imagine the demand for oil, gas, and metals pre and post industrialization), to make the argument to use the same method developed generations ago is just plain silly.

Your second link contains a debate on the COGI vs GOLI. I'm no exppert on this, but I'm almost certain it definitely would not have generated such huge difference as wage would go up with inflation by the same rate in the long run to maintain a similar standard of living.

I see no real problem with the Peter Schiff article, core vs headline are used for different purposes, and have long been published side by side. The reason the Fed looks at core is because food and energy prices are affected by too many exogenous factors and are too volatile to be controlled by monetary policy. Headline CPI (including food and energy) is around 3.2% fyi, with the core being a lot lower at 1.8% from Nov 2010 to Nov 2011. The compounded difference over 10 years is only 4% according to that article, which is nowhere near the 6% annual difference you claim it to be.

Also what did you mean anything above 4% is considered emergency? US Inflation in the early 80s peaked around 14% before Volcker brought it down...

On January 04 2012 05:46 EternaLLegacy wrote:


There was no price inflation before 1913, really. The dollar maintained almost 100% of its purchasing power. I do agree the chart should be log, since we're dealing with exponential growth not linear growth. The cost of a big mac includes much more than the raw cost of food. There's a cost of labor, rent, insurance, marketing, energy, etc. Food prices are not actually what you pay as a consumer, because there's so many other costs built in.

Wages do not go up with inflation. Inflation replaces real savings with debt by which allows people to continue to purchase more than they can actually afford. That's why we have such a monumental consumer debt problem combined with a huge public debt problem AND fairly stagnant wages for the last few decades. Unfortunately, while on paper you'd think wages would go up but it doesn't work that way and wages lag behind inflation.

As I said, the 9% was only for the past 3-4 years, as opposed to the 10 years that article referenced. Therefore that 4% annual difference is probably reasonable if inflation was fairly low until the Fed sprung into action in 2007/2008. I don't see a problem with both numbers coexisting.

As for that 4% - I believe that is what inflation was at when Nixon panicked and did some price freezing. To be fair, I am not very familiar with what occurred then, so I need to learn more about monetary history in that time period. I could be completely wrong, but I'm pretty sure that's correct.

On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.

On January 04 2012 07:27 Glacierz wrote:


I think that's pretty much all you got if you invested in the S&P 500. The August drawdown was a bullet too hard to dodge.

If you bought long duration us gov't Treasury, you would have been up around 20% in 2011 despite the rating downgrade on U.S. gov't debt and rise in inflation. Funny how economics and the markets interact huh?

On January 03 2012 03:11 Azzur wrote:

You can go to your bank and ask to purchase some AUD currency. When you deposit that AUD in the bank, they should give comparable interest rates in Australia. Ok, perhaps they won't give you term deposit rates but it should be similar to the cash rate in Australia, which is about 4.25%.

On January 04 2012 10:31 CakeOrI)eath wrote:


Although currencies are relatively unpredictable right now, this might be even better than 4.25%. If the dollar continues to drop, the exchange rates could get even better.

On January 04 2012 06:05 Glacierz wrote:


Exactly, the cost of big mac involves all these other costs, which is why the GOLI is preferred as a measure for inflation. I don't agree with the 9% number simply because I am not experiencing a reduction in my purchasing power over the last year of 9%.

Wage plays a very central role in cost-push inflation, although I do agree the current situation is in the demand-pull type.
http://economics.about.com/cs/money/a/inflation_terms.htm

The causality you made between debt and inflation doesn't make sense. Higher government debt, however, could sometimes lead to higher inflation and currency depreication (it's a cheap way for the gov't in debt to pay its way out), but not the other way around. I haven't heard of personal debt being linked to inflation with any statistical significance.

On January 04 2012 03:13 Glacierz wrote:
Why would he trade gold/silver? I think all he's gonna do is buy and hold... Using TIPS to beat inflation means you have to put 100% of your portfolio into it, there are way more efficient ways of going about it.

I also don't think you should tell him to trade any sort of spread, as that involves shorting and some sort of view on intermediate/short term fundamentals, which are by no means beginner friendly.

On January 04 2012 12:01 EternaLLegacy wrote:


Well, inflation causes debts to be worth less, which makes people more likely to go into debt. It's simply an incentive to borrow. Hell, if inflation is 5% and I can get a loan for 4%, that's like having free money, so long as I have a good revenue stream that ought to grow with inflation. Of course, look at interest rates now and you'll see that they're WAY too low for how much inflation we have, which means people are going to borrow like madmen. That's how bubbles form, and lord knows we don't need more of those.

Also, I have no idea what the heck cost-push inflation is... The definitions for inflation can be either rising prices or rising money supply, to my knowledge. Then again, I'm not an economist so some of the terminology might be foreign to me if I haven't heard it used.

On January 04 2012 13:45 BrTarolg wrote:


You'll actually be surprised at how good regular, normal people who live in their own country that are generally aware are of generating fantastic spread ideas

The only reason normal people suck at it is because their implementation of those ideas is generally terrible, and they lack the quantitative (yet very basic and learnable within a day) skills required to understand a some of the mechanics of it.
Also, the major reason is because people have useless emotions and "feelings" which usually get in the way

Personally i think generating either cross or intra-industry alpha is a really simple and effective strategy to implement given a little bit of study time as a way of managing your retirement money.
Theres absolutely no reason why a normal person can't generate 5-10% alpha a year without taking major risks, being well hedged and having zero exposure to beta.

On January 04 2012 23:16 Glacierz wrote:


It would be pretty hard to find a loan for 4% when inflation is 5%, banks are not dumb. Inflation only helps people who are already in debt. Also there will not be massive inflation as long as demand for goods/services stays low. Just because you have rising money supply does not mean you will for sure get inflation. Right now the problem is we have massive money supply from the Fed, but people are not spending/investing them (which is what the Fed want people to do to stimulate growth). The same is happening to a lot of large corporations who are just keeping their profits in cash instead of investing.

On January 04 2012 03:33 EternaLLegacy wrote:


I've seen the numbers referenced all over the place, and there's a lot of bogus information out there, but that was the number Peter Schiff referenced.

I did a simple Google and came up with these links:
http://www.neuralnetwriter.cylo42.com/node/200 - no idea who this guy is but those charts are really good at showing exactly what I'm referring to, and I've seen similar reproduced in other places.

http://www.investopedia.com/articles/07/consumerpriceindex.asp#axzz1iQ8z3Kjj - has a good explanation as to why some people think CPI is stupid and why it's probably inaccurate or at least way too dynamic to be a good indicator.

In short, the weightings assigned to various categories seem to be a source of great dispute. Personally, I think real inflation is probably higher than reported, but maybe not as high as some of the claims of 9-10%. However, anything over 4% was considered an emergency 35 years ago. Lets just say, it's not looking too good.

And additionally, on another note, I think if you're going to hold currency take a look at the singapore dollar, australian dollar, or swiss franc, to name a couple. Hell, even canadian dollars aren't bad. USD only looks good cause Euros really suck, but they're not so hot and haven't been for some time.

Edit: http://www.schiffradio.com/blog?action=blogArchive&blogTag=CPI is one article talking about CPI from Peter Schiff