cmarlin20May 27, 2009

There is an earlier thread about how to invest for inflation, but I'm wondering - how would you invest now to prepare for stagflation, would you do anything differently?

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Seek guaranteed yield (insured bonds, high-demand rents, etc.) and defend reserves jealously.

    Bookmark   May 28, 2009 at 1:50PM
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Stagflation is a "dropping tide" where there are no stable investment classes to push off of... "gains" are simply relative to alternative losses... so the name of the game is stability & defense...

"Keep your powder dry" and reserve your oxygen.

    Bookmark   May 28, 2009 at 1:55PM
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You know I own rentals, but I'm wondering if this is good for the short or more important long term future. We don't know all the new rules yet, but I'm concerned many of the tax benefits are going to be removed. If the the properties don't appreciate in value, what is the benefit? I know I have the income, but wonder if that is enough benefit for the future if I don't have any tax benefit.
I'm waiting to see Obama's new rules of the game. Hope I can adjust my plans for a good fit.
Will we have inflation, stagflation?
Questions, questions - life is interesting in these times.

    Bookmark   May 29, 2009 at 10:15AM
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Anyone else seeing *inflation* anywhere? Grocery prices had stabilized. Beef has actually dropped. Now I see new increases in the grocery items. A result of rising gasoline prices? Something else? I was expecting 'grocery wars' as Walmart and Target moved further into groceries. Not happening here. (Chicagoland)

    Bookmark   May 29, 2009 at 12:06PM
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Paul Krugman in this morning's NY Times says that inflation is NOT the problem now and not for a while, either. He cited stats showing some deflation in recent months. He also cites the situation in Japan since the 90s -- people worried that the policies would cause rampant inflation, but it did not happen.

To "prepare" for inflation, so you're ready when/if it eventually happens: TIPS mututal funds, but only in tax-deferred accounts because they are not tax efficient; and buy short-term bonds or bond mutual funds (duration up to 5 years) only because when there's an uptick in inflation, they are less susceptible to loss than long-term bonds.

    Bookmark   May 29, 2009 at 1:42PM
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If you'd chosen to buy Canadian Dollars a few months ago, US$780.00 would have bought CA$1,000.

If you chose to use that CA$1,000. to buy U.S. funds now ... you'd get $910.00. (if your financial agencies were giving you a rate near the standard rate).

But ... about three years ago when a former Canadian now a resident of the U.S. had an aunt die in Canada and leave her about CA$25,000., the financial agency in the U.S. wanted over $1,000. to exchange it (quite a bit over, if I recall correctly). I suggested that she send the cheque back to Calgary and have them issue a cheque in U.S. Dollars, which they did at about 1% or less exchange rate, I think.

(I told her that she owed me a dinner, some time when we got together).

If your agency's spread between buying rate and selling rate is more than about 1% ... take your business somewhere else.

Good wishes for increasingly skillful management of:
a) income, and
b) assets.

Your dollars should make more for you than for the other guys (i.e. managers).

ole joyful

    Bookmark   May 30, 2009 at 10:15PM
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I'm seeing rising gas prices which will result in higher utility bills.
Also seeing rises in healthcare (Office visits, lab fees etc).
My vet just raised her fee for office visits and has added a "biohazard disposal fee" of $2.50.
I see creeping added charges with interesting names ("administrative charge" and "regulatory charge") added to my cell phone bill
While I'm not seeing actual prices for food go up, I AM seeing the size of the packaging go down.
I consider all of this a stealth inflation.

    Bookmark   June 1, 2009 at 12:38PM
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I agree that the rising cost of energy is troubling. But I would caution against the view that every hike in price is evidence of uncontrolled inflation about to arise. Even assuming that the "official" cost of living numbers underestimate the "true" cost of things, I do not see any evidence of the kind of inflation that some people are worried about.

That does not mean that it will not happen, but not for a while yet. The challenge is to figure out when it's a real threat, and to head it off. Unfortunately, that's more art (and politics) than science.

    Bookmark   June 1, 2009 at 10:57PM
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The cost of food is rising where we live. Sometimes the manufactures try to disguise the rise by putting less in the box. The cost per ounce is up a lot. That is what counts. With so many states, counties and cities in financial trouble, we are seeing many added fees and taxes for any type of service or use such as higher fees to go camping. The cost of gas has taken a big increase here and every day we hate to pass the gas station as it just keeps going up. I am terrified that when Obama gets his cap & trade taxes, that we will see $5-$6 per gallon gas. We live out in the country, about 5 miles from town. We have teenagers that have to be taken into town and picked up everyday for school, youth group, dance class and such. We have a 50 mile trip to do our grocery shopping or to see most of our doctors. We are both retired and our savings and investments are not keeping up with the costs. Do we have inflation? YES!

    Bookmark   June 5, 2009 at 6:27PM
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