I pulled a Rip Van Winkle--interest rates

JimPghPA said:
BUT, the rate of inflation versus the interest earned is way too far in the wrong direction compared to what it used to be.
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such as with anything else out there, everything is prone to manipulation and different interpretation

especially since removal of the gold standard back in '71
 
atikovi said:
Umm...it's the eggs that smell, not the skillet. That's kinda like telling a street person to wash his clothes because HE smells.
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Super fresh eggs have almost no smell. I had a neighbor give me a dozen fresh laid eggs and there was no funk or smell. The same with fish or fresh cut beef.
 
atikovi said:
I don't eat eggs because I just don't like them. When cooked or scrambled they smell like unwashed feet. And consuming the unborn life form of an animal is gross.
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If you're referring to the store bought ones they're unfertilized and incapable of being life though. But i kinda get that sentiment. I don't eat eggs from my chickens if i see development like even a hint of blood. Not really gross it just feels weird to think about eating it. But i have noticed that store bought eggs can have a smell to them that same day farm eggs don't.
 
atikovi said:
That's why I prefer FDIC insured bank accounts. 11% is great but it would have to be more like 50% to take that risk. And how is it able to pay 11%? I assume the companies it goes to are paying 15% dividends for that and can't borrow the money though banks, so aren't they big risks to begin with?
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It does NOT need to be so binary.

You should have money in more than one bucket. Yes all short term saving should be solid and safe.

I only have one guaranty about investing. It you DON'T own a variety of well diversified stocks, real assets and hold someone else's debt, you will be losing fiat money over time.
 
Pablo said:
It does NOT need to be so binary.

You should have money in more than one bucket. Yes all short term saving should be solid and safe.

I only have one guaranty about investing. It you DON'T own a variety of well diversified stocks, real assets and hold someone else's debt, you will be losing fiat money over time.
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Well said and it doesn't have to be all that complicated - others have already packaged these things up into nice and neat MFs and ETFs with virtually no expense (or at least very little).
 
Almost forgot! JEPI has not changed a ton since 2020 but here is the month-month chart of JEPI.

1678050503919.jpg

Here are the monthly distributions of JEPI

1678050747351.jpg
 
PWMDMD said:
Yup, and my point is the relative change in CPI over time is more important than the actual CPI number. Let's pretend we are omniscient and we can KNOW inflation exactly and the US Labor Department reported inflation in Jan 2020 to be 2.5%, Jan 2021 1.4%, Jan 2022 7.5%, and Jan 2023 6.4% but in reality all of these numbers under reported actual inflation compared to what the average American experienced. This could be due to the items and services they choose to look at or households and businesses they choose to survey or whatever. Since the methodology hasn't changed appreciably in years there is no reason to think that using the same methodology would cause any significant difference between these years and that the underreporting would not be the same for all these years. So if the actual inflation rate of Jan 2020 was 3.2% then the actual inflation of Jan 21 should proportionally be 0.7% higher or 2.1% and Jan 2022 should be 0.7% higher or 8.2% and Jan 2023 should be 0.7% higher or 7.1%. Who cares if Jan 2020 is 2.5% or 3.2% as long as Jan 2021 is reported to be proportionally the same compared to Jan 2020? It's just the change in the value (real or estimated) that we care about.

There's is no basis to believe (other than some want it to be true to fit their narrative) that if actual inflation in Jan 2020 was actually 0.7% higher than CPI-U estimated that magically in Jan 2023 it's really now 5% higher. FRED even tries to make this point, that it's the relative change over time that is important and the ability to compare two time points.

"The Consumer Price Index for All Urban Consumers: All Items (CPIAUCSL) is a price index of a basket of goods and services paid by urban consumers. Percent changes in the price index measure the inflation rate between any two time periods. The most common inflation metric is the percent change from one year ago."
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This I actually do disagree with. It works if there are very little change to a line item. But with big swings like we had, the methodology is flawed.

Lets look at the feds measure of housing - or as they call it - shelter - which just happens to be the largest single item in the feds basket. According to the fed, "shelter" is up 7.9% in the last 12 months. Except case shiller say house prices are up 25% in the last year and Realtor.com says national rents are up 11.5% just in the last 12 months.

So if rent is up 11.5%, and housing prices are up 25%, and interest rates to buy a house have doubled, how can "shelter" only be up 7.9%?

The reason for this is the fed's methodology of "owners equivalent rent", which is almost impossible to understand for me at least. It likely is accurate from a macro standpoint, but it fails to identify the fact that if I wanted to buy another house like this it would cost double what it did 3 years ago, and if I wanted to finance another house like this it would cost double in interest rate I pay now, and If I wanted to take a home equity loan against it its now worth double what it was before. So it fails to take into account my personal economic situation and those like me.

I think this is the big reason why the current inflation rate of 6% is significantly understated. There methodologies work fine when things are orderly, but as soon as they don't follow the orderly pattern, their model fails them. We see this time and again. We saw there models fail in 2006 with subprime. We saw there models fail in 2021 with inflation being "transitory" and I think we will see there models fail again before this hiking cycle ends.

I quite hope I am wrong, but history shows I likely won't be.
 
PWMDMD said:
others have already packaged these things up into nice and neat MFs and ETFs
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I read an interesting article that said 50%+ of the S&P is now held in ETF's. So people think there super diversified because they own 500 stocks, but in reality they own the exact same 500 stocks as more than half the market. So when the market crashes, there going to be selling the exact same 500 stocks everyone is trying to sell at exactly the same time. Not good.

I still own a S&P 500 ETF - but I feel far less diversified than I did before.
 
SC Maintenance said:
This I actually do disagree with. It works if there are very little change to a line item. But with big swings like we had, the methodology is flawed.

Lets look at the feds measure of housing - or as they call it - shelter - which just happens to be the largest single item in the feds basket. According to the fed, "shelter" is up 7.9% in the last 12 months. Except case shiller say house prices are up 25% in the last year and Realtor.com says national rents are up 11.5% just in the last 12 months.

So if rent is up 11.5%, and housing prices are up 25%, and interest rates to buy a house have doubled, how can "shelter" only be up 7.9%?

The reason for this is the fed's methodology of "owners equivalent rent", which is almost impossible to understand for me at least. It likely is accurate from a macro standpoint, but it fails to identify the fact that if I wanted to buy another house like this it would cost double what it did 3 years ago, and if I wanted to finance another house like this it would cost double in interest rate I pay now, and If I wanted to take a home equity loan against it its now worth double what it was before. So it fails to take into account my personal economic situation and those like me.

I think this is the big reason why the current inflation rate of 6% is significantly understated. There methodologies work fine when things are orderly, but as soon as they don't follow the orderly pattern, their model fails them. We see this time and again. We saw there models fail in 2006 with subprime. We saw there models fail in 2021 with inflation being "transitory" and I think we will see there models fail again before this hiking cycle ends.

I quite hope I am wrong, but history shows I likely won't be.
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CPI-U was never meant to represent all of America - it doesn't even represent rural inflation all that well. As I said, it is NOT about the actual number, it's just about the trends and it's only accurate for urban areas. Your comments about home prices may very well be true for the US as a whole but it's not true in urban areas or at least not true in my urban area where housing is flat to down and certainly not up 25%. CPI-U has a whole bunch of weaknesses and that's why there are other measures.

No one is saying it's perfect. It is also not the only measure as there are a handful of CPIs and other measures of inflation that all come together to give a reasonably reliable estimate that over time gives trends. Was inflation actually 6.4% last month? No idea, but I'm more confident inflation was lower last month than in June 2022. You also have to give economists credit, they know these indices inside and out including their strengths and weaknesses - CPI-U is just what gets reported in the media. There is a whole lot more analysis that goes into it, or at least that's what my economics prof who studies inflation taught us.

What I'm railing against in this thread is people just making up inflation numbers - "I don't believe inflation was 6.4% last month and I actually think it's up to 12%." Well if that were true, then inflation in June 2022 was more like 18%. And yes, individual metrics within each index can change over time and skew results but economists know that which is why economists don't hang their hats on any one index. When all or at least most measures of inflation say inflation is down or up you can be reasonably confident it's down or up. The focus is less on the 6.4% and more on 6.4% is less than 9.3% and that's good.
 
SC Maintenance said:
I read an interesting article that said 50%+ of the S&P is now held in ETF's. So people think there super diversified because they own 500 stocks, but in reality they own the exact same 500 stocks as more than half the market. So when the market crashes, there going to be selling the exact same 500 stocks everyone is trying to sell at exactly the same time. Not good.

I still own a S&P 500 ETF - but I feel far less diversified than I did before.
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Depends on the ETF. VTI and ITOT are both Total US Market funds but both hold a different total number and proportion of stocks. Either choice, you are far more diversified than individual stock pickers. Super easy to pick a total market, foreign market, bond market, and REIT ETF and be pretty darn diversified.

Plus QQQ for the win!
 
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