Deflation is everywhere. Get used to it.

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3CT_Paddler
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Re: Deflation is everywhere. Get used to it.

Post by 3CT_Paddler »

bt365 wrote: Mon Apr 20, 2020 9:38 am "From a macroeconomics standpoint, the market has risen, but much of this was due to the corporate tax cuts and the buybacks, as mentioned above. How much that has actually benefited the average investor, especially those that haven't sold anything, may not see those great gains. Despite all of the platform speeches and talk, the majority of corporations didn't use the tax cuts to increase wages, and a majority of the employment gains were in the gig economy. There is an excellent index that was recently released called the job quality index. It's very insightful to note that the quality of jobs hasn't increased greatly, but the number of jobs has."

Agree with this.
Prior to the COVID-19 quarantine impacts on the world this was the best US economy in a long time for workers. There was a war for talent going on that was driving up salaries in my industry (civil engineering) and I know that was the case in many other industries.
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Stef
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Re: Deflation is everywhere. Get used to it.

Post by Stef »

1 barrel of oil costs now less than discount toilet paper.

What a time to be alive.
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CarpeDiem22
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Re: Deflation is everywhere. Get used to it.

Post by CarpeDiem22 »

Dottie57 wrote: Mon Apr 20, 2020 12:02 pm So are you saying prices for Japanese groceries, clothing, rent are less today than they were 365 days ago?
In 2019, Coca cola increased their prices in Japan after 27 years!

https://www.ft.com/content/aa9c6530-3fd ... 36ec32aece
Pomegranate
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Re: Deflation is everywhere. Get used to it.

Post by Pomegranate »

02nz wrote: Mon Apr 20, 2020 11:41 am
fredflinstone wrote: Mon Apr 20, 2020 7:32 am I think we're turning Japanese.
Do we also get a delicious fish-based diet and one of the world's longest life expectancies?
I’d say diet also includes some Fukushima nuclear waste seasoning :sharebeer
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wassabi
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Re: Deflation is everywhere. Get used to it.

Post by wassabi »

beth65 wrote: Mon Apr 20, 2020 9:17 am I'm 40 years old, and I have yet to live during a time where overall inflation did not exist, as real inflation is different from projected and BLS-calculated inflation. My salary has not increased since 2008 (I work in marketing, an area that took a big hit and never fully recovered), and I can look back at my budget and spending from 12 years ago and see that things cost more now than they did then (with the exception of a a few categories like clothing and utilities, which have been mostly stagnant). Healthcare and housing costs are the two biggest increases.

From a macroeconomics standpoint, the market has risen, but much of this was due to the corporate tax cuts and the buybacks, as mentioned above. How much that has actually benefited the average investor, especially those that haven't sold anything, may not see those great gains. Despite all of the platform speeches and talk, the majority of corporations didn't use the tax cuts to increase wages, and a majority of the employment gains were in the gig economy. There is an excellent index that was recently released called the job quality index. It's very insightful to note that the quality of jobs hasn't increased greatly, but the number of jobs has.
Real wages haven't increased in decades. Purchasing power is not much better (if at all) than it was in the 1970s.
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Re: Deflation is everywhere. Get used to it.

Post by snowman »

Interesting thread. I also noticed collapsed oil prices this morning. I would have never expected to see WTI price this low. Just goes to show you how impossible it is to predict the future. Having said that...

I think deflation is temporary. 2020 for sure, 2021 probably, then going up again. Personally, I'd love to see some deflation in my personal finances, because my inflation is pretty significant! Food prices are up (although only slightly so no biggie), but property taxes went up 10% this year, college costs close to it, healthcare costs even higher! Call me skeptical, but somehow I don't expect those last 3 categories to deflate over the next couple of years. And cheap gas does me no good when I am ordered to stay home.
anil686
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Re: Deflation is everywhere. Get used to it.

Post by anil686 »

Maybe the low price is here to stay but I think the June, July and August futures all have WTI crude in the 20s. This is a massive supply problem that predates to some extent Covid and is clearly made worse by it. Basically, everybody has been producing too much for the past year or two and storage was already pretty full. Now, storage is at a premium and nobody wants to buy the oil because there is nowhere to put it. It seems like the oil thing should work itself out to some extent by the fall - JMO though...
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eye.surgeon
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Re: Deflation is everywhere. Get used to it.

Post by eye.surgeon »

Not a political statement, but there have been many in the minority met with derision for stating that we will run out of the need for oil before we run out of oil.

Wonder how low gas at the pump will go. We could be filling the tank for $10.
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austin757
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Re: Deflation is everywhere. Get used to it.

Post by austin757 »

I am currently 100% stock. Would Vanguard EDV ETF be a good fund for these times?
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fredflinstone
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Re: Deflation is everywhere. Get used to it.

Post by fredflinstone »

Van wrote: Mon Apr 20, 2020 11:58 am
fredflinstone wrote: Mon Apr 20, 2020 7:38 am
HEDGEFUNDIE wrote: Mon Apr 20, 2020 7:34 am I have three words for you, my animal fur-clad friend.

Long. Term. Treasuries.
It wouldn't shock me at all if the 30-yield falls to 0 percent within the next year or two. (That is not a prediction, just an observation.)
If it has not happened, how can it be an ovservation?
Let me rephrase: If the 30-year yield falls to 0 percent within the next year or two (which may or may not happen), I predict I would not be shocked. See? It's an if-then statement. The "prediction" pertains only to my state of mind (not shocked) not the interest rate.

Here is another "prediction": If the 30-year yield rises to 3 percent within the next year or two (which may or may not happen), I predict I would not be shocked.
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fredflinstone
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Re: Deflation is everywhere. Get used to it.

Post by fredflinstone »

Dottie57 wrote: Mon Apr 20, 2020 12:02 pm
fredflinstone wrote: Mon Apr 20, 2020 8:00 am
beth65 wrote: Mon Apr 20, 2020 7:58 am Deflation is not quite everywhere - food costs have definitely not decreased recently. Even despite less dining out, my grocery bill is up substantially from two months ago. I went to the grocery store yesterday, and they were advertising prices as sales that were the regular price on the exact same items before the outbreak. If you can get eggs or chicken, the prices are definitely higher. Prices on PPE and hand sanitizer, and even ordinary cleaning supplies have also been inflated.

Doesn't a deflationary environment typically revert to an inflationary one after a short amount of time (a year or less)?
Japan has had deflation for most of the last 30 years.
So are you saying prices for Japanese groceries, clothing, rent are less today than they were 365 days ago?
I was a bit off, as someone else pointed out. Prices in Japan declined from around 1999 to around 2014 but have rebounded steadily since then. Overall, the CPI today is about 2% higher than it was in 1999.

https://tradingeconomics.com/japan/cons ... -index-cpi
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Fat-Tailed Contagion
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Re: Deflation is everywhere. Get used to it.

Post by Fat-Tailed Contagion »

How much will residential rents fall in HCOL areas?

Any predictions?
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fredflinstone
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Re: Deflation is everywhere. Get used to it.

Post by fredflinstone »

austin757 wrote: Mon Apr 20, 2020 12:45 pm I am currently 100% stock. Would Vanguard EDV ETF be a good fund for these times?
90% stock + 10% EDV would be superior to 100% stock in my opinion (significantly better risk-adjusted returns). But true diversification means owning more than just stocks and bonds.
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bt365
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Re: Deflation is everywhere. Get used to it.

Post by bt365 »

Pomegranate wrote: Mon Apr 20, 2020 12:12 pm
02nz wrote: Mon Apr 20, 2020 11:41 am
fredflinstone wrote: Mon Apr 20, 2020 7:32 am I think we're turning Japanese.
Do we also get a delicious fish-based diet and one of the world's longest life expectancies?
I’d say diet also includes some Fukushima nuclear waste seasoning :sharebeer
Been drinker of Japanese Sencha (and other Japanese teas) and user of Japanese condiments for almost four decades. Japanese are well known as rigorous testers of food and beverage they consume and that they export. I'd be much more concerned about Chinese food products which Americans consume in huge volumes without a second thought.
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Re: Deflation is everywhere. Get used to it.

Post by garlandwhizzer »

SimpleGift wrote:

I believe Mr. Bernanke was talking about expectations for deflation taking hold among consumers and the financial markets. Once deflationary expectations get entrenched in an economy, they are hard to reverse.

The Fed's worst fear is of a deflationary spiral, I believe, where falling prices cause further deflationary pressures to cut prices, creating expectations of further price falls, and therefore consumers reduce their spending because they expect goods to become cheaper in the future.
1+

The FED can effectively kill inflation with monetary policy by raising rates. That causes a recession which puts a sudden stop to inflation. However as SG points out and has Bernanke has said, deflation, if persistent, cannot be stopped effectively by FED monetary policy. That was his greatest fear in the GR. Japan and Europe, and to a lesser extent the US, have all used maximal monetary policy stimulus for years with zero or negative yielding nominal rates plus QE and, yet, all this has been unable to create even low levels of inflation. If persistent deflation actually occurs--we're not there yet IMO--the risk is that a deflationary mindset gets entrenched in the public and they defer consumption because prices of everything will be cheaper in the future. Deflation in short defers and decreases consumption which is what drives the economy in favor of savings. That in turn lessens future economic growth which promotes further deflation. It can become a nasty self-reinforcing cycle no matter how low rates go. What can stop deflation is fiscal policy, helicopter money, which is the purview of Congress, not the FED. We are resorting to it now with massive fiscal stimulus which helps our short term crisis and may prevent a deflationary mind set from getting entrenched in the public mind. That money however increases our deficit and at some point--we don't know for sure where--massive deficits may decrease the expected rate of future economic growth. There is no easy worry-free way out of either bad inflation or bad deflation IMO. I believe the government's preemptive aggressive action to combat the current CV-19 crisis is on target, the best alternative we have now in a difficult situation that doesn't offer any pain-free fixes.

Garland Whizzer
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Re: Deflation is everywhere. Get used to it.

Post by bobcat2 »

fredflinstone wrote: Mon Apr 20, 2020 8:00 am Japan has had deflation for most of the last 30 years.
Japanification describes an economy with low inflation, low real interest rates, and slow to moderate growth. Japan has been like that for about 30 years. We have been like that for at least ten years. Contrary to popular opinion Japan has not had deflation for most of the last 30 years. Most years they have had low inflation and in a minority of years a low rate of deflation. I have the Japanese CPI data for the 30 years from 1989-2018. There was deflation in 12 of the 30 years. It looks like the average annual inflation rate was about 0.5% over the thirty years.

Code: Select all

1989	2.3%
1990	3.1%
1991	3.3%
1992	1.8%
1993	1.2%
1994	0.7%
1995	-0.1%
1996	0.1%
1997	1.7%
1998	0.7%
1999	-0.3%
2000	-0.7%
2001	-0.7%
2002	-0.9%
2003	-0.3%
2004	0.0%
2005	-0.3%
2006	0.2%
2007	0.1%
2008	1.4%
2009	-1.4%
2010	-0.7%
2011	-0.3%
2012	-0.1%
2013	0.3%
2014	2.8%
2015	0.8%
2016	-0.1%
2017	0.5%
2018	1.0%
Link to data source - https://www.macrotrends.net/countries/J ... n-rate-cpi

BobK
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Re: Deflation is everywhere. Get used to it.

Post by gmaynardkrebs »

garlandwhizzer wrote: Mon Apr 20, 2020 1:33 pm
SimpleGift wrote:

I believe Mr. Bernanke was talking about expectations for deflation taking hold among consumers and the financial markets. Once deflationary expectations get entrenched in an economy, they are hard to reverse.

The Fed's worst fear is of a deflationary spiral, I believe, where falling prices cause further deflationary pressures to cut prices, creating expectations of further price falls, and therefore consumers reduce their spending because they expect goods to become cheaper in the future.
1+

The FED can effectively kill inflation with monetary policy by raising rates. That causes a recession which puts a sudden stop to inflation. However as SG points out and has Bernanke has said, deflation, if persistent, cannot be stopped effectively by FED monetary policy. That was his greatest fear in the GR. Japan and Europe, and to a lesser extent the US, have all used maximal monetary policy stimulus for years with zero or negative yielding nominal rates plus QE and, yet, all this has been unable to create even low levels of inflation. If persistent deflation actually occurs--we're not there yet IMO--the risk is that a deflationary mindset gets entrenched in the public and they defer consumption because prices of everything will be cheaper in the future. Deflation in short defers and decreases consumption which is what drives the economy in favor of savings. That in turn lessens future economic growth which promotes further deflation. It can become a nasty self-reinforcing cycle no matter how low rates go. What can stop deflation is fiscal policy, helicopter money, which is the purview of Congress, not the FED. We are resorting to it now with massive fiscal stimulus which helps our short term crisis and may prevent a deflationary mind set from getting entrenched in the public mind. That money however increases our deficit and at some point--we don't know for sure where--massive deficits may decrease the expected rate of future economic growth. There is no easy worry-free way out of either bad inflation or bad deflation IMO. I believe the government's preemptive aggressive action to combat the current CV-19 crisis is on target, the best alternative we have now in a difficult situation that doesn't offer any pain-free fixes.

Garland Whizzer
Modest deflation, like Japan's after the bubble burst, is not the horror show you depict. Japan was and is a stable, well off society, particularly for the elderly. Even in the US Great Depression, the hardship, great as was, was not caused by people waiting to spend their money, but because they had no money at all to spend!
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Re: Deflation is everywhere. Get used to it.

Post by bobcat2 »

Somewhat surprisingly Japanification is not inconsistent with low unemployment rates. Here are the annual unemployment rates in Japan from 2013 thru 2018.

Unemployment rate in Japan

Code: Select all

2013  4.0%
2014  3.6%
2015  3.4%
2016  3.1%
2017  2.8%
2018  2.4%
Link to source data - https://www.macrotrends.net/countries/J ... yment-rate

These are unemployment rates even lower than in the US over the last few years. While part of the lower than US rates in Japan may be because the two countries calculate unemployment somewhat differently, low rates of unemployment are certainly consistent with Japanification.

BobK
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trueblueky
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Re: Deflation is everywhere. Get used to it.

Post by trueblueky »

jeffyscott wrote: Mon Apr 20, 2020 11:08 am
BeneIRA wrote: Mon Apr 20, 2020 10:20 amCostco used to have sales on items I buy and they just sent out a letter that the latest sales are online. I checked and virtually none of the items are products people would want right now. Everyone is buying groceries, so those costs are going up.
Yeah, I noticed there were no food items in the new "coupon book", coffee and vitamins were about the closest to actual food as I recall. Also no cleaning products. I think some of the discounted items may also be in the warehouses, it's just that they did not mail out a coupon book. From the notice that was mailed it was implied that they made last-minute changes to what they were going to have deals on.

Our other primary grocery store, Meijer, has had a much smaller weekly ad than usual and I think fewer virtual coupons on their website recently. They also had been mailing monthly coupons to us, but that has stopped.
The food supply chain has two end points -- groceries and restaurants. Food is packaged differently for those two. (McDonald's doesn't get its cheese in 10-slice packages, for instance.) The supply chain has not caught up. There is more demand for grocery-packaged food, less for restaurant-packaged food.
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Re: Deflation is everywhere. Get used to it.

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Pomegranate
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Re: Deflation is everywhere. Get used to it.

Post by Pomegranate »

bt365 wrote: Mon Apr 20, 2020 1:15 pm
Pomegranate wrote: Mon Apr 20, 2020 12:12 pm
02nz wrote: Mon Apr 20, 2020 11:41 am
fredflinstone wrote: Mon Apr 20, 2020 7:32 am I think we're turning Japanese.
Do we also get a delicious fish-based diet and one of the world's longest life expectancies?
I’d say diet also includes some Fukushima nuclear waste seasoning :sharebeer
Been drinker of Japanese Sencha (and other Japanese teas) and user of Japanese condiments for almost four decades. Japanese are well known as rigorous testers of food and beverage they consume and that they export.
Agreed with every word but would change 'are' to 'used to be' :mrgreen:
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Re: Deflation is everywhere. Get used to it.

Post by willthrill81 »

fredflinstone wrote: Mon Apr 20, 2020 7:38 am
HEDGEFUNDIE wrote: Mon Apr 20, 2020 7:34 am I have three words for you, my animal fur-clad friend.

Long. Term. Treasuries.
It wouldn't shock me at all if the 30-yield falls to 0 percent within the next year or two. (That is not a prediction, just an observation.)
If so, the convexity of long-term Treasuries will result in some really nice gains.
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DualCitizen
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Re: Deflation is everywhere. Get used to it.

Post by DualCitizen »

fredflinstone wrote: Mon Apr 20, 2020 7:32 am I think we're turning Japanese.
I wish, but my rent and housing prices are screaming everything but deflation.
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Re: Deflation is everywhere. Get used to it.

Post by snowman »

Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?
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Re: Deflation is everywhere. Get used to it.

Post by Grt2bOutdoors »

fredflinstone wrote: Mon Apr 20, 2020 10:08 am
Grt2bOutdoors wrote: Mon Apr 20, 2020 8:01 am
fredflinstone wrote: Mon Apr 20, 2020 7:32 am I think we're turning Japanese.

At the time of this writing, oil is trading at $11 per barrel. Who could have imagined this 5 or 10 years ago?

Consumer prices in the US dropped 0.4 percent in March.

Dairy prices are falling:
https://www.spglobal.com/marketintellig ... t-57961571

Rents are falling in Seattle and elsewhere:
https://www.housingwire.com/articles/re ... ronavirus/

Real estate prices in Dallas are falling:
https://www.dallasnews.com/business/rea ... aded-down/

Of course some of this is due to coronavirus, but investors are betting that deflation will persist for a long time. Switzerland's 50-year bond has a yield of -0.296%. No that is not a typo. Negative .296 percent.
Oil is trading at 25.80 for a barrel of WTI and Brent is close to 27.00. Where are you seeing it trade for $11 a barrel?

The other thing that is not declining is real estate taxes.
And the contract in question is settling tomorrow. Why is it so low? You know why because speculators do not want to take delivery of the physical oil. Fred - the market action is being driven by speculators, if you want a better idea of where the true price of oil will be take a look at the longer dated contracts, not the contract settling tomorrow morning.
https://finance.yahoo.com/quote/CL=F?p=CL=F

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Re: Deflation is everywhere. Get used to it.

Post by Stanczyk »

striker79 wrote: Mon Apr 20, 2020 9:03 am We need more stimulus!...So big companies can use that money to buyback shares, instead of actually circulating it into the economy. Then we can all watch our retirement accounts grow and pat ourselves on the back for staying the course and adhering to boglehead principles.
I find it very ironic that we are using socialism to save capitalism.
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jeffyscott
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Post by jeffyscott »

milosz19 wrote: Mon Apr 20, 2020 4:57 pm
striker79 wrote: Mon Apr 20, 2020 9:03 am We need more stimulus!...So big companies can use that money to buyback shares, instead of actually circulating it into the economy. Then we can all watch our retirement accounts grow and pat ourselves on the back for staying the course and adhering to boglehead principles.
I find it very ironic that we are using socialism to save capitalism.
No not that, it's to save Capitalists...again.
trueblueky
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Re: Deflation is everywhere. Get used to it.

Post by trueblueky »

snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?
My auto insurance company has asked the state to reduce its rates by 20% because of reduced driving and fewer accidents. Maybe your state too?

The 2008 recession caused a decrease in property values here, which was reflected in lower property taxes. As property values increased again, the taxes were held down by a 3% annual cap for permanent residents. Expect that to recur.
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Re: Deflation is everywhere. Get used to it.

Post by Dottie57 »

fredflinstone wrote: Mon Apr 20, 2020 1:03 pm
Dottie57 wrote: Mon Apr 20, 2020 12:02 pm
fredflinstone wrote: Mon Apr 20, 2020 8:00 am
beth65 wrote: Mon Apr 20, 2020 7:58 am Deflation is not quite everywhere - food costs have definitely not decreased recently. Even despite less dining out, my grocery bill is up substantially from two months ago. I went to the grocery store yesterday, and they were advertising prices as sales that were the regular price on the exact same items before the outbreak. If you can get eggs or chicken, the prices are definitely higher. Prices on PPE and hand sanitizer, and even ordinary cleaning supplies have also been inflated.

Doesn't a deflationary environment typically revert to an inflationary one after a short amount of time (a year or less)?
Japan has had deflation for most of the last 30 years.
So are you saying prices for Japanese groceries, clothing, rent are less today than they were 365 days ago?
I was a bit off, as someone else pointed out. Prices in Japan declined from around 1999 to around 2014 but have rebounded steadily since then. Overall, the CPI today is about 2% higher than it was in 1999.

https://tradingeconomics.com/japan/cons ... -index-cpi
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Re: Deflation is everywhere. Get used to it.

Post by rustymutt »

Is there a deflation fund, or etf, that tracks deflation as it concerns investors. None of that 2x, 3x stuff for me.
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Re: Deflation is everywhere. Get used to it.

Post by stocknoob4111 »

Deflation? I don't think so. Rather the opposite, the price of everything at my grocery store has gone up - eggs shot up by 50% due to no supply. I scheduled an oil change at my local dealer and the price has gone up by $10 probably to compensate for the lack of work which is odd since I thought that would make it go down but I guess not.

I'm yet to see any softening in rents in the LA metro area - it just seems to be going into the stratosphere even though everything else is burning down. I believe even home prices were still up due to lack of inventory and some Realtor told me that they had multiple offers even now. Insane.
CurlyDave
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Re: Deflation is everywhere. Get used to it.

Post by CurlyDave »

jebmke wrote: Mon Apr 20, 2020 8:13 am ... Contractors that do home building and home improvement are going to see business dry up so will price aggressively on projects. I would not be surprised if there will be good deals on home improvement for those who have the cash.
I agree.

1. I am predicting that not only will prices of existing homes go down, but so will interest rates.

2. I live in a rural area and there will be a lot of "contractor trucks" on sale in a few months. 3/4 or 1 ton pickups with diesel engines and all the bells and whistles.
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Re: Deflation is everywhere. Get used to it.

Post by garlandwhizzer »

gmaynardkrebs wrote:

Modest deflation, like Japan's after the bubble burst, is not the horror show you depict.
First of all, I didn't say we're going into deflation. I don't think we are. What I said was the monetary policy (FED) cannot effectively deal with deflation which is why Bernanke was so worried in the GR. Fiscal policy--tax cuts, helicopter money, increased government spending into the economy--are required early along to beat deflation. I think we've done that. I expect us to be in a sluggish growth, low inflation, low interest rate environment for the foreseeable future, but not deflation. The Japanese people have done remarkably well with such an environment for 30 years but they didn't have real persistent deflation for most of that time. They did however develop a mindset of preferring saving to spending at both household and corporate levels. This did not stimulate consumer/business investment led growth as much as in the US where we have favored spending rather than saving.

While the Japanese people have done quite well overall, the Japanese stock market has been a total disaster. In December 1989, the Nikkei 225 Index reached 38,915 yen. Today it closed at 19,669 yen, a drop of about 50% over a 30 year period. Real estate in Tokyo costs less today than it did in 1990. There are consequences for investors of 3 decades of secular stagnation, low interest rates and low inflation. For the record, I don't expect the next 3 decades for US investors to be likewise, but neither do I expect the long term stock, bond, and real estate returns in the US to remain as robust as their robust long term averages going forward.

Garland Whizzer
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Re: Deflation is everywhere. Get used to it.

Post by runner540 »

snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?

Your basket of goods differs from the CPI basket.
https://www.bls.gov/news.release/cpi.htm
snowman
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Re: Deflation is everywhere. Get used to it.

Post by snowman »

trueblueky wrote: Mon Apr 20, 2020 5:20 pm
snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?
My auto insurance company has asked the state to reduce its rates by 20% because of reduced driving and fewer accidents. Maybe your state too?

The 2008 recession caused a decrease in property values here, which was reflected in lower property taxes. As property values increased again, the taxes were held down by a 3% annual cap for permanent residents. Expect that to recur.
Well, I would argue that returning 20% of car insurance premium for the months of April and May back to policyholder is not a sign of deflation. In fact, my proposed 6-month premium just went up 10%. So the refund just temporarily reduces the rate of inflation. No deflation on the horizon.

HO insurance premium renewal last month went up 25%. Again. I shopped around, nothing cheaper available.

Property taxes did not decrease where I live in 2009. They just remained stagnant for 4 years, then resumed their way upwards. No cap around here on potential future increases. In fact, at least around here, the rents in 2009 went up as former homeowners needed a place to live. If we have a repeat of 2008-2009, we will have housing inflation, not deflation.

Healthcare premiums and co-payments - is there anyone out there experiencing deflation? Anyone?

College bills - same question - where is the deflation? Or at least a hint of it?

Food cost is also going up, albeit at a much lower pace than above mentioned categories.

I understand how inflation/deflation works, and a lot depends on where one lives and which categories he consumes most. I get that. All I am saying is that I don't see even a hint of deflation, let alone seeing it "everywhere".
OnTrack
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Re: Deflation is everywhere. Get used to it.

Post by OnTrack »

mptfan wrote: Mon Apr 20, 2020 8:19 am
fredflinstone wrote: Mon Apr 20, 2020 7:38 am It wouldn't shock me at all if the 30-yield falls to 0 percent within the next year or two. (That is not a prediction, just an observation.)
You can observe the future?
:shock:
Maybe Fred watches the Jetsons. There was an episode where Barney tries to repossess Fred'sTV.
Last edited by OnTrack on Mon Apr 20, 2020 9:13 pm, edited 1 time in total.
drk
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Re: Deflation is everywhere. Get used to it.

Post by drk »

rustymutt wrote: Mon Apr 20, 2020 5:59 pm Is there a deflation fund, or etf, that tracks deflation as it concerns investors. None of that 2x, 3x stuff for me.
What do you mean by this? Are you looking for an ETP that tracks the inverse of the CPI, or something like that? I don't know of anything like that.

Or are you looking for something that goes up when inflation goes down? If this, you could use a long-term Treasury fund, such as TLT or EDV.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
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SimpleGift
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Re: Deflation is everywhere. Get used to it.

Post by SimpleGift »

snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?
What may not be immediately obvious is that almost everything that can be produced in a low-cost country (China, Vietnam, Mexico, etc.) over the last decade has been declining in price, often dramatically — while those goods and (mostly) services that cannot have been increasing in price.

You may have seen this chart showing a breakdown of price changes in various categories for 2005-2014:
So while the price of goods has generally been getting cheaper, the price of services has mostly been increasing.
Last edited by SimpleGift on Mon Apr 20, 2020 9:38 pm, edited 1 time in total.
MotoTrojan
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Re: Deflation is everywhere. Get used to it.

Post by MotoTrojan »

fredflinstone wrote: Mon Apr 20, 2020 1:06 pm
austin757 wrote: Mon Apr 20, 2020 12:45 pm I am currently 100% stock. Would Vanguard EDV ETF be a good fund for these times?
90% stock + 10% EDV would be superior to 100% stock in my opinion (significantly better risk-adjusted returns). But true diversification means owning more than just stocks and bonds.

Significantly better in the past but only marginally better expected. More importantly, the expected return of your 90/10 is well under that of the S&P500.
ARoseByAnyOtherName
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Re: Deflation is everywhere. Get used to it.

Post by ARoseByAnyOtherName »

snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?
You’re missing deflation, which doesn’t actually seem to be happening despite many people here driving themselves into a tizzy about it.
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HanSolo
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Re: Deflation is everywhere. Get used to it.

Post by HanSolo »

runner540 wrote: Mon Apr 20, 2020 6:45 pm
snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?

Your basket of goods differs from the CPI basket.
Snowman's mistake: living in the real world.

"I can't eat an iPad." -- ordinary guy to Fed official.
SimpleGift wrote: Mon Apr 20, 2020 9:33 pm So while the price of goods has generally been getting cheaper, the price of services has mostly been increasing.
That was a very informative chart posted by SimpleGift. As a person who buys few manufactured goods, I'm not seeing any deflation either.

Actionable item: Deflation isn't everywhere. Get used to it.
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trueblueky
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Re: Deflation is everywhere. Get used to it.

Post by trueblueky »

SimpleGift wrote: Mon Apr 20, 2020 9:33 pm
snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?
What may not be immediately obvious is that almost everything that can be produced in a low-cost country (China, Vietnam, Mexico, etc.) over the last decade has been declining in price, often dramatically — while those goods and (mostly) services that cannot have been increasing in price.

You may have seen this chart showing a breakdown of price changes in various categories for 2005-2014:
So while the price of goods has generally been getting cheaper, the price of services has mostly been increasing.
see Baumol 1967, Macroeconomics of Unbalanced Growth, in The American Economic Review.

Products/services that are more subject to automation and productivity gains (think electronics) will decline in price relative to products/services that are less (think education).
boglerdude
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Re: Deflation is everywhere. Get used to it.

Post by boglerdude »

Nikkei (priced in gold) looked good until 2001

http://pricedingold.com/nikkei-index/
visualguy
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Re: Deflation is everywhere. Get used to it.

Post by visualguy »

CurlyDave wrote: Mon Apr 20, 2020 6:20 pm
jebmke wrote: Mon Apr 20, 2020 8:13 am ... Contractors that do home building and home improvement are going to see business dry up so will price aggressively on projects. I would not be surprised if there will be good deals on home improvement for those who have the cash.
I agree.

1. I am predicting that not only will prices of existing homes go down, but so will interest rates.

2. I live in a rural area and there will be a lot of "contractor trucks" on sale in a few months. 3/4 or 1 ton pickups with diesel engines and all the bells and whistles.
This varies a lot in different parts of the country. One of those things that go a certain way in some areas, and the exact opposite in other areas.
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Re: Deflation is everywhere. Get used to it.

Post by fatcoffeedrinker »

3CT_Paddler wrote: Mon Apr 20, 2020 12:03 pm
bt365 wrote: Mon Apr 20, 2020 9:38 am "From a macroeconomics standpoint, the market has risen, but much of this was due to the corporate tax cuts and the buybacks, as mentioned above. How much that has actually benefited the average investor, especially those that haven't sold anything, may not see those great gains. Despite all of the platform speeches and talk, the majority of corporations didn't use the tax cuts to increase wages, and a majority of the employment gains were in the gig economy. There is an excellent index that was recently released called the job quality index. It's very insightful to note that the quality of jobs hasn't increased greatly, but the number of jobs has."

Agree with this.
Prior to the COVID-19 quarantine impacts on the world this was the best US economy in a long time for workers. There was a war for talent going on that was driving up salaries in my industry (civil engineering) and I know that was the case in many other industries.
+1
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unclescrooge
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Re: Deflation is everywhere. Get used to it.

Post by unclescrooge »

Stef wrote: Mon Apr 20, 2020 9:24 am As a Swiss I'm already used to it.

I don't mind. My salary keeps going up and things are getting cheaper or stay the same.
How? If the only thing going up is wages, where is this money coming from? Corporate profits?

When you say"as a Swiss", I'm assuming this is common across the entire country, regardless of industry.
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Stef
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Re: Deflation is everywhere. Get used to it.

Post by Stef »

unclescrooge wrote: Mon Apr 20, 2020 11:17 pm
Stef wrote: Mon Apr 20, 2020 9:24 am As a Swiss I'm already used to it.

I don't mind. My salary keeps going up and things are getting cheaper or stay the same.
How? If the only thing going up is wages, where is this money coming from? Corporate profits?

When you say"as a Swiss", I'm assuming this is common across the entire country, regardless of industry.
I'm 29, so it's just career development.
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OnTrack
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Re: Deflation is everywhere. Get used to it.

Post by OnTrack »

From CNN Before the Bell April 20, 2020:
" US oil prices plunged, falling below $0 Monday to $-37.63 a barrel. That's the lowest level since NYMEX opened oil futures trading in 1983." (That is negative)
https://www.cnn.com/2020/04/20/investin ... index.html
rascott
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Re: Deflation is everywhere. Get used to it.

Post by rascott »

snowman wrote: Mon Apr 20, 2020 4:50 pm Can someone please tell me when I can expect my property taxes, homeowners insurance, health insurance, healthcare bills, car insurance, and college bills to deflate? I have seen significant inflation over the last 12 months, ranging from 5% to 30% depending on item. And I shop around! Deflation is apparently everywhere except for where I live. What am I missing?
All the things you mentioned are very lagging indicators.... something that would take months (or years) to show up.
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Re: Deflation is everywhere. Get used to it.

Post by rascott »

Stef wrote: Mon Apr 20, 2020 11:22 pm
unclescrooge wrote: Mon Apr 20, 2020 11:17 pm
Stef wrote: Mon Apr 20, 2020 9:24 am As a Swiss I'm already used to it.

I don't mind. My salary keeps going up and things are getting cheaper or stay the same.
How? If the only thing going up is wages, where is this money coming from? Corporate profits?

When you say"as a Swiss", I'm assuming this is common across the entire country, regardless of industry.
I'm 29, so it's just career development.
At 29.... almost all your capital is of the human variety.
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