Any investors out there? What are you doing to protect your portfolio from inflation? They say it’s transitory but I have my doubts. I see a market correction coming but taking advantage of it requires a cash position. What are your thoughts?
Inflation
- Thread starter L92 OLDS
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Well, there's a couple issues here even a novice like me can see.
1) you've got an impending MASSIVE spending program that, if every indication holds true will see about 7-8 TRILLION in new borrowing after forcing through that reconciliation BS that has no basis in what was actually voted on normally. That's a lot of bond issuance.
2) there's a TON of for lack of a proper term I'll call grey money. Of the prior trillions there's a lot of covid relief cash - rental/mortgage assistance, community grants that need to be allocated and spent still... it's out there to flood things.
3) you have those damn continuing cash payments allocated in the most ridiculous manner regarding the expanded child credit being advanced monthly.
So even if the fed pulls back on its policies and raises the rate, there's a ton of fuel for that inflation fire and a certain portion of people are gonna keep fueling the market with that money when it rolls in.
Plus, although necessary due to this runaway inflation, tons of SSDI or SS recipients will get a sizable COLA this year. A 6% bump in your monthly check isn't nothing when you're talking dozens of millions of checks worth tens of billions per month.
Correction? Inevitably. But how far away? And, will the majority force through continued heightened payments and the covid UI supplements as social welfare? That's even more fuel for the fire.
I've got nothing to base it on but gut feeling... until those payments start to dry up to private parties I can't see the correction hammering home.
Is it more like momentum or pendulum? I think momentum. But many years ago I got burned with an August selloff so I'm out till September. I only do index funds and leave the other stuff to the smart people that want to take greater risk. Oh yeah, inflation will continue to go up for the next year or two.
There's a bigger systemic problem on the horizon waiting though.
With mortgages, they make mortgage backed securities, sell them on the mass market to institutional types, not great but there are safeguards and the system is designed to account for it somewhat these days with insured backing so on so forth.
No, the big problem is all these millions of overpriced overextended car loans. Those aren't bundled and resold as securities. They're held by finance companies and banks. And they're not thay same type of insured financial instruments.
So, all these 4, 6 year old cars selling for more than their new MSRP back in the day? Do you REALLY think the values won't crater when new inventory and 2 year old inventory returns? They're gonna drop like a rock. AND, people will walk away in DROVES. All those banks, all those loan companies, they'll lose their shirts. I paid 21k for my '14 new. It's selling in the mid 20s right now. We paid 24k for our '16... comparable cars are selling mid to upper 20s.
First 2 years or so are high on interest low on principal. So, do you REALLY think someone will want to owe say 24k on a car they paid 28k on, but is then 8 years old and drops to 14k value? He'll no, they default and walk away. And at auction that car will pull 8k or 9k. So on one car the institution loses 60% of the value on the asset.
Worse still when these new electric tubs will roll out with heavy tax rebates and incentives from the govt.
That's a ticking time bomb in the financial industry. And THAT will blow their regulatory balance sheet requirements and the like out of the water.
Then things will get messy, because those loans, those losses, they aren't insured.
With mortgages, they make mortgage backed securities, sell them on the mass market to institutional types, not great but there are safeguards and the system is designed to account for it somewhat these days with insured backing so on so forth.
No, the big problem is all these millions of overpriced overextended car loans. Those aren't bundled and resold as securities. They're held by finance companies and banks. And they're not thay same type of insured financial instruments.
So, all these 4, 6 year old cars selling for more than their new MSRP back in the day? Do you REALLY think the values won't crater when new inventory and 2 year old inventory returns? They're gonna drop like a rock. AND, people will walk away in DROVES. All those banks, all those loan companies, they'll lose their shirts. I paid 21k for my '14 new. It's selling in the mid 20s right now. We paid 24k for our '16... comparable cars are selling mid to upper 20s.
First 2 years or so are high on interest low on principal. So, do you REALLY think someone will want to owe say 24k on a car they paid 28k on, but is then 8 years old and drops to 14k value? He'll no, they default and walk away. And at auction that car will pull 8k or 9k. So on one car the institution loses 60% of the value on the asset.
Worse still when these new electric tubs will roll out with heavy tax rebates and incentives from the govt.
That's a ticking time bomb in the financial industry. And THAT will blow their regulatory balance sheet requirements and the like out of the water.
Then things will get messy, because those loans, those losses, they aren't insured.
Agree that this a time bomb. At what point is the debt overwhelming?
The stock market is a terrible indicator of the situation.
I've put roughly 5% give or take stop loss percentages on my stock investments as of Friday. They were wider previously, but I'm thinking things are going to get stupid shortly and I don't want to be left holding the bag. So I'm going to wait and see. Fed meets Tuesday so keep an eye on that. If stocks move up, fine. My stop loss moves up with it. But if it pulls back I'm ready.
I'm far from a professional, but I've been able to return to my pre-Covid losses, so I'm feeling ok with it for now. Except if inflation doesn't get under control soon, we'll ALL be losing, and fast. Case in point- at Sam's we like to buy those "2 dollar" salad bags. They were 1.98 for an azzload of salad. Don't eat it all before it goes bad? So what? It's 1.98. Been that way for a couple years now. We got the goody out of it even if it didn't last. But today, we bought it for $2.12 per bag. That's a 14 cent increase from 2 weeks ago. Still a good deal, but that's a 7% jump in the price of that salad alone. Everything else is going up fast too.
Watch the Fed and what they do with bonds. If they start pulling back on bond buying, then they're going to be setting up to raise interest rates. That will put a stick in the spokes of inflation a bit, depending on how much interest rate action goes on, but the mere fact of that, will spook investors and send the market on a pullback.
I do agree with these auto loans and "other" loans that aren't secured or insured. It won't matter, though. The crisis will never go to waste and bailout of the too big to fail will go on. The current Sugar Daddy will just pile on more debt and bail them out. Just in case, make sure if you have over $250K in one financial instutution that's FDIC insured, move it around so that you have no more than $250K exposed at a single FDIC insured banks. You can do that, but you can't have it at the same bank ownership. Such as Bank of America account and excess into a Citibank account or something. Otherwise you'll be SOL on anything over 250K at a single institution. Got over a million in the bank? Find 4 or more banks independently owned from each other and each FDIC insured.
It's REALLY hard to tell if this inflation is indeed "transitory" (Stupid economist's words- don't need to tell you which one). WTF does that even mean? It's word salad he was jabbering on about that doesn't mean crap. If it was a price drop, is that transitory too? There's no there there. He may have meant to say temporary, but nobody knows for sure. That's like picking the DJIA amount at the closing bell on the last Thursday in May, 2041. Your guess is as good as mine. SOMEONE would like you to think this inflation isn't real, at least that's what line they're trying to feed everyone. Tell that to the money stuffers that shove money into an economy that doesn't need it. DUMB DUMB DUMB!
Get off my damn lawn!
I'm far from a professional, but I've been able to return to my pre-Covid losses, so I'm feeling ok with it for now. Except if inflation doesn't get under control soon, we'll ALL be losing, and fast. Case in point- at Sam's we like to buy those "2 dollar" salad bags. They were 1.98 for an azzload of salad. Don't eat it all before it goes bad? So what? It's 1.98. Been that way for a couple years now. We got the goody out of it even if it didn't last. But today, we bought it for $2.12 per bag. That's a 14 cent increase from 2 weeks ago. Still a good deal, but that's a 7% jump in the price of that salad alone. Everything else is going up fast too.
Watch the Fed and what they do with bonds. If they start pulling back on bond buying, then they're going to be setting up to raise interest rates. That will put a stick in the spokes of inflation a bit, depending on how much interest rate action goes on, but the mere fact of that, will spook investors and send the market on a pullback.
I do agree with these auto loans and "other" loans that aren't secured or insured. It won't matter, though. The crisis will never go to waste and bailout of the too big to fail will go on. The current Sugar Daddy will just pile on more debt and bail them out. Just in case, make sure if you have over $250K in one financial instutution that's FDIC insured, move it around so that you have no more than $250K exposed at a single FDIC insured banks. You can do that, but you can't have it at the same bank ownership. Such as Bank of America account and excess into a Citibank account or something. Otherwise you'll be SOL on anything over 250K at a single institution. Got over a million in the bank? Find 4 or more banks independently owned from each other and each FDIC insured.
It's REALLY hard to tell if this inflation is indeed "transitory" (Stupid economist's words- don't need to tell you which one). WTF does that even mean? It's word salad he was jabbering on about that doesn't mean crap. If it was a price drop, is that transitory too? There's no there there. He may have meant to say temporary, but nobody knows for sure. That's like picking the DJIA amount at the closing bell on the last Thursday in May, 2041. Your guess is as good as mine. SOMEONE would like you to think this inflation isn't real, at least that's what line they're trying to feed everyone. Tell that to the money stuffers that shove money into an economy that doesn't need it. DUMB DUMB DUMB!
Get off my damn lawn!
Well, it's not that it's terrible, it's that it's not what correlation people usually picture.
If I'm buying xyz items for $5000 I can pay cash, and it's all mine.
OR
I can take the low interest credit. Oh, I pay 1.9% or 0% for 60 months. Then I dump that $5000 into the stock market, and earn 7% or 10% on it. So I make money by investing. And yet, it's not really a net positive on my net worth, the 5k I owe equals the 5k I bought stocks in. Even after capital gains I made profit. But all those chunks of money inflate the stock market as if all that wealth was net worth.... it isn't. The only thing that's "mine" long term is the profit.
But market crashes.... again, more bankruptcies, more over leveraged people with large looking balances really had little worth.
Stocks can be liquidated quickly, though. And with a stop loss, I don't even have to be awake to sell if a stock gets in trouble. I had stop losses last year when the pandemic hit, but they were much larger, more so for catastrophic crashes, so it did it's job, but who knew that was coming? This year is tighter.
The market is going to correct, at some point. It WILL. The fact is, we don't know exactly when. I've also been hedging my bets a little with dividend stocks. They pay out some of those dividends to me, and the rest gets reinvested into buying more stocks. Which in turn pay more dividends...the snowball thing.
Other than the two relatively miniscule car notes, we owe nothing. And we can pay those off tomorrow if we wanted. We're fortunate to be financially secure (for now). But even so, if inflation becomes a monster, we'll probably have to consider cutting here and there- after we come back from our beachfront vacation. 🙂
The market is going to correct, at some point. It WILL. The fact is, we don't know exactly when. I've also been hedging my bets a little with dividend stocks. They pay out some of those dividends to me, and the rest gets reinvested into buying more stocks. Which in turn pay more dividends...the snowball thing.
Other than the two relatively miniscule car notes, we owe nothing. And we can pay those off tomorrow if we wanted. We're fortunate to be financially secure (for now). But even so, if inflation becomes a monster, we'll probably have to consider cutting here and there- after we come back from our beachfront vacation. 🙂
