Inflation Adjustments
Before I get to this week’s post I wanted to say a few words about the markets. Stocks have been grinding lower and it’s getting to be brutal in the bond market (although there’s a little relief for both as I write this Tuesday morning).
I think this is short-term and, unfortunately, there’s little to do about it in the meantime. Obviously you could sell everything and park it in the bank; that’s always an option. But one thing we know is that getting back in after you’ve gotten out is an extremely hard thing to do. That’s why we try to avoid it. Instead, ensure you own good quality stock and bond investments, and that you own them in the proper proportions. Fix problems in those areas if they exist. Otherwise, rebalance your allocation while embracing your inner-stoic. I wish there was a better or easier answer than that but there isn’t.
If I’m managing your portfolio I’m looking at it daily and making necessary adjustments. Even if I’m not managing things for you, let me know and we can find time to chat about strategy and tactics. For one thing, it’s a good time to put excess savings to work.
Okay, on to this week’s post…
“In spite of the cost of living, it’s still popular.” – Kathleen Norris
Are you sick of hearing about inflation yet? A recent survey found that 48% of American’s are thinking about inflation “all the time”. I hope that’s an exaggeration, but something tells me it’s not, or at least it’s not for a sizeable chunk of the population. After all, it’s one more thing outside of our control during tumultuous times. And if you go down the variety of internet rabbit holes on the topic of inflation you’re likely to come back jittery. Understandable, given that much of the “content” is trying to press your buttons, usually to sell you something. But it’s what you do next that matters.
As we’ve discussed before, inflation expectations can become a self-fulfilling prophecy as more consumers pull forward their future purchases in an attempt to save money. People tend to feel the need to do something about rising prices, even though we have no control over the prices themselves. For example, in large part due to the Russia/Ukraine issue, the USDA assumes “food at home” prices could rise another 6% by year-end, so buying extra of something you’d eventually buy soon anyway can make sense.
But we should be careful about feeling forced to buy things we might not need based on fear of rising prices. Remember that high prices today might not last longer-term; that’s what the bond market is currently telling us anyway. So instead of fear-based decision making, perhaps we should channel the need to do something into bringing more control, more intention, to our buying habits.
The following article from CNBC suggests some good ways to offset rising prices via modest lifestyle changes that are easily adjusted back to normal when we feel the time is right.
The same article and survey found that, on average, Americans are spending an extra $300 per month due to inflation. That’s probably equivalent to one or more utility bills and is just an average. Gas prices are up over 40% in the past year nationally and 50% in California, according to AAA. And in the last week or so average mortgage rates hit 5%, up from a very recent 3%. This alone adds $115 to a monthly payment for every $100,000 borrowed now. And in Sonoma County that’s what, maybe another $700 tacked onto a mortgage payment?
I’m also including an article from AARP about shrinkflation, the old trick manufacturers use of repackaging less while charging the same, or perhaps more, hitting consumers from both sides.
One thing I get a lot of satisfaction from doing (much to my family’s chagrin) is comparing “per unit” pricing information on the shelf label at the grocery store. I often look there before even looking at the item’s purchase price. It’s a quick and objective way to determine value between similar products and isn’t always about buying the lowest-priced item. And if you’ve been doing this for a while as I have, it’s easy to see which of your favorite brands is trying to gouge you through shrinkflation. (Yes, I’m fun to shop with…)
Here’s a link to the CNBC article referencing the survey.
Here’s the article about shrinkflation.
https://www.aarp.org/money/budgeting-saving/info-2022/shrinkflation-same-price-less-product.html
And here’s the article on stretching your food budget by comparing per unit pricing information at the grocery store.
Have questions? Ask me. I can help.
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