We live in interesting times – prices are up, the market is down, life’s necessities are often not available at any price, and even gasoline is at “all-time highs” (if you ignore inflation)…
So it is no wonder that people are concerned. I’ve been asked the question numerous times, “Is early retirement doomed? Is this the start of another worst retirement ever?”
Let’s explore.
Inflation Pontification
Prices are up. As reported by the BLS, inflation over the past 12 months is a whopping 8.3%. That is no joke.
Even numbers are up. Check out these poll results as a perfect example. (This… is a joke.)
As seen on Twitter (sorry, can’t find source.)
But clearly this is no laughing matter. Households are feeling the squeeze, where income isn’t keeping up with cost of living.
And for the privileged few who are able to live off their investment portfolio, it is a time of concern. It’s even in the mainstream press, as exemplified by this USA Today headline.
Let’s investigate this topic for this latter group.
The 4% Rule (and inflation)
The 4% Rule is a helpful guide. Simply stated, if you spend 4% of your starting portfolio value each year (inflation adjusted) your portfolio should last 30 years at least (96.x% “guaranteed.”)
The 4% Rule is built from the worst economic time frames in history… else it would be the 5% rule. It survived the crash of 1929, WW1, WW2, and the big crashes of 2000 and 2008 (probably.)
It only fails (that irritating 4% of the time) when the shit really hits the fan, when truly bad things happen early on, such as… sustained high inflation.
Which…. sounds bad.
Is that the situation we are in today? Well… according to a bunch of economists at Fannie Mae and market expectations:
inflation is expected to remain elevated, averaging 5.5 percent in Q4 2022. The Fed’s preferred inflation measure, the core PCE deflator, is forecast to be 4.3 percent by the end of the year, before slowing to 2.8 percent by the end of 2023 as economic activity also slows.
Of course nobody knows for sure. The CBO and I were wrong less than a year ago. But… here is what I think.
Deep thoughts
By and large, the inflation we are experiencing at present is due to supply shock. The entire world economy shut down due to Covid-19 and it is trying to turn on again much like an ancient fluorescent tube.
It will turn on eventually, but it is going to flicker for awhile. This is especially noticeable in anything that uses semiconductors (aka everything) such as cars.
Add in a bit of war in Ukraine (crude oil and wheat), another hard lock down in China (every product made), backlogged ports, etc… and the problem persists / spreads / cascades. Every time it looks like one sector is getting back to normal another stumbles.
Why is this important? Because it is very different from the inflation drivers of the 70s that caused prices to triple from 1965 to 1982. This is something that can be solved with the right incentives – the best answer to high prices is high prices. The profit motive will do the rest – there is a lot of $$$ to be made getting supply chains running smoothly.
Which is why I find projections for sub-3% inflation by the end of 2023 to be credible.
Actions Taken and Considered
All that said… several steps we have taken in life do increase our inflation resiliency.
First and foremost, we continue to spend less than 4%. (A 3% withdrawal rate has a 100% historical success rate vs 4%’s 96%.)
Second, we fixed our housing costs. By buying a house we have set a significant percentage of our total spending to zero.
Third, we have made efforts to reduce exposure to oil. We ride an e-bike daily and use an electric car for longer trips. Filling the tank on our car costs $0 at the public charging stations or about $6 at home, whereas a gallon of gasoline is $6+ in our part of California.
We also added solar panels to our rooftop. For the past ~4 months we have generated more power than we have used and have been paid full retail prices for that surplus (which will probably be used for our AC in July and August.)
None of these 3 actions were taken specifically to address inflation but fixed costs and low cash-flow has been a nice secondary effect.
Directly because of inflation I also chose to take on debt. Holding debt at a rate much lower than inflation is free money. As such, I added a mortgage to the house (2.75% 30-year fixed) and got a loan for the EV purchase (2.74% 6?-year fixed.) I’ll pay those off as slowly as possible. I’m also exploring some 0% credit card offers and have a HELOC application in process (4% rate at present.)
Because high inflation is terrible for bonds and cash we have nearly eliminated these from our portfolio. As interest rates rise bond prices will fall and the purchasing power of cash will just wither away. By contrast, companies that can raise their prices to offset increased supply and labor costs will continue to flourish (e.g. the SP500.)
Lastly… we do make a little bit of income off of this website and I enjoy thinking and writing about all of this stuff. But I wouldn’t be opposed to taking on some other projects for additional income if things got really bad. Additional work is usually an option for people with in-demand skills. It might even be fun to learn to drive a forklift and Costco is hiring.
Summary
Prices are up. Price expectations are up. The market is down. That is a bummer for people living off a portfolio.
It probably isn’t as bad as 1965 – the profit motive should help supply chains get back to normal asap – but it doesn’t hurt to pay extra attention. I’m not concerned though.
As early retirees we took some steps that increased our inflation resiliency, such as fixing housing and energy costs, taking on debt at rates lower than inflation, and reducing exposure to bonds and cash. Earning additional income is also a good option.
Where do you think inflation is going? Are there any other good tools for inflation resiliency?
“By buying a house we have set a significant percentage of our total spending to zero.”
With the mortgage, I’m guessing you meant “By buying a house we have set a significant percentage of our total spending to an inflatation rate of zero.”?
And what ideas are you toying with for leveraging a 0% rate CC?
iBonds aren’t a big help because you can’t buy very much, only $20K per year for most couples. But they certainly are outperforming every other asset in my portfolio right now. We also bought 25 acres($160K) of wilderness land in a very popular vacation area for hiking, fly fishing and kayaking recently. It’s hard to measure its rate of appreciation but it’s well above 10% a year and our property taxes on it are less than $100 per year (yay Arkansas!). We also have some gold, commodities and alternative investments that are up. But mostly our return has been a strong negative. Which is OK, because like you we are under 3% and will switch to only 1% withdrawal in four years because Social Security will start adding over $70K USD to our income in four years (in 2022 dollars). And that’s inflation indexed income which really is enough for us to live on by itself but we might as well spend at least some of what we’ve saved and invested.
A big reason I am positive about the 4% rule in general is all of the analysis focused on failure cases ignores social security. Add that back to the mix and 4% is secure once again.
We have a few ibonds also. The downside is unless you have a way to get out of them tax-free (e.g. education spending for our kids) then the tax burden can be onerous – paying tax on current 8.x% yield when real return is zero is a bummmer.
Steveark- We had thought about buying land in NW AR (Holiday Island area) also but decided against it because we don’t know much about land investing. What sources did you use for research? Thanks!
$70k a year in social security (presumably for 2 people). I didn’t know that was possible.
Max benefit at full retirement age is around $3500/month. Higher if you delay. 2 high-income earners can get to $80k+
Yes, I mean that. But also… I no longer pay rent so that expense is fixed at zero, or at least much less than it was previously (now just property taxes and maintenance.)
Our cost of living is still more than income so I sell stock from time to time. 0% debt is a way to shift costs into the future rather than sell stock now when it is down.
Good article. Time will tell, but things will probably revert to roughly where they were before COVID…eventually.
Like you, we recently purchased a house. A new build on which we finalized the price last summer and closed a couple of months ago.
Last summer, I figured that we probably grossly overpaid. Now I’m not so sure.
Paid cash and to smooth out the tax burden, we took out roughly $220K in 0% APR credit cards to cover this year’s living and move-in expenses. Didn’t do much for our credit scores (whatever…) but it’s hard to beat free money, even if it’s just for a year or so. The signing bonus rewards weren’t bad either. :-)
Also, there’s a typo in the article. “maid” instead of “made”.
Keep up the good work!
We also overpaid. I think.
$220k in 0% credit cards is impressive. I was thinking in the range of 10-20% of that.
Is that a lot of different cards? How did you go about getting so much credit limit?
typo fixed, thank you
Fourteen cards to be exact with credit limits ranging from 9K to 25K. Most of them are cash-back cards from the usual assortment of big banks. And most of them offered a signing bonus. (Total bonus was $2K.). All had a 0% APR of at least 15 months which easily gets me through this tax year.
Roughly half were applied in my name with the rest in my wife’s name. And all applications were submitted within a span of a few weeks. Other than being a bit of a management headache, it wasn’t hard. :-)
As a side note, the number of credit card offers we get in the mail has gone up, not down. What a strange world!
How many credit cards did it take to reach 220K in credit limit @ 0%?
Fourteen. Thank goodness for spreadsheets to manage it all.
But once you get autopay set up for them all, it smooth sailing.
Wow, that’s impressive! Were all of those balance transfers free of fees? Did you use DoC to find them?
Are you Dicey from MMM forums? If so, you once made me dinner when I lived in the Volt!
I think most of the cards have a balance transfer fee ranging from 2-4%. But in our case, the attraction was 0% APR for new purchases.
When we moved into our new home, we sold/gave away almost all of our old stuff (furniture, appliances, etc.). So we started almost from scratch. And we’ve had a healthy amount of custom work done on the house which added up quickly.
In other words, we have bought a LOT of stuff in the last few months and I’m now on first name basis with the fellow who makes most of the Amazon truck deliveries in our area. :-)
I don’t think I used Doctor of Credit to find the offers. Mostly it was Nerd Wallet and Bank Rate but that’s only because I happened to go there first.
After this year, we’ll go back to our normal spending patterns. Like GCC, we made this home purchase with “house money”.
Build Back Better is working perfectly….soon we will own nothing and be happy! Yay!
That makes no sense
For the record, a different Mark wrote this comment.
In these interesting times as a soon to FIRE (probably too old now to be considered RE), resilient asset allocations have become of greater interest to me. A portfolio called the Golden Butterfly (GB) by Tyler on Portfolio Charts has some very high marks across a dozen metrics (high SWR, high PWR and low start date sensitivity). However, I am still skeptical of the allocation to gold and bonds.
As a thought exercise, I am wondering about your thoughts on a “permanent” portfolio like the GB that hedges against all market conditions.
GGC has been a huge help in our financial life and continues to inspire. Thanks!
I’ll write a future post on this – I’m on vacation at the moment and can do a better reply, but…
We’ve had 40-60 years or so of declining interest rates and no real monetary purpose for gold. This allocation seems like a good way to run out of money before you die. At least there is social security.
Inflation? Barely noticed. As you well know, selling almost everything and traveling internationally to less expensive places has mostly taken the sting out of inflation. Hey, we draw less than 2% without even trying hard. We are currently making a stop in the U.S. on our way from Mexico to Malaysia. Hung out with some friends the other day and paid $15 for a bowl of ramen… Yo, the sticker shock was real 😆. Thanks for all of the inspiration from back in the day. Still love your brain.
I haven’t really noticed either – I have no context for US prices after a decade of spending in other currencies.
Just because I’m interested in the topic I figure out things like basic 2x4s cost 3x what they did 2 years ago, but it is what it is.
Yes it is a bit worrisome … My TSX Index fund (Canada has a lot of oil, gas, wheat and fertilizer etc ) is about even since starting investing in after recently coming back to Canada, my real estate was up but seems to be wilting a bit recently , have about 1/3 of assets in cash … maybe buy on the dips? …. … my few stocks went up at first …dipped a lot but seem to be coming back to life the past few days a little bit… splurged on a gas guzzling GLE … but still like it … I too am considering doing a bit part time side work … maybe teach online etc .. .a lot of reverse culture shock after being overseas since the 90’s .. our daughter likes her private Christian primary school … will probably sell my overseas real estate and invest that in Index Funds … maybe some discounted stocks? … over the next year? …renting now … looking maybe to buy a place in Canada? and travel — I think I am addicted to living overseas etc :) …. Canada is a bit too quiet for me now? … any thoughts on the doomsday crowd like Ray Dalio etc ?
>any thoughts on the doomsday crowd like Ray Dalio etc ?
Ain’t nobody got time or energy to let the doomsday crowd cloud their thoughts.
I like that perspective … I suppose a well diversified portfolio of things like real estate (investment grade and rentals etc ), an entertaining side hustle or two (including small short term consulting/projects …), a variety of index funds (including index funds in regards to Canada, the States, Emerging/International and possibly some short term sector index funds REITS, Oil and Gas, IT and the like as deemed useful might be as best as we can do to cover all the bases for to fend off the doomsayers’ scenarios etc .. though I do like to throw the dice a bit with volatile TESLA … :)
Doomers predicted 117 of the last 0 end-of-world-events so I’m not sure why anybody pays attention anymore. Fear sells I guess. Nobody who has turned them off / blocked them has ever regretted it.
You missed one big cause of the current inflationary cycle we are in, namely the ridiculous “stimulus” payments the current administration pushed out, well after even progressive economists said they were no longer necessary. Caused the classic scenario of too many $ chasing too few goods that we are still living with today.
There was a lot of stimulus during Trump’s term too, right?
GCC: Thanks for adding the followup comment email feature!!
Ken, compared to biden that would be a big no.
The Trump stimulus was a $2.2trillion bill while the Biden bill was $1.9trillion. Both mind blowing, of course.
I suppose we could blame inflation in Germany and Brazil on stimulus in the US? Seems strange that we have high inflation in used cars because of new car factory shutdowns due to silicon shortages out of Taiwan, etc…
GCC, if you want to ignore the affects of the stimulus payments on inflation that is fine; it’s your blog. Just don’t try to insinuate they had no effect by leaving them off the list of what caused the inflation we are living with, when any economist worth their salt says otherwise, including progressives. Hope you are enjoying your vacation!
Vacation is good, thanks. We spent the day at the seaside amusement park with Jr’s grandma and cousins.
Point of curiosity: how much higher or lower would the current inflation rate be in the United States had there been no stimulus in 2021? Same question but for the UK, Germany, Korea, Mexico, etc… whatever countries you think are relevant.
If you have some links to papers by economists (progressive or otherwise) please do share.
(Earlier you said 100% of economists agree, but now it is only a certain caliber of economist? Either way, happy to learn.)
GCC, glad your vacation is going well. BTW, I never said “100% of economists” agree, I said “any economist worth their salt”. Of course there will be apologists for the administration that will put their knowledge and learning on the backburner in the interest of politics. Heck, the worst example of that is Yellen, who will pander and say anything required to stay in the good graces of the administration that hired her, be it Democrat or Republican (her famous “transitory inflation” remark that she was roundly criticized for being the most obvious).
No idea what the inflation rate would be without the stimulus payments. Perhaps it could be an academic study to show the delta, but regardless anything that causes more money to be chasing fewer goods will cause an uptick in inflation. And I never said the stimulus payments were the sole contributor to that fact, just that they were certainly a contributing factor.
Stay safe and enjoy this beautiful weather with your family!
This is the source of our disconnect.
I infer that you believe the American Rescue Plan is a significant contributor to US inflation. Prices up 8.5% or so. Extra stimulus was ridiculous, etc…
(Prices in Germany up 8.6% as a comparison, different president, different covid response, etc…)
The SF Fed analysis says the ARP adds 0.3% to inflation rate or somewhere thereabouts. The analysis explains methodology and source data, you can decide if the economists meet your credibility requirements.
It is a pretty glaring blindspot in the analysis. More than just stimulus. Shutting down gas and oil pipelines day one and doing all they can to wreck the economy. Rough times ahead. In order to Build Back Better I guess you must destroy first. It is a global plan, so yes affect most countries.
Agree 100%. Unfortunately a lot of people are comfortable being lied to.
citations needed
Do you think the disasterous economic policies of the current administration contributed to the current inflation?
No more than the disastrous climate policies of previous administration contributed to hurricanes…
Inflation is a multi pronged monster and Biden (stimuli) and Trump (stimulus and tax cuts) equally share in contributing to the problem, but mostly Covid.
Can’t pretend China isn’t shut down or that Keystone would be more than a drop in bucket when 3 mill BPD refining capacity remains offline.
Oil producers got hurt (remember negative prices) and that has more to do with oil price today than all the regulation and stimulus combined. Don’t believe me, check history of oil prices.
Sad to see we can’t have an intelligent conversation here!
My guess is had you phrased your initial question in a way that said you wanted to have an intelligent conversation then you would have been more likely to get that result.
I work in oil and gas and it is the volatile price of oil that has caused under-investment. There is also a worry that demand for oil and gas will fall during the 3 – 5 years it takes to find and start producing, so investment in increasing production is still anemic. Similar story for refineries, as well as the US being an uncompetitive place to build a new refinery. It is a complicated discussion, but the narrative that ‘Green Policy’ is solely responsible for driving up oil and gas prices is FAKE NEWS!
I read recently that US refinery capacity was down 800k barrels/day in 2020 and hasn’t recovered.
I wonder about the mortgage as an inflation hedge.
At a 3% mortgage rate you must withdraw 5% of a portfolio to cover just principle and interest. That means you need 2.5 years of sustained 10% inflation or 5 years of 5% inflation or eight years of 3% inflation to cover the loan.
In the context of supplementary income that can cover your loan taking out a mortgage is surely more than viable, but presenting a mortgage as a safe inflation hedge for someone living completely off their portfolio seems unwise.
Can you explain your math?
I don’t spend 0.5% of the portfolio on mortgage, let alone 5%.
Also nothing is safe. Not even life itself.
A $1M mortgage at 3% (with zero insurance or taxes) costs $4,216.04 per month according to mortgagecalculator.org.
That’s $50592.48. Assuming the $1M were invested and used to pay off the mortgage, that’s a 5.06% withdrawal rate.
If we take that the mortgage is modeled as an inflation hedge, and the 4% rule is considered sufficiently safe, then the mortgage is quite unsafe, requiring a 25% higher than safe withdrawal rate.
So what inflation rate is required to make this desirable?
One way to model this is to consider that 2.5 years of 10% inflation adjustments to an original 4% withdrawal will align with the mortgage cash flow. So one could argue that with several years of sustained inflation without a market crash would justify holding the mortgage.
Or one could argue that holding a mortgage is unwise when you’re dependent on a portfolio to cover the payments.
Or one could argue that when sufficient income is present to float the mortgage and living expenses are covered by the portfolio, then the mortgage is a long term hedge (as I suspect your logic is).
Thanks for explaining the math, much appreciated.
At the time I got a mortgage (August 2021 +/-) I wasn’t thinking about it for the general case.
Some main thoughts at the time:
– 30-year fixed rates were 2.5% – 2.75% and inflation was already 5% with no clear end to covid related supply chain issues (but probably for more than a year in important markets like semiconductors)
– mortgage was small percentage of house value and mortgage payment was small withdrawal rate from portfolio
– I looked at interest only mortgages but went the traditional route for lower interest rate.
Unlike a failure case with a safe withdrawal rate analysis, if the investments did go to zero as a result of the mortgage payments it isn’t the end. You still have x years of home equity with 40-50% of the payments going to principal in the early years. A 5% withdrawal rate still has a 75% success rate and would last a minimum of 15 years based on past performance. I don’t think I would play those probabilities myself.
“That’s $50592.48. Assuming the $1M were invested and used to pay off the mortgage, that’s a 5.06% withdrawal rate.”
SWR analysis assumes withdrawal amount rises with inflation. Mortgage loan expense remains fixed (unadjusted for inflation) for the life of the loan. Run the numbers in cfiresim (setting the withdrawal amount as fixed, non-inflation-adjusted) and you will see that a leveraged-investing-via mortgage strategy with a 3% interest rate loan has a better success rate (has been quite “safer”) than the 4% rule.
brooklynguy!
I always appreciate your insights, this is great thank you. I should have gotten a bigger mortgage.
Haven’t commented on any of the FIRE blogs or forums in a few years (lost the urge since retiring), but I’ve never been able to resist a “to mortgage or not to mortgage” discussion.
I can definitely relate. I hope retirement is treating you well!
My ‘confirmation bias’ is that of an debt extremophobe.
Averse to having a fixed debt while exposed to possibility of home and investments synchronously devaluing relative to said debt.
Even though home value is small portion of net worth.
In 1970’s USA Fed remained timid about inflation – much like currently. Inflation compounded in large part to compounding wage rates.
Then along came Volker. He replenished my saddlebags through large real interest rates for decades.
Something like one-third of all dollars in circulation were printed by the Fed in the last two years (starting under Trump during Covid and continuing under Biden).
If you increase the money supply by that much (with no end in sight), inflation isn’t going anywhere anytime soon.
Time to break out of your liberal bubble, Jeremy! Conservatives (and bitcoiners) are all over this issue, yet it seems it’s not even on your radar.
> Conservatives (and bitcoiners) are all over this issue
This makes sense then as it isn’t true.
Here is an old post
https://www.gocurrycracker.com/money-printer-go-brrrr/
Heh heh. My bad. After years of reading your insightful work, I should’ve known you’d already considered the Fed’s role. Having said that…
In the link you sent, you argued that the huge increase in M1 money supply is a statistical quirk (because the Fed started including savings accounts in M1).
But that doesn’t explain why there’s also been a massive increase in M2. In Jan 2020, M2 was $15.4 trillion. By April 2022, it was up to $21.73 trillion, a 41% increase in nominal terms (source: St. Louis Fed, https://fred.stlouisfed.org/series/M2SL).
So, it seems the conservatives were right, after all – though they’ve downplayed just how much money printing occurred under Trump.
So, it seems the conservatives were right, after all – though they’ve downplayed just how much money printing occurred under Trump.
The key point is this: Recent inflation is much more than just a supply shock phenomenon. And with this much money printing, inflation is going to remain a problem long after the supply shocks subside.
Some questions for you if you don’t mind. I’m trying to understand your assumptions.
What is the reason for an increase in M2? Is it 100% because of stimulus?
Does an increase in M2 always mean an increase in inflation? What is the relationship?
What percentage of M2 is moving around in the economy? What percent is available to be spent on goods and services?
Who has M2? How is it distributed throughout the individuals and institutions of the country?
Here is the breakdown of the 2021 inflation figures.. Where is M2 at work?
Thanks
Socialist Capital, if Trump was still in office people on the Left would be blaming him 100% for any increase in inflation. But since one of their own is in control they want to blame him still for the current administration’s policies. Won’t work and you will see the results in November since the absolute #1 concern for Americans is inflation and the economy. It isn’t climate change, transgender rights, abortions, or any other buzzwords that the Dems might want to parade out.
I like the idea of a house plus 100% equities for the rest of the portfolio. Would you have kept the bonds if you continued renting?
maybe just out of momentum… although I dumped a lot of them in the initial covid downturn
So inflation will make our stocks go higher…excellent!
Probably not. But stocks would be in a better position than bonds or cash.
A lot of discussion/debate here about what causes inflation, specifically as it relates to monetary and fiscal policy. The explanation is one that requires a good bit of education and understanding beyond “printing money = bad.” I’ve found various resources but the one that stands out is a website authored by Lyn Alden. Here are just two articles, of dozens and dozens, that will make us all smarter if you are willing to put in the time:
https://www.lynalden.com/inflation/
https://www.lynalden.com/money-printing/
I retired early(ish) at the end of 2020 when I was 57. I was always conscious of Sequence of Returns Risk and had a plan tucked away in the back of my mind where I’d go back to work as a casual teacher if the stock market fell substantially in the first 5 years of my retirement.
As I type this, I’m sitting in front of a year 8 English class at the school where I used to teach.
What with covid and the flu, (we’re coming into winter in Australia) the demand for casual teachers is sky-high. I’ve been working 5 days a week for the last month.
This has more than covered what we need for household expenses and I’m enjoying the work. (Unless I have a naughty class, but at this school that’s pretty rare.)
I’m happy because, even though I didn’t want to go back to work, it’s keeping me from tapping my cash bucket and/or my portfolios while the market is down.
I think that, even though I know that I’ll probably be ok even if I didn’t go back to the classroom, Old Lady Frogdancer in the future will be glad that I made the effort to safeguard her future.
Better safe than sorry!
It’s a nice transition too, doing things you enjoy when it is convenient that also happen to make a bit of extra money.
Most recently I was an assistance coach on Jr’s baseball team. Thanks to my free labor I was able to pay $50 less for the registration fee and coaches weren’t asked to contribute to the end-of-season party fund (~$40.) Including taxes that was like earning $100 for something I was going to do anyway. Repeat for additional benefits.
I’m looking at possibly borrowing against my house to do some fun improvements, so I’m curious to hear more about your progress and evolving thoughts on the HELOC–are you still doing it at 4%? Is that rate fixed? And why did you go that route instead of a Home Equity Loan? Any other (new) thoughts on this issue you can share?
Love the blog. Long time reader. Thanks for writing!
HELOC has been approved should get it all sorted in next couple of weeks.
I don’t need a big chunk of up front cash (as per a home equity loan.) I got that with the mortgage just a few months ago.
The HELOC gives me a way to flexibly get cash and has an option to lock in a long-term fixed rate for big purchases, e.g. if I spend $20k on a new HVAC system I can lock that purchase into a fixed rate payback option (currently 4%) separately from the more volatile purchases. It cost $0 to setup so I just did it for the option.
Lots of comments on this post were strongly opinionated but without supporting data provided within the comments themselves.
I saw this chart on Twitter recently that seems relevant to the topic. A podcast goes through the analysis.
So I my retirement side hustle has me consulting back in my old industry which spans a variety of segments from auto to consumer goods. What I can tell you not as antidotal, but real life conversations is that the supply chain issues have broken down further in 22 and continue to erode across every front.
These issues are not going to ease by the end of the year and inflationary pressure is going to stay high in almost every segment of manufacturing. I’m not an economist, but I did stay in a Holiday Inn Express last night, so I can say that I’d not hold my breath waiting for inflation to return to 3% in the next 2 years. I sincerely hope all of the executives I’m working with and I are dead wrong about this!
I think the Fed buying Treasuries for so long played a part. Created an asset bubble. A bubble in stocks probably isnt inflationary but a long enough bubble in real estate probably is- rental properties change hands and rents go up to finance the now higher debt on the property. And those price increases will be sticky