Why isnt everyone buying TIPS?

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expat
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Re: Why isnt everyone buying TIPS?

Post by expat »

I bought some per IPS.
BJJ_GUY
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Re: Why isnt everyone buying TIPS?

Post by BJJ_GUY »

watchnerd wrote: Fri May 07, 2021 12:15 am
BJJ_GUY wrote: Thu May 06, 2021 11:10 pm
The quote of mine that you are referencing was a direct reply to someone who said inflation has been declining for 40 years.
Yes, inflation has been declining for 40 years.

In 1979, inflation was about 13%

Now it's about 2%.

That's a pretty big decline in inflation.

USA green, EU red.

See graph.

Source: https://www.worlddata.info/america/usa/ ... -rates.php

Image
You are misinterpreting the data.
Those are both Y-o-Y growth rates. When you look at inflation or CPI from point A to point B, it should be obvious.
CuriousTacos
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Re: Why isnt everyone buying TIPS?

Post by CuriousTacos »

BJJ_GUY wrote: Fri May 07, 2021 1:31 am You are misinterpreting the data.
Those are both Y-o-Y growth rates. When you look at inflation or CPI from point A to point B, it should be obvious.
You are misinterpreting what cbeck said. This started with:
BJJ_GUY wrote: Thu May 06, 2021 9:35 pm
cbeck wrote: Thu May 06, 2021 7:25 pm We have been in a world of declining inflation for forty years. During the revival of the economy there may be a blip of inflation as the money dikes break open, but the conditions that have prevailed for these past decades are most likely to resume. Those conditions are weakness of labor due to anti-union legislation and exposure to international competition.
Inflation has gone up, not down over the last 40 years. This is kind of a silly statement if you think about what you said. 40 years ago, how much was a Big Mac, gallon of gas, home price, new car etc.?
cbeck never said prices have been declining, but instead used the term "inflation" in the way many/most people do, which is the Y-o-Y change in prices. That rate of change most certainly has declined over the last 40 years.

You seem to be using the term "inflation" to be synonymous with the price index itself (and you are correct that prices have not declined, but nobody was saying otherwise), but that is not typical.
BJJ_GUY
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Re: Why isnt everyone buying TIPS?

Post by BJJ_GUY »

CuriousTacos wrote: Fri May 07, 2021 2:37 am
BJJ_GUY wrote: Fri May 07, 2021 1:31 am You are misinterpreting the data.
Those are both Y-o-Y growth rates. When you look at inflation or CPI from point A to point B, it should be obvious.
You are misinterpreting what cbeck said. This started with:
BJJ_GUY wrote: Thu May 06, 2021 9:35 pm
cbeck wrote: Thu May 06, 2021 7:25 pm We have been in a world of declining inflation for forty years. During the revival of the economy there may be a blip of inflation as the money dikes break open, but the conditions that have prevailed for these past decades are most likely to resume. Those conditions are weakness of labor due to anti-union legislation and exposure to international competition.
Inflation has gone up, not down over the last 40 years. This is kind of a silly statement if you think about what you said. 40 years ago, how much was a Big Mac, gallon of gas, home price, new car etc.?
cbeck never said prices have been declining, but instead used the term "inflation" in the way many/most people do, which is the Y-o-Y change in prices. That rate of change most certainly has declined over the last 40 years.

You seem to be using the term "inflation" to be synonymous with the price index itself (and you are correct that prices have not declined, but nobody was saying otherwise), but that is not typical.
Bond investors had a 40 year period of positive returns beginning at a time when inflation and subsequently interest rates were at peak levels. We all know this referred to as the ~35 year year secular bull bond market (or something similar).

Why do we think about the cumulative performance of bond investors over this time period, and say that had a 'positive return' for several decades? Would you. really defined that time period as one in which bond investors experienced 40 years of declining returns?

If something changes by 200 or 400% over a 4 decade period, I think that's the headline. That is the only point I was trying to make.
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watchnerd
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Re: Why isnt everyone buying TIPS?

Post by watchnerd »

BJJ_GUY wrote: Fri May 07, 2021 1:31 am

You are misinterpreting the data.
Those are both Y-o-Y growth rates. When you look at inflation or CPI from point A to point B, it should be obvious.
Yes, that's what inflation is: YoY growth in price.

The YoY growth in price has declined over the last 40 years, ergo inflation is declining.
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#Cruncher
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Re: Why isnt everyone buying TIPS?

Post by #Cruncher »

BJJ_GUY wrote: Thu May 06, 2021 11:10 pmI think the CPI shows inflation just over 2.5% annually over the last 20 years.
Not that much. The not seasonally adjusted CPI-U increased from 176.2 in March 2001 to 264.877 in March 2021, an annual growth rate of 2.06%. Here are the growth rates for various time periods over the past 50 years:

Code: Select all

                 ------- CPI-U Annual Growth Rate for Various Number of Years -------
March   CPI-U       1       2       3        5      10     15       20     30     40

Code: Select all

 1971   40.000
 1972   41.400    3.50% 
 1973   43.300    4.59%   4.04% 
 1974   47.800   10.39%   7.45%   6.12% 
 1975   52.700   10.25%  10.32%   8.38%
 
 1976   55.900    6.07%   8.14%   8.89%    6.92%
 1977   59.500    6.44%   6.26%   7.57%    7.52% 
 1978   63.400    6.55%   6.50%   6.36%    7.92% 
 1979   69.800   10.09%   8.31%   7.68%    7.87% 
 1980   80.100   14.76%  12.40%  10.42%    8.73%
 
 1981   88.500   10.49%  12.60%  11.76%    9.62%  8.27% 
 1982   94.500    6.78%   8.62%  10.63%    9.69%  8.60% 
 1983   97.900    3.60%   5.18%   6.92%    9.08%  8.50% 
 1984  102.600    4.80%   4.20%   5.05%    8.01%  7.94% 
 1985  106.400    3.70%   4.25%   4.03%    5.84%  7.28%
 
 1986  108.800    2.26%   2.98%   3.58%    4.22%  6.89%  6.90% 
 1987  112.100    3.03%   2.64%   3.00%    3.47%  6.54%  6.87% 
 1988  116.500    3.93%   3.48%   3.07%    3.54%  6.27%  6.82% 
 1989  122.300    4.98%   4.45%   3.98%    3.58%  5.77%  6.46% 
 1990  128.700    5.23%   5.11%   4.71%    3.88%  4.86%  6.13%
 
 1991  135.000    4.90%   5.06%   5.04%    4.41%  4.31%  6.05%    6.27% 
 1992  139.300    3.19%   4.04%   4.43%    4.44%  3.96%  5.83%    6.25% 
 1993  143.600    3.09%   3.14%   3.72%    4.27%  3.91%  5.60%    6.18% 
 1994  147.200    2.51%   2.80%   2.93%    3.78%  3.68%  5.10%    5.78% 
 1995  151.400    2.85%   2.68%   2.82%    3.30%  3.59%  4.34%    5.42%

 1996  155.700    2.84%   2.85%   2.73%    2.89%  3.65%  3.84%    5.26% 
 1997  160.000    2.76%   2.80%   2.82%    2.81%  3.62%  3.57%    5.07% 
 1998  162.200    1.37%   2.07%   2.32%    2.47%  3.36%  3.42%    4.81% 
 1999  165.000    1.73%   1.55%   1.95%    2.31%  3.04%  3.22%    4.40% 
 2000  171.100    3.70%   2.71%   2.26%    2.48%  2.89%  3.22%    3.87%
 
 2001  176.200    2.98%   3.34%   2.80%    2.50%  2.70%  3.27%    3.50%  5.07% 
 2002  178.800    1.48%   2.23%   2.71%    2.25%  2.53%  3.16%    3.24%  5.00% 
 2003  184.200    3.02%   2.24%   2.49%    2.58%  2.52%  3.10%    3.21%  4.94% 
 2004  187.400    1.74%   2.38%   2.08%    2.58%  2.44%  2.89%    3.06%  4.66% 
 2005  193.300    3.15%   2.44%   2.63%    2.47%  2.47%  2.75%    3.03%  4.43%
 
 2006  199.800    3.36%   3.26%   2.75%    2.55%  2.53%  2.65%    3.09%  4.34% 
 2007  205.352    2.78%   3.07%   3.10%    2.81%  2.53%  2.62%    3.07%  4.22% 
 2008  213.528    3.98%   3.38%   3.37%    3.00%  2.79%  2.68%    3.08%  4.13% 
 2009  212.709   (0.38%)  1.78%   2.11%    2.57%  2.57%  2.48%    2.81%  3.78% 
 2010  217.631    2.31%   0.96%   1.95%    2.40%  2.43%  2.45%    2.66%  3.39%
 
 2011  223.467    2.68%   2.50%   1.53%    2.26%  2.40%  2.44%    2.55%  3.14%  4.39% 
 2012  229.392    2.65%   2.67%   2.55%    2.24%  2.52%  2.43%    2.53%  3.00%  4.37% 
 2013  232.773    1.47%   2.06%   2.27%    1.74%  2.37%  2.44%    2.44%  2.93%  4.29% 
 2014  236.293    1.51%   1.49%   1.88%    2.13%  2.35%  2.42%    2.39%  2.82%  4.08% 
 2015  236.119   (0.07%)  0.72%   0.97%    1.64%  2.02%  2.17%    2.25%  2.69%  3.82%
 
 2016  238.132    0.85%   0.39%   0.76%    1.28%  1.77%  2.03%    2.15%  2.65%  3.69% 
 2017  243.801    2.38%   1.61%   1.05%    1.23%  1.73%  2.09%    2.13%  2.62%  3.59% 
 2018  249.554    2.36%   2.37%   1.86%    1.40%  1.57%  2.04%    2.18%  2.57%  3.48% 
 2019  254.202    1.86%   2.11%   2.20%    1.47%  1.80%  2.05%    2.18%  2.47%  3.28% 
 2020  258.115    1.54%   1.70%   1.92%    1.80%  1.72%  1.95%    2.08%  2.35%  2.97%
 
 2021  264.877    2.62%   2.08%   2.01%    2.15%  1.71%  1.90%    2.06%  2.27%  2.78%
Table above is similar to this webpage. CPI-U can also be obtained by selecting "U.S. city average, All items - CUUR0000SA0" from BLS CPI Top Picks webpage.
trueblueky
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Re: Why isnt everyone buying TIPS?

Post by trueblueky »

watchnerd wrote: Wed May 05, 2021 4:03 pm
lazynovice wrote: Wed May 05, 2021 1:39 pm

Fair point, Dad. So far my county is not jacking up my assessed value, but it is coming next year.
My assessment just got bumped up.
This is state-dependent. Florida assessments are capped at 3% increase for legal residents. Many who saw their assessments crater in 2008 are not back to that level, although their property values are rising again.

Theoretical example: assessment $100,000. Over 10 years, values are +10%, +10%, +10%, +10%, -30%, +10%, +10%, +10%, +10%. Tax assessments are +3%, +3%, +3%, +3%, -30%, +3%, +3%, +3% +3% +3%. Assessment without the cap $165,000; with the cap $91,000.

Another way to see that: snowbird with residency up north $165,000; snowbird with Florida residency $91,000.
cbeck
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Re: Why isnt everyone buying TIPS?

Post by cbeck »

BJJ_GUY wrote: Thu May 06, 2021 9:35 pm
cbeck wrote: Thu May 06, 2021 7:25 pm We have been in a world of declining inflation for forty years. During the revival of the economy there may be a blip of inflation as the money dikes break open, but the conditions that have prevailed for these past decades are most likely to resume. Those conditions are weakness of labor due to anti-union legislation and exposure to international competition.
Inflation has gone up, not down over the last 40 years. This is kind of a silly statement if you think about what you said. 40 years ago, how much was a Big Mac, gallon of gas, home price, new car etc.?

I'll stay away from the second point you are making. Your rationale seems more emotion that data driven, so no point in furthering the point.
There has been inflation every year, but the rate of inflation has been declining since the 80's. https://fred.stlouisfed.org/graph/?g=i6u6
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