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Post by xray on Dec 7, 2021 14:55:20 GMT
MarketWatch
This is Warren Buffett’s ‘first rule’ about investing. Here’s what to do if your financial adviser breaks that rule
Updated: Dec. 6, 2021 at 10:16 a.m. ET
By Alisa Wolfson
Warren Buffett once said, “The first rule of an investment is don’t lose [money]. And the second rule of an investment is don’t forget the first rule. And that’s all the rules there are.” Of course, your financial adviser isn’t always going to be able to follow that rule — the markets do go down, and nobody beats the market every time, even Buffett himself — but when they do lose you money, how do you know when to pull the plug? (You can use this tool to get matched with a planner who meets your needs.)
One good rule of thumb when you see losses in your portfolio: “Comparing the relative returns of your investment portfolio to a similar target portfolio, over the same time period, can help you see if your losses are out of line. If you have a portfolio with 60% in stocks and 40% in bonds, compare it to a similar portfolio,” says Tiffany Lam-Balfour, investing spokesperson for NerdWallet. You can also consider getting a second opinion from another adviser. “Some brokerage firms may include a target portfolio as part of their statement or a financial adviser can likely include it in a client’s portfolio review,” says Lam-Balfour. Additionally, you can use a benchmark like the S&P 500 but you will likely need to do a weighted average of one or more indices because a diversified portfolio will not be 100% invested in the S&P 500. “If your portfolio happens to be 60% stock and 40% bonds, you might calculate a 60% weight to the S&P 500 and 40% to the Barclays Aggregate bond index or something like that to get a more accurate representation of your actual portfolio,” says Lam-Balfour.
If you’re consistently underperforming the market, Lam-Balfour recommends asking your adviser why and seeing if the explanation makes sense. “You may also want to seek a second opinion to check if your current investments are appropriate for your goals and whether you should go in a different direction,” says Lam-Balfour.
It’s also key that you consider whether your adviser invested according to your goals and expectations. “What’s important is that clients have a clear understanding and expectation so they are not caught off guard. If an adviser inappropriately invests a client in a portfolio with too much risk that does not align with their profile, then I would suggest they think about switching advisers,” says Arielle Jacobs-Bittoni, certified financial planner at Refresh Investments.
Remember, too, that losing money isn’t always a dealbreaker. Luis Strohmeier, certified financial planner at Octavia Wealth Advisors, notes that advisers don’t control market fluctuations, so it’s difficult to judge their performance based solely on losses alone. “If the market is down 30% and your adviser loses you 10%, I might be happy that the adviser didn’t lose me an additional 20%,” says Strohmeier. And, he adds, make sure your adviser is an advocate and a fiduciary for you. “They don’t have to judge your lifestyle, but they do have to understand it. If it’s important to you, it should be important to them and they should find ways to help support your goals,” says Strohmeier.
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Live Long and Prosper....
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Post by Chahta on Dec 7, 2021 15:52:58 GMT
While it is sage advice, I am not sure it's practical for all investors other than traders. How long of a time do you not lose money? 1 week or 1 year or 10 years. Is he talking about a portfolio or each holding on a portfolio? You never lose until you sell.
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Post by bb2 on Dec 7, 2021 18:02:18 GMT
Hard thing I had to do was fire a childhood friend from managing some of my money. Paid him $25K one year to lose money in a bull market. That was finally enough to make the call. Painful.
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Post by uncleharley on Dec 7, 2021 18:13:55 GMT
Sometimes rules get broken.
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Post by ignatz on Dec 7, 2021 19:21:30 GMT
Buffett's first rule is so facile as to be laughable.
He knew that when he said it.
But of course that doesn't matter to the financial press, who love bumper sticker stuff because it's so easy to use such "rules" to lead rubes around by the nose. Can you say "click bait"? I knew you could.
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Post by xray on Dec 7, 2021 22:11:51 GMT
Chahta, bb2, uncleharley, steelpony10, ignatz, Chahta.... Your:I am not sure it's practical for all investors other than traders. 1... How long of a time do you not lose money? 1 week or 1 year or 10 years. 2...Is he talking about a portfolio or each holding on a portfolio? 3... You never lose until you sell. ......... 1... Keep in mind that Warren and others (like some of us) follow our buy's continuously. What is meant by that statement is that Warren and others keep analyzing their securities in their portfolio continuously (and usually have "safeguards" built into their continuing analysis). In my case, I use "sell codes", "Rf" (risk measurements), report card grades and star ratings as a "quick look" for "continual" buying/selling direction. Others use their own methodology (going forward). If/when sell codes and my report card grades start going negative, I always view that as some early selling may be in order [not in a continual down market though). The cycle (1week,1month,1year) is never considered important as sectors change, managers change, favor abilities change, (etc) and we buy/sell on the analysis only [again, going forward from our initial buy).... 2... I am sure he is talking about both when doing a thorough analysis. Two negatives together or two positives together indicate that more is going on than we may be aware of (in our current analysis).... 3... This assumes that we are always buying/selling the same amount of shares which is usually never the case for some of us. Using the out/in methodology, we can capture a lot of CatGain over many periods of time before any security tends to go totally negative. We must always assume of course that we bought a security that was undervalued at the onset and at discount to either the NAV or book value.... Live Long and Prosper....
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Post by retiredat48 on Dec 8, 2021 0:07:25 GMT
I'll be as brief as I can...
About 50 years ago, I developed my investing partly around the Buffett rule (do not lose money), after having taken some losses on individual stocks during the 1960's. I implemented two strategies that have enabled me to not have losses...ever...until one recently. That strategy was/is:
--Do not invest in individual stocks. Only mutual funds and now ETFs (and CEFs). I have not bought an individual stock in last five decades...often tempted.
--Pyramid Up invest...don't want to belabor this, but it involves never averaging down, and only adding to stock funds that are moving upward. All purchases/additions must be higher than past buy points. In younger accumulation phase, this permits not losing money.
I continually assess my funds using methods such as xray posted above, like: If my fund is ever lagging an index fund, switch to the index fund, at the least. If any fund is in a bear market, is it because the overall market is in a bear market? Is my fund lagging peer funds? Only buy into top performing funds in terms of last 3 to 6 months performance...etc.
Fifteen years ago I posted my financial life history on the Bogglehead Forum...had over a thousand reply posts. I had stated I never had a losing fund situation. All my holdings were in a net positive position. This is achievable. Over time, as your funds will be going up, and when adding money, you may lose on that money buy, but not have the fund be in an overall loss position. That is the primary goal. Being in a gain position enables you to think straight, if you head towards a loss position.
That continues to today.
However, I can report that I now have a net-lost money in a position, namely, Master Limited Partnerships investing in gas pipelines. In the hey-day a decade ago, I owned three funds/C-corp type holdings that each held about 35 MLPs. When the killer bear market in MLPs occurred, I sold off one fund at a gain; the second (KYN) I sold off at about even, considering the approx 8% yield these funds were giving. The third, NTG, I kept. It went down...down...and down. I still own it. While I got good dividends over the years, I think my investment in MLPs (never a major percent of portfolio) is at a loss today. My biggest loss was the amount of time I spent trying to understand and assess MLPs. Still not sure how a gas pipeline MLP C-corp of 33 MLPs can lose 85% of value, and underlying companies are still pumping gas?
BTW We had a courageous poster on M* who averaged down MLPs, stating at one point he had lost $250,000! His approach after this was: to keep buying. Yikes!
Anyway, IMO you can reasonably strive to hit the Buffett goal, if you do not invest in individual stocks, never average down, only buy in buckets of perhaps 1/5th your buy amount; use some index funds for core holdings, use dollar cost averaging benefits of small periodic (bi-weekly) buys when investing in 401.Ks, and be firm on assessing any fund you begin accumulating that is badly lagging peers, or the market.
Good day.
R48
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Post by steadyeddy on Dec 8, 2021 1:30:02 GMT
I'll be as brief as I can... ..... BTW We had a courageous poster on M* who averaged down MLPs, stating at one point he had lost $250,000! His approach after this was: to keep buying. Yikes! ... Has anyone heard from Cliff lately ? |
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Post by nobhead on Dec 8, 2021 2:12:08 GMT
However, I can report that I now have a net-lost money in a position, namely, Master Limited Partnerships investing in gas pipelines. In the hey-day a decade ago, I owned three funds/C-corp type holdings that each held about 35 MLPs. When the killer bear market in MLPs occurred, I sold off one fund at a gain; the second (KYN) I sold off at about even, considering the approx 8% yield these funds were giving. The third, NTG, I kept. It went down...down...and down. I still own it. While I got good dividends over the years, I think my investment in MLPs (never a major percent of portfolio) is at a loss today. My biggest loss was the amount of time I spent trying to understand and assess MLPs. Still not sure how a gas pipeline MLP C-corp of 33 MLPs can lose 85% of value, and underlying companies are still pumping gas? I lost in the Master Limited Partnerships as well (probably more than you). I do not plan to ever look again to see how much.
A former coworker (in about 2003) had worked with Kinder Morgan out west in the Rockies and transferred to the east coast to our company. He would come by my desk at times and ask me to pull up Kinder Morgan stock. Through our conversations, I determined he and his wife both had all of their IRA's in that as only investment at about a million dollars at that time. I asked him why he had all invested in one stock. His replay was if Rich Kinder makes money, he would make money. Here is a link to Rich Kinder which shows him as a billionaire. I have not seen the former coworker in 15 years but often wonder how it all turned out for him.
Glad to see you posting some again.
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Post by Chahta on Dec 8, 2021 14:45:43 GMT
I'll be as brief as I can... ..... BTW We had a courageous poster on M* who averaged down MLPs, stating at one point he had lost $250,000! His approach after this was: to keep buying. Yikes! ... Has anyone heard from Cliff lately ? He never came over to BB or ArmChair that I saw. His posting died at the previous M* forum. He would be a great addition here. Too bad.... |
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Post by Deleted on Dec 8, 2021 15:37:38 GMT
I also am a survivor of MLPs. I learned some good lessons. Diversification works. Trust the financials and not management. Still hold MMP and EPD - both small holdings. Enbridge - bigger holding - converted from SEP. It's been a winner. I watch them closely. Dividends are holding up for these and CVX. But - I also have my OXY and RDSB holdings which are down. Energy was a special case and the MLPs were one part of it. CVX has been steady. It is the one major market sector that is priced as a commodity - isn't it? Riskier by nature - higher loss, higher reward.
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Post by xray on Dec 8, 2021 16:38:46 GMT
Chahta, bb2, uncleharley, ignatz, retiredat48, steadyeddy, nobhead,@slooow, I was listening to David Solomon (CEO Goldman Sachs) and he reminded listeners that "Real Inflation" is hard to predict and we could (possibly) go back to the 1970-1980 High Inflation era (historical's that people normally forget) where: 1... cash was lost money 2... equities lost 50% of their value and where only OIL and GOLD made money.... Interesting comment for implementing this old/new change in strategy should we start to see this transition.... Live Long and Prosper....
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Post by Chahta on Dec 8, 2021 16:56:52 GMT
I remember my first mortgage at 15% interest, CDs paying 7% etc.....
I didn't feel inflation so much then because I was a 20 something starting out with not much.
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Post by steadyeddy on Dec 8, 2021 17:31:18 GMT
Chahta , bb2 , uncleharley , ignatz , retiredat48 , steadyeddy , nobhead ,@slooow , I was listening to David Solomon (CEO Goldman Sachs) and he reminded listeners that "Real Inflation" is hard to predict and we could (possibly) go back to the 1970-1980 High Inflation era (historical's that people normally forget) where: 1... cash was lost money 2... equities lost 50% of their value and where only OIL and GOLD made money.... Interesting comment for implementing this old/new change in strategy should we start to see this transition.... Live Long and Prosper.... Let us bring Volker-like Fed chair back then |
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Post by richardsok on Dec 8, 2021 17:54:05 GMT
We CAN'T bring another Volker-type back again, even if we were inclined to.
Our insatiable demand for new debt & entitlements (at 10%+ interest rates ) would be ruinous and vast towers of bonds already in existence would be crushed. Real estate and sky-high equities would collapse, making 2008 seem like a lark.
No, the prospect of Volker redux would be too terrifying.
They'll attempt to inflate our way out.
They already are.
What I find mystifying is precious metals remaining lackluster -- still.
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Post by steelpony10 on Dec 8, 2021 22:37:55 GMT
richardsok , When China attacks Taiwan and/or Russia attacks the Ukraine we’ll see how the Great Satan (and gold) reacts. There’s no Bogeyman out there yet.
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Post by richardsok on Dec 8, 2021 23:43:32 GMT
Has anyone heard from Cliff lately ? He never came over to BB or ArmChair that I saw. His posting died at the previous M* forum. He would be a great addition here. Too bad.... I fear saratoga has gone missing also. |
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Post by steadyeddy on Dec 8, 2021 23:50:24 GMT
We CAN'T bring another Volker-type back again, even if we were inclined to. Our insatiable demand for new debt & entitlements (at 10%+ interest rates ) would be ruinous and vast towers of bonds already in existence would be crushed. Real estate and sky-high equities would collapse, making 2008 seem like a lark. No, the prospect of Volker redux would be too terrifying. They'll attempt to inflate our way out. They already are. What I find mystifying is precious metals remaining lackluster -- still. , what exactly does it mean to say "inflate our way out?" I would like to understand that a bit. |
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Post by yogibearbull on Dec 8, 2021 23:51:23 GMT
richardsok, I see Saratoga posting at M* and Armchairinvesting. saratoga is registered here too but posts less.
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Post by Deleted on Dec 9, 2021 0:46:21 GMT
Steady - I looked around for a simplistic description of what you are asking R about. Here it is (lifted it from an online blog):
How Does Inflation Reduce Debt?
With inflation, the losers are the people and institutions that own the debt, because the currency shrinks in value. For example, say you loan the government money by buying a $1000 U.S. government bond that matures in ten years. At the time you buy it, you could buy a fully loaded laptop or a round trip ticket to London for $1000.
Now, let’s say the U.S. inflates its currency at a 7% rate for the next ten years, which would be about twice the “normal” inflation rate of 3.3% for the past 80 years. At the end of that time the bond matures and you get your $1000 back. You go to buy a laptop; they now sell for $2000. That trip to London costs $2000, too. Many people in this situation will think that the prices of laptops and airline tickets have gone up.
Actually, in real dollars (which are dollars adjusted for inflation), the cost of these items hasn’t gone up a dime. It’s the value of the dollar that’s gone down, in this case, by 50% over ten years. The big winner here is the U.S. government, because its multi trillion-dollar debt has been chopped in half (again in real dollar terms) in ten short years. They accomplished this without raising taxes or cutting spending, which is intoxicatingly appealing to politicians.
Sara's summary - bondholders pay the freight.
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Post by retiredat48 on Dec 9, 2021 2:48:11 GMT
I'll be as brief as I can... ..... BTW We had a courageous poster on M* who averaged down MLPs, stating at one point he had lost $250,000! His approach after this was: to keep buying. Yikes! ... Has anyone heard from Cliff lately ? BTW it was not Cliff who posted of losing $250,000. It was however a close MLP Heyday poster/follower. R48 |
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Post by retiredat48 on Dec 9, 2021 2:59:20 GMT
Steady - I looked around for a simplistic description of what you are asking R about. Here it is (lifted it from an online blog): How Does Inflation Reduce Debt? With inflation, the losers are the people and institutions that own the debt, because the currency shrinks in value. For example, say you loan the government money by buying a $1000 U.S. government bond that matures in ten years. At the time you buy it, you could buy a fully loaded laptop or a round trip ticket to London for $1000. Now, let’s say the U.S. inflates its currency at a 7% rate for the next ten years, which would be about twice the “normal” inflation rate of 3.3% for the past 80 years. At the end of that time the bond matures and you get your $1000 back. You go to buy a laptop; they now sell for $2000. That trip to London costs $2000, too. Many people in this situation will think that the prices of laptops and airline tickets have gone up. Actually, in real dollars (which are dollars adjusted for inflation), the cost of these items hasn’t gone up a dime. It’s the value of the dollar that’s gone down, in this case, by 50% over ten years. The big winner here is the U.S. government, because its multi trillion-dollar debt has been chopped in half (again in real dollar terms) in ten short years. They accomplished this without raising taxes or cutting spending, which is intoxicatingly appealing to politicians. Sara's summary - bondholders pay the freight. Another way of seeing this is: Most employees get pay raises during inflation. So if you have a mortgage you are paying it back with cheaper, and more, dollars earned, each year. During the 1970's high inflation, I was handing out to GE employees elevated pay raises, that one employee exclaimed: "this raise equals my entire yearly mortgage payments!" Fun days. Inflation is a godsend for governments, underfunded pension plans, and those people in debt. Disclaimer: my taxable accounts are in net debt now, with 15 year HELOCS, one at 2.5%, the other at 3% fixed. I will not relinquish until I die. R48 |
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Post by steadyeddy on Dec 9, 2021 3:59:46 GMT
Steady - I looked around for a simplistic description of what you are asking R about. Here it is (lifted it from an online blog): How Does Inflation Reduce Debt? With inflation, the losers are the people and institutions that own the debt, because the currency shrinks in value. For example, say you loan the government money by buying a $1000 U.S. government bond that matures in ten years. At the time you buy it, you could buy a fully loaded laptop or a round trip ticket to London for $1000. Now, let’s say the U.S. inflates its currency at a 7% rate for the next ten years, which would be about twice the “normal” inflation rate of 3.3% for the past 80 years. At the end of that time the bond matures and you get your $1000 back. You go to buy a laptop; they now sell for $2000. That trip to London costs $2000, too. Many people in this situation will think that the prices of laptops and airline tickets have gone up. Actually, in real dollars (which are dollars adjusted for inflation), the cost of these items hasn’t gone up a dime. It’s the value of the dollar that’s gone down, in this case, by 50% over ten years. The big winner here is the U.S. government, because its multi trillion-dollar debt has been chopped in half (again in real dollar terms) in ten short years. They accomplished this without raising taxes or cutting spending, which is intoxicatingly appealing to politicians. Sara's summary - bondholders pay the freight. @slooow, thanks for a nice explanation. So, how do we as investors fight back? Hold no IT government bonds like R48 says? |
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Post by xray on Dec 9, 2021 22:34:08 GMT
Chahta, bb2, uncleharley, ignatz, retiredat48, steadyeddy, nobhead,@slooow, richardsok, steelpony10, yogibearbull,For retiredat48.... For: retiredat48 Your: When the killer bear market in MLPs occurred, I sold off one fund at a gain; the second (KYN) I sold off at about even, considering the approx 8% yield these funds were giving. The third, NTG, I kept. It went down...down...and down. I still own it. While I got good dividends over the years, I think my investment in MLPs (never a major percent of portfolio) is at a loss today. My biggest loss was the amount of time I spent trying to understand and assess MLPs. Still not sure how a gas pipeline MLP C-corp of 33 MLPs can lose 85% of value, and underlying companies are still pumping gas? --------- A followup for your review and any comment: KYN has been good to a lot us. You may have missed their 9/29/20 announcement (or not) where a lot us added shares (KYN announces change in their name to "Energy & Infrastructure Fund").... I agree that they crashed their previous dividend ($0.12/monthly, $1.44/Yr with their lowered (CRASHED) NAV to 4.39) in the 1st Qtr of 2020 (along with many others) but the old adage is that if we liked something (by analysis), we should always carry it on our watch lists (as a PENNY STOCK" <$10) to see what they were going to do about it. Here is a quick synopsis of what has transpired since their announcement: 2020: 4/9 NAV 4.39 5/7 NAV 6.36 5/31 NAV 7.04 6/9 ... $0.15 ($0.60/Yr) ... 6/17, 6/30 6/10 ... insider buying activity 15,000sh @ 6.44 7/31 NAV 6.22 9/11 ... $0.15 ($0.60/Yr) ... 9/29 ... Changed name Moved from our "Watch List" to "Current Portfolio's" .... Current Announcement dates ... Dividend announced ... x-div, paydate2021: 12/10 ... $0.15 ($0.60/Yr) ... 12/18, 12/31 3/10 ... $0.15 ($0.60/Yr) ... 3/22, 3/31 6/25 ... Dividend increased by $0.025/month... $0.175 ($0.75/Yr) ... 7/2, 7/13 9/24 ... $0.175 ($0.75/Yr) ... 10/1, 10.26 ----------- Comments: Currently, KYN (COB Friday) is a 9star CEF (13wk star average of 9.83 stars) with a Report card grade of 98 and a Power rating of 100. Numb3rs are very good (especially for a Penny Stock).... Warning: Penny Stocks are not for everyone as many of them can crash to "0".... Disclosure: Some of us have a Portfolio maximum Phase #4 position (>6%) in KYN (with substantial CapGain) and a "Sell Code" of "3" (some normal risk) and a % Portfolio safety Rating of "High Risk".... Current data 12/9: MktPrc: 9.08 NAV: 7.94 Discount {excessive) +1.15 Live Long and Prosper....
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Post by retiredat48 on Dec 10, 2021 3:17:31 GMT
Fair enough XRAY.
I was simply showing my experience in limiting any loss. KYN is still way below my exit price.
Yes, I keep watching funds forever.
But remember, I posted I still own NTG, the C-corp of my choice, which holds about 35 MLPs.
Yes, these may make excellent investments today. But I will not add significant amounts.
R48
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Post by richardsok on Dec 10, 2021 3:37:14 GMT
We CAN'T bring another Volker-type back again, even if we were inclined to. Our insatiable demand for new debt & entitlements (at 10%+ interest rates ) would be ruinous and vast towers of bonds already in existence would be crushed. Real estate and sky-high equities would collapse, making 2008 seem like a lark. No, the prospect of Volker redux would be too terrifying. They'll attempt to inflate our way out. They already are. What I find mystifying is precious metals remaining lackluster -- still. , what exactly does it mean to say "inflate our way out?" I would like to understand that a bit. Say you're the Prime Minister of Nuckistan. Your currency, the Fatso, is pegged at 10 to a dollar. But you have a problem. Your king keeps borrowing wildly, running up the debt. Nuckistan is now a trillion Fatsos in debt to European banks at 5% interest. They're getting worried and are balking at lending more. No way your people (95% goat herders) can pay off the interest, much less the principal. If you default, no more loans for you. The king will have your head on guava plank. What to do? You just PRINT an extra 50 billion Fatsos! Now they are rated at 25 to a dollar -- but you use the new, much weaker Fatsos to pay down the debt a little. You're INFLATING your way out of the crisis. Your goat herding people don't import all that much, so their now-deeper poverty is bearable. Your Euro banks grumble, but they accept what they can get and hope things will get better. Western governments fear to be too strict with you lest you grant Putin a 100-year lease for a Russian air base. Your king gets to borrow a little while longer, albeit less and at a far higher interest rate. And, while the gettin's good, you have just enough time to raid Nuckistan's National Bank for their gold reserves and skip to Qatar. Everyone's happy. |
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Post by steadyeddy on Dec 10, 2021 4:48:22 GMT
richardsok , what exactly does it mean to say "inflate our way out?" I would like to understand that a bit. Say you're the Prime Minister of Nuckistan. Your currency, the Fatso, is pegged at 10 to a dollar. But you have a problem. Your king keeps borrowing wildly, running up the debt. Nuckistan is now a trillion Fatsos in debt to European banks at 5% interest. They're getting worried and are balking at lending more. No way your people (95% goat herders) can pay off the interest, much less the principal. If you default, no more loans for you. The king will have your head on guava plank. What to do? You just PRINT an extra 50 billion Fatsos! Now they are rated at 25 to a dollar -- but you use the new, much weaker Fatsos to pay down the debt a little. You're INFLATING your way out of the crisis. Your goat herding people don't import all that much, so their now-deeper poverty is bearable. Your Euro banks grumble, but they accept what they can get and hope things will get better. Western governments fear to be too strict with you lest you grant Putin a 100-year lease for a Russian air base. Your king gets to borrow a little while longer, albeit less and at a far higher interest rate. And, while the gettin's good, you have just enough time to raid Nuckistan's National Bank for their gold reserves and skip to Qatar. Everyone's happy. , I was ROFL 🤣🤣The other assumption in the story is that Fatso is freely convertible to Euros? If not, printing more Fatsos won't help, right? |
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Post by Mustang on Dec 11, 2021 20:22:16 GMT
We CAN'T bring another Volker-type back again, even if we were inclined to. Our insatiable demand for new debt & entitlements (at 10%+ interest rates ) would be ruinous and vast towers of bonds already in existence would be crushed. Real estate and sky-high equities would collapse, making 2008 seem like a lark. No, the prospect of Volker redux would be too terrifying. They'll attempt to inflate our way out. They already are. What I find mystifying is precious metals remaining lackluster -- still. , what exactly does it mean to say "inflate our way out?" I would like to understand that a bit. As I understand it you need to think about inflation in reverse when talking about government debt. Inflation runs up the cost of goods and services. It also runs up the tax base and government revenues. If someone earned $1 in 1970 and wages kept up with inflation then he is paying taxes on $2.12 in 1980. His purchasing power did not increase but his taxes did. If property values kept up with inflation then property taxes would have gone up 112% as well. No increase in tax rates was needed. Inflation did that on its own. Working backwards the government's 1970 debt is only worth 47 cents in 1980 dollars. Basically inflation cut the value of the 1970 debt in half.
High inflation artificially increases GDP and reduces our national debt as a percentage of GDP. Inflation can make the debt incurred in 1970 seem like it is half as important in 1980. Inflation hurts the poor and harms our economy but it makes government debt look good.
Banks know this. That is why mortgage rates skyrocket when there is double-digit inflation.
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Post by uncleharley on Dec 11, 2021 21:10:59 GMT
"High inflation artificially increases GDP and reduces our national debt as a percentage of GDP. Inflation can make the debt incurred in 1970 seem like it is half as important in 1980. Inflation hurts the poor and harms our economy but it makes government debt look good."
Bingo!!! I would add that leveraging a business, investment, or lifestyle is a way of keeping ahead of inflation.
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