Published Thu, 06 Dec 2018 12:59:46 -0500 on Seeking Alpha
Just when you think inflation will work in your favor, the yield curve threatens to invert.
Inflation exists for ordinary investors despite low interest rates. Low yields push income investors into higher risk investments. An inverted yield curve is negative for banks and insurers but positive for stocks with solid debt management. Conventional wisdom suggests inflation is a hidden tax because it erodes your purchasing power. In this case, conventional wisdom is accurate. For instance, according to the official U.S. inflation calculator site, a $5,000 bond purchased at par 20 years ago in 1998 would cost more than $7,700 to buy today.
The Federal Reserve is in charge of regulating bank lending rates. Theirs is a dual mandate to maintain a reasonable level of inflation and employment and in so doing, they use many metrics to determine if inflation exists. Some of their measures include food and energy, some do not. Some measure wholesale prices and some measure consumer prices.
Inflation Exists For Ordinary Investors Despite Low Interest Rates
I measure my family's personal expenses and through nearly three 20-year cycles, I know that my expenses double every 20 years. That computes to about a 3% annual inflation rate. Yet during these nearly 3 decades, interest rates on a government insured certificate of deposit have ranged from .5% to more than 20%. A brief history of CD rates can be seen here.
Cost of goods, cost of wages as well as cost of money... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|VANGUARD EXTENDED DURATION TREASURY ETF||115.63||0.0||0.00||0.00||2.87|
|SPDR BARCLAYS CAPITAL 1-3 MONTH T-BILL ETF|
Older articles featuring Vanguard Extended Duration Treasury Etf (EDV):Misreading The Signs: Is Yield-Curve Inversion A False Alarm?
The Inverted Yield Curve: Why It Will Not Lead To A Recession This Time
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When A Yield Curve Inversion Means Recession