I'm reading more and more economists warning stagflation is on the way. I was a kid in the late 70s / early 80s - I remember the long gas lines, relatively bare shelves, sky high interest rates (as a kid, getting double digit interest on a savings account was the bomb - or so I thought), and rapidly rising prices.

What's your play to offset the effects of stagflation if it happens? I'm not too far from retirement - 10 years or less...

Have to appreciate the direction the country is heading right now, without political comment of course.

lb3 said:

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If 12% CDs ever come back, that's where I'm putting my money and praying Reagan and Volcker come back before they mature.

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Careful with that. Those banks could fail when rates come back down.

YouBet said:

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I was going to say if you have a low interest, fixed rate mortgage then do not move and stick with that, if at all possible.

And cut as much cost as you can from your budget.

About all I got.

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So let's say I have the cash to pay that fixed rate mortgage off. Where would you suggest putting that cash to work instead?

YouBet said:

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I was going to say if you have a low interest, fixed rate mortgage then do not move and stick with that, if at all possible.

And cut as much cost as you can from your budget.

About all I got.

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I was contemplating this with my 15 yr 2% mortgage refinance from last summer. Total interest is only
like 40K.

If I put down 130K as an additional principle only payment I save 30K in interest and will realize it in 6 years when thr regular payments end

dmart90 said:

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YouBet said:

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I was going to say if you have a low interest, fixed rate mortgage then do not move and stick with that, if at all possible.

And cut as much cost as you can from your budget.

About all I got.

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So let's say I have the cash to pay that fixed rate mortgage off. Where would you suggest putting that cash to work instead?

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Since you have <10 years left, I would run scenarios on paying it off now and the cash flow increase that immediately creates (and subsequent use of that cash) vs investing that lumps sum into the market somehow. There is always the option of doing nothing and just holding the cash but all kinds of people will poo poo that idea.

Really tough call because we have no idea what the future holds but most are betting at this point that the next few years are going to be rough. The world is entering a new, chaotic phase and the markets are going to be volatile as hell in the short term and then likely leveling out to significantly lower rates of growth than we've seen for the past decade+.

Thus, will you be better off with that immediate cash flow from paying off loan vs a potential paltry growth % on the lump sum of money you put into market? No clue. But, again, I would just run some scenarios so you at least have context of what each bet potentially pays. And what is the downside risk of each.

Could always hedge and put half that cash towards mortgage and knock your mortgage way down and put the other half in the market.

1. Divide your cash into 1/8 portions.
2. Pick the three best stocks, with the best balance sheets, with exposure to cloud growth. Two of the three are MSFT and GOOGL.
3. Buy in once a quarter to average in.

Once this correction finishes, those stocks will dominate.

dmart90 said:

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I'm reading more and more economists warning stagflation is on the way. I was a kid in the late 70s / early 80s - I remember the long gas lines, relatively bare shelves, sky high interest rates (as a kid, getting double digit interest on a savings account was the bomb - or so I thought), and rapidly rising prices.

What's your play to offset the effects of stagflation if it happens? I'm not too far from retirement - 10 years or less...

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how old are you?

YouBet said:

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I was going to say if you have a low interest, fixed rate mortgage then do not move and stick with that, if at all possible.

And cut as much cost as you can from your budget.

About all I got.

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good advice

definitely be owning real estate now- and lots and lots of dividend stocks. and bitcoin, and lots of oil companies.

Bonfire1996 said:

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1. Divide your cash into 1/8 portions.
2. Pick the three best stocks, with the best balance sheets, with exposure to cloud growth. Two of the three are MSFT and GOOGL.
3. Buy in once a quarter to average in.

Once this correction finishes, those stocks will dominate.

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I disagree with one part of this- how much of GOOGLE is based on ad revenue?!

already companies are cutting their ad spending- what happens when there is a recession and the first thing to be cut are ad campaigns?

LMCane said:

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dmart90 said:

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I'm reading more and more economists warning stagflation is on the way. I was a kid in the late 70s / early 80s - I remember the long gas lines, relatively bare shelves, sky high interest rates (as a kid, getting double digit interest on a savings account was the bomb - or so I thought), and rapidly rising prices.

What's your play to offset the effects of stagflation if it happens? I'm not too far from retirement - 10 years or less...

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how old are you?

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55

I would build a portfolio of dividend king stocks (and reinvest the dividends subject to your tax bracket) with the goal of a 4-5% yield. The underlying stock price may fluctuate wildly over time but astute decision making on what and when to purchase these stocks should set you up nicely for consistent income when you hit retirement.

dmart90 said:

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YouBet said:

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I was going to say if you have a low interest, fixed rate mortgage then do not move and stick with that, if at all possible.

And cut as much cost as you can from your budget.

About all I got.

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So let's say I have the cash to pay that fixed rate mortgage off. Where would you suggest putting that cash to work instead?

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Easy. There is one calculation for that scenario. You did not indicate your fixed rate, so I'll just use 4%. You find the investment you feel safe with. If the investment choice yields more than 4% put your money there. You do not pay off your mortgage. Paying off your mortgage in this example means you received a 4% return on your money. I'm thinking you can find better investments yielding better returns than paying off a mortgage. I-bonds at 9+% would be a good place for $20,000 of your cash. You didn't say how much cash you had, so I-Bonds would be one place to start for securing some of your money.

Farmer @ Johnsongrass, TX said:

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dmart90 said:

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YouBet said:

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I was going to say if you have a low interest, fixed rate mortgage then do not move and stick with that, if at all possible.

And cut as much cost as you can from your budget.

About all I got.

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So let's say I have the cash to pay that fixed rate mortgage off. Where would you suggest putting that cash to work instead?

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Easy. There is one calculation for that scenario. You did not indicate your fixed rate, so I'll just use 4%. You find the investment you feel safe with. If the investment choice yields more than 4% put your money there. You do not pay off your mortgage. Paying off your mortgage in this example means you received a 4% return on your money. I'm thinking you can find better investments yielding better returns than paying off a mortgage. I-bonds at 9+% would be a good place for $20,000 of your cash. You didn't say how much cash you had, so I-Bonds would be one place to start for securing some of your money.

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But it's borrowed money year over year at 4%

Seems to me you have to consider how much you will pay over the remainder if the loan as I mentioned above which is a lot more than 4% unless it's just 1 year remaining

By paying it off early you bring the realization in by however many years

If I paid 165K in 1 principle payment on my 2% mortgage I would save in interest 37K, or 22.4% of 165K and still owe for 4 more years of regular payments before it's realized.

22.4%/4= 5.6%

Does that matter though? You wouldn't invest in something for only one year and then take it out, so just like the mortgage interest would be reduced year over year, so would the value of your alternative investment grow year over year.

I may be misunderstanding though.

The recession will hit in the first half of 2023 and the Dow is headed lower:
CNBC CFO survey

PUBLISHED THU, JUN 9 20228:23 AM EDTUPDATED 59 MIN AGO


KEY POINTS

• Amid high inflation that has become the No. 1 business risk, not a single chief financial officer surveyed by CNBC thinks a recession can be avoided.
• The macroeconomic view of CFOs informs a bearish stock market outlook, with most expecting the Dow Jones Industrial Average to fall to 30,000 before reaching a new high, which would represent a decline of 18% from its current level.
• The CNBC CFO Council Survey is a sample of views from the C-suite at top corporations and organizations, with this quarter's survey including responses from 22 CFOs.

JDCAG (NOT Colin) said:

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Does that matter though? You wouldn't invest in something for only one year and then take it out, so just like the mortgage interest would be reduced year over year, so would the value of your alternative investment grow year over year.

I may be misunderstanding though.

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But how much you pay down compresses the time scale for the realization it seems to me


Say instead I pay down my entire remaining mortgage tomorrow.


I will save in interest not paid 40K ovee the next 14 years immediately. It seems to me the rate of return would be 40K out of the 244K I owe, or 16%.

Then I immediately move my mortgage payment over into a brokerage account and average in $2650 a month for the next 14 years.

I'm not sure you "realize" it instantly. You realize it over the next several years that you aren't paying it. If you pay off your mortgage today and somebody else doesn't, you don't come out tomorrow with $40k more than them. You accumulate $40k more than them as they take the interest payment hit each month and you don't.

I'm not a finance guy, so perhaps some people would say you do realize it, but to me, I'm thinking if you and your neighbor each have the same spare cash and the same mortgage, and you pay yours off tomorrow....there isn't magically $40k more in your account than your neighbors...that would only be the case after the entire timeline has played out and they have paid that interest and you haven't (which of course leaves out any discussion of what they could do with the lump sum you have today)

JDCAG (NOT Colin) said:

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I'm not sure you "realize" it instantly. You realize it over the next several years that you aren't paying it. If you pay off your mortgage today and somebody else doesn't, you don't come out tomorrow with $40k more than them. You accumulate $40k more than them as they take the interest payment hit each month and you don't.

I'm not a finance guy, so perhaps some people would say you do realize it, but to me, I'm thinking if you and your neighbor each have the same spare cash and the same mortgage, and you pay yours off tomorrow....there isn't magically $40k more in your account than your neighbors...that would only be the case after the entire timeline has played out and they have paid that interest and you haven't (which of course leaves out any discussion of what they could do with the lump sum you have today)

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Agreed, the realization is really over the coming 14 years though it ends up being that 40K. I thought perhaps de-escalate the dollars by 2% a year standard inflation so maybe it's more like 30K savings in buying power


I would agree in normal circumstances you just invest the money. But if we're looking at a recession or trending sideways for some time......that's why I'm thinking this.



Perhaps just split the difference, half on house and half whenever you think the bottom is in

There is also a level of comfort knowing the house is paid in case of a recession. I've been part of 2 company lay-off/closures.

Yeah, it's a tough environment to know for sure. The "just do the math" arguments are much harder when you really have no idea what things will look like several years from now.

dmart90 said:

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I'm reading more and more economists warning stagflation is on the way. I was a kid in the late 70s / early 80s - I remember the long gas lines, relatively bare shelves, sky high interest rates (as a kid, getting double digit interest on a savings account was the bomb - or so I thought), and rapidly rising prices.

What's your play to offset the effects of stagflation if it happens? I'm not too far from retirement - 10 years or less...

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You got the inflation part of Stagflation right, but Stagflation does not mean empty shelves. Quite the opposite. The stag part of Stagflation means a stagnant economy. Therefore, a slowdown in buying, so stockpiles actually pile up. Normally, increasing stockpiles mean lowering prices to more products as part of the supply and demand equalization process. That's what makes Stagflation unusual. Why are prices rising when the economy is sluggish? I can't answer that. But if true, you should be concerned about losing your job. If you are confident you will not lose your job, then just proceed how you would in an inflationary market, and ignore the stag part.

However, I've read about surging company stock buybacks and increased C level stock purchases, which would indicate a strong corporate sentiment not consistent with a stagnant economy or recession.

Who really knows?

Inflation rose 8.6% in May, highest since 1981

@JEFFCOXCNBCCOM

Inflation accelerated further in May, with prices rising 8.6% from a year ago for the fastest increase since 1981, the Bureau of Labor Statistics reported Friday.

The consumer price index, a wide-ranging measure of goods and services prices, increased even more than the 8.3% Dow Jones estimate.

Excluding volatile food and energy prices, so-called core CPI was up 6%, slightly higher than the 5.9% estimate.


On a monthly basis, headline CPI was up 1% while core rose 0.6%, compared to respective estimates of 0.7% and 0.5%.

I would buy more bitcoin. Especially at $22k and continue if it heads lower.

Yes. Exponential growth is coming. This is not investment advice. This is just what I would do in that type of stagflation environment. (For the record, i think the fear of stagflation is overblown. Easy to live in doom and gloom when the market is down.)

LMCane said:

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AggieMainland said:

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Yes. Exponential growth is coming. This is not investment advice. This is just what I would do in that type of stagflation environment. (For the record, i think the fear of stagflation is overblown. Easy to live in doom and gloom when the market is down.)

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Stagflation risk is overblown?!

what do you think has been happening the last two months?

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Yep. Employment market is softening due to uncertainty. Inflation can't be denied. With another quarter of negative GDP growth likely, that equals stagflation. Period. That's the definition of the word.