[an]

[quote=flu]You guys are so behind in times (pun intended).

Why do you use toilet paper anymore??Just get washlet with a dryer….

I think costco has a cheaper made-in-china non-Toto versus too for like $300….

Since I don’t have a colon anymore, I get tired of wiping my ass with sandpaper all the time ….:(

No more dealing with toilet paper anymore (well, except for the guest bathroom)[/quote]
That can’t possible clean everything without any hand intervention.

[an]

I just finish a refi with Sheldon at 3.625% with ~$4k net credit. Which will pay for 80% of my property tax for the year. At the time that I locked, absolute mortgage was offering 3.625% with ~$4500 net credit. But I rather go with someone who get things done and I know personally. I did 4 loans with him now and have been happy every single time. I would highly recommend you guys check with him too.

Currently, on absolute mortgage, a 3.625% rate have a $6100 net credit and a 3.5% rate have a $2800 net credit. I’ll probably refi again when I can get 3.375% with a $4k credit. Hopefully that’ll be the end of this year. All these refi means I don’t have to pay property tax and insurance for the last couple of years, all the while, getting lower rates than I did before.

[an]

AFCU fees are quite low and their rates are quite good. Too bad I can’t become a member.

[an]

livinincali, I have to admit that my crystal ball is much more murkier than yours. So, I’m ready to change my investment if I see we’re clearly heading on one direction or another. My response to flu was that, if we see higher inflation, I can reach my goal of early retirement faster and easier. If we see long period of deflation, then I’m not as optimistic of an early retirement.

I don’t intend to fight the fed and the government. They’re doing everything they can to inflate the next bubble. I will just ride the wave.

[an]

I think the type of food you eat/cook makes a huge difference. Here are some examples:
Pho:
– Whole chicken (~1-5, depending on if you buy on sale or not)
– Veggies ($2-5)
– Noodle ($2)
So, for $12, you can easily feed 4-8 people, depending on how much chicken you eat.

Spring roll:
– 1 lb of sliced pork ($3-4)
– 1 lb of shrimp (~$4)
– Veggies ($2-5)
– Noodle ($2)
For $11-15, you can easily feed 6-8 people.

Or you can go for less fancy meals and get make stir fry beef + soup & rice:
– 1 lb of beef $3-5
– Veggies for soup ($2)
– Rice ($1)
For $6-8, you can easily feed 8-10 people, depending on your beef to rice consumption ratio.

This is might be why our food bill is much lower than yours. Although CAR’s is right that we don’t have 2 full grown kids. Our oldest is already eating almost as much as my wife. But this won’t affect the cost much, because as you can see above, the type of food we cook can feed a lot of people for very little money. It’s better and cheaper than your $1 burger + fries at McDonald. CAR, like I said, my aunt does an even better job than us, since she cooks 95% Asian food while we’re closer to 50%. She also only buy stuff that are on sale and freeze them for future usage. She grows most of the veggies they eat. She feeds two teenage boys and two teenage girls. So, her food consumption is A LOT higher than ours. But, just based on the food she cooks, I don’t think her food bill is nearly as high as ours, even with more people eating.

[an]

[quote=craptcha]
That’s awesome. We shop at Costco and spend $200+/month on fruit, milk and eggs for 5 of us.[/quote]
We don’t buy fruit from Costco. I find that a lot of times, Costco fruits are more expensive. If you look at the circular for the various supermarkets, you see the fruits they have on sale are cheaper than Costco and not all sales items are cheap. We also find Zion market veggies and fruit, a lot of time are cheaper too. Though not always. You just have to keep a mental note on what price is good for certain product and wait to see when a supermarket have it on sale at that price and you buy it. We tend to only buy non perishable stuff and frozen stuff from Costco. Eggs are often not the cheapest at Costco either. Costco eggs comes out to about $1.1/dozen. A lot of times, you can find eggs on sale for $0.99/dozen somewhere else.

[an]

[quote=CA renter]AN,

Don’t have time to address the details of your post just yet, but regarding food, that was for food and household/toiletry items like paper towels, shampoo, soaps, toilet paper, cleaning supplies, etc. These costs do not include eating out. We’re a family of five, and I can assure you that our costs actually run higher than this for these categories, as do all of our friends’ costs when we’ve talked about it.

You might want to closely track your expenses for a couple of months to see what you’re spending. If you can manage to spend under $1,000/month for food/toiletry/household items for a family of four, please let us know how you’re doing it. Seriously, this type of cost inflation is killing lots of families. It costs around $5 for a gallon of milk if it’s organic/without hormones![/quote]I don’t keep close eye on exactly what I spend on each item. However, I put everything on 1 credit card and my credit card monthly bill average ~$2k most of the time. I just look at the detail expense over the last couple of months and my grocery have been around $200-250, restaurant have been $100-200, toiletries, I buy in bulk from Costco when they have coupons and stock up in my garage. I go to Costco once a month and I spend around $100-150 there for both toiletries and food. So, on average, my food + household goods range between $400-600. Over the past year, I never spend more than $1k in food + household goods, even the month where I have family coming to visit and I have to feed 10+ people.

How we do it? I have to refer that question to my wife. She’s the COO of the family. She does a great job in buying stuff that’s on sale. Figure out what to cook with those items. Her meals area better than most restaurants out there (except for the 5 stars places). So we don’t go out much. It’s also very helpful with my aunt assisting us (i.e. telling us when and where the sales are). She’s able to feed a family of 6 on an income that’s probably 50-70% of ours AND they’re able to save. If I have to guess, her food + household goods expense is most likely be less than $400/month. Based on the type of food she cooks and how she buys her groceries. She grows most of her veggies, she buys meat when they’re on sale and freeze them.

[an]

[quote=livinincali]But nobody bought all of their assets at the absolute low. Most 401K investors have been buying every month or twice a month. They bought both at the highs, the lows, and everything in between. They’ve seen their portfolio go up and they’ve seen their portfolio go down. If you we’re to take all of your contributions over the years and compared it to the value of your portfolio now it would be highly unlikely that you’d be ahead by over 100%, unless you successfully timed the market or focused on a narrow set of investments.[/quote]I agree that no one bought all of their assets at the absolute low. But no one bought all of their assets at the absolute high of 2000 either. But that seems to be what you were insinuating with this statement:
[quote=livinincali]Look at the stock market bubble in 2000. If you invested in stocks back in 1980’s or 1990’s you were still way up after the crash but new investors to the market in 2000 going forward would be extremely lucky to be beating CPI over the years even now when we’re approaching the 2008 highs.[/quote]The only reason why I brought up 2001-2002 was to disprove your statement about buying in 2000. It wasn’t meant to say that we all sit in cash and wait for that bottom. If we can truly time the market, we wouldn’t be here today on this forum talking about timing the market.

[quote=livinincali]So over the past 12 years you’ve been up almost 40% and down almost 20%. As of right now it look pretty good but if you look at 2001 to 2011 your stock portfolio went up 20.45% yet CPI went from 174 to 226 or 29.8%. So those 10 years of diligent investing in a balanced portfolio left you 10% behind CPI. As of right now CPI is 31.6% so your stock portfolio has performed 7% better than CPI. Have you really successfully done well against inflation if you’re only up 7% versus CPI right now. You’ve barely won and it wouldn’t take much of a stock market correction to have you back in a losing position again.[/quote]Beating CPI during the 12 years where stock is basically flat and we saw one of the major stock market crash this side of the great depression is pretty impressive to me. Now, how would your number look if you extend it to 20 years instead of 12? Here’s a helpful link for you: http://www.moneychimp.com/features/market_cagr.htm
Based on their calculator, your inflation adjusted return for the S&P over the last 11 years is basically 0. However, if you extend that calculator back another 11 years to 1990, your annualized inflation adjusted return is 5.41%. If you extend that back another 10 years to 1980, your annualized inflation adjusted return would be 7.42%. So, the question is, will we see 20-30 more years of what we saw in the last 11 years, or will we see something like the 80s-90s?

Also, keep in mind that we might not buy stock in one lump sum, we are essentially doing just that with housing. If we bought at or near the bottom (I say we’ve been there for the last 4 years), lock in the bottom of interest rate, you’re sitting pretty. It’s not like you’re buying a new house every month, like you do with stocks.

[quote=livinincali]Our population is aging as well. Maybe we’re a little further back in the curve, but pretty much everyone agrees that the aging boomer population is the huge problem for Medicare and Social Security. Japan learned that it’s hard to grow when you have an aging population that needs to be supported and we’re going to have the same problems here if not yet, soon. It’s just a numbers game Japan might be 1.8 workers for every retiree, we might be 2.2 workers, but that a far cry from the 5 to 1 that we had just 10 years ago. [/quote]Although we have a lot of aging baby boomer, we also are having a lot of birth. 4 years ago, we had more birth in 2008 than any year during the baby boomer period. So, we do not have similar problem Japan has, which is, birth can’t keep pace with death and retirement. Which is why Japan is paying people to have kids. We also are much more friendlier to immigrations. What you’re seeing now might be bad, in term of workers vs retiree ratio, however, I don’t see it lasting. Since the babies who were born in 2008 will reach their working age in 14 years. That’s a huge population that will enter the work force in the near future, which will offset the retiring baby boomers.

[quote=livinincali]The bottom line is all exponential growth must come to an end at some point. Whether it’s bacteria in a petri dish, or decades of debt.[/quote]I’ll offset this with, the market with “The Market Can Stay Irrational Longer Than You Can Stay Solvent”. We have no idea when or how it will end, but a crash in 2000 & 2008 for stocks and 2005 for housing, changes their trajectory quite a bit.

[an]

[quote=CA renter]Also, while you’ve seen your wages go up in the past 10 years, I think you’re younger than most of us here. IIRC, you graduated from college around the time of the stock/internet bubble, which means you’re in the early stages of your career trajectory. Most of your gains in earnings will happen in the first 10-20 years of your career. While you may well see rising wages over time, most people tend to top out at a certain point, usually in their 40s or 50s.[/quote]You’re right, I’m younger than most on here. I would say my trajectory was higher in the first 5-7 years of my career. After that, it has definitely has been on a slower trajectory. However, even with the lower trajectory, my company have been giving raises that have been above the CPI number. The raises applies to company wide, so people who have 20-30 years experience still get similar raises (assuming they’re performing well). So, I don’t see my wage topping out, unless I’m stuck w/ a crappy company that doesn’t give raises. The moment I see that, there won’t be any problem with jumping ship. I’m getting bombarded by head hunters today. I don’t see that letting up in the near future. As long as my skill sets are up to date and I keep myself ahead of the curve, I don’t see myself having problem finding jobs in the next 10-20 years. Also, keep in mind that this debated started out with flu saying those of us in our 30s-40s who plan to retire early should watch out. I do intend to retire early, hopefully by the time I’m 50 give a take a few years, so even if you’re right that wages for those over 50 flat line, that wouldn’t matter much, since I would be retired by then (assuming things fall into place).

[an]

[quote=CA renter]Okay, let’s say we have 100% inflation over 10 years, and your income goes up only 50%. What if your healthcare costs go up 150% (they’ve been outpacing inflation for quite a while), food costs go up 90%, and energy costs go up 100%.

Let’s take a hypothetical wage earner who earns $6,000/month (make it net, just to keep it simple).

1. P&I is $2,000/month on a 30 yr FRM.

2. Healthcare costs are $1,000 for a family of four.

3. Gasoline, natural gas, electricity run around $600/month.

4. Groceries and household items cost around $1,000/month.

We’ll leave out the other costs just to keep it simple, as well; most of those will go up, too.

These costs add up to $4,600/month while your earnings are $6,000. These costs consume 76% of your earnings.

….

At the end of 10 years, the wage earner makes $9,000/month (unlikely, will go into this later).

1. P&I are $2,000/month.

2. Healthcare costs are $2,500/mo.

3. Energy costs are $1,200/mo.

4. Groceries and HH items are $1,900/mo.

These four items now cost $7,600.00 while your wages are $9,000/month. They consume 84% of your earnings.[/quote]
OK, lets use this example and your numbers. Today, this couple’s expense would take up 76% of your income and by your numbers, lets say with 150% health care inflation while wage is rising at 50%, which is absurdly off balance and I don’t think is sustainable, their % of income going to expense only went up by 8%. That show you how much of a boon it is to have a fixed rate mortgage. Imagine what those numbers would be if income rises at 2/3 of the rate of assets inflation, or even 3/4? We’re not even talking about income rising at the rate of CPI. I see a few things this couple can do to drastically change their financial numbers.
1) Energy cost. I say, if it goes up 100% over 10 years, it would make perfect sense to go solar and live close to work and get a bike. They would probably cut down the energy usage drastically from the $600/month they’re spending. BTW, $600 is kinda high. My cars are definitely not the fuel efficient type and I leave my AC on at 73 all day long. Yet, my total energy usage is around $500 during peak summer months and around $350 during the cooler months. Even with my usage numbers, it already make sense to go solar.

2) Food, again, this is kinda high. Maybe because I don’t eat out nearly as much as most people. But my food only takes up <$500/month for a family of 4. We buy organics when we can, so this is not skimping on quality at all. If your estimating $1k/month because you go out to eat a lot. Then maybe starting to cook fresh meals will not only reduce your food cost but make you more healthy as well. 3) The main key point, do you seriously think we'll have health care and other cost rising at 100-150% while income rising only at 50%? I call that a bubble. We all know what happens to bubble. I don't see those kind of inflation out pacing income as sustainable. Here are some data to back up point about assets inflation vs CPI. Food inflation: http://www.forecast-chart.com/inflation-food-price.html (2.7% over the last 20 years)
Energy: http://www.forecast-chart.com/inflation-usa-energy.html (5.1% over the last 20 years)
Medical care: http://www.forecast-chart.com/inflation-medical-care-cost.html (4.1% over the last 20 years)
So, food price basically track CPI numbers. Medical care is rising faster than inflation, but only by about 30-50%, not 300%. How much of this is attributed to true inflation and how much of this is attributed to better medicine/tests/etc. that keep people alive a lot longer. Also, how much of it is attributed to people just getting fatter everyday and needing more healthcare.
I concede that Energy have been rising almost 2x the cost of CPI. However, I don't see that happening much longer. If it continue in this trajectory, it would be a no brainer to go w/ solar and electric cars. Your average renter won't be able to take advantage of alternative energy, but as a home owner, you can totally do that.

[an]

[quote=livinincali]I tend to disagree with this statement. Look at the stock market bubble in 2000. If you invested in stocks back in 1980’s or 1990’s you were still way up after the crash but new investors to the market in 2000 going forward would be extremely lucky to be beating CPI over the years even now when we’re approaching the 2008 highs. I think housing will follow that same pattern (it did play out in Japan that way where housing prices and stock prices have drifted lower over the past 20-30 years after those bubbles popped). The next bubble will likely not show up in the previous bubble.

I personally think we’re already seeing the next bubble in Treasury bonds/total debt, but I don’t know when it will end and I don’t know how it will end. I see hyperinflation or a deflationary depression as the end game but depending on how it plays out there might be a way to take advantage. Of course it’s certainly possible that even if you win the government will confiscate the winnings in the name of fairness.[/quote]
Of course if you buy at peak, you’re screwed. Just like if you bought a house in 2005, on average, you’re still screwed today. However, like you said, if you bought stocks in the 80s and 90s, even after the .com crash, you’re still ahead. If you bought a house before 2001, you’re still ahead. Today is not 2005. So, if you bought today, you’re more likely to come out ahead than if you bought in 2005. You point out that if you bought in 2000, it’s unlikely for you to beat CPI over the last 12 years. But I say, if you bought in 2001, it’s very likely you’re coming out ahead of CPI over the last 11 years. Point is, it matters when you buy and at what price you bought it at.

Stocks didn’t drift lower over after the .com crash. It crashed, then “drift” higher, until 2008. Today, the NASDAQ is at a 12 years high. If you bought in January 2000, yes, you’re still under, but if you bought in 2001-2002, you’re probably up over 100% over 10-11 years. That’s not too shabby and I wouldn’t call that as drifting lower.

I see our housing behave similar to our stock market instead of like the Japanese housing market. Japan have problems we don’t have. Such as an aging population and low birth rate that can’t even keep up w/ the death rate. There are others, but because your demographics are different, it’s hard to draw a link.

What make you say the next bubble won’t show up in the previous bubble? There are only so many asset classes. If bubble doesn’t reoccur in past bubble assets, then wouldn’t we run out of asset classes to inflate and bubble would no longer exist?

Bring this back to my original response to flu’s:
[quote=flu](2) If you’re still mid-career in your 30-40ies and were planning an early retirement…Think twice.[/quote]
I’m stating this for myself, but inflation would make it easier for me to be ahead of the curve and retire early than if we see deflation.

[an]

[quote=CA renter]I think livinincali made the correct observation. The only way a person’s mortgage payment can become “peanuts” is when there is wage inflation that meets or beats cost inflation in other basic needs like food, energy, healthcare, etc.

Whether it’s you, the next buyer, or your renter, most people depend on wages for purchasing power. Without wage inflation, cost inflation takes away from most people’s purchasing power. The one kind of inflation that the Fed hates is wage inflation…that seems to be the only thing they’ll fight. In the absence of wage inflation, I would not count on higher rents unless you run a flop house where people can bunk up in each of the rooms.

Back in the 70s, there was significant wage inflation. Much of that was due to the relative strength of unions and the lack of cheap overseas competitors, etc. Those conditions don’t exist today.[/quote]
That makes no sense. Lets say your P&I = 10% of GI right now. Lets say we see 100% inflation over 10 years. Even if your income increase at 1/2 of the inflation rate, that still mean your income increased by 50% over 10 years. Your P&I is fixed, so your P&I will become only 2% of your GI. How is that not becoming “peanuts”. Unless you’re assuming there’s 0% wage increase when inflation runs at 100% over 10 years. I don’t see that happening.

BTW, if you assume there’s no wage inflation and high asset inflation, then everyone will be dirt poor. At that point, we all can just stop working and go on Welfare. If that happen, then essentially, I’ll be in early retirement anyways. Since there will be no reason for me to work. There’s also much bigger problem to worry about in the scenario.

Did wage inflation in the 70s keep pace with inflation or did it outpace inflation? I’m in an industry that have no unionization and there are plenty of cheap overseas competitors. Yet, my wage has been far outpacing inflation for the last decade. So, your statement about needing union and no cheap overseas competitors to have wage inflation is completely wrong.

BTW, you don’t see the government increasing the section 8 assistance to match inflation? Or at lease somewhat keeping pace with inflation? If they do, then why can’t I count on higher rents?

[an]

[quote=livinincali]How does inflating asset prices translate to inflating wages especially in our high unemployment globalized world. It’s certainly possible that the inflation shows up mostly in the commodities that we consume, leaving less for shelter. That’s always been the problem with the fed’s method. They can increase the money/credit supply but they can’t dictate where that inflation will show up. In the late 1990’s it showed up in the stock market in the mid 2000’s it showed up in housing. In order to win the fed’s money printing game you need to be invested in the next bubble and get out before it pops.[/quote]
I didn’t say anything about inflating wages in my post. But, since you brought it up, my wage have been inflating well above inflation number for the last 10+ years. So, even if I stop seeing wages increasing at faster than inflation and start seeing it increasing slower than inflation, it wouldn’t change my statement. If you noticed, I said I have a fixed rate mortgage. If my wage increase at 1/2 of the inflation rate and inflation is high, I still would be better off, since my shelter cost would decrease as a percentage of my total income every year that we see high inflation. However, I don’t see wages in my profession going down in the near term. I’m being bombarded by head hunters all the time and it’s has been increasing in frequency lately. It’s no longer small start up in the bay, but the big boys are ramping up too.

Also, you pointed out that in order to win the fed’s money printing game, I’d need to invest in the next bubble. I totally agree. Housing is one of those assets that will take full advantage of inflation. Even after this crash, many places are still higher than where they were in the mid 90s, much less 80s.

[an]

[quote=flu](2) If you’re still mid-career in your 30-40ies and were planning an early retirement…Think twice.[/quote]
I’m one of those 30-40s who are planning an early retirement. If anything, this move by the fed to inflate asset prices will help me get to my goals easier. It would have been much harder if we’re in a long deflation period. If we see another bout of inflation like the 70s and 80s, my mortgage will look like peanuts, just like those who bought in the 70s or 80s. It will almost be like getting my house almost for free. Not to mention, if you have rentals with fixed rate, your PITI will stay fixed and when rent rises to match inflation, your ROI will be much more sweeter.

[an]

I’m sticking w/ Amazon as well. Prime rocks. A lot of time, the product already comes next day. I also use the online streaming, so, I look at it as either free streaming or free 2-days shipping, since the cost of Prime is cheaper than the cost of Netflix.

[Author]

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