Monday, November 8, 2010

Are you worried about inflation?

 

One of the benefits of being 63 years old is that I have lived through not just inflation, but hyper inflation and I lived to tell about it.

My husband continues to convince me that as much of a thief inflation is, "they" know to kill it. And, he tells me that he put bought an 18 month C.D. (FDIC insured certificate of deposit) that paid 20% in 1981. He still wishes he put all his money in that C.D.

Income investors, would you not like that kind of income.

Scared of inflation? We income investors are already experiencing the inflation not measured by the CPI (consumer price index). My sewer, water and utility bills are up. Ground chuck was $1.99 a pound just 6 months ago and now it's $3.29 a pound. All home maintenance costs are up. This is inflation but we are not getting the commensurate increase in our fixed income investments. Social security recipient have not enjoyed an increase for 2 years but their home owner's fees increased.

I am looking for what I hope is a short term opportunity to put a bunch of my money into laddered certificates of deposit and pray that my husband is right and "they" know how to kill it.

If you are interested in pursuing the intellectual pursuit of determining for yourself a bout of hyperinflation can be controlled, study Paul Volker's leadership of The Federal Reserve in the from 1979 to 1987.

You can devote a lot of time to learning about this subject or you can hope history repeats itself. Stock prices were very volatile during that period of time but my money and I are here to tell you about it. You know what I mean. During that time frame I bought my first house and sold my first house. We had the crash of 1987 and we were emerging from the bear market of the mid 70's.

Go ahead and worry. But your more important move as an income investor is to seize the opportunities the income market gives you. Someday, you will be able to buy debt cheap but right now it is expensive and you still have to invest in dividend machines while you wait for the inflation opportunity and hope "they" can kill it again.

Very Truly Yours,

TheMoneyMadam