Inflation

[Country Lad]

February 2022 = $39.11

That's a long way from the $1.80/Gj in a gas supply agreement contract I was involved in. Mind you, that was 2002 when coal seam gas was in its infancy.

 

[over9k]

The one thing I'll add is that transporting gas is very, very, very difficult (expensive) so I suspect that will provide some kind of cushion to domestic prices.

 

[over9k]

On the topic of energy:

Just before the vaccines were announced to now. Not a single trade, not a single swing play, nothing:

 

[over9k]

It's been well & truly risk-on in response to the news, with crypto in particular running HARD:



So I'm hoping that these two join back together at some point:



As you can see there was a beautiful correlation up until the new year, I'd bet on yields rising and then it busted correlation

 

[over9k]

It's been well & truly risk-on in response to the news, with crypto in particular running HARD:

View attachment 137058

So I'm hoping that these two join back together at some point:

View attachment 137057

As you can see there was a beautiful correlation up until the new year, I'd bet on yields rising and then it busted correlation

Ok so I might have been absolutely raging about this for the last month after I dumped 6 figures into it only to see it not only bust correlation but actually move in the opposite direction to the 10 year but shhhh don't tell anyone

 

[Value Collector]

That's a long way from the $1.80/Gj in a gas supply agreement contract I was involved in. Mind you, that was 2002 when coal seam gas was in its infancy.

I remember when Queensland gas was proving up so much gas that they literally could not sell it all because the domestic market couldn’t absorb it, so they started building their own gas fired power stations to convert it to electricity just so they could sell it.

They also were part of the JV that built one of the first LNG facilities.

 

[over9k]

 

[Knobby22]

A small amount of inflation supported by growth as appears to be occurring in Australia, and if it translates to wage rises can only be a good thing long term.
Retired people reliant on interest are winners, people with loans getting more cash.

In Europe negative interest rates ending with all the damage related to this, is another good thing.

I know in the US wage rises probably won't occur so harder for them.

 

[Value Collector]

Retired people reliant on interest are winners, people with loans getting more cash.

Not really, inflation and taxes is always likely to cause their principle to take a bigger hit than the interest they receive can offset anyone with investments in fixed dollar amounts should not see inflation as their friend.

The people with the least concern of inflation are the ones with investments where the revenue rises with inflation, and the capital value of the assets goes up with inflation.

even then the capital value increase will cause a tax hit, due to the capital gains tax taxing the rise in value caused by inflation, but atleast that is discounted by 50% if it’s a long term investment, which makes it much better than a cash investment threat stays the same.

 

[Knobby22]

Not really, inflation and taxes is always likely to cause their principle to take a bigger hit than the interest they receive can offset anyone with investments in fixed dollar amounts should not see inflation as their friend.

The people with the least concern of inflation are the ones with investments where the revenue rises with inflation, and the capital value of the assets goes up with inflation.

even then the capital value increase will cause a tax hit, due to the capital gains tax taxing the rise in value caused by inflation, but atleast that is discounted by 50% if it’s a long term investment, which makes it much better than a cash investment threat stays the same.

There are a lot of pensioners who may get .5% on their money who may soon get 1%. I know they are financially illiterate but it will make a big difference to them.

 

[sptrawler]

There are a lot of pensioners who may get .5% on their money who may soon get 1%. I know they are financially illiterate but it will make a big difference to them.

You are spot on Knobby, my MIL has always had a term deposit, when the FIL died she asked me for a bit of guidance. I suggested she pull out her $100,000 term deposit in CBA and buy 10,000 CBA shares, well she still has her CBA term deposit many years later.

 

[Value Collector]

There are a lot of pensioners who may get .5% on their money who may soon get 1%. I know they are financially illiterate but it will make a big difference to them.

If inflation rises 1% from 3% to 4%, the buying power of their capital base is reduced by far more than the additional 0.5% of income they will receive.

Especially when that additional 0.5% of income is taxed.

of course they will feel good, because the income numbers will be higher than last year, but over all they are worse off, their $100K or what ever amount now has far less purchasing power, and the additional income didn’t come close to offsetting it’s erosion.

 

[Knobby22]

If inflation rises 1% from 3% to 4%, the buying power of their capital base is reduced by far more than the additional 0.5% of income they will receive.

Especially when that additional 0.5% of income is taxed.

of course they will feel good, because the income numbers will be higher than last year, but over all they are worse off, their $100K or what ever amount now has far less purchasing power, and the additional income didn’t come close to offsetting it’s erosion.

However they are on a pension which rises with inflation and they are psychologically incapable of spending their capital.

 

[sptrawler]

However they are on a pension which rises with inflation and they are psychologically incapable of spending their capital.

Again you are spot on Knobby, referring back to the MIL, she qualified for the age pension years ago, but she refuses to apply and now she is 89 years old I don't think she will.
She would rather live on bread and jam than apply for the pension, some people are like that, she manages on $700/fortnight super from the FIL old Gov super and the term deposit.

 

[qldfrog]

Again you are spot on Knobby, referring back to the MIL, she qualified for the age pension years ago, but she refuses to apply and now she is 89 years old I don't think she will.
She would rather live on bread and jam than apply for the pension, some people are like that, she manages on $700/fortnight super from the FIL old Gov super and the term deposit.

Do not expect this attitude to grow...
Australians in general are becoming a bunch of entitled spoiled brats: media and education to blame as the cause more than governments imho.but honestly, while i might have had that grand attitude 10y ago, i will not now and will suck back any dollar i am " entitled" to.
Covid handling and reactions has been enlightening.

 

[Value Collector]

However they are on a pension which rises with inflation and they are psychologically incapable of spending their capital.

I guess if they are never going to spend their capital, and intend to die with it, then a system higher inflation and interest rates might be good for them because they are technically eating their capital without knowing it, because they are spending the interest which is intended to offset the principle loss.

However, it is not an ideal situation to be in, no one should really be planing to die with money on the table, and you would be better to own assets that have a good chances of being hedges against inflation.

————————
dying with capital left in term deposits on the table is pretty silly for the following reasons.

1, by avoiding spending it you might be missing out on living your best life, and if you really don’t care about it’s capital value, would be better holding it in higher income thing like a share market index and earning 5% franked dividends, because you don’t care about is capital value the market ups and downs shouldn’t bother you

2, if you are leaving it there because you want your kids to inherit it, you are letting your kids inheritance erode in value, while also missing the chance to give them money that might be more valuable earlier in their life, eg giving them money when they are in their 60’s when you die at 90 is not going to help them as much.

3, if it’s insurance for something in the future, inflation eating the capital value might actually mean on the day you need it, the capital value no longer covers what you need.

 

[over9k]

 

[JohnDe]

If you have time -

Inflation, Interest Rates, Retail Sales, Crypto​

ARK CEO/CIO, Cathie Wood, weighs in on the workweek drop, the 90s vs. today, inflation, interest rates, and more. As always, she also discusses fiscal policy, monetary policy, the economy, market signals, economic indicators, and innovation.​

 

[divs4ever]

However they are on a pension which rises with inflation and they are psychologically incapable of spending their capital.

unless things have changed since mum was on a pension ( there was OFFICIALLY inflation back then ) , those increases are based on CPI which is late and less than the increases on the cost rises currently ... a bit like chasing the bread vendor for crumbs

the indexation of Pension rises would be bad enough just being 3 to 6 months after the price rises , but the CPI is only a parody of ordinary living cost increases

and who can blame them for being cautious , the weather bureau can't predict the weather regularly 7 days in advance ( with a super computer ) expecting a pensioner to forecast the day they die ( without resorting to suicide ) is a bit much

 

[Knobby22]

If you have time -

Inflation, Interest Rates, Retail Sales, Crypto​

ARK CEO/CIO, Cathie Wood, weighs in on the workweek drop, the 90s vs. today, inflation, interest rates, and more. As always, she also discusses fiscal policy, monetary policy, the economy, market signals, economic indicators, and innovation.​

She is excellent, long watch though.
0.5% rise in interest rates, oil price is should be thought of as a tax, economy is weak so inflation will end quickly. Retail will fall. This was my thinking, so good to see a professional thinking this (but with better analysis). I just don't believe these inflation pundits. And as a result we will see a big boom is share prices later this year in certain fields.