Originally Posted by a64pilot
Shot in the dark, I'm hoping for 5%, will get, what I get.
Although I fail to understand what has been keeping inflation down, perhaps if I understood that, then I would understand better.
Depends on which 'risk free' (it is not risk free, it is just lowest available uncertainty/return ratio) you elect to buy.
If you buy now:
US GOVT 30Y = 2.2872%
US GOVT 10Y = 1.5731%
Inflation rate = 1%
So to say if you are buying
'risk free' then you are making between .57 and 1.28% p.a.
Now you sure know the problem with long term 'risk free' instruments is as inflation picks up, only buyers of new series get the margin. Very poor position, unless you are ready to shed the investment in no time and can do so at very minimal intermediary (brokerage etc.) costs. Unlikely the case of any cruiser except an ex banker.
On top of that I do not know the US tax code, so maybe the am .6 to 1.2% is actually less once tax (if any) on interest received is paid.
IMHO it does not matter WHAT has been keeping inflation this low. All we need to know is that it is low and so due to go up again one day. Then act accordingly.
BTW1 I bet at these rates the US Govt bonds pick up must be at its low.
BTW2 My wild guess is what initially got the inflation was the boom and gloom cycle of 2007/2012. However what keeps it down now is that the dollars so profusely printed by the Govt (also here in the EU) was given to the wrong people. If you want more inflation, you print and give to CONSUMERS not to the bankers. Helicopter money, child benefits, etc. Give to the ones who will walk out of the dole shop and buy cigarettes on the corner, not to those that will stash it under the mattress.
And just imagine what if. Imagine you bought US30Y back in 1996 (@ 7%) and you were lucky enough to make it till today. Pocket the 6%, buy a beer
to barnakiel. ;-) Maybe even get a new sail for that boat ...
Frankly. It looks that today one must accept some risks or else forget about good gains. Own a business or buy corporate bonds. The only benefit of the latter you do not need to spend 10 hours at a desk every day.
BTW3 I would buy a rent-out'able property and rent it out.