{"id":347684,"date":"2021-10-02T23:09:00","date_gmt":"2021-10-02T20:09:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/brett-arendss-roi-my-ridiculously-simple-inflation-hedge\/"},"modified":"2021-10-02T23:09:00","modified_gmt":"2021-10-02T20:09:00","slug":"brett-arendss-roi-my-ridiculously-simple-inflation-hedge","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-my-ridiculously-simple-inflation-hedge\/","title":{"rendered":"#Brett Arends&#039;s ROI: My ridiculously simple \u2018inflation hedge\u2019"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a33bdafbb838\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a33bdafbb838\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-my-ridiculously-simple-inflation-hedge\/#Brett_Arends\" >Brett Arends<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Brett Arends&#039;s ROI: My ridiculously simple \u2018inflation hedge\u2019<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\">\n<\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\" role=\"region\" aria-label=\"article body\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000424548\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000424548\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       Well, I just went out and spent a ton of money on nonperishable food items. Not because I\u2019m especially hungry, but because right now it\u2019s\u00a0a better\u00a0investment than keeping money in the bank.<\/p>\n<p> Financial planners tell you to keep \u201c3 to 6 months\u201d worth of expenses in cash in an emergency fund. I have other questions about that, but let\u2019s start with the assumption they\u2019re right.<\/p>\n<div class=\"paywall\">\n       The interest rate I\u2019m going to earn on money I keep in the bank, either in a savings account or a certificate of deposit? About 0%.<\/p>\n<p>Food price inflation: 3%.<\/p>\n<p>In other words I am, of course, going backward.<\/p>\n<p>Bankrate tells me the highest rate I can get on a CD is 0.75%. And remember that interest is taxed, so realistically you\u2019re getting less \u2014 maybe a lot less.<\/p>\n<p>Meanwhile if your marginal income-tax rate is, say, 25%, prebuying food and saving yourself that 3% inflation is the equivalent of making about 4% on your savings before tax.<\/p>\n<p>If any bank anywhere was offering 4% on its CDs the front door would be crushed by the stampede. It would be like a 1930s bank run, only in reverse. They\u2019d have to pull down the steel shutters to keep people out.<\/p>\n<p>OK, so there is only so much food I can buy and store. And not that much food keeps indefinitely, either. How much rice, barley, oats, split peas and lentils am I going to eat?<\/p>\n<p>But of course I\u2019m not just prebuying food, but all sorts of other personal and household necessities as well.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>Sure, we\u2019re not talking vast sums of money. But this is at least one of the few low risk ways available to anyone to keep up with inflation. The government\u2019s own Treasury inflation-protected securities, or TIPS, don\u2019t even keep up with inflation\u2014which makes you wonder how they can still be called \u201cinflation protected securities.\u201d The <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/fred.stlouisfed.org\/series\/DFII5\" class=\"icon none\">5-year TIPS bond<\/a> actually guarantees that my money will buy 7% less when the bond comes due than it does today. Yet people are so desperate for inflation protection they will still buy them.<\/p>\n<p>As our chart above shows, the current situation is nothing new. So far this millennium, anyone keeping their money in the average 3-month CD, and paying around 20% marginal tax, has been falling behind food price inflation most of the time. Over the past 10 years the average loss of purchasing power has been about 1% a year.<\/p>\n<p>I have a broader problem with these emergency savings theories. I understand the psychological <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>eal of having 3-6 months\u2019 worth of expenses in checking or deposit accounts. But the actual cost is horrendous.<\/p>\n<p>Money in such accounts has been losing value, net of taxes and inflation, consistently for about two decades. And it\u2019s been a poor investment almost forever. The same financial planning industry that tells us to have up to half a year\u2019s expenses in cash also tells us that cash is a terrible long-term place to hold your money.\u00a0<\/p>\n<p>The \u201creal,\u201d inflation adjusted return on the S&amp;P 500<br \/>\n        SPY,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/209901640\/composite\" class=\"positive\">+1.19%<\/bg-quote><br \/>\n       has averaged about 5% or 6% a year for most of the past century. The equivalent yield on your cash is negative. And half a year\u2019s expenses would account for a large chunk of most people\u2019s savings. How is anyone going to save for retirement if they are keeping all that money where it is shrinking in value each year?<\/p>\n<p>If someone knows the answer to these questions, I am\u2014in the words of the late, great Ross Perot\u2014\u201call ears.\u201d <\/p>\n<p>Meanwhile, one thing I do know is that when I prebuy necessities like food I am at least guaranteed to keep up with inflation, after tax. <\/p>\n<p>Oh, and food has one great advantage over that other \u201cinflation hedge,\u201d gold.<br \/>\n        GC00,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210034565\/delayed\" class=\"positive\">+0.24%<\/bg-quote><br \/>\n       You can eat it.<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author mobile-scrim hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Brett Arends\",\"subhead\":\"The Wall Street Journal\",\"list\":[{\"type\":\"link\",\"icon\":\"bio\",\"url\":\"https:\/\/www.marketwatch.com\/topics\/journalists\/brett-arends\",\"text\":\"Biography\"},{\"type\":\"link\",\"icon\":\"twitter\",\"url\":\"https:\/\/twitter.com\/BrettArends\",\"text\":\"@BrettArends\"},{\"type\":\"link\",\"icon\":\"email\",\"url\":\"http:\/\/www.marketwatch.com\/news\/mailto:barends@marketwatch.com\",\"text\":\"barends@marketwatch.com\"}]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\" aria-label=\"links to  author page\"><span class=\"ez-toc-section\" id=\"Brett_Arends\"><\/span>Brett Arends<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-767A-6486F04AB155%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#Brett Arends&#039;s ROI: My ridiculously simple \u2018inflation hedge\u2019&#8221; Well, I just went out and spent a ton of money on nonperishable food items. Not because I\u2019m especially hungry, but because right now it\u2019s\u00a0a better\u00a0investment than keeping money in the bank. Financial planners tell you to keep \u201c3 to 6 months\u201d worth of expenses in cash&#8230;<\/p>\n","protected":false},"author":1,"featured_media":347685,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-347684","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/347684","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=347684"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/347684\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/347685"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=347684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=347684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=347684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}