Many contracts come up for negotiations in 2023. They will drive inflation as management will increase pricing of their products.
I suppose management might be praying for a recession to use as an excuse that wages cannot be raised at this time. But union members have already been exposed to rising inflation & realize inflation is likely to continue especially due to demographic issue.
And you though the RR contract negotiation was serious. Will congress/politicians again become involved in contract talks?
At least 150 large union contracts are set to expire next year, potentially heralding more worker unrest amid soaring inflation and rising corporate profits.
The lapsing agreements represent at least 1.6 million workers, more than the population of Philadelphia. Among those are the Detroit automakers with 150,000 workers among three companies, UPS with 256,000 workers, and SAG-AFTRA performers with 160,000 workers, according to data collected by Bloomberg Law on union contracts covering more than 1,000 workers.
Those figures are based on information available in mid-December, and are likely to rise as more contract expiration notices are filed with the federal mediation service.
Short term inflationary force and longer term growth opportunity. The growth pays taxes. The growth brings higher equity prices and greater profits. The growth brings higher yields on fixed income or at least shores up better yields in a low yield environment for seniors.
All of that contributes to more manufacturing and economies of scale a deflationary longer term force.
For years, I automatically added a 5% raise to my employees salary annually to adjust for inflation. At some point, some of them became expensive enough that they were replaced by equipment and others stopped getting the automatic bump as they were already paid well above “market”. There should also be a realization that “better yields” for seniors (at a bank) will never catch up with inflation - they just lose purchasing power more slowly than if they kept their money in their mattress.
The machines have been replacing us since 1880 but the unemployment rate is realistically to be considered low.
I am not actually pandering to people’s emotions saying interest rates for seniors. I am interested in the prosperity of the country. It is not a perfect world and never really a perfect time to get old.
I’ve explained any number of times that this is generally incorrect. They lose money FASTER as rates go up due to the effect of taxes. For the [very] few in a zero percent marginal tax bracket, perhaps not, but still probably yes due to the relationship between inflation and rates (rates lag inflation almost every time).
When interest rates were near zero, the tax effect was minimal, and I was more or less satisfied, or let’s say resigned, with losing 1.5-2% a year due to inflation. But suddenly the interest paid has ballooned to very large sums. Now I get 4+% interest on most of it, but being in the 35% marginal tax bracket (last year, and probably also this year) means that I earn gross 4%, pay 1.4% in tax, net is 2.6%, and inflation eats 6.5% or so of it. That leaves me with about a 3.9% loss after inflation. That is more than twice as bad as previously during near-zero rates. And to add insult to injury, it causes all sorts of phaseouts and additional taxes on capital gains and dividends. So this whole bout of inflation and higher rates has really hurt people like me. It is also why I am always so puzzled by the jubilation among many I see over these 4% CDs (“rates”).
This is not a longer term view. Or at least the context is more important here.
The FED is normalizing rates and reducing inflation. The proof is a wait and see but the FED’s goal is clear.
The result will be a different environment with lower input and output costs especially in relative terms. Capital will be much more self sufficient. The entire supply side econ was marked by arguments that capital was not self sufficient. You are reiterating a lack of self sufficiency for capital. That wont be true.
In fact for 40 years 1981 to 2020 we had a capital policy. From here we have industrial policies.
Yes, seniors having money market accounts at 4%, or having 1-year CDs at 4.25% have nothing to do with the longer term. I assume that would be clear to all the readers of this post.
I understand that and you are correct.
But most of us are not in the 35% marginal tax bracket.
Even if you are filing single, that’s a pretty hefty income. Kind of the level where people don’t need to pay attention to inflation.
State taxes will make your situation even worse.
I put most of that stuff in my IRA where the taxes will be deferred to be managed upon use.
The principal is true in all brackets, mine was just an illustration (and next year I hope to be in the 24% bracket as per earlier discussions about it).
Here’s a more typical scenario that illustrates the problem just as well -
Now you get 4+% interest on it, but being in the 22% marginal tax bracket (easily with a medium pension plus social security plus a few modest dividends and some interest) means that you earn gross 4%, pay 0.88% of it in tax, net is 3.12%, and inflation eats 6.5% or so of it. That leaves you with about a 3.38% loss after inflation. Nearly twice as bad as recent years. And, yes, state taxes can only make it worse.
Mark’s analysis applies to us even though we are retired and in a lower tax bracket because the extra interest in savings and money markets threatens to push us into a higher tax bracket and Medicare threshold. Admittedly a first world problem.
I would do that as well, but through 2028, I have HUGE monthly expenses (on the order of $20-25k/month) due to a bunch of kids in graduate school/college, and it is prudent to keep at least 5 years of expenses in cash. After summer 2028, everything will settle back down to normal, and monthly expenses ought to be about $5k, maybe a little more once a year if there is a vacation or other unusual expense.
One thing about that plan. Some day, Buffett and Munger will die. Buffett is 92. Munger is 99. Remember what happened to Apple when Jobs was pushed out?
I do. I follow BRK and would like to buy some shares some day. It’s on my watch list. I’m waiting for a bigger picture flush across the market for better prices, but besides that, I may still not invest in BRK because of the age of the principals.
I would think that there will be a significant buying opportunity when we hear of sad news re: either one of them.
BRK is setting up an institutional behemoth. Meaning a major ownership in the top companies.
Warren is doing no magic stock picking these days.
He may even be placing BRK for the Gates Foundation. By placing I mean instead of stock picking creating a fortress of American and other industry that feeds global poverty concerns etc instead of doing any corporate business of its own.
If you are investing in BRK for a double of course it could be there but without a dividend as the guru would say, why?
The death of Buffett/Munger would probably only create a momentary opportunity. Recall Sculley, Spindler, Amelio, and the long rot? I am frankly surprised that the wheels have not come off again, since Jobs’ death in 2011. But what really new product has Apple introduced since then? Anything really different, like the ipod, or iphone were when they were new?
Apple introduced the Mac OS back in 1980 based on technology Jobs saw at XEROX PARC. Ever since Apple has made new gadgets based on that technology now known as macOS and iOS. Just new clothes for the eMPEROR.
The Captain
Mac user/developer/reseller since 1980
For the record, nobody nowhere no how has introduced a product as revolutionary since then, so it’s not as though Apple has been lapped around the track.
What they have done is firmed up a lock on their software(s) universe, including but not limited to the App Store, Apple TV, Cloud storage, subscriptions, movies, etc.
The Apple stickiness, once noted as a really good moat has become nuclear in force; almost nobody moves from an iPhone to an Android, with only a few exceptions. It seems that what Apple has not done is blow shareholders money on vain dreams that others have recommended: buying Netflix, buying Toyota, buying Comcast, or a host of other related - but completely different - businesses, instead returning earnings to shareholders through dividends and buybacks.
Disruptive technologies appear to be on the decline.
Despite exponential growth in recent decades of research papers and patents, a new University of Minnesota study published in Nature suggests science and technology are becoming less disruptive.
Carlson School of Management Associate Professor Russell Funk, doctoral student Michael Park and Professor Erin Leahey of the University of Arizona analyzed data from 45 million papers and 3.9 million patents across six decades for their research. They used a “disruptiveness score," which is based on the patterns of citations five years after publication, to assess the extent to which papers and patents push ideas toward new trajectories. They determined:
Papers and patents are less likely to be disruptive, or make previous findings obsolete and push science and technology in a new direction, such as the discovery of the DNA double helix structure.
Instead, papers and patents are more likely to be consolidating, or further developing previous work — e.g., the Kohn-Sham equation which improved upon existing equations about electron particles.
Scientists and inventors are increasingly using narrower slices of knowledge to develop their new work.
This pattern holds across all major fields of science, including technology, medicine and social sciences.
