Economic Truth vs Fallacy: Explaining the Discrepancy between Reduced Inflation and Unchanged Prices
In the turbulent financial landscape of 2022, inflation spiked to a staggering 9.1%, causing prices for various goods and services to rise significantly. This marked a departure from the gradual price increases of the past decade, making it challenging for many consumers (Myth 13).
Despite the U.S.'s efforts to reduce reliance on foreign oil, it still imports a substantial portion of its supply. The U.S. imports most of its oil from neighbouring countries Canada and Mexico, with Saudi Arabia being the third-largest source, contributing roughly 7.7% of the annual imported total. Notably, the U.S. is also the world's largest exporter of liquified natural gas (LNG).
In 2024, the U.S. produced more crude oil than any other country but still imports part of its annual supply due to the type of crude oil it produces not always being compatible with U.S. refineries.
When it comes to estate planning, it's crucial for investors to understand how each asset they own will pass to heirs when they die. Assets requiring a beneficiary designation include life insurance policies, annuities, traditional and Roth IRAs, SEP and SIMPLE plans, 401(k) plans, 403(b) plans, 457 plans, and other retirement or pension plans. Myth 12 states that not all assets are distributed according to the statutory will, many assets pass according to beneficiary designations, right of survivorship, or terms of a trust.
Real estate may not always keep up with compound annual growth rates of stocks and private equity investments. However, owning an appreciating asset that also provides shelter and security for one's family is a valid consideration when investing in real estate.
The S&P 500 Index experienced an 18.1% loss, and the Bloomberg US Aggregate Bond Index lost 13.0% in the 2022 calendar year. Diversification of investments, including real estate, with stocks, both public and private, can be a solid, productive, and responsible investment strategy for many families.
Contrary to popular belief, Myth 11, adding bonds to a stock-oriented portfolio does not always protect against market sell-offs, as stocks and bonds can move in the same direction. Economists and market watchers believe the higher-rate, higher-inflation regime we're currently in may produce more periods of positive correlation between stocks and bonds.
Many types of irrevocable trusts are used in estate planning and provide their own distribution instructions for assets owned by the trust. Revocable living trusts (RLTs) are used to keep assets from going through probate and distribute them according to the terms of the trust when the trustee passes away.
By the end of 2023, many consumers were still facing higher prices for items they purchase regularly, despite the inflation spike receding to around 3%. It's important to note that the inflation rate refers to the rate of change of prices, not the absolute level of prices themselves.
In summary, understanding the nuances of inflation, estate planning, and investment strategies is crucial for navigating the complex financial landscape. Stay informed, stay diligent, and always consider seeking advice from a financial professional.
Venture capital firms might see opportunities in innovative businesses that aim to mitigate the impact of inflation on personal-finance, offering solutions for financial management and efficiency.
Individuals who have invested in the crypto market, such as Initial Coin Offerings (ICO), might need to reconsider their investment strategies due to the volatile market conditions and the increased interest rates, which might affect the yields.
Applying knowledge of estate planning to real-estate investments can help in securing a long-term strategy for passing down property to future generations while considering tax implications and the distribution of wealth, ensuring the growth and sustainability of one's personal finance and business wealth.
