April 1, 2025 • 19 mins
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Speaker 1 (00:01):
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:34):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
My name is Aaron.
I am joined, as always, by RyanNelson, the founder of Alchemy
Wealth Management.
Ryan, how are you on thisbeautiful day?
Ryan Nelson (00:46):
I'm doing well, how are you doing?
Aaron Hoisington (00:49):
Not too, bad.
I'm enjoying life, enjoyinglearning, getting fiscally fit
if you will, because God knowsI'm not getting physically fit
so got to have one piece offitness in there, but yeah.
I just wanted to say thanks toall the listeners out there and
appreciate you guys joining us.
Hopefully you'll find today'stopic relatable.
I assume that you will.
(01:10):
But, ryan, today we're going totalk about inflation.
What are your thoughts oninflation, just in general?
Yeah, I don't know that topicof inflation.
I would say that it's somethingthat I've heard about, I
learned about in like historybooks, like after like world
(01:30):
wars and stuff you see, likeinflation of currency.
But honestly, up until I guessafter COVID you know 2021, 2022,
we started hearing that wordget thrown around a lot and you
know on the news, inflation,inflation.
So I think there might be a lotof misconceptions or ignorance
that are related to inflation.
(01:50):
So that's kind of what we'regoing to tackle today.
So I just want to see if youcan break it down a little bit
for us here, ryan, with some ofthe important parts of it, what
it is, what it isn't, and seewhere that kind of takes us.
Ryan Nelson (02:01):
Yeah, what kind of connotation do you have when you
hear about inflation?
Is it negative, positive,exciting?
Aaron Hoisington (02:08):
scary Good question.
I would say that most of thetime with inflation, of what I
hear is negative connotation,that's kind of what goes around
with it.
I'm like oh my gosh, likeinflation, like the dollar
doesn't go as far.
Things are more expensive.
You know, things aren'tmatching up.
The Fed's trying to get thisunder control.
I would say that those are whatyou hear about Now, whether or
(02:29):
not that's true, because I feellike you can hear a lot of
things, and whether they beaccurate or not, I don't know.
But that's kind of.
My first thing is, I think,about negative connotation when
it comes to inflation.
Ryan Nelson (02:41):
Yeah, I got to imagine that's the vast majority
of people, and yeah, I don'tknow that it really is negative
or positive per se.
So inflation, sort of thetechnical definition of
inflation, is the tendency forgoods and services to increase
in price over time, so the costfor goods and services
increasing over time.
And what's interesting is solet's actually take a quick step
(03:06):
back.
So the Bureau of LaborStatistics measures a metric and
they call that the consumerprice index.
So when most people talk aboutinflation it's like what is it?
It's like, oh, I go to thestore and I pay more for
groceries, like, okay, that'ssome effects of.
You know, there's someinflationary effects there.
But you know, how do we measureit?
(03:26):
Or, you know, is there any morelike sort of definitiveness
around it?
And so really, this CPI soconsumer price index, measured
by the Bureau of LaborStatistics, is really sort of
the the one of the go-to metricsfor gauging if inflation is
going up, if it's going down orjust what it's doing.
(03:47):
And so you can kind of think ofthis as the average price for
everyday goods.
It includes things like food,fuel, energy, housing, cars,
things like that, and then youcan compare how these goods cost
today versus, say, how theycost a year ago.
Sure, and so now, when you takethis kind of pool of things
(04:07):
including the food, the cars,the housing, and then if it
costs more today than it did 12months ago, okay, that means
everything's getting moreexpensive, inflation is going up
, and so that's on the surfacelevel.
I think that's what inflationreally is, or, when people are
talking about inflation, that'swhat they are referring to.
One thing that I think is alittle bit interesting is so the
(04:30):
Federal Reserve has someresponsibility for some target
inflation rates, and what theytarget is not a 0% inflation,
they actually target a 2%inflation.
So I think you could almosttake from that that the Federal
Reserve believes that someinflation is actually positive
right.
Right, 2% being better than 1%being better than 0%, but also
(04:56):
maybe 2% being better than 3% or4% or 5%.
So it's an interesting sort ofmetric.
I think the 2% number isprobably a bit arbitrary, but I
think what you might be able totake from that is that actually
some amount of inflation isactually healthy for a growing
economy, and I don't know thatyou would want just zero or
negative inflation, nor do Ithink you'd probably want like
(05:18):
20% or 30% inflation.
So, super high inflation right.
But again, to kind of keep inthe back of your mind, you know
the Federal Reserve.
They claim to target a 2%inflation rate.
So as you're thinking or youhear about what current
inflation rate is, you can kindof you know compare it to maybe
that 2% rate.
Aaron Hoisington (05:37):
Yeah that's a good point, to be able to kind
of, that is like a baseline, notsaying that it's good, bad
specifically, but that's likewhat it seems to be targeted
overall.
So you see like, oh, 6%inflation.
You're like, well, that'shigher than 2%.
That might not be the best.
Ryan Nelson (05:50):
Yep, yeah.
So what we find is there's sortof this compounding effect that
happens, right, and it almostthis like snowball effect or the
spiral that happens where.
So I'll just walk you throughthe process and this is how
inflation can take hold.
So businesses will ask for ahigher price if it costs them
(06:13):
more to produce an item.
So let's say we have someinflation, it costs more, so all
the costs and services costmore.
So now a business if I'mproducing some objects, right,
let's.
Yeah, I'm trying to sell awidget and now it costs me more
to source the pieces for thewidget and the services for the
widget, then I'm going to wantto sell this for more right, so
(06:38):
I can maintain my profit margin.
So then what happens is, as theprices go up, the workers demand
higher wages.
So now I'm having to pay myemployees more, and then, as
wages go up, it costs more forthe businesses to produce the
items, and then it's thisreoccurring cycle.
So as it costs more to producethe items, the prices go up,
right.
(06:58):
And it's because out of thisthis like self-fulfilling
prophecy, where they just keepkeep going up Right, and so, um,
a lot of times you can, whenyou hear this, like on the news
or something, um, you know,there's like oftentimes, like as
some sort of like sense ofpanic.
Probably that may be unfounded,but the worry would be that it
could almost spiral out ofcontrol and it feeds on itself
(07:19):
to some degree.
Um, would be that it couldalmost spiral out of control and
it feeds on itself to somedegree, and so you don't want
inflation to get too highbecause it can kind of compound
on itself.
So trying to maintain it aroundthat two-ish percent seems to
be again, according to the Fed,a good target number there.
Aaron Hoisington (07:34):
Is that 2% year over year?
I don't know if they measure itmonthly.
I've seen graphs for monthlyinflation and these certain
things.
Ryan Nelson (07:42):
Yeah, so they measure inflation, that CPI
number I was talking about, umthe consumer price index.
They measure that morefrequently, so you could measure
, you know usually there's.
They have a report every monthso you could see, you know what
January or February or March orApril uh increase was over the
last month.
But really what you want to,typically when we're talking
(08:03):
about percentages, we're talkingabout the annual percentage, so
it'd be what happened over thelast year.
If you really get into weeds,what people will look at is more
kind of fine tooth comb is likethey'll try to start figuring
out like okay, so if inflationis at 6%, great, that's one
piece of valuable information.
But is it at 6% and headingupwards or is it at 6% and
heading downwards?
(08:23):
Right, so you can look at sortof the monthly numbers and start
to get a better feel for sortof where it's maybe heading in
the future.
So it really is more of a 12month number, but looking at it
monthly can give you a littlebit more context.
Awesome, one example or onething you know so.
So like, let's take, let's takeeggs, for example.
(08:43):
So you know, let's say thateggs, you know who cares if
these numbers are relative, I'lljust use nice round numbers to
keep them simple.
So let's pretend that eggs usedto cost you know $4 a dozen and
some inflationary effects takeplace, and now eggs cost $10 a
dozen, right?
(09:03):
I think the general consensusis it's like okay, eggs feel
like they're super expensive,Right, yeah.
And we would want or expectthem to go back down to $4,
right.
And so you might hear like eggshave inflated at 100% rate, or
something like that.
And it's like, oh, and so youmight hear like, oh, eggs have
inflated at you know a hundredpercent rate, or something like
that.
And, and it's like, oh, and.
(09:24):
Then you might start hearingyou know, okay, the inflation
rate on eggs has like come tozero, right, and.
But then you go to the storeand you're like dude, these eggs
are still $10.
Yeah, a dozen, right.
Like, what's the deal here?
I thought inflation was goingdown, yeah dozen right.
Like, what's the deal here?
I thought inflation was goingdown.
Now we're, now we're, I'm stillpaying a ton for eggs, right?
(09:44):
And so I think one of theimportant things to think about
here is is, if eggs cost $10, ifeggs cost $10 a dozen and
inflation's at 10%, what thatmeans is the next year eggs will
now cost 10% more, so, or $1more, so a $10, instead of $10 a
dozen, they'll cost $11 a dozen.
If, if, uh, then instead ofbeing $1 more, it'd be 50 cents
(10:07):
more right?
5% of $10 is 50 cents.
So a year later they would cost$10 and 50 cents.
So if inflation rate was at like10%, we said, oh man, that's
super high.
We get inflation, quote,unquote, under control.
We get it down to 2%.
Well, what that still means, itdoesn't mean that $10 eggs go
back down to $4.
It means that now $10 eggs areonly increasing at 2% per year,
(10:32):
so by either be increasing by 20cents approximately every year,
so from $10 to 1020.
So if you hear something I feellike you hear it with the
housing market a lot, or justthe market in general and you'll
hear like, oh, inflation isback under control.
And then somebody will say,well, I don't think so, because
when I go to the supermarket itstill costs me a fortune to buy
my groceries, a lot more than itcost me last year.
Well, yes, if inflation isstill positive, it means prices
(10:55):
are still going up, but maybe ata slower rate than they were
right.
So if you wanted prices toactually go back down to what
they were before so to go from,say, $10 a dozen down to $4 a
dozen, you'd actually needwhat's called deflation.
You would need effectively anegative percent return, right.
So not a 2% inflation rate, notas a 1%, not even a 0%.
You'd need a negative rate,which would be called deflation,
(11:18):
and I would tell you thatthat's probably not necessarily
good for the overall economy.
So when you see things, thatwhen you see like price of some
good going up, it's probablyfair to assume the price of that
good will be up for like ever.
And when we talk about gettinginflation under control, it's
more about making sure it's nowraising at a reasonable rate
(11:40):
from that new standard.
You could think of that newprice as almost a new floor and
inflation will just continue tomake it grow from there.
But we want to make sure it'sgrowing at a slower, more
sustainable rate from there.
Aaron Hoisington (11:50):
Sure, no, that makes a ton of sense to think
about, because I've been guiltyof that in the past, where I
it's easy, yeah, when you lookat something, you're like, oh my
gosh, the inflation, car pricesare so expensive, and you see,
these certain things.
I know that a couple of yearsago we were shopping for a new
car and we were like, oh my gosh, this is like the highest rate,
this is inflated so much, blah,blah, blah.
(12:11):
And then, like you look at likewhat the inflation rate was
then to now and you go back tobuy that car, you're like, well,
it's more expensive than it wastwo years ago.
Ryan Nelson (12:18):
Yeah, yeah.
Aaron Hoisington (12:19):
Or it's like barely, but it's like wait a
minute, shouldn't this be goingdown?
When is it going to go down?
Ryan Nelson (12:24):
Right, right.
When are we going to get backto the prices of yesterday?
Aaron Hoisington (12:28):
Yeah, exactly the prices of yesterday or the
last year or whatever.
But to think about it in a termlike that of like, yeah, it
probably won't go back down,maybe it just won't go up as
fast, if you will.
So I think that that's a bigpiece of like.
When I found that, when thatclicked in my head at a
startlingly old age, I was like,oh okay, cool, that at least
(12:49):
helps for planning purposes.
Ryan Nelson (12:50):
I suppose we're probably not seeing $4 eggs
again, right, and we reallydon't want again.
We don't for all intents andpurposes.
We don't want to have deflation, so we don't want the cost of
all of our goods to be declining, right, we want the idea of,
like, increasing wages and allof that, and so, you know, a
small amount of inflation ishealthy.
We just don't want really superhigh inflation.
(13:10):
But so if we sort of thinkabout that, it would be like,
okay, whatever something coststoday, we would expect it to
continue to increase in cost,you know, tomorrow and the day
after, but hopefully at a slow,reasonable rate.
Aaron Hoisington (13:21):
Sure, yeah, that makes sense.
I would say that the only thingthat appears to be immune to
inflation is the Costco hot dogand a soda deal.
Ryan Nelson (13:28):
Oh yeah, I'd be curious how.
What is it?
A dollar?
Aaron Hoisington (13:35):
Dollar 50.
Dollar 50?
Yeah, how long.
I wonder how long it's beenthere.
It's been.
I read an article the other day.
It's been like that for like 30years.
That's awesome, something likethat.
And there was a-.
Ryan Nelson (13:40):
They're probably losing money.
Oh, they're definitely.
Aaron Hoisington (13:41):
I mean they're spending they're just proving a
point, hundreds and hundreds ofdollars, like there at the
store, I mean they're doing fine, they can get away with selling
a hot dog.
They're probably still making aprofit on that hot dog.
If we're being honest, A sodacosts like two cents to make or
something like that.
But I read this article a whileago about the CEO of Costco.
Said like hey, this will nevergo up.
(14:02):
The price of our hot dog andsoda will never go up and such.
And I was like, well, you canprobably get away with that when
the rest of your goods go.
Everybody's just buying that onthe way out after spending a
thousand dollars or somethinglike that.
Ryan Nelson (14:13):
That's funny.
Yeah, I just Google it.
It says Costco's hot dog combo.
It's been $1.50 since the 1980s, 1980s, yeah, yeah, so yeah,
hey, there you go.
There's an exception to everyrule.
Exactly, that's inflation proofthe Costco hot dog is inflation
proof.
Aaron Hoisington (14:28):
Yeah, we should probably get sponsored by
Costco.
They have pretty good hot dogsI was there last weekend
actually and they're pretty goodFor $1.50, you can't beat it
Exactly, Especially on the wayout.
It makes you feel like a winafter you just got gouged for a
lot of things.
Cool man.
Well, that's all I really hadon inflation.
Hopefully that at least shedsome light on when you see those
numbers, I guess, or you hearon TV like inflation's at an
(14:51):
all-time high or these certainthings, maybe take a step back
and think about what actuallyinflation is, and hopefully
you're not hearing thatinflation's at an all-time high,
because we're far from that.
Ryan Nelson (15:00):
Yes, yeah.
Aaron Hoisington (15:01):
Hopefully we're not there by any means.
Kind of take that intoconsideration and take it with a
grain of salt, to really take astep back on, maybe looking at
month over month, year over year, whatever it might be, and just
kind of have that financialknowledge of what it actually is
and what it might not be.
I suppose, in the end,absolutely Awesome.
Well, does everybody want tohang tight with us?
(15:23):
We'll be right back on theother side of this.
Speaker 1 (15:25):
And now to put the personal in personal finance.
And now to put the personal inpersonal finance.
Aaron Hoisington (15:32):
Welcome back to this side of the Fiscal
Physical Podcast.
I am still here with RyanNelson, and I got a question
here for you, ryan.
This is a fun one, I suppose.
Would you rather explore spaceor the deep ocean Space, all
right, any reason why?
No, I don't know.
Ryan Nelson (15:52):
I don't know, I yeah, I just think it sounds
more interesting.
I mean it's more like foreignright.
The ocean is like four hourdrive away, space is like really
far yeah it's a little morethan four hour drive yeah, I
don't know.
I mean, I don't know much aboutit.
I think it just is like thisyou know, there's like this
(16:15):
human desire for like flightright.
Sure, and then the Wilburbrothers put us on their backs
there and helped us figure thatout and I don't know.
I think like the idea of likespace exploration is just
interesting yeah.
Aaron Hoisington (16:30):
So yeah, I don't know, that's a good call,
I think it's.
I think it was the wrightbrothers, wilbur and orville.
Ryan Nelson (16:33):
What did I say?
The?
Wilbur brothers well, that'swhy I do finance, exactly.
That's why you're not a pilot,yeah no, it's, it's an
interesting thing.
Aaron Hoisington (16:41):
I just I was like thinking about questions I
could ask you and these certain,and this one popped up and I
was just like, yeah, that's aninteresting question because,
like I think, the ocean is sovast.
Speaker 1 (16:51):
Oh it's crazy.
Aaron Hoisington (16:53):
A while ago, a few months ago, my wife and I
went to Hawaii and, like you flyfrom, you know the mainland
over there and it is like fiveor six hours just over ocean and
you're going like 500 miles anhour.
Like you look down and theyhave all the apps you can track
your flight path and thesethings.
And you're like, wow, there is alot of space out there.
(17:14):
That is space.
There's a lot of mass out there, area in the ocean that I'm
just like has anyone ever beenin that spot like before and
like how deep is it right there?
Like that kind of thing.
So I don't know.
Like I feel like I would alsochoose space, because I think
that that's just kind ofingrained with me of like
growing up.
You're like cool, like go intospace and explore mankind, or
(17:37):
one small leap for whatever.
And one giant leap for mankind.
You're kind of ingrained withthat, but the more I thought
about this question, I think theocean would be pretty wild to
do as well.
Ryan Nelson (17:48):
Yeah, what's like.
That stat is probably not eventrue, but uh, something about
like we've like explored more ofthe moon surface than like, the
ocean yes, there's somethinglike that.
Aaron Hoisington (17:56):
We've explored more area.
Yeah, I don't know.
Yeah, and I was like I don't Ialways find that hard to believe
because like you're justdriving in town and you can look
up and see like the stars andthat's incredible, but like it's
pretty hard to just look outand see the ocean unless you
live there.
You're like wow, that goes onfor a while just overall.
So it is crazy.
But yeah, that's something to,something to puzzle the
(18:16):
listeners with.
We'd love to hear if you guyswould enjoy or are more curious
about exploring space or theocean, and if so, why.
Let us know.
You can email us at a podcastat alchemywealthcom, or just
text us, send us a chat,whatever it might be.
And that's all we got for youguys today.
But, ryan, you got anything towrap us up with.
Ryan Nelson (18:38):
As always, stay the course.
Speaker 1 (18:40):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
podcast to ensure you never missan episode and consider leaving
(19:03):
us a rating and review on yourfavorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
just that personal.
(19:23):
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:34):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
My name is Aaron.
I am joined, as always, by RyanNelson, the founder of Alchemy
Wealth Management.
Ryan, how are you on thisbeautiful day?
Ryan Nelson (00:46):
I'm doing well, how are you doing?
Aaron Hoisington (00:49):
Not too, bad.
I'm enjoying life, enjoyinglearning, getting fiscally fit
if you will, because God knowsI'm not getting physically fit
so got to have one piece offitness in there, but yeah.
I just wanted to say thanks toall the listeners out there and
appreciate you guys joining us.
Hopefully you'll find today'stopic relatable.
I assume that you will.
(01:10):
But, ryan, today we're going totalk about inflation.
What are your thoughts oninflation, just in general?
Yeah, I don't know that topicof inflation.
I would say that it's somethingthat I've heard about, I
learned about in like historybooks, like after like world
(01:30):
wars and stuff you see, likeinflation of currency.
But honestly, up until I guessafter COVID you know 2021, 2022,
we started hearing that wordget thrown around a lot and you
know on the news, inflation,inflation.
So I think there might be a lotof misconceptions or ignorance
that are related to inflation.
(01:50):
So that's kind of what we'regoing to tackle today.
So I just want to see if youcan break it down a little bit
for us here, ryan, with some ofthe important parts of it, what
it is, what it isn't, and seewhere that kind of takes us.
Ryan Nelson (02:01):
Yeah, what kind of connotation do you have when you
hear about inflation?
Is it negative, positive,exciting?
Aaron Hoisington (02:08):
scary Good question.
I would say that most of thetime with inflation, of what I
hear is negative connotation,that's kind of what goes around
with it.
I'm like oh my gosh, likeinflation, like the dollar
doesn't go as far.
Things are more expensive.
You know, things aren'tmatching up.
The Fed's trying to get thisunder control.
I would say that those are whatyou hear about Now, whether or
(02:29):
not that's true, because I feellike you can hear a lot of
things, and whether they beaccurate or not, I don't know.
But that's kind of.
My first thing is, I think,about negative connotation when
it comes to inflation.
Ryan Nelson (02:41):
Yeah, I got to imagine that's the vast majority
of people, and yeah, I don'tknow that it really is negative
or positive per se.
So inflation, sort of thetechnical definition of
inflation, is the tendency forgoods and services to increase
in price over time, so the costfor goods and services
increasing over time.
And what's interesting is solet's actually take a quick step
(03:06):
back.
So the Bureau of LaborStatistics measures a metric and
they call that the consumerprice index.
So when most people talk aboutinflation it's like what is it?
It's like, oh, I go to thestore and I pay more for
groceries, like, okay, that'ssome effects of.
You know, there's someinflationary effects there.
But you know, how do we measureit?
(03:26):
Or, you know, is there any morelike sort of definitiveness
around it?
And so really, this CPI soconsumer price index, measured
by the Bureau of LaborStatistics, is really sort of
the the one of the go-to metricsfor gauging if inflation is
going up, if it's going down orjust what it's doing.
(03:47):
And so you can kind of think ofthis as the average price for
everyday goods.
It includes things like food,fuel, energy, housing, cars,
things like that, and then youcan compare how these goods cost
today versus, say, how theycost a year ago.
Sure, and so now, when you takethis kind of pool of things
(04:07):
including the food, the cars,the housing, and then if it
costs more today than it did 12months ago, okay, that means
everything's getting moreexpensive, inflation is going up
, and so that's on the surfacelevel.
I think that's what inflationreally is, or, when people are
talking about inflation, that'swhat they are referring to.
One thing that I think is alittle bit interesting is so the
(04:30):
Federal Reserve has someresponsibility for some target
inflation rates, and what theytarget is not a 0% inflation,
they actually target a 2%inflation.
So I think you could almosttake from that that the Federal
Reserve believes that someinflation is actually positive
right.
Right, 2% being better than 1%being better than 0%, but also
(04:56):
maybe 2% being better than 3% or4% or 5%.
So it's an interesting sort ofmetric.
I think the 2% number isprobably a bit arbitrary, but I
think what you might be able totake from that is that actually
some amount of inflation isactually healthy for a growing
economy, and I don't know thatyou would want just zero or
negative inflation, nor do Ithink you'd probably want like
(05:18):
20% or 30% inflation.
So, super high inflation right.
But again, to kind of keep inthe back of your mind, you know
the Federal Reserve.
They claim to target a 2%inflation rate.
So as you're thinking or youhear about what current
inflation rate is, you can kindof you know compare it to maybe
that 2% rate.
Aaron Hoisington (05:37):
Yeah that's a good point, to be able to kind
of, that is like a baseline, notsaying that it's good, bad
specifically, but that's likewhat it seems to be targeted
overall.
So you see like, oh, 6%inflation.
You're like, well, that'shigher than 2%.
That might not be the best.
Ryan Nelson (05:50):
Yep, yeah.
So what we find is there's sortof this compounding effect that
happens, right, and it almostthis like snowball effect or the
spiral that happens where.
So I'll just walk you throughthe process and this is how
inflation can take hold.
So businesses will ask for ahigher price if it costs them
(06:13):
more to produce an item.
So let's say we have someinflation, it costs more, so all
the costs and services costmore.
So now a business if I'mproducing some objects, right,
let's.
Yeah, I'm trying to sell awidget and now it costs me more
to source the pieces for thewidget and the services for the
widget, then I'm going to wantto sell this for more right, so
(06:38):
I can maintain my profit margin.
So then what happens is, as theprices go up, the workers demand
higher wages.
So now I'm having to pay myemployees more, and then, as
wages go up, it costs more forthe businesses to produce the
items, and then it's thisreoccurring cycle.
So as it costs more to producethe items, the prices go up,
right.
(06:58):
And it's because out of thisthis like self-fulfilling
prophecy, where they just keepkeep going up Right, and so, um,
a lot of times you can, whenyou hear this, like on the news
or something, um, you know,there's like oftentimes, like as
some sort of like sense ofpanic.
Probably that may be unfounded,but the worry would be that it
could almost spiral out ofcontrol and it feeds on itself
(07:19):
to some degree.
Um, would be that it couldalmost spiral out of control and
it feeds on itself to somedegree, and so you don't want
inflation to get too highbecause it can kind of compound
on itself.
So trying to maintain it aroundthat two-ish percent seems to
be again, according to the Fed,a good target number there.
Aaron Hoisington (07:34):
Is that 2% year over year?
I don't know if they measure itmonthly.
I've seen graphs for monthlyinflation and these certain
things.
Ryan Nelson (07:42):
Yeah, so they measure inflation, that CPI
number I was talking about, umthe consumer price index.
They measure that morefrequently, so you could measure
, you know usually there's.
They have a report every monthso you could see, you know what
January or February or March orApril uh increase was over the
last month.
But really what you want to,typically when we're talking
(08:03):
about percentages, we're talkingabout the annual percentage, so
it'd be what happened over thelast year.
If you really get into weeds,what people will look at is more
kind of fine tooth comb is likethey'll try to start figuring
out like okay, so if inflationis at 6%, great, that's one
piece of valuable information.
But is it at 6% and headingupwards or is it at 6% and
heading downwards?
(08:23):
Right, so you can look at sortof the monthly numbers and start
to get a better feel for sortof where it's maybe heading in
the future.
So it really is more of a 12month number, but looking at it
monthly can give you a littlebit more context.
Awesome, one example or onething you know so.
So like, let's take, let's takeeggs, for example.
(08:43):
So you know, let's say thateggs, you know who cares if
these numbers are relative, I'lljust use nice round numbers to
keep them simple.
So let's pretend that eggs usedto cost you know $4 a dozen and
some inflationary effects takeplace, and now eggs cost $10 a
dozen, right?
(09:03):
I think the general consensusis it's like okay, eggs feel
like they're super expensive,Right, yeah.
And we would want or expectthem to go back down to $4,
right.
And so you might hear like eggshave inflated at 100% rate, or
something like that.
And it's like, oh, and so youmight hear like, oh, eggs have
inflated at you know a hundredpercent rate, or something like
that.
And, and it's like, oh, and.
(09:24):
Then you might start hearingyou know, okay, the inflation
rate on eggs has like come tozero, right, and.
But then you go to the storeand you're like dude, these eggs
are still $10.
Yeah, a dozen, right.
Like, what's the deal here?
I thought inflation was goingdown, yeah dozen right.
Like, what's the deal here?
I thought inflation was goingdown.
Now we're, now we're, I'm stillpaying a ton for eggs, right?
(09:44):
And so I think one of theimportant things to think about
here is is, if eggs cost $10, ifeggs cost $10 a dozen and
inflation's at 10%, what thatmeans is the next year eggs will
now cost 10% more, so, or $1more, so a $10, instead of $10 a
dozen, they'll cost $11 a dozen.
If, if, uh, then instead ofbeing $1 more, it'd be 50 cents
(10:07):
more right?
5% of $10 is 50 cents.
So a year later they would cost$10 and 50 cents.
So if inflation rate was at like10%, we said, oh man, that's
super high.
We get inflation, quote,unquote, under control.
We get it down to 2%.
Well, what that still means, itdoesn't mean that $10 eggs go
back down to $4.
It means that now $10 eggs areonly increasing at 2% per year,
(10:32):
so by either be increasing by 20cents approximately every year,
so from $10 to 1020.
So if you hear something I feellike you hear it with the
housing market a lot, or justthe market in general and you'll
hear like, oh, inflation isback under control.
And then somebody will say,well, I don't think so, because
when I go to the supermarket itstill costs me a fortune to buy
my groceries, a lot more than itcost me last year.
Well, yes, if inflation isstill positive, it means prices
(10:55):
are still going up, but maybe ata slower rate than they were
right.
So if you wanted prices toactually go back down to what
they were before so to go from,say, $10 a dozen down to $4 a
dozen, you'd actually needwhat's called deflation.
You would need effectively anegative percent return, right.
So not a 2% inflation rate, notas a 1%, not even a 0%.
You'd need a negative rate,which would be called deflation,
(11:18):
and I would tell you thatthat's probably not necessarily
good for the overall economy.
So when you see things, thatwhen you see like price of some
good going up, it's probablyfair to assume the price of that
good will be up for like ever.
And when we talk about gettinginflation under control, it's
more about making sure it's nowraising at a reasonable rate
(11:40):
from that new standard.
You could think of that newprice as almost a new floor and
inflation will just continue tomake it grow from there.
But we want to make sure it'sgrowing at a slower, more
sustainable rate from there.
Aaron Hoisington (11:50):
Sure, no, that makes a ton of sense to think
about, because I've been guiltyof that in the past, where I
it's easy, yeah, when you lookat something, you're like, oh my
gosh, the inflation, car pricesare so expensive, and you see,
these certain things.
I know that a couple of yearsago we were shopping for a new
car and we were like, oh my gosh, this is like the highest rate,
this is inflated so much, blah,blah, blah.
(12:11):
And then, like you look at likewhat the inflation rate was
then to now and you go back tobuy that car, you're like, well,
it's more expensive than it wastwo years ago.
Ryan Nelson (12:18):
Yeah, yeah.
Aaron Hoisington (12:19):
Or it's like barely, but it's like wait a
minute, shouldn't this be goingdown?
When is it going to go down?
Ryan Nelson (12:24):
Right, right.
When are we going to get backto the prices of yesterday?
Aaron Hoisington (12:28):
Yeah, exactly the prices of yesterday or the
last year or whatever.
But to think about it in a termlike that of like, yeah, it
probably won't go back down,maybe it just won't go up as
fast, if you will.
So I think that that's a bigpiece of like.
When I found that, when thatclicked in my head at a
startlingly old age, I was like,oh okay, cool, that at least
(12:49):
helps for planning purposes.
Ryan Nelson (12:50):
I suppose we're probably not seeing $4 eggs
again, right, and we reallydon't want again.
We don't for all intents andpurposes.
We don't want to have deflation, so we don't want the cost of
all of our goods to be declining, right, we want the idea of,
like, increasing wages and allof that, and so, you know, a
small amount of inflation ishealthy.
We just don't want really superhigh inflation.
(13:10):
But so if we sort of thinkabout that, it would be like,
okay, whatever something coststoday, we would expect it to
continue to increase in cost,you know, tomorrow and the day
after, but hopefully at a slow,reasonable rate.
Aaron Hoisington (13:21):
Sure, yeah, that makes sense.
I would say that the only thingthat appears to be immune to
inflation is the Costco hot dogand a soda deal.
Ryan Nelson (13:28):
Oh yeah, I'd be curious how.
What is it?
A dollar?
Aaron Hoisington (13:35):
Dollar 50.
Dollar 50?
Yeah, how long.
I wonder how long it's beenthere.
It's been.
I read an article the other day.
It's been like that for like 30years.
That's awesome, something likethat.
And there was a-.
Ryan Nelson (13:40):
They're probably losing money.
Oh, they're definitely.
Aaron Hoisington (13:41):
I mean they're spending they're just proving a
point, hundreds and hundreds ofdollars, like there at the
store, I mean they're doing fine, they can get away with selling
a hot dog.
They're probably still making aprofit on that hot dog.
If we're being honest, A sodacosts like two cents to make or
something like that.
But I read this article a whileago about the CEO of Costco.
Said like hey, this will nevergo up.
(14:02):
The price of our hot dog andsoda will never go up and such.
And I was like, well, you canprobably get away with that when
the rest of your goods go.
Everybody's just buying that onthe way out after spending a
thousand dollars or somethinglike that.
Ryan Nelson (14:13):
That's funny.
Yeah, I just Google it.
It says Costco's hot dog combo.
It's been $1.50 since the 1980s, 1980s, yeah, yeah, so yeah,
hey, there you go.
There's an exception to everyrule.
Exactly, that's inflation proofthe Costco hot dog is inflation
proof.
Aaron Hoisington (14:28):
Yeah, we should probably get sponsored by
Costco.
They have pretty good hot dogsI was there last weekend
actually and they're pretty goodFor $1.50, you can't beat it
Exactly, Especially on the wayout.
It makes you feel like a winafter you just got gouged for a
lot of things.
Cool man.
Well, that's all I really hadon inflation.
Hopefully that at least shedsome light on when you see those
numbers, I guess, or you hearon TV like inflation's at an
(14:51):
all-time high or these certainthings, maybe take a step back
and think about what actuallyinflation is, and hopefully
you're not hearing thatinflation's at an all-time high,
because we're far from that.
Ryan Nelson (15:00):
Yes, yeah.
Aaron Hoisington (15:01):
Hopefully we're not there by any means.
Kind of take that intoconsideration and take it with a
grain of salt, to really take astep back on, maybe looking at
month over month, year over year, whatever it might be, and just
kind of have that financialknowledge of what it actually is
and what it might not be.
I suppose, in the end,absolutely Awesome.
Well, does everybody want tohang tight with us?
(15:23):
We'll be right back on theother side of this.
Speaker 1 (15:25):
And now to put the personal in personal finance.
And now to put the personal inpersonal finance.
Aaron Hoisington (15:32):
Welcome back to this side of the Fiscal
Physical Podcast.
I am still here with RyanNelson, and I got a question
here for you, ryan.
This is a fun one, I suppose.
Would you rather explore spaceor the deep ocean Space, all
right, any reason why?
No, I don't know.
Ryan Nelson (15:52):
I don't know, I yeah, I just think it sounds
more interesting.
I mean it's more like foreignright.
The ocean is like four hourdrive away, space is like really
far yeah it's a little morethan four hour drive yeah, I
don't know.
I mean, I don't know much aboutit.
I think it just is like thisyou know, there's like this
(16:15):
human desire for like flightright.
Sure, and then the Wilburbrothers put us on their backs
there and helped us figure thatout and I don't know.
I think like the idea of likespace exploration is just
interesting yeah.
Aaron Hoisington (16:30):
So yeah, I don't know, that's a good call,
I think it's.
I think it was the wrightbrothers, wilbur and orville.
Ryan Nelson (16:33):
What did I say?
The?
Wilbur brothers well, that'swhy I do finance, exactly.
That's why you're not a pilot,yeah no, it's, it's an
interesting thing.
Aaron Hoisington (16:41):
I just I was like thinking about questions I
could ask you and these certain,and this one popped up and I
was just like, yeah, that's aninteresting question because,
like I think, the ocean is sovast.
Speaker 1 (16:51):
Oh it's crazy.
Aaron Hoisington (16:53):
A while ago, a few months ago, my wife and I
went to Hawaii and, like you flyfrom, you know the mainland
over there and it is like fiveor six hours just over ocean and
you're going like 500 miles anhour.
Like you look down and theyhave all the apps you can track
your flight path and thesethings.
And you're like, wow, there is alot of space out there.
(17:14):
That is space.
There's a lot of mass out there, area in the ocean that I'm
just like has anyone ever beenin that spot like before and
like how deep is it right there?
Like that kind of thing.
So I don't know.
Like I feel like I would alsochoose space, because I think
that that's just kind ofingrained with me of like
growing up.
You're like cool, like go intospace and explore mankind, or
(17:37):
one small leap for whatever.
And one giant leap for mankind.
You're kind of ingrained withthat, but the more I thought
about this question, I think theocean would be pretty wild to
do as well.
Ryan Nelson (17:48):
Yeah, what's like.
That stat is probably not eventrue, but uh, something about
like we've like explored more ofthe moon surface than like, the
ocean yes, there's somethinglike that.
Aaron Hoisington (17:56):
We've explored more area.
Yeah, I don't know.
Yeah, and I was like I don't Ialways find that hard to believe
because like you're justdriving in town and you can look
up and see like the stars andthat's incredible, but like it's
pretty hard to just look outand see the ocean unless you
live there.
You're like wow, that goes onfor a while just overall.
So it is crazy.
But yeah, that's something to,something to puzzle the
(18:16):
listeners with.
We'd love to hear if you guyswould enjoy or are more curious
about exploring space or theocean, and if so, why.
Let us know.
You can email us at a podcastat alchemywealthcom, or just
text us, send us a chat,whatever it might be.
And that's all we got for youguys today.
But, ryan, you got anything towrap us up with.
Ryan Nelson (18:38):
As always, stay the course.
Speaker 1 (18:40):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
podcast to ensure you never missan episode and consider leaving
(19:03):
us a rating and review on yourfavorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
just that personal.
(19:23):
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
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