Capital Investment Advisors

#157 – The Guide To Inflation For Investors: The Wilting Dollar

Do the dollars in your wallet seem to be wilting as prices increase?

In this episode, Wes Moss and Retire Sooner producer Mallory Boggs discuss the worth of a dollar and price volatility at every level of purchase power. Whether you noticed price increases for a bottle of soda or a new car, we’re all experiencing the impact of rising costs. First, Wes shares insights about the most recent Consumer Price Index (CPI) numbers, though he notes that those differ from what investors should consider looking at right now. Next, he explains the US economy’s inflation, deflation, and avenues for capital once you’ve saved enough emergency cash. Finally, Wes and Mallory wrap up the episode with a few final thoughts and good news for investors.

Read The Full Transcript From This Episode

(click below to expand and read the full interview)

    • Wes Moss [00:00:00]:We are living in a period of wilting dollars. It’s really a conversation that we’re about to have around inflation. We keep hearing about inflation going up and egg prices higher and chicken prices higher, car prices higher, and housing prices higher. But what we don’t typically see, or don’t look at it in reverse, which is a much more powerful way to see how inflation is slowly but surely, and sometimes not so slowly, eviscerating the buying power of the dollars that are sitting in your wallet. Today we’ll talk about wilting dollars. It’s a problem we constantly face as investors. It is the very reason why we almost need to invest in order to get to retiree and outpace inflation so we can protect our purchasing power. That today right here on the Retire Sooner podcast. I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying, and advising American families, including those who started late, on how to retire sooner and happier. So my mission with the Retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them. Let’s get started. Mallory, how are the dollars in your wallet? Are they wilting?Mallory Boggs [00:01:29]:You know, I would definitely describe them as not nearly as stiff, strong, and ready to spend as they used to be.Wes Moss [00:01:36]:Well, is it because of inflation?

      Mallory Boggs [00:01:40]:

      Okay, listen. Example. I went to the zoo recently with some family and we went to go and buy Coca Cola out of the vending machine. Guess how much it was?

      Wes Moss [00:01:49]:

      Oh, it was probably like $3.

      Mallory Boggs [00:01:51]:

      It was like $3.75.

      Wes Moss [00:01:53]:

      Almost $5 for Coke.

      Mallory Boggs [00:01:55]:

      I was like, this is outrageous. I just want to drink a tasty beverage and you’re trying to charge me almost $5.

      Wes Moss [00:02:02]:

      So you used to be. And this is this concept of wilting dollars. It wasn’t that long ago that for a dollar, you throw a dollar in and you can get one of those big 16 ounce bottles. Today your dollar only gets you a third of a Coca Cola. Not even one quarter. Almost just one quarter. And this is how we’re going to look at this today. Your soda dollars. In this specific year, your vending machine soda dollars are really only worth about twenty five cents. And that’s how we’re going to look at inflation today. I want us to imagine, as you’re listening to the podcast today, that every dollar in your whole entire budget is specifically dollars for a particular need. So if you want to go buy a car, you’ve got to go use your car dollars. Mallory, your example, you want to buy soda pop. You have only soda pop dollars. If you’re going to go out to eat it’s only your going out to eat dollars. So we have food dollars and car dollars and housing dollars. And this is a way to really illustrate just how powerful the wilting force for your purchasing power inflation really is. I think we’ve been talking about inflation for the last year. It’s been top economic topic number one. We had lots of stimulus money from the pandemic and supply chain issues due to COVID and all that combined to push prices dramatically higher. The definition of inflation is too much money chasing too few goods. So we dumped 40% of new money on the US economy and oh, guess what? Prices went up by about 40%. Now it took a couple of years before that happened and when it happened, it happened rapidly. But all year long the Fed’s been talking. Really, it’s been over a year now. The Fed is waging war against inflation. But the headline you hear, Mallory, is about what? It’s CPI. Do you sit there and watch the CPI numbers come in?

      Mallory Boggs [00:03:55]:

      It’s so funny. I don’t think I had heard that term before. Probably like in the headlines, at least before the last year. Really. Now I feel like everybody and their mother knows that phrase.

      Wes Moss [00:04:07]:

      That’s a good point. I think you’re right. It’s CPI. We say it because we said it a million times, but inflation didn’t get a lot of billing five years ago. Three years ago, because we had so little inflation, it was never really a big economic worry. So today I think anybody knows what CPI is, but it’s because it’s been in the headlines. Five years ago. Was it as commonly used a term? Probably not sure. I was looking at it. But I look at the economy every day. But for the average American, were they worried about CPI? Not really. But what the world has been focused on, and this is what led me to write about wilting dollars, is that we’re very focused on CPI coming down. So we need to get CPI was over 9% last summer and it’s come down. They went down to eight and then seven and it’s come down about a little bit every month since then. And now here as we stand today, we’re looking at CPI just under 5%. But the number we’re getting for CPI is really still the rate of inflation increase year over year. Even if CPI were to go to zero, let’s just say magically it’s at zero today. You’re listening to this podcast and there’s just no more. CPI has hit zero. What that doesn’t change is all the inflation that we’ve just had, the massive run up in prices that we’ve just had, let’s call it up 30% on average. Maybe it’s better to even look at specifically. Let’s say housing inflation goes to zero. It doesn’t do away with the fact that housing prices in general are now 40% higher than they were, let’s call it three years ago. The world’s been focusing on getting inflation down. The Federal Reserve has been focusing on getting inflation back to its 2% target. But really what they’re trying to do is core the rate of inflation. Getting even worse doesn’t fix the fact that prices are already dramatically more expensive than they have been over the last couple of years. And they’re very likely going to stay there as a new high watermark, almost permanently higher prices.

      Mallory Boggs [00:06:12]:

      So can I ask, do we want deflation then, as investors?

      Wes Moss [00:06:17]:

      So we’ve had such price volatility, we’ve seen some disinflation. As an example, we’ll talk about car dollars. Car prices went up 55% and down 15 or 16%. Now they’re only up only up 32%. We do not want deflation in general. We right now are just focusing on disinflation, which means we’re bringing the rate back down to 2%. We actually want, as an economy, a little bit of upward pricing pressure. It helps motivate consumers to not wait forever to go buy whatever they’re about to buy. If we live in a world of deflation, then you get into this weird spiral where a debt becomes more expensive because you’re earning less, and your debt relative to new dollars just automatically balloons, number one. Number two, if we have deflation in general, we would tend to wait for purchases because everything would be getting cheaper. So it’s a very bad economic situation to end up having deflation. So a naturally growing, strong, robust economy wants a little bit of inflation all the time, but we don’t want ten or 15% a year like we saw in the 1970s and like we’ve just seen over the past year. But very good question. That’s why we have you on this podcast. What other questions do you have?

      Mallory Boggs [00:07:35]:

      I don’t know. As we keep going, I’m sure I’ll.

      Wes Moss [00:07:37]:

      Find all right now, so let’s give some examples. Mallory, you and I were hosting a radio show a couple of weeks ago, and the producer, Uncle Leo. Uncle Leo came in and said, hey, man, can you talk about used car inflation or deflation? He’s thinking about I’m thinking about buying a car. I’m wondering if prices are ever going to go down. Which led me down the track of saying, this is a big ticket item that Americans are always thinking about. So think of it this way. The Bureau of Labor Statistics keeps track of used car and truck prices, and it’s an interesting economic exercise. They’re always looking at cars that are between two and seven years old. That’s what they measure. And it’s every used car. It’s subcompacts, it’s full size luxury cars, it’s light trucks, pickups vans, specialties fort, utilities. And if you take a look at what prices have done and there’s so much like an earthquake on the Seismograph, when you look at economic data because of COVID, COVID was the earthquake.

      Mallory Boggs [00:08:41]:

      That was true in so many ways.

      Wes Moss [00:08:43]:

      In so many ways. But used car prices and again, we’re going to look at January of 2020, right before the pandemic .

      Mallory Boggs [00:08:50]:

      And I think we all remember whenever the prices shot up during COVID and a lot of that was because of what?

      Wes Moss [00:08:58]:

      Well, first of all, it was economic stimulus payments. And so that is the root cause of a lot of the inflation. So people had more money in their bank accounts and they could potentially buy more cars and interest rates were really low. So again, the financing was cheap and then there was an increase in demand for cars because less people wanted to take public transportation. And then on top of that, supplies got hit because factories are shut down. So it was the classic surge in demand, limited supply, and we saw prices whipsaw higher.

      Mallory Boggs [00:09:31]:

      Okay, I’ve got another question for you. We know that so much of this comes back with inflation to COVID and really the stimulus money that was dumped into the system. Do you consider that dollars well spent still gosh?

      Wes Moss [00:09:45]:

      I think that’s a hard question. I mean, it’s a politically fraught question. I think that we were in a situation where we truly unprecedented. We didn’t know what to do, and it was frightening for a period of time that the world was shut down. I mean that was something that we just were never taught in any economics class, that we would just shut down a modern economy for an extended period of time. Schools, businesses, roads were empty. So it was such a twilight zone there for a while. As much as we look back and see all the issues that were created by the economic stimulus, by Washington, they were just making it up as they went. And I see as a lawmaker you wanted to do something, hey we’re mandating you shutting down and not being able to go to work. So we also have to provide economic support at the same time. So I don’t know if there was a whole lot of choice, but we’re paying for it today still to this day through inflation. And again it has increased the rate of how our dollars are wilting and here are the numbers behind it. So again, we’re looking at January 2020 to January 2022. Used car prices shot up 55% in that two year period. Since then, they’ve fallen about 14%. We have had a little bit of that’s actual deflation, but in this particular one segment of the economy it’s prices do yoyo a little bit. Prices in one particular item can oscillate a fair amount. So since then, prices fell about 14%. But that still means wes have a net increase of 32% from where we started. So the used truck that would have been 20 grand in 2022 is now approximately $26,400. All things being equal, which means that not not the actual truck, but the truck. And another one, all things being equal, that’s taken an extra $6,000 out of your budget and $6,000 is a very real amount of money. It might mean the cancellation of an entire family trip, the underfunding of a retirement account. Real money. So now let’s look at this in reverse. We’re going to now look at the value, the hit to the value of your car dollars. Remember, these are dollars that you can only spend on cars. Remember, we have food dollars, car dollars, gas dollars for each line item.

      Mallory Boggs [00:12:12]:

      And I think this is how most people really operate, right? You don’t just magically have more money in your bank because you need to buy something that costs more. You’re like, okay, I’ve got X amount saved for a new car, right? It doesn’t just immediately jump up because that’s true.

      Wes Moss [00:12:26]:

      We do think in terms of that. Oftentimes it’s like we’ve got a, there’s a car budget, I’ve got my house budget over here. So to some extent, this is real life. But if you look at using car dollars as an example, and you set a baseline of $1 value, january 2020, right before the pandemic, today that same car dollar is only worth about $0.75.

      Mallory Boggs [00:12:52]:


      Wes Moss [00:12:54]:

      Inflation looks a lot different if you’re looking at it from that angle, talking about not just the increase in cost, but the decrease in your purchasing power, you don’t have less money, but your money is worth less. Full disclosure, I am affiliated with Capital Investment Advisors, which is a full service and a fee only financial planning and investment management firm in Atlanta and Denver and Tampa and Phoenix or wherever you are. And if you’d like to take your retirement planning or retire sooner, journey to the next level, Capital Investment Advisors would love to help. You can find our team and schedule a time to chat at . Now let’s look at what inflation has essentially done to every dollar or collectively in your wallet. In this case, we have to look at the now famous CPI data. As you pointed out, it’s now famous. Everybody knows what CPI is.

      Mallory Boggs [00:13:54]:

      It’s having its 15 minutes of fame. So, great. Yeah, let this be like a shorter lifespan than the Kardashians.

      Wes Moss [00:14:03]:

      That’s funny. The overall CPI, so overall CPI was 260 back in January 2020. Same exact periods of time that we looked at car dollars. And you can see that. And then by March of this year CPI, the overall CPI level is at 301. So 260 to 301, that’s a 16% increase in aggregate price. Everything aggregate prices. That’s all the major categories. That’s everything from eggs to bread to barbecues, beer, gasoline, cars, airline tickets. This is the overall CPI number.

      Mallory Boggs [00:14:39]:

      That’s such a high number for everything.

      Wes Moss [00:14:44]:

      In aggregate, everything’s 16% more than it was. That’s quick.

      Mallory Boggs [00:14:49]:

      And looking at that in reverse, essentially our $1 is worth eighty four cents.

      Wes Moss [00:14:54]:

      Now, mathematically, $1 is worth eighty six cents today.

      Mallory Boggs [00:14:58]:

      Eighty six. This is why you’re the numbers guy.

      Wes Moss [00:15:01]:

      Connor Miller, our CIO, helped me out with that number. So again, a buck in 2020 is now worth $0.86 no matter what happens to the inflation rate. 15 minutes of fame CPI. What’s the annual CPI. It’s very improbable that the $0.86 will ever return to being worth a dollar. It’s not going to happen unless, again, we have deflation, which we talked about is very improbable, very unlikely, and something that would create a whole nother set of problems. And we’ve seen this very rapidly over just three years. It was a much less steep line going back to 2011 until 2020, the ten years prior. Very little inflation, one to 2% a year. But it’s still there. The dollars are still wilting. They’ve wilted very quickly over the last couple of years. They wilted more slowly for the decade prior to that. And that’s why it didn’t get a lot of press. We just didn’t really we weren’t worried about inflation as much because it was so nascent. But we know it’s going to continue. And it’s almost this insidiousness that will just continue. Sometimes it’ll be fast, sometimes it’ll be slow. And that’s why cash that’s not keeping up with inflation creates a major problem. So once you’ve saved enough emergency cash and again that amount is different for everybody, then it’s time to start looking elsewhere for the rest of your capital and the rest of your wealth. The good news is there are a lot of places we can put it that could potentially keep up with inflation. I think of it as we want to make sure that we are placing our dollars not just in our wallets that are earning zero, but in other assets that have the ability to inflate along with inflation. What could that be? Homes, real estate, 401K, IRA, stock options, businesses, private businesses. All of those areas have the potential to keep up with inflation. An actual physical dollar in your wallet, in a safe is earning zero. Or a bank account that’s earning zero is equivalent of a wilting dollar. Even bonds today are now keeping up with inflation. For the most part. The important thing is to avoid the wilting value of cash. And here’s the good news, or here’s the bottom line is that we got a lot of good options here in the United States. We are a country with bountiful opportunities to find things that inflate along with inflation. Growth stocks, dividend stocks, mutual funds, ETFs, real estate funds, all of those, even though there’s much more volatility in those investments over time, we’ve seen the US equity market be one of the most formidable places to combat inflation. And the only way to combat inflation is that our dollars keep up with inflation.

      Mallory Boggs [00:18:01]:

      So our dollars should join us in the US army.

      Wes Moss [00:18:05]:

      They should join us in the army of productivity and not be stuck in the break room doing nothing. They need to be working for us as well. And again, the great news is there’s a lot of places that we can find to do that. So rather than putting our heads in the sand, rather than naivety. I look at this perspective as a way to really understand why we almost have no other choice but to invest, even though we’ve got all these problems at any given time. Whether it’s we don’t like Congress, or who’s in Washington, or we’re on the precipice of a recession, or in a recession, or coming out of a recession, or the unemployment rates going up, or the stock market’s overvalued, or there’s a constant set of problems of why we don’t want to invest. And pessimists always make great arguments of why you shouldn’t have your money invested anywhere. But when you really look at just how immutable inflation is, sometimes it’s slow, sometimes it’s fast, but it’s almost always there and it just keeps going. The way I look at it is we almost have no choice but to invest to combat wilting dollars.

      Mallory Boggs [00:19:17]:

      Hey y’all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us at That’s Wes You can also follow us on Instagram and YouTube. You’ll find us under the handle @Retire SoonerPodcast. And now for our show’s. Disclosure this podcast is provided to as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. It is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment or financial planning considerations. Please refer to the full disclosure in the podcast description for any additional information.


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