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How do you protect yourself?
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How do you protect yourself?

Borrow at low fixed rates.

AJ
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Stocks work very well provided they are industry leaders able to pass through price increases.

Land ownership is probably best especially if it is productive land like say a tree farm, farm land, pasture land.

The product produced can ideally be priced to cover for inflation. You want enough return to cover maintenance costs like taxes and insurance. Ideally you can hold long term.

Any collection can work too, but finding one that consistently appreciates can be a problem. Antique autos? Baseball cards? Art? They say coins and stamps or antiques are not so good these days.
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aj485 writes,

<<How do you protect yourself?>>

How do you protect yourself?

Borrow at low fixed rates..

</snip>


Of course, the fact that you can "Borrow at low fixed rates", means that the people lending you the money don't believe there will be much in the way of inflation.

intercst
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Of course, the fact that you can "Borrow at low fixed rates", means that the people lending you the money don't believe there will be much in the way of inflation.

Some people still believe in the Easter Bunny. They are in for a big surprise.
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Some people still believe in the Easter Bunny. They are in for a big surprise.

It was delicious.

PSU
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The long term historical inflation rate is about 3.5%. Getting a long term, non-callable, tax-advantaged loan at 3.5% is the deal of a life time.
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Rayvt analyzes,

<<Of course, the fact that you can "Borrow at low fixed rates", means that the people lending you the money don't believe there will be much in the way of inflation.>>

Some people still believe in the Easter Bunny. They are in for a big surprise.

</snip>


I've been betting against conservative's predictions of inflation for 25 years. It's worked out very well.

The only thing we need to fear is racism, ignorance and innumeracy. I hedge against that by being attentive to the tax code and taking every tax break available to me.

I feel very confident that poor to middle-class people ignorant of arithmetic and the tax code will continue to shield me from a wealth tax.

No one ever lost money betting on the racism and ignorance of the American people.

intercst
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You had better hope for inflation -- the only times we have not had inflation recently were the 1930s and when government froze prices.

If you think we are in for a period like the 1970s, that is a matter worthy of discussion - for the record I am on the side of believing the Fed. The Fed more data and they are very well aware of the dangers.
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We have been in an inflationary era all of our lives. A part of the recovery from the Great Depression was planned (controlled?) inflation. WW 2 was paid "On the Cuff" more inflation. Ditto Korea, then Viet Nam. Eisenhower's Interstate Highway system was all on credit (Can anyone say inflation?) In 1961 a new Ford Falcon cost $2000. How do I know? I bought one. How much is a budget low-end car today? It doesn't even matter which party was (supposedly) in control. Inflation is a fact of life in the US for a hundred years. Te last time anyone tried to control inflation was Herbert Hoover - just before the Great Depression. Whether you notice Carter, Reagan, or either Bush - just more inflation.

Has it mostly been a good thing? Yes, except for the older folks living on a fixed income or on savings. It hurts them.

CNC
... not complaining
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GWPotter writes,

You had better hope for inflation -- the only times we have not had inflation recently were the 1930s and when government froze prices.

If you think we are in for a period like the 1970s, that is a matter worthy of discussion - for the record I am on the side of believing the Fed. The Fed more data and they are very well aware of the dangers.

</snip>


Sure. The whole economy is designed to operate with about a 2% annual inflation rate. A retiree who took a $40,000 withdrawal from a $1 MM portfolio in 1994 when I retired is drawing $69,620 in 2021 using the CPI-U as the inflation measure. That's just shy of 2% annualized.

Of course, every time someone tries to do something for the poor or middle-class, the deficit scolds (of both parties) start to warn about runaway inflation. It hasn't happened and won't likely happen in the future as automation keeps labor wage increases in check, and there's no shortage of manufacturing capacity, food production, etc. You may see some temporary price spikes due to one-off events like the chip shortage for automobiles due to a factory fire in Asia, or random transporation bottlenecks causing problems, but long-term 5%+ inflation rates? I think not.

intercst
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The long term historical inflation rate is about 3.5%. Getting a long term, non-callable, tax-advantaged loan at 3.5% is the deal of a life time.

What then would you call getting a long term, non-callable, tax-advantaged loan at 2.5%?

And there are still people telling me that you should pay off your mortgage before you retire.
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In 1961 a new Ford Falcon cost $2000. How do I know? I bought one.

How interesting.

I found that price hard to believe but Google confirmed it. Why did it seem so wrong to me? Because I bought my first new car fifteen years later in 1976, and paid roughly $1700ish. Mine was a pretty basic (but not the absolute bottom) Toyota Corolla, but the Falcon wasn't exactly a fancy car either. The idea that I paid less after 15 years of inflation just threw me. I guess it makes it pretty clear how the Japanese did so well vs. Detroit.


(Unrelated, but in 1982 I bought my first house at what must have been pretty close to the peak of those strange times: 20% down, 30 year, 16% variable with no cap.)
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And there are still people telling me that you should pay off your mortgage before you retire.

We hadn't had a mortgage in over a decade, but I took a 30 year at 2.75% when I bought a new house last summer at age 67. When I sell my old house (soon, I hope) I won't be putting it toward the mortgage. Instead a bit of it will pay taxes on an IRA to ROTH conversion up to the top of a tax bracket, among other fun things.
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What then would you call getting a long term, non-callable, tax-advantaged loan at 2.5%

Overpaying. ;P

Hawkwin
Sitting on his 2.25% 30yr VA loan.
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"How do you protect yourself? "

***********************************************************

Continue to try to make as much of an income as I can.

Howie52
Never forget about the "prosper" in the "Live Long and Prosper" wish.
We are here to help ourselves do exactly that.
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(RHinCT:) I bought my first new car fifteen years later in 1976, and paid roughly $1700ish. Mine was a pretty basic (but not the absolute bottom) Toyota Corolla, but the Falcon wasn't exactly a fancy car either.
----------------------------
And your figures grabbed my eyes too. Because I bought MY first new car in 1976. And it was a Toyota Corolla. And I paid about $3,900 for it. But it was a 4-dr. sedan with an automatic transmission and the larger engine - probably the top edition for the Corolla model. But most definitely not a fancy car.

Bill
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Fine. We're comparing first new cars? My first new car was a 1984 Toyota Corolla. Paid just under $8000 out the door. (OK - $197 a month for 5 years. Forgot the down payment at this point.) And it was mostly bottom of the line. Manual transmission, manual windows, cloth seats. Air conditioning was the fancy part.

One of the two best cars I've owned.

--Peter
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First new car - Econoline Van E-150 in 1975 with dual gas tanks. Would hold 600+ miles of driving - very good for the times - and a way around 'gas rationing' happening about then.

Think about $4800 - basic van, ac, only front seats.....could sleep in back -

- --

Also in 1977 bought new International Scout - a year old model - 4 banger - 4 on floor. white in color. 4 wheel drive with manual hubs. Everyone wanted 'color' one with V8. And a/c. This was an orphan that sat around six months. Got a real good deal on it. Think like $3500. Lived on 2 mile gravel road with steep hill - needed it in winter to get home at times.

---

In 1983, bought a Nissan Sentra - low end 4 banger, auto trans, a/c. Sold the van - too big for DC area when I moved. Sold the Scout, too. Only needed one car in DC as I rode subway most of time to work.

---

Got transferred to TX. Sold the Sentra - it could barely do 65.....and in TX, that is a slow poke. Bought Honda Accord. Kept in 17 years.

- ---

Been through several cars in TX....

---

But my very first car was a $50 old Pontiac.....bought for a summer job in 1965. My sis got it for going to school. Later I got a $100 11 year old VW Bug 1957 .....had it 18 months. Sis inherited that one too...for another year.

Got out of college and bought a used $1300 Mustang - 3 years old.

Been through some fun cars. Got them out of my system.

Now the road car is a 2016 Chevy Malibu. Around town car is 14 year old Prius. Both bought new.

t.
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Because I bought MY first new car in 1976. And it was a Toyota Corolla. And I paid about $3,900 for it. But it was a 4-dr. sedan with an automatic transmission and the larger engine - probably the top edition for the Corolla model. But most definitely not a fancy car.

Mine was 2 door, 5 speed manual transmission. I'd never driven a stick shift. The salesman taught me over the course of a few evenings while we waited for mine to arrive. Mine differed from the absolute basic model in two ways I can remember. It had carpet instead of a rubber floor, and it had an AM/FM radio instead of just AM. I'd finished college the previous December, started my first career job the following April, and drove my old heap of a college commuting car until I bought the Corolla in November. The first significant fruits of my success! 8-)
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First car 1972.

First new car 2009.

Toyota Corolla. Still driving it.

Saved enough to retire early.

Are we back on topic?
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1st new car was, I think late 1984, after college graduation. A VW Jetta. I don't remember what I paid for it. Totaled a couple of years later and replaced with a cheap used car.

Have bought a few new and a few used since then.
Never anything all that expensive.

Last new one was a 2006 Pontiac Vibe, still going strong. Probably cost around $17-18k?

Don't know if I'll ever buy new again. I've got the money, but get sticker shock.
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Last new one was a 2006 Pontiac Vibe, still going strong.

My first new car was a 2003 Pontiac Vibe GT. $15.5k. Needed a four door when 1st kid came along, the Miata wasn't going to work. My current car, bought new, is a 2019 VW GTI. $26.5k. There's inflation for you. Of course, the GTI is a much, much better car, similar utility - both are 4-door hatchbacks.
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Needed a four door when 1st kid came along, the Miata wasn't going to work.

My Vibe replaced a 1991 Geo Storm - definitely a non-child-friendly 2 door hatchback, with a small backseat and sloping roof line. Although I made it work for many years, mostly for commuting. My wife's Olds Alero was a much better choice for rear seat passengers, so we always used that if all three of us had to go somewhere together.

With 15 years on the Vibe, I'm about due for a replacement, but there is no rush, as it still runs well and is reliable.
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You need to ask yourself, When you are 70 or 80 years old, how old of a car do you want to be driving?

For sure, when I'm 70 years old I don't want to be driving a 15 or 20 year old car. Or even a 10 year old car.
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You need to ask yourself, When you are 70 or 80 years old, how old of a car do you want to be driving?

For sure, when I'm 70 years old I don't want to be driving a 15 or 20 year old car. Or even a 10 year old car.


Why not?

PSU
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Funny. I judge by a game show. The Price is Right. When I was a kid (pre-teen), I watched that show a lot. The new cars were always around $3K-$5K. Nice cars (for the time). Fords, Chevys, etc. No Audis or Porsches. I know what new cars cost today. Comparable vehicles would run between $20K-$25K. So in over 40 years the prices have gone up roughly 500%. Of course we get a feature-laden vehicle, where back in the day you got a basic radio and maybe a shoulder restraint to go with that lap belt.

I don't worry much about inflation. The Fed is obsessed with controlling it, and hopefully my portfolio is appreciating at a rate greater than inflation.

1poorguy (planning on pulling the trigger at the end of this year...will be fully vaccinated, should be healthier and/or more recovered from various issues we have had the past 18 months, and my worst-case modeling says we won't run out of money)
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"For sure, when I'm 70 years old I don't want to be driving a 15 or 20 year old car. Or even a 10 year old car."

why not? My Prius 2007 is now....14 years old with 65K miles. Keeps on running, gets 43 mpg. why should I replace it? When it starts giving me problems, I'll trade for something newer.

My road car is a 2016 Malibu - with 130,000 miles. Probably keep it to 170K and look for something new at that point. Another 2 years or so....

Have gone through a bunch of road cars - 6-7 years - 175 to 200K miles.

these days, 10-15 year old cars have another 10 good years left in them If they are Toyotas, Hondas, Lexus, etc. Other brands - well, that's iffy. Especially Jeep , Fiat made cars of all varieties, etc.


t.
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You didn't ask me, but my answer would be driver-assist features. Of course I'm 12 years from being 70. We're buying a new car NOW because the driver-assist features will make me a safer driver. And if I have an episode similar to when I shattered my spine last year, the car can brake without hitting anything.

Right now I won't use cruise control on my existing vehicle because if something happens to me, the vehicle will collide with something at 65mph. If I don't use cruise control, it will at least be slowing down before I wrap it around a concrete overpass support. The new vehicle will have lane-keeping, adaptive cruise control, blind-spot monitoring, and emergency braking. So I can do road trips again, and use cruise control.
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"Right now I won't use cruise control on my existing vehicle because if something happens to me, the vehicle will collide with something at 65mph. If I don't use cruise control, it will at least be slowing down before I wrap it around a concrete overpass support. The new vehicle will have lane-keeping, adaptive cruise control, blind-spot monitoring, and emergency braking. So I can do road trips again, and use cruise control."


If you are subject to 'blackouts' or whatever, no matter how smart the car - you shouldn't be taking 'road trips' until we really have total autonomous vehicles that can transport you in safety.

It won't make you any safer a driver when it comes to blacking out then killing a few people as your lane assist can't find the lines and you collide head on with a van full of children.


t.
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You need to ask yourself, When you are 70 or 80 years old, how old of a car do you want to be driving?

For sure, when I'm 70 years old I don't want to be driving a 15 or 20 year old car. Or even a 10 year old car.


Depends on where I am driving that vehicle. I'm quite comfortable, stress-free in driving my 1992 Toyota Camry station wagon around town. (I've never have been stranded while driving that vehicle) Not comfortable, stress-free driving it across country. The potential break down always in the back of the mind on such a trip. Then I rent a vehicle. They are no more than a year old. And if they break down I call the rental company & demand to be picked up & a replacement vehicle. I never had a rental vehicle quit working on me. So I don't know what the response of the rental company would be.
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why not? My Prius 2007 is now....14 years old with 65K miles. Keeps on running, gets 43 mpg. why should I replace it? When it starts giving me problems, I'll trade for something newer.

Play the odds.
With an older car, the first time it gives you trouble may well be on the highway 50-500 miles away from home.

Like when our Honda CR-V told me it was time to get a new battery. In the parking lot of Walgreen's 20 miles away from home. Up to that point, it had NEVER given any sign of trouble. Even after sitting in the garage untouched for days at a time.

And, really, what's the point?
Say you are 70 years old, figure on the outside you have 20 more years. Your 14 year old car is unlikely to last to be a 34 year old car. So you *are* going to be buying another car in your lifetime. Why not now, instead of in 10 years?

When my Mom died, she had a closetful of new clothes with the tags still on them. She wouldn't wear them because her old clothes were not worn out yet. What was she saving it for?
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And, really, what's the point?
Say you are 70 years old, figure on the outside you have 20 more years. Your 14 year old car is unlikely to last to be a 34 year old car. So you *are* going to be buying another car in your lifetime. Why not now, instead of in 10 years?


In 10 years, EVs will be much more improved. Maybe 100% autonomous driving will be available. If the older car is serving your needs, you can wait for the improvements.

PSU
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In 10 years, EVs will be much more improved. Maybe 100% autonomous driving will be available. If the older car is serving your needs, you can wait for the improvements.

</snip>


I don't think you'll have to wait 10 years for 100% autonomous driving, at least on limited-access, interstate highways.

I've been evaluating getting a plug-in hybrid RAV4 PRIME, but I'm putting a set of tires on the 2005 Nissan instead. In 2 or 3 years the Toyota will likely be obsolete versus the features on new cars.

intercst
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My first new car was a 2003 Pontiac Vibe GT. $15.5k.

Thread drift is an interesting thing. This thread was supposed to be about inflation. I mentioned my first new car as an illustration of inflation. This post illustrates my point nicely. In 1961 my new Ford Falcon cost @2000. In 1961 a new Cadillac cost $10,000 - less than your Pontiac. Can you buy a new Cad for less than $60K now?

CNC
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why not? My Prius 2007 is now....14 years old with 65K miles. Keeps on running, gets 43 mpg. why should I replace it? When it starts giving me problems, I'll trade for something newer.

Play the odds.
With an older car, the first time it gives you trouble may well be on the highway 50-500 miles away from home.

Like when our Honda CR-V told me it was time to get a new battery. In the parking lot of Walgreen's 20 miles away from home. Up to that point, it had NEVER given any sign of trouble. Even after sitting in the garage untouched for days at a time.


We drove our Chevy Venture 200,000 miles. It was a great road car, with an easy 500 mile range between fuel stops. One time in Palm Springs the load leveling apparatus died, and the rear end was higher than the front end. The parts had to be ordered from Los Angeles, so we had an extra couple of days in PS.

CNC
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It's a little strange to look all the way back to the 60s (or before)....due to the 7 years or so of REALLY HIGH inflation - with treasury notes at 13% in about 1983. From, what, 1977 to 1983, inflation ran super high. buy it this year as next year it will be 10%...or more!

Some lucky folks loaded up on 30 year t-bills at 13% interest around 1983.....then the rates fell quickly to mid single digits....

Mortgage interest rates were - close to 13% if I recall right. I bought a townhouse in 1983. Ouch! but refinanced it twice within 7 years to lower rates! to way less of that quickly as rates plummeted.


http://www.freddiemac.com/pmms/pmms30.html

Now, it's 3%.....


t.
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"With an older car, the first time it gives you trouble may well be on the highway 50-500 miles away from home."

My Prius rarely gets more than 25 miles from home. IT's the around town car. Got the HID lights - great for night vision. Good visibility all around, easy to park, scoots well. So far so good.

YEah, you don't want a 20 year old road car with 200K miles. by then, too many things are living on borrowed time- water pump, radiator, transmission, wheel bearings, CV joints, exhaust system, computer, etc. Brakes, master cylinder, alternator, etc. The more gizmos on your car, more things to fail..

Batteries die. Heck, AAA will replace them anywhere for a service call. Or get them checked once a year. Around here - they'll die in 5-6 years likely. Up north where it hits 30 below - probably 3-4 years.

t.
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Mortgage interest rates were - close to 13% if I recall right. I bought a townhouse in 1983.

We paid 14% on the townhouse we bought in 1984.
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I don't think you'll have to wait 10 years for 100% autonomous driving, at least on limited-access, interstate highways.

I've been evaluating getting a plug-in hybrid RAV4 PRIME, but I'm putting a set of tires on the 2005 Nissan instead. In 2 or 3 years the Toyota will likely be obsolete versus the features on new cars.


I don't keep track of the various levels of autonomous driving but when I made my comment, I was thinking of a car that can navigate NYC during the middle of the day without ever touching the steering wheel. That's a lot different than cruising a rural interstate highway.

PSU
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Also, "obsolete" is a given. When you buy your car it's already obsolete. There are new features, new tech, already in the works for the next year's models (perhaps even two years out).

Not sure about your NYC example. A divided highway with no cross-streets should be a lot easier than city streets with pedestrians, cyclists, drivers trying to change lanes at the last second, "men at work" signs, etc.

Just my intuition.

I'm less optimistic than you, regardless. After seeing the NOVA about autonomous driving, I think we're a really long way off from that. Maybe on interstates where all the traffic is going the same direction. But I never really appreciated how complex of a task is driving until I saw the program. We humans do it with ease (mostly), but trying to get a machine to do it is immensely difficult. If you haven't seen it, it's a great program. Well worth watching if you're at all interested in the topic.

1pg
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That's a lot different than cruising a rural interstate highway.

I think autonomous driving on an interstate highway would be a game changer. Driving in New York City traffic when most people use public transit is a novelty. The big explosion will come when interstate highway driving goes autonomous.

All the 18-wheel tractor-trailers will be unmanned, and you'll have human drivers for the 2 to 25 mile trip from the depot at the end of the exit ramp to the final destination. Trucking with be a 40-hour job again and you'll get to go home at night. No shortage of takers for a job like that.

I think most business people would prefer a 3-hr ride in their Escalade to airline travel, when you can drive door-to-door and do work while in "autonomous driving mode", which is the bulk of the trip.

intercst
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Also, "obsolete" is a given.

Sure, but there's different levels of obsolescence. Going from lane-monitoring and automatic braking to full-self driving, even only on Interstates, is a huge step up.

intercst
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think autonomous driving on an interstate highway would be a game changer. Driving in New York City traffic when most people use public transit is a novelty. The big explosion will come when interstate highway driving goes autonomous.

If you are interested, there is a long discussion in this book: https://www.amazon.com/Energy-Disruption-Triangle-Sectors-Ge...

The author predicts "trains"of driverless trucks being led by one truck with a driver. The others just follow along connected only by computers.

I suspect the Teamsters will not be enthusiastic about this development.

CNC
... but, do read the book.
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CNC writes,

The author predicts "trains"of driverless trucks being led by one truck with a driver.

</snip>


We're already beyond that.

https://spectrum.ieee.org/transportation/self-driving/this-y...

Among nearly a dozen companies developing autonomous trucking, San Diego–based TuSimple is trying to get ahead by combining unique technology with a series of strategic partnerships. Working with truck manufacturer Navistar as well as shipping giant UPS, TuSimple is already conducting test operations in Arizona and Texas, including depot-to-depot autonomous runs. These are being run under what’s known as “supervised autonomy,” in which somebody rides in the cab and is ready to take the wheel if needed. Sometime in 2021, the startup plans to begin doing away with human supervision, letting the trucks drive themselves from pickup to delivery without anybody on board.

</snip>


Note: This is a truck carrying "revenue producing" freight, not an experiment.

intercst
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"Note: This is a truck carrying "revenue producing" freight, not an experiment.

intercst "

***********************************************************************

What happens if they hit a deer or a bear?

Howie52
Likely the same as if a car or truck I was driving hit a deer or a bear - but without
my head hitting an air bag or windscreen.
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What happens if they hit a deer or a bear?

The truck autonomously moves to the side of the highway and stops, then radios headquarters for assistance. A human operator looks at the 360 degree video feed from around the truck and assesses the situation. Then likely hires a local tow truck operator to remove the carcass from the grill and sends the truck on its way.

intercst
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intercst:
We're already beyond that.

https://spectrum.ieee.org/transportation/self-driving/this-y......

The next step, as described in the book,is to have other, driverless trucks trailing behind the lead truck. What you describe still requires a driver in each truck, no?

I can see mischief in driverless trucks - Forcing them off the highway, for instance - the automation likely wouldn't allow them to hit another vehicle. Another vehicle with driver trailing as "shotgun" to identify such activity might be needed.

CNC
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What happens if they hit a deer or a bear?

The truck autonomously moves to the side of the highway and stops, then radios headquarters for assistance. A human operator looks at the 360 degree video feed from around the truck and assesses the situation. Then likely hires a local tow truck operator to remove the carcass from the grill and sends the truck on its way.

intercst


Meanwhile the truck gets looted.

CNC
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"What happens if they hit a deer or a bear?"

if a deer hits an 18 wheeler, it is good bye deer..and the truck carries on. 50,000 lbs beats 300. Now, if it's a 1300 lb moose - truck loses too......

There are 100,000 deer accidents a year - at least - maybe that many in MI alone.....

You see lots of dead deer early in mornings on many roads - trucks just keep on a going.....maybe a dent in the bumper....


t.
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What you describe still requires a driver in each truck, no?

</snip>


TuSimple says they're removing the safety driver from the truck this year (2021). Another self-driving truck operator had a truck make a 9 mile run on the Florida Turnpike in 2019, in the middle of the day with no human on board. Florida state officials approved the experiment on the open highway with civilian traffic.

https://www.sun-sentinel.com/business/fl-bz-driverless-truck...

Florida motorists might be sharing the state’s highways with driverless semi-trucks sooner than they realize. In fact, some have already done so and not known it.

</snip>


intercst
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CNC writes,

I can see mischief in driverless trucks - Forcing them off the highway, for instance - the automation likely wouldn't allow them to hit another vehicle. Another vehicle with driver trailing as "shotgun" to identify such activity might be needed.

</snip>


You only have a trailing vehicle with armed men for high value cargo like nuclear materials. Drivers aren't going to engage in a gun fight with "looters" over a shipment of frozen peas.

If there's any monkey business on the highway, the system alerts HQ and they call the police, with full 360 degree, high definition video of the incident as evidence.

intercst
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" they call the police, "

***********************************************************

Good plan in some locales.
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What then would you call getting a long term, non-callable, tax-advantaged loan at 2.5%

Overpaying. ;P

Hawkwin
Sitting on his 2.25% 30yr VA loan.


And we refied to 2% back in January.

IP
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Sitting on his 2.25% 30yr VA loan.

And we refied to 2% back in January.

I'm jealous of you guys. I wanted to refi, but I never saw rates that good. I think my mortgage is too small.
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syke6,

I wanted to refi, but I never saw rates that good. I think my mortgage is too small.

</snip>


Mark Zuckerberg has a 1% mortgage.

https://www.thetruthaboutmortgage.com/facebook-founder-mark-...

intercst
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So should we just continue to borrow indefinitely to help the poor and middle class? We are at over 100% of GDP debt. But Japan is over 200% GDP debt. At what point can we no longer increase the debt-to-GDP ratio? Is borrowing to help the poor and middle class sustainable?
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Darryl44 asks,

So should we just continue to borrow indefinitely to help the poor and middle class? We are at over 100% of GDP debt. But Japan is over 200% GDP debt. At what point can we no longer increase the debt-to-GDP ratio? Is borrowing to help the poor and middle class sustainable?

</snip>


The same questions were asked while we flushed $4 Trillion of deficit spending down the toilet in Iraq & Afghanistan and borrowed $2T to fund the 2017 billionaire tax cuts. The answer was "deficits don't matter" as long as our folks are getting the lucre.

But you're right. Eventually taxes will have to be increased to match spending. After 25+ years of being early retired and living off an investment portfolio, I've been astonished at how lightly taxed I am. The dumbest thing you can do in America, tax-wise, is work for wage & salary income. We really need to bring the "People of Leisure" like myself up to same tax level as working folks with the same income and wealth.

A good place to start would be the elimination of the "stepped up basis" on estates. What's up with that? Pay your kid $100,000 to do a job and it's wage & salary (income tax and FICA applies.) Die and give him a $100,000 and it's all "tax-free"? And people have a bug up their behind because some poor person got a $300/week bump in his unemployment check?

intercst
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So Biden wants a 49% marginal capital gains rate with a forced collection at death. A new middle class death tax. Yeah, he's asking for a $1M exemption, but that might end up being much lower and even halved for singles...he'll claim the $1M was for couples, the same way he's trying to welsh on his no tax hike for under $400,000. And Bernie Sanders and gang wants to lower the estate tax exemption to $3.5M from the currently schedule $6M in 2026.

So at the margin, on assets with a zero basis, a 49% capital gains tax and about a 50% estate tax. If I do the math about right, the heirs end up with about 25 cents on a dollar. I agree this won't hit the little guy, but it does hit family businesses. And is it really American to take 75cents of someone's dollar at death?
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Daryll44 asks,

So at the margin, on assets with a zero basis, a 49% capital gains tax and about a 50% estate tax. If I do the math about right, the heirs end up with about 25 cents on a dollar. I agree this won't hit the little guy, but it does hit family businesses. And is it really American to take 75cents of someone's dollar at death?

</snip>


The "stepped-up basis" at death has been a part of the tax code for nearly 100 years. In an earlier post, I demonstrated that merely avoiding paying a financial advisor a 1% fee over 60 years increased the value of the account by 76%.

https://retireearlyhomepage.com/vg_advice.html

What would be the effect of avoiding say a 10% tax over 100 years? I haven't done the calculation, but I wouldn't be surprised if 95% of the value of these billion-dollar multi-generational family fortunes is due to the "stepped-up" basis and tax avoidance. They're getting off easy if they're only going to pay a 75% tax.

intercst
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The issue isn't the multi-billionaire families. It's the investor-class families well below that level.
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I agree this won't hit the little guy, but it does hit family businesses.

</snip>


That's what Berkshire Hathaway is for. If your family business is worth at least $100 million and you have competent management in place and a reasonable succession plan, Warren will buy it in exchange for BRK stock and leave the family members in day-to-day control of the business. You can then sell-off sufficient BRK shares to pay the estate tax and keep the family business.

Warren isn't interested in running your jewelry store as long as the family is providing a sufficient ROI. See page 6 of the 2015 Chairman's letter to Shareholders

https://berkshirehathaway.com/letters/2015ltr.pdf

intercst
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That's just pie-in-the-sky talk around my main point: It's unAmerican and ruins the secret sauce of America to take 75% of someone's assets at death. But you're OK with it, so go for it.
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That's just pie-in-the-sky talk around my main point: It's unAmerican and ruins the secret sauce of America to take 75% of someone's assets at death. But you're OK with it, so go for it.

So, call it trickle down. The money doesn't know who has it or where it's coming from. Having wealth means it's not in the economy. At least if the Gov takes it it does something. And that's the secret sauce of economics. Having some rich guy and his drunken relatives keep it out of the economy and offshore it enhances and contributes to nothing
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Daryll44 asks,

That's just pie-in-the-sky talk around my main point: It's unAmerican and ruins the secret sauce of America to take 75% of someone's assets at death. But you're OK with it, so go for it.

</snip>


I'd say it's more unAmerican to screw the poor and middle-class in favor of giving a huge tax benefit to the wealthy.

A few weeks ago they reported that the scion of the family that owns Samsung paid a $10 Billion inheritance tax. I've detected no shortage of investment or innovation from Samsung over the past 40 years, have you?

https://www.cnbc.com/2021/04/28/samsung-inheritance-lee-fami...

The "secret sauce" remains intact despite taxation.

Of course, the average Korean is much better at math than the average American. The wealthy have traditionally been able to use the widespread racism, ignorance and innumeracy of that "special" 35% of the population to their advantage and get them to support policy that is clearly against their economic interests. Perhaps that's changing?

intercst
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That's just pie-in-the-sky talk around my main point: It's unAmerican and ruins the secret sauce of America to take 75% of someone's assets at death. But you're OK with it, so go for it.

Obviously, you don't know your history. The top estate tax rate was 70%-77% between 1935 and 1981 and 50% or more between 1934 and 2002.

Ira
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What's unamerican about it?

Tax rates used to be a LOT higher, both income and estate taxes.
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Ira:"Obviously, you don't know your history. The top estate tax rate was 70%-77% between 1935 and 1981 and 50% or more between 1934 and 2002."

And obviously, you're not aware, and don't know your history. According to The Millionaire Next Door by Stanley, almost zero millionaires pay a dime in estate taxes - over the last 50 years.
Only those that stumble into the estate tax limits at the bottom end wind up paying some estate taxes.


Those with five million or more employ tax planners who neatly sidestep the taxman at death and have been doing it for a hundred years.

Even folks like the Kennedy clan have nearly all their real estate in a family trust. They 'rent' their houses, and when they die, the house is not an asset - even though it might be worth 10 million..... it's in the family trust.

t.
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That's just pie-in-the-sky talk around my main point: It's unAmerican and ruins the secret sauce of America to take 75% of someone's assets at death.

If you're worried about your estate having to pay an estate tax before your heirs get your wealth and/or your heirs having to pay a capital gains when they inherit upon your death, then you could always solve the whole problem by giving away all of your money before you die, and taking the tax benefit to do so.

AJ
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That's just pie-in-the-sky talk around my main point: It's unAmerican and ruins the secret sauce of America to take 75% of someone's assets at death. But you're OK with it, so go for it.

I thought the secret sauce for America was making the money yourself and working hard to get it. It seems UnAmerican to give someone a lot of money so they can sit around and do nothing. But what do I know? My Grandparents where homesteaders and built their wealth up all on their own, just like I have.

Andy
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I thought the secret sauce for America was making the money yourself and working hard to get it. It seems UnAmerican to give someone a lot of money so they can sit around and do nothing. But what do I know? My Grandparents where homesteaders and built their wealth up all on their own, just like I have.

That used to be the secret sauce. Now the tax code rewards speculation and punishes honest labor. In the words of Ronald Reagan "If you want less of something, tax it." The tax code is designed to discourage paid work. From a tax standpoint, earning a living by doing productive work is like taking a punch to the face.
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My Grandparents where homesteaders and built their wealth up all on their own

As homesteaders, your grandparents did not build their wealth on their own. They built their wealth on land taken from Native Americans by force.
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"As homesteaders, your grandparents did not build their wealth on their own. They built their wealth on land taken from Native Americans by force."

Depends where.....some cases, yes...some cases no....

and Native Americans fought each other - the 100+ different tribes - over the same land - time and time again. tribes came and went.

there were many residents of places like Mesa Verde, Chaco Canyon, and a hundred other places that were occupied and abandoned.

ever hear of Cahokia IL? Look it up. the Mound builder of Cahokia.....

But..even NY city was 'bought' from the Native Americans..... and same for some of the lands west.

In TX, the Spanish held much of the land....taken by force. Who owned much of the west? Hmmm..the French. We bought 'the Louisiana Purchase' much of the western US.

Folks moved west....and occupied land and farmed it, ranched it.

After the white folks killed off the buffalo, the nomadic tribes no longer had a food source and were relegated to reservations.....

then we started raising steers.....for meat...


t.
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As homesteaders, your grandparents did not build their wealth on their own. They built their wealth on land taken from Native Americans by force.

That is a good point spinning. But that was the way of the world back then. Everyone on this board has made their money on the backs of other people, because the place you are living in right now, was at one time taken from someone else. The indigenous people took it from other indigenous people, and so on and so on. It was a brutal world, where people had to work hard to survive. People have to adapt for the times they live in and nobody should judge the past with what the world is today. At least that is my thoughts.

Andy
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A bit of raw truth emerges the more we look back and then evaluate current events in light of history and the way it repeats (or rhymes).

It really is a jungle out there.


Law of conquest (winners make the rules, etc) still is in effect. Always has been, still is (just more nuanced).
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the place you are living in right now, was at one time taken from someone else.

That is true and has probably been going on since we came down from the trees. But this contradicts the idea that we are self-sufficient. The idea that higher taxes are somehow un-American is nonsense. The US was built on wealth redistribution from slaves and Native Americans and women and immigrants and, well, the list is long. This is not about guilt. I don't feel guilty for the crimes of my ancestors and I don't want to shame the descendants of those who committed crimes against my other ancestors. The world was what it was. But higher taxes and wealth redistribution are decidedly not un-American, they are a central part of our history. If you want to argue that higher taxes are counterproductive to building a healthy economy that benefits everyone equally, go ahead and make that case. But don't hide behind false ideas of self-sufficiency and rose-colored glasses that filter out past injustice.
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If you want to argue that higher taxes are counterproductive to building a healthy economy that benefits everyone equally, go ahead and make that case. But don't hide behind false ideas of self-sufficiency and rose-colored glasses that filter out past injustice.

Spinning, I think you are trying to find an argument where none exists. I have never argued against higher taxes, and I find your argument of rose-colored glasses comical. Especially when you stated it is not about guilt or shaming descendants. Of course it is, you just can't come to terms with your own thoughts.

I never filter out past injustices, I just say so what, the past is the past. Acknowledge it and move on. If you choose to live in the past that is your problem not mine.

Andy
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Do you have a reliable source for your “Biden is going to take all your money at death” concern? Like actual laws being written and debated?
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SG: Do you have a reliable source for your “Biden is going to take all your money at death” concern? Like actual laws being written and debated?

I am sure everyone knows that only congress can pass tax laws, even the newbie (although he does seem retarded.) I am so tired of reading hysterical blather about "death tax" and the like. In this country we have an income tax. It's right there in the constitution. If your income has never been taxed, don't get your panties all in a wad because it is taxed at your death.

Before 1913 and the 16th amendment, the US taxed mainly imports (tariffs) - a tax 99% on on the rich. As Dillinger famously said when he was asked why he robbed banks, "That's where the money is." Until the 20th century, only the rich had enough money to be worth taxing. (Of course, the poor wound up paying for the excise taxes because the tax increased the price of the commodities the poor bought.) If the US collected no tax at all, how would we pay for all our aircraft carriers?

One of the biggest scams I see today is that wealthy families can just pass the wealth on to the next generation - continuously. My favorite example is the DuPonts. They have owned the state of Delaware (and a substantial part of the rest of the US) since the Civil war, . Generation after generation of people free-loading off the rest of us, meanwhile enjoying a lifestyle most of us can hardly imagine. That's not a good advertisement for our country and its tax system. The libertarians are fond of saying that the sales tax is a "fair" tax, but I say it is unfair because it unfairly taxes the poor on every cent they make (because they don't/can't afford to save.)

My wish would be that we return to the pre-Reagan taxes. Somewhere in the 1950's to 1960's era. OK, I think 90% tax is too much - how about between 50 to 70%?

CNC
... radical, bleeding heart liberal.
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As Dillinger famously said when he was asked why he robbed banks, "That's where the money is.

Said by Willie Sutton, not John Dillinger.

Goofy (pendant historian)
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"Goofy (pendant historian)"

More likely 'pedant historian'...

Neuromancer (pedant speller)
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pendant historian

Just made me think about things that are suspended. And then there's Franklin's "We must all hang together, or, most assuredly, we shall all hang separately."

Pete
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Said by Willie Sutton, not John Dillinger.

Goofy (pendant historian)


I humbly doff my hat.

CNC
... pedant wannabe
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(pendant historian)

Welcome to the club of typoists. I've made this exact mistake a few times - and been called on it every last stinkin' one of them.

--Peter
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Pendant historian

More likely 'pedant historian'...
Neuromancer (pedant speller)


Yeah, maybe. But how do you know I wasn’t just describing whether I wear boxers or briefs?
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My wish would be that we return to the pre-Reagan taxes. Somewhere in the 1950's to 1960's era. OK, I think 90% tax is too much - how about between 50 to 70%?

CNC
... radical, bleeding heart liberal.



Does that include going back to zero Medicare tax? And Social Security tax was a fraction of today's? And will there be "three martini" lunch tax breaks? And will there be zillions of cash business who skirt taxes? And will Forms-1099 go away? And will state and local taxes revert to 1950's levels? And will Social Security benefits become tax free again?

It's a myth that many actually paid 50% to 70% marginal back then.
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Does that include going back to zero Medicare tax? Medicare began in 1965. I like it, at least the idea, not the way it has been implemented into a giant give-away to the insurance companies.

And Social Security tax was a fraction of today's? And will there be "three martini" lunch tax breaks? Oh, has the three martini lunch gone away? I hadn't heard. Back when I worked for wages itwas alive and well.

And will there be zillions of cash business who skirt taxes?
News flash! I don't know about Missouri but here in Sunny California, the cash business sector is alive and well.

And will Forms-1099 go away? The 1099 is not a bad idea, imho.The amount of money involved is trivial in the larger scheme of things, but it is not a bad thing to get everyone to pay at least a little just so they feel they are a part of the system. Not many (and no billionaires) are affected by this.

And will state and local taxes revert to 1950's levels?
That's a matter for each state to decide.

And will Social Security benefits become tax free again?
I don't care. The widow who is living off her Social Security likely won't have to pay much in any case. In my case, yes, we do pay a it of tax on our SS. Shrug.

It's a myth that many actually paid 50% to 70% marginal back then.
So the answer to that is to reduce the tax rates? Non sequitur. As long as corporations and billionaires run our government(s), they will enjoy these "perks". The problem isn't in the tax rates, it's in the application and enforcement. Maybe (somehow) to get an honest congress. (ha ha)

CNC
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