Retirement Is Inflationary

The WSJ has a write up noting that not all core bond ETFs are the same. Here's a table that shows the differences.

Or, you could just go an entirely different route.

A few people have talked about the importance of knowing what to avoid which is a concept I believe in. The core funds are more volatile than many investors realize and if rates ever take another meaningful leg higher, then the core funds will get hit hard again. The charts for CGCP and AGG are total return. Anyone who has held CGCP since inception and taking out the dividends is down 11.9% on a price basis and there is no guarantee that they will ever be whole on a price basis. 

Are interest rates going to go up? I don't know but John Authers laid out a theory that is interesting because it is simple and it relies on something that is very hard to argue with. Essentially, the act of saving for retirement is deflationary while the act of retirement spending is inflationary. The country is obviously pivoting older to a much larger percentage of the population being of retirement age. 

If price inflation keeps moving up or stays elevated then that creates visibility for higher interest rates. Maybe it won't play out that way but in terms of assessing risk, the risk here is that this simple theory plays out. 

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