Long-Term Bond Buyers May Find Themselves Substantially Poorer

| About: SPDR S&P (SPY)

Something is not jiving. If cost of living keeps going up in dollars like this, anybody who is buying a 10 year bond at 2.94% may well find themselves substantially poorer in 10 years.

Spare me statistics from the Government. Let's be frank with real world examples.

Electric Bill: I live upstate NY and the only utility company we have is called NYSEG. NYSEG was bought by a Spanish utility company called IBERDROLA in 2007.

NYSEG has a monopoly, you either use them for your electricity, which we need to survive/make a living in today's world, or you go off grid, which still to this day is more expensive.

From an aritcle I just read about utility rates, they are going up next year:

Under the original proposal, outlined at the April hearing, the typical total NYSEG residential electricity bill would have increased $12.39 per month (18.6 percent), and the typical residential gas heating bill would have increased by $25.34 per month (17.4 percent).

But over the past three months, NYSEG reduced its requested increases so the average monthly electric bill would increase by $3.27 (5 percent) and the average monthly gas bill would increase by $13.61 (12.9 percent) by the end of the next three years.

Great, so the electric bill for nearly 1 million customers of NYSEG is going up 5% and gas is going up 12.9% over the next 3 years. They wanted nearly a 20% increase!!!

Internet Bill: I just received a letter in the mail today from Time Warner Cable. My internet bill is going up 10% next year, from $49.95 to $54.95.

Food: Wheat, a staple product in my diet and many others may be facing a shortage. A drought in Russia has caused the price of wheat to rise over 50% in the past month.

Property Taxes: At the moment, property taxes in my county are stated to go up 5% next year. There is a fight in my State capitol to put a cap on property taxes of 4% or 120% of the rate of inflation, which ever is lower. 120% of inflation?? That's exponential growth for crying out loud!

So unless we're able to find after tax returns over 5% from the previous year or increase our salary to achieve a 5% after tax gain in income, our purchasing power is going down.

Standards of living may well fall too unless we're creative. This is important, we must be creative in how we can increase our standards of living with a weaker dollar in terms of purchasing power. A greater and greater % of our income and wealth going toward food and energy, as well as taxes so to pay off the money brokers and promised social welfare benefits is a given.

The Average Dividend yield on stocks in the S&P 500 is 2.38% according to a recent report by Bloomberg.

The 2 year US Treasury bond is yielding only 0.56%, a sure way to become poorer in purchasing power.

The 10 year US Treasury bond is yielding only 2.94% as of the writing.

When the State of NY wants to raise property taxes 5% next year and is having a hard time getting it to be caped at 4% or 120% of inflation, then lending out your dollars for 10 years at 2.94% is a near sure way to become poorer.

It seems to me, quite clearly, that both stocks and bonds are in need of a price correction to allow better returns to investors looking to at least preserve their purchasing power and wealth.

The forecast for such a correction is quite obvious, the prediction of just when it will occur is far more difficult.

There is a way to increase our standards of living for sure, you just need to use your creative capacity.

What are you doing to increase your standard of living with less purchasing power?

Disclosure: Not long or short anything specifically mentioned in this article.