Fill 'er up: Fond member illustrates inflation

So we pulled into a gas station just north of Brookport, Ill., and combined our resources to buy as much gas as possible; enough, we hoped, to get us back home.

Twenty-six cents was our liquid (no pun intended) net worth; the same as the price of one gallon of gas at the Sinclair pump, so that’s what we put in the tank of the Chevy. We had tried to persuade the station owner that we could be trusted and would, on our next trip to Kentucky, stop in and pay him for whatever additional gallons he would let us have on credit.

No such luck. He probably figured that we were not from around there, were just a couple of smart-alecky kids, and there was no way he’d ever see the money. (He was right on the first one, half right on the second, but way off base on the third. We may not have been great at finances and logistics, but we were teen-age honest about most things.)

We damned near weaned the Chevy by the time we got back to town, kicking it out of gear and coasting down every slope – and there are a lot of them in the Shawnee National Forest – even turning the ignition off and throwing our weight forward (now, that was real scientific) as we descended the long, steep Dixon Springs hill.

Somewhere along the way we vowed that we would never again go anyplace with so little cash, and discussed stashing a couple of dollars somewhere in the car for emergency use. That idea fell through, because, to be fair about it, money would also have to be secreted in the car that I drove, which meant we would need a total of four dollars, an amount that we seldom had.

Afterwards, as the young are wont to do, especially when they have overcome an obstacle that at the time seemed insurmountable, we laughed about it. I still do.

I seldom fill my car’s tank without thinking about that day and what we paid for a gallon of gas.

The point of the story? No, it’s not just the fond reminiscing of a 66-year-old who had the pleasure of growing up in a small Midwestern town during a golden era. It’s about inflation – no kidding.

Because the media love to tell the public about the high cost of fuel, and since some electioneering politicos will rant about how the oil companies are gouging us, let’s put into perspective the current price of gasoline.

Using the Department of Labor calculator (on the Internet at www.stats.bls.gov) to adjust for inflation, the 26-cent cost of the gallon of gasoline that Wayne and I pooled our funds to buy in 1956 would be $1.81 in today’s dollars. Strange how most everything with the media, especially moral values, is relative – there are no absolutes, except for energy costs. They don’t, for example, point out how, on an inflation-adjusted basis, gasoline prices compare with what’s happened over the same period to the cost of a first-class stamp. And they never, never make it a lead story when gas prices fall.

One of my favorite questions when speaking before an audience of retirees is, “How many of you paid more for your last car than for your first home?”

Usually the majority of attendees raise their hands (there are always some in the audience who are too self-conscious to do so) and nod or laugh. Most also remember when an attendant pumped the gas for you, checked the battery, water, oil and tires, and we referred to those places as “gas stations.” Now we pump our own gas, tell ourselves that next time we’ll check the tires and oil, and we call it a “service station.” Hmmmm.

Inflation is insidious, eroding away the buying power of those who look to fixed-income investments, such as certificates of deposit or government bonds, to provide them adequate cash flow for retirement.

It’s food for thought and a primary reason why investors should own assets that regularly increase their cash flow. But there are some important caveats. We’ll cover several in the next column, but right now I have to go fill up my Chrysler before the price goes up again.

Clark Davis is a 34-year investment veteran and CEO of Saint Louis Investment Advisors, a specialized money-management company.