There is a convenient myth that rich people are not happy. It is convenient to the non-rich, as it justifies being non-rich. After all, who wants to be unhappy? During my decades of exposure to both groups, I have found no difference in the happiness level of either group. An exception might be those rich who were born with modest means. I suspect their happiness…
Most people think of an economic recession as a big, bad Boogie-Man. Economists have conjured up precise definitions of a recession, but the only one that matters to the stock market is the conventional “two consecutive quarters of negative GDP growth.” Right now, we have precisely zero quarters of a shrinking GDP, and this quarter will also be positive. More importantly, we should understand a…
Most online brokers, like Schwab, TD Ameritrade, and E-Trade, just reduced their trading commissions to zero, down from the $3-$6 per trade and way down from “the good old days” when trading commissions averaged $30-$50. The stocks of these online brokers immediately dropped about 25% Don’t feel too sorry for them! The brokerage business is full of stated fees and also hidden fees. For example,…
I worry about my 96-year-old father. I worry about my family and friends. I worry about our combat soldiers. I worry about our elected leaders. I worry that some people still smoke. I worry about ebola and other contagious diseases. I worry about high drug prices, especially for the poor. I worry about sea level rise, since I live on a beach. Like everybody, I…
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Yesterday was a bad day in the stock market, with the Dow falling over 340 points. It was also a bad day for the President’s re-election probability. The latest ISM Manufacturing report was released, showing a continuing drop in manufacturing. In fact, it is firmly in contraction territory at 47.8, which was worse than economists expected. (Anything under 50 indicates contraction.) This level is the…
Yes, we are headed into a recession. Of course, there is ALWAYS a recession coming, but I think the next one will become visible early next year. Yes, the stock market will suffer. History suggests the market will drop 25% over a 13-month period, before rebounding. Yes, you should sell all your stocks at the market high and buy them back at the market low. …
Yes, we are headed into a recession. Of course, there is ALWAYS a recession coming, but I think the next one will become visible next year. Yes, the stock market will suffer. History suggests the market will drop 25% over a 13-month period, before rebounding. Yes, you should sell all your stocks at the market high and buy them back at the market low. Good…
The President has signed the annual Federal budget on Tuesday, preventing yet another government shutdown for the next two months. Keep in mind that over 60% of that budget is non-discretionary, which means Congress is already legally required to spend certain monies, like paying interest on the national debt or entitlements like Social Security, which is truly a “third-rail” of budgetary politics, killing any politician…
Larry Summers is a former Secretary of the Treasury and a former President of Harvard. Republicans don’t like him, even though he agrees with President Trump that current interest rates are too high. Democrats don’t like him, because he is as arrogant as the President. But, he has been discussing an interesting new concept – a monetary black hole. The idea is that very low…
By the time I finished my first course in international economics years ago, I was excited about the ability of globalization to lift our nation and the world to greater wealth and prosperity. When President Trump referred to us an “globalists,” I thought that was benign and mildly amusing. Later, he started dividing thoughts between globalists and nationalists. That bothered me a little, as it…
I was opposed to the impeachment of Bill Clinton, and that didn’t make me a Democrat. I am opposed to the impeachment of Donald Trump, and that doesn’t make me a Republican. Negating an election because somebody lied about a sex act was stupid and nonsensical. Negating an election when the charges are too nuanced to be understood by most voters is equally nonsensical. While…
If you have 100% agreement with the President’s – any President’s – foreign policy, and . . . If you have 100% agreement with the President’s – any President’s – domestic policy, then . . . Does character or decency even matter?
For decades, the Fed controlled the economy primarily with interest rates. Decrease rates to pump up the economy and employment. Or, increase rates to tamp down the economy and inflation. That was sufficient until the global financial crisis of 2008/9. Fed chief Ben Bernanke introduced the technique of controlling the economy with the Fed’s balance sheet, called quantitative easing/tightening/twisting etc. It was very successful at…
Financial planners often help clients prepare for retirement by preparing a retirement budget. In a perfect world, every person would have the original type of long-term care insurance, you know, the type that doesn’t have rapidly rising premiums when you are elderly. In the real world, we plan for caregivers in the home of the retirees. That is expensive enough, with prices starting at $15-20…
There has been much recent discussion on the “interest rate inversion,” meaning short-term interest rates are higher than longer-term interest rates. When you buy a bond, you are lending money to a borrower. If the borrower has to repay you in ten years, there are many things that can go wrong, making him unable to pay. If a borrower has to repay you next week,…
I only have one grandchild. He lives in Texas and has not had an easy childhood. The smallest boy in his class, he had to learn to protect himself. He did! I love that boy! That’s why I’m opposed to the President’s new proposal to cut middle-class taxes.
Most people agree that the benefits should be greater than the costs. For example, I will pay $10 for something that is worth $11. The problem is often that the costs are clearly known, while the benefits are only vaguely estimated. If you’re spending $100 million to build a dam, how do you know if the benefits of cheaper electricity and water control over the…
It is not unreasonable to think of general recessions as hurricanes. They can be strong or week. Some are fast, and some are slow. “Experts” usually predict their strength and path well in advance. Likewise, you can think of a financial crisis or financial recession as a tornado. Likewise, few are ever weak. Few are ever slow, but they are always loud. “Experts” seldom predict…
It is no longer a question of whether we’re heading into a recession or not. We are! The important question is whether it is a bad recession or merely a slowdown, which is known as a “growth recession.” GDP growth has slowed from 3.1% in the first quarter to 2.0% in the second. Business spending has dropped 5.5%, the biggest drop in five years. Small…
Congress created the annual labor day holiday in 1894 to honor the nobility of work. It was also meant to remind the indolent rich of a nobility they will never have. An important part of my financial planning practice is retirement planning — that is, developing a plan to retain your dignity and nobility after working many years. The most common mistake I see is…
I like steaks – big, medium-rare, slabs of beef, along with a bottle of delicate Merlot. But, I don’t like climate change. Most everyone admits the climate is changing but argue whether mankind is responsible for that change. My thought is that mankind is partially responsible for some portion of climate change, and I’m willing to reduce my carbon dioxide and methane footprints. My wife…
Sometimes, a recession can be a self-fulfilling prophecy. If everyone believes a recession is imminent and stops spending, a recession becomes certain. Of course, public opinion can get ahead of economic data, and that may be happening now. The mass media blankets consumers with worry, which helps the media and annuity salesmen. (I cannot call it “fake news” but can call it “un-news” as it…
One so-called market indicator of a recession in six to twelve months, is called interest rate inversions, and it means nothing. The economic data does not indicate a high-probability of recession, although it does suggest a minor slowdown, which is called a “growth-recession.” A regular recession produces a decrease in GDP. In a growth-recession, GDP continues to increase albeit at a slower rate. A growth-recession…
When the Fed raised interest rates last December, the weight of economic data justified it, although I wrote then that the increased quantitative tightening (QT) was unnecessary. Hindsight is a wonderful thing! While I was right about QT, raising the interest rate was clearly a mistake. Last month, the Fed admitted their error and reversed course. After all, they are human. Unfortunately, that error legitimized…
I believe the National Rifle Association has caused more harm to our country than the American Communist Party AND the American Nazi Party, combined!
Traditionally, American politicians jump on a soap box, rip their shirt off, and pound their chest about a “strong dollar.” It is a “flag, motherhood, and apple pie” kind of thing. Every President has wanted a strong dollar, until President Trump. That is one reason he has been so critical of the Fed. He has a good point, as the dollar is up 11% over…
The American Institute of Economic Research has never been confused with the Institute of Comedy Research. However, their current issue contains an amusing article by its Editorial Director Jeffrey Tucker. He states two “gangs” are ruining the world, by ignoring “real” economics. The Gang of the Right says the road to redemption is lined with tax cuts, while the Gang of the Left says the…
During my education years, I learned to use the “scientific method” in reasoning. During my marriage years, I developed a grudging respect for “feminine intuition.” On a recent car trip, we were passing thru some no-name place and pulled off the Interstate for gas. When I got back into the car, my wife asked “Did you see her?” Like all husbands, I responded with “Huh?” …
I applaud President Trump for — finally — dealing with the trading abuses of China. However, as I’ve written many times, I wish we did not negotiate three different trade problems at one time. Contrary to popular belief, NAFTA II is still not complete, as Mr. Trump has not negotiated with the House to pass the bill. The nascent European negotiation has focused on cars…
Today, the Dow dropped over 800 points because interest rates inverted. What does it mean? Very little! It was discussed in this blog on August 9th. Take another look here: False Alarm
The nation of Argentina has been circling the drain since 1946, when Juan Peron became president. Since then, I’ve lost track of how many crisis the nation has endured, such as depressions, devaluations, and defaults. Their stock market dropped 38% on Monday, which is not surprising since interest rates have jumped to 74.8% from 63.7%, and their currency has dropped 30%. Their budget deficit each…
How often have you heard someone say “I can’t wait until I turn 65 and retire.” That’s crazy talk! First, age 65 as a retirement age was set long before we enjoyed greater life expectancy. Second, with unemployment at 3.6%, the sun is shining, and it’s time to bank more money. Third, you can no longer receive Social Security at age 65. It is 66…