The Flinchum File

The most common question asked of economists is . . . “are we going into a recession?”  The answer is yes, of course — because there is always a recession somewhere in our future.  The question they’re really asking is . . . “when will we feel the pain of a recession.” Economists have very technical definitions of when recessions start, but the most commonly used…

I have often agreed with the actions of President Trump. Often with joy, if never delirious with joy. Then, he betrayed the Kurds. My stomach is sick, and my heart hurts. Imagine the Special Forces betraying the Monteyards of Vietnam. I don’t know whether to vomit or to cry . . .

I served on the regional board for the National Association of Personal Financial Advisors (NAPFA) with Holly Donaldson and have great respect for her.  Below, I have copied her excellent latest article in LinkedIn on a very difficult subject. The Hospice Decision: Sooner, or Later? 4 Misconceptions Published on October 14, 2019 Holly Donaldson, CFP®, CEPS Fee-only Financial Planner | Behavioral Economist … See More…

It was March 21, 2017 that I predicted Donald Trump would not serve a full 4-year term.  I didn’t expect him to leave by impeachment, but by resignation, like Richard Nixon.  That opinion reflected the thinness of his skin, but I was wrong.  Constant attack normally encourages resignation.  However, the chaos around him only seems to encourage him.  If our electorate was calm and peaceful,…

I like Exchange-Traded-Funds (ETFs).  (In fact, I’ve attended the “Inside ETFs” conference in Florida many times.)  Unlike mutual funds, which only trade at closing, you can trade ETFs anytime the market is open.  There are no tax bombs, like in some mutual funds.  With ETFs, you can make more targeted bets.  For example, I believe cyber-security is a growing sector and bought an ETF (HACK) …

Long before the British and the French designed the national borders in the Middle East following World War I, it was well known that the Kurds of Kurdistan were tough and tenacious fighters.  Not wanting to leave behind a strong, united Kurdistan, it is decided that the nation would be divided between Iraq, Syria, and Turkey.  In other words, the Kurds were denied their own…

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…

For those who want to read my latest quarterly column for Inside Business, please click here: https://www.pilotonline.com/inside-business/vp-ib-expert-flinchum-1007-20190930-xai2gq3vavewlc2bc2lnh7pqia-story.html

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…