Record-breaking, big outlier events tend to move the needle the most in the economy and stock market.* Note the word, “outlier.” Outlier events typically are surprises and are indeed unlikely. In his beyond excellent book The Psychology of Money author Morgan Housel lists five events that were outliers with world-changing consequences:
The Great Depression
World War II
The dot-com bubble
The housing crash of the mid-2000’s.
A conclusion could be drawn from the book’s chapter titled, “Surprise!” that surprises are perhaps the most reliable thing going. But the irony of the reliability of surprises is we do not know what the surprise is until after it has unfolded.
Shorter post today – the summer weather is HOT! And car purchasing decisions can make a person sweat, or not.
Last July, yours truly bought a new car – after 16 years driving the same fully-paid for car. The old car was purchased as a certified pre-owned (back when CPO saved tens of thousands of dollars); the new car purchase last year was a brand-new car from a dealership. There were “those people” who commented, “Why buy a car now (last July) amidst high prices for new and used cars? Why not wait for prices to come down?” There were valid reasons to ask those questions. But looking back, the decision was a wise one and has stood up amidst full-on, continuing high inflation.
To keep with the theme of walking, and because this week the US Federal Reserve “walked up” its benchmark interest rate, a brief discussion is warranted about interest rates, recessions, and the economy. By the way, the weather is HOT as heck, so today’s is a shorter post.
In the accompanying photo please note the mountains in the distance – which could be equated to higher ground, higher prices, and higher interest rates. The walkers seem not to be panicking (yet) because it is early in the higher interest rate progression. Think:
“Man’s or Woman’s Best Friend”. At a time when true friends have proven to be more valuable than ever, it seems that getting a dog is something a good number of people and families did during the pandemic and its aftermath. Long-time dog lovers seem to agree that dogs can bring true happiness to unbearable situations. And the saying, “if you want a friend, get a dog” has been heard for years, even in the movies. “Dog benefits” range from personal joy to family togetherness…with a good deal of responsibility mixed in.
While a dog can turn out to become a true best friend, the “getting a dog” decision is a BIG one and not to be taken lightly. The considerations are several:
Will the Fed raise interest rates aggressively? Or will the economic threat of recession force the Fed to slow its pace of rate increases? The outcome in what is shaping up as a sort of “game of chicken” remains to be seen.
Inflation is raging – there is no question. Prices of items as basic as eggs, butter and milk are increasing at crazy high rates. This is not to mention price increases for meat and produce. Gas prices have become crippling, just as workers return to corporate offices even part-time. Restaurants are still raising prices for diners. Home prices are still going up, although the recent rise in mortgage rates may cool the craziness. Wage increases are still happening (and not keeping up with inflation but also feeding into inflation) although there may be moderation in wages coming. The list goes on.
Long walks and successful long term financial & life goal setting go hand in hand. Lots of people have zero interest in long walks but even a walk to the mailbox can turn into a long walk – so stay with me here. A recent, rather long walk on the Camino de Santiago in northern Spain (pictured) taught me life-changing lessons about goal setting. Namely,
There is no truly right or wrong way to formulate financial or life goals. Yes, goal setting is easier when pen & paper are involved, but the process is more about quality of thought (meaning being honest and open with oneself) than any set of “rules.”
There need not be a rush to set financial, business or life goals. Although starting sooner rather than later can help – and momentum will develop on its own. The list of goals may then turn out longer and more exciting than ever imagined! (Dreams can become goals too.)
Accomplishing goals in a quality way becomes a series of decisions made along the way – seemingly small decisions and larger, more serious-feeling decisions.
Today’s edition is a review of Crypto from early April 2022. TGIF 2 Minutes will return with new content in early July! Read on for:
A high-level update & follow-up on cryptocurrencies
Brief comments on Inflation & 1st quarter 2022
Continuing with the whirlwind of interest generated by “To Crypto Or Not To Crypto” and “Crypto Superbowl” there is more to say including highlighting the recent 36% decline in Bitcoin since November 2021. There is broad evidence that high-profile, fiduciary financial advisers are hesitant – for good reason – to include cryptocurrency across the board in client portfolios. At the same time, a good number of high-profile, responsible, fiduciary financial advisers are including cryptocurrency in some – emphasis, “some” – client portfolios, depending on the client’s goals and risk tolerance.**
Under the heading of ICYMI and how meaningful this man’s work is to every human being:
The Nobel Prize in Economics may be a real yawn for most people. But this year , the winner is a rock star. He made a cameo appearance in a hit movie with Selena Gomez and has written multiple best-sellers. His name is Richard Thaler and he’s an economist by trade but over the years chose to combine his studies of economics with psychology – and is widely known as “The Father of Behavioral Economics.” Are you still yawning? Read on.
Money and Therapy: two things that people may love or hate thinking about. However, among other things in life, money and therapy help.
About five years ago I read a must-read book for young and old, wealthy, or building wealth, married or single. Anyone who wants to have a “life” someday… or even have a life NOW. The book is called The Number* and was written by Lee Eisenberg nearly 15 years ago but reads like he wrote it yesterday.
Here are several of the chapters:
“Welcome To Numberland”
“Alone At Sea”
“Covering Your Assets” (nice play on words)
All of these topics could be covered in conversations with friends, or by reading The Number,explored in a therapy session… or all 3! I recommend all three (and the therapy session could be with your financial adviser – because a real financial adviser makes this conversation mandatory.)
TGIF 2 Minutes will be taking a small break over the next five or so weeks. While looking back on several topics from the past 5 to 7 years – consider these editions a sort of ICYMI (“In Case You Missed It”). In times such as the current market weakness, it helps to understand that each economic cycle has its unique qualities, and there are certain factors that repeat themselves. There are also super-smart and talented people – see the upcoming edition about Richard Thaler – who educate and remind us about human nature and the factors within and not within our control.
Enjoy these upcoming “Best of TGIF“ editions starting next week for Memorial Day.