Looking Ahead in 2022

One thing is certain: numerous predictions about 2020 and 2021 in categories ranging, from the emergence of a pandemic, to continuance of the pandemic, how best to cure the pandemic, to rates of inflation, supply and demand in the economy, to the ability of technology to make accurate predictions… were wrong.

Possibly the largest factor affecting the US economy today, inflation, was not even on the list of biggest risks at the 2021 World Economic Forum.* This is not to poke fun at the predictors but rather an indication of how misguided predictions about risk can be.

Numerous predictions about 2020 and 2021 were wrong.

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Will Social Security Be There?

Here starts a mini-series of TGIF 2 Minutes editions.

The following is taken directly from the current Social Security website. The italics below are copied from the website and presumably are meant for emphasis. Underlines are mine.

The concepts of solvency, sustainability, and budget impact are common in discussions of Social Security but are not well understood. Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits.

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Inflation is Here

Long time readers of TGIF 2 Minutes may remember the above photo* which accompanied a February 2018 post describing how inflation feels.

Earlier this year in March, a TGIF 2 Minutes post titled Get Ready for Corona Inflation described what could happen if government spending and stimulus continued unchecked. This week’s reported economic numbers underscore reality: a three-month continued surge in inflation that in several categories has not been seen since the early 1980’s. Lots of people reading this post may not have even been born in 1981 – which was the last time that restaurant meals and food prices rose this fast. To the younger generation, inflation may be learned painfully early in their careers. Inflation hurts EVERYONE, most of all the middle class and low-wage workers. For the wealthier, inflation gradually eats into returns on savings and investments.

Photo by Jared Haworth, www.wehadtoday.com/jared

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A Good Time to Borrow Money?

Life without some kind of debt is nearly impossible. Still, there are “good” kinds of debt and “bad” kinds of debt, and timing of taking on debt matters too.

As the US economy emerges from the extended pandemic a number of factors affecting debt and borrowing are at play:

  • Jobs – job openings, job creation and job RE-creation
  • Ability of small businesses to pay workers amidst longer-term uncertainty
  • The presence of Inflation for all kinds of popular products and services – meaning consumers are being forced to pay more, often unexpectedly
  • Changing demographics and geographies around home ownership…
  • …Creating increases in home prices
  • Super low interest rates
  • Plain old desire to spend after year-long restrictions on nearly everything!
As the US economy emerges from the extended pandemic a number of factors affecting debt and borrowing are at play.

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What’s Going On in the Markets?

It may be time to diversify – if that was not already the name of your game.

When is the last time that BONDS, no less the 10-year Treasury and TIPS, were the information we sought to read before we checked TSLA and AAPL??

Yes, when stock markets get rocky it is wise to look to the bond market, interest rates and the Fed for answers. Here is a less than 2-minute primer on several terms that matter. Oh, and my bond expert and bond trader friends will smile at the following statement: Everyone knows the “bond gals and guys” are smarter than the “equity gals and guys.” (PS. I started out as an equity gal.)

When stock markets get rocky it is wise to look to the bond market, interest rates and the Fed for answers.

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Looking Ahead to What’s to Come

As we approach the end of an extremely weird and difficult year, no doubt what is on lots of people’s minds: What is to come in the months and year immediately ahead?

From an economic and financial standpoint, a great deal depends on several factors very well summed up in a recent The Wall Street Journal article.*

In order to gauge how early 2021 will look, we need to understand:

  • How bad this latest surge in coronavirus cases might get?
  • What measures people and state and local governments take and the resulting effects on spending?
  • How much relief will come from the federal government?
  • How much better things will look toward the end of 1Q 2021?
As we approach the end of an extremely weird and difficult year, no doubt what is on lots of people’s minds: What is to come in the months and year immediately ahead?

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Biggest Losers

Upon recently personally experiencing the multiple shocks of:

  • Minimal amounts of people at rush hour in one of the typically busiest cities and train stations in the world,
  • Open parking spaces and empty parking lots at one of the busiest train lines in the world,
  • No lines at Starbucks in the typically busiest city in the world…

… I started thinking bigger-picture about who will be most deeply affected in the intermediate-term by the virus pandemic and the resulting slow-downs, shut-downs, cuts, and service eliminations. Near the top of the list of business types and job types negatively affected are (obviously),

  • Restaurants and their owners
  • Airlines
  • Commercial real estate property owners
  • Business conference managers
  • …the list goes on.
New York Penn Station at the morning “rush hour”, October 2, 2020.ation at “rush hour”

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What Comes Next? – Part 1

In these times of knowing virtually NOTHING for sure… there are a handful of possible “What Comes Next” topics that can be covered:

  • What Comes Immediately Next with Coronavirus Closures & Re-openings?
  • What Comes Next in the World Markets?
  • What Comes Next in the US & World Economy?
  • What Comes Next Further Down the Line in General?
  • …When do we all get to go back to work, sports and Life?

hands with latex gloves holding a globe with a face mask
Let’s simply digest that fact for now: there will be immediate, serious change to the way we literally wake up, work, and conduct our lives. 

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Will There Be A Recession?

The past several weeks has seen the first pandemic in the era of social media. The last H1N1 Influenza pandemic was in 2009. In 2009, Facebook was young (founded 2004) and Twitter was in its infancy (founded 2006).

In addition to a handful of other major factors, the Covid-19 coronavirus is descending on the planet during: a US Presidential election year, a high-level fight over oil between the Saudis and Russia AND immediately following an almost 11-year UP stock market in the US.

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Negative Interest Rates

Staying positive in a negative interest rate world just got a little easier. Sweden’s central bank, one of the world’s first to lower benchmark interest rates to below zero, this week raised its rate up to zero from negative 0.25%, or -0.25%.

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A negative interest rate from a bank means that instead of depositing monies and earning interest, the depositor pays interest over time. The concept has been said to signify ultra-safety of deposits thus providing “value” to the depositor.

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