Tag: Interest Rates

Interest Rates, The Fed & Gray Hair

Time again for the “soft landing” airplane drawing. As in, will there be a soft landing for the US economy or a hard landing? How soon might the US Fed lower rates and how fast might the markets keep going up or falter down?

A certain amount of gray hair (read: wisdom and experience) helps in understanding the current interest rate and US Federal Reserve environment. Why? Because economies do not move as fast as Amazon delivering a package same-day, or even same-month. And “gray hairs” know this.

Continue reading “Interest Rates, The Fed & Gray Hair”

Doritos in 2024

Looking for Doritos at the supermarket? That may be difficult at certain grocery chains where the chips are being pulled from shelves – so far only in several European countries.* The reasons? Partly, to protest possible “shrinkflation”, that annoying occurrence of a company lowering the amount of product in its packaging but charging the same price (which also could be called a “rip off”). Another reason the grocery chain is choosing not to stock Doritos and several other PepsiCo products is persistent and unreasonable price increases by PepsiCo.

Apparently, consumers and certain supermarket chains concerned with holding on to customers, have had enough with price increases, especially on discretionary items (are Doritos a staple or discretionary?). The move by the grocer Carrefour could be a positive development for consumers in early 2024. What else would consumers, investors and savers like to see in 2024?

Continue reading “Doritos in 2024”

How Long Does It Take to Tame Inflation?

  • Excerpts from a TGIF 2 Minutes written 11 1/2 months ago follow.
  • Today, the US Fed is not finished raising interest rates.
  • Inflation is still around for multiple reasons.
  • Note the emphasized comments in bold.

Wind back to October 2022: A question that may be on a number of people’s minds was, “How long will it take to tame inflation?” Unfortunately, there was very little telling. Part of the reason is that inflation is always part of a complicated economy. Predictions about the timing of inflation (and hard-landing/soft-landing) are nearly impossible.

To add to the confusion, emotions – specifically people’s expectations of inflation – are part of what keeps inflation around. In this inflationary cycle (as of October 2022), inflation had already stuck around longer than at almost any time in US history; long enough to increase people’s expectations that inflation would not go away quickly. The US Fed had stated one of its original intentions was to lower consumers’ inflationary expectations. But the Fed may have missed that boat late in 2021 due to forces out of its control, namely, the pandemic aftermath. Note that today in late September 2023 inflation is still running strong.

Continue reading “How Long Does It Take to Tame Inflation?”

Difficult Spending Realities

*Please see footnote below for a CORRECTION to last week’s edition, TGIF 2 Minutes – Tax & 401k Infor for ALL Ages. Thank you to my astute readers!

On to this week’s edition:
So far, 2023 has been a decent year, even slightly better than decent, for the stock market and the short-term end of the bond market (total return).

When times are mostly good it becomes easier to feel comfortable spending more money or making major purchases. BUT –

  • as we are still in a fairly dire inflationary environment,
  • with longer-term consumer price effects still to be seen (up or down, but most likely UP)
  • and following over 12 months of Federal Reserve interest rate increases,

currently it makes sense to thoroughly think through – and take more time (perhaps a couple of years) – making major spending decisions.

Continue reading “Difficult Spending Realities”

Markets & Taming Inflation

Believe it or not, the following is taken from October 2022 (with a couple of updates). Inflation almost always takes longer to tame than we think.

A question that may be on a number of people’s minds is: How long will it take to tame inflation? Unfortunately, there is very little telling how long it will take the US Federal Reserve, or any other entity or force, to tame inflation, especially in the short-term. Part of the reason is because inflation is always part of a complicated economy – with diverse people, businesses and governmental/fiscal forces in action. Timing (and hard-landing/soft-landing) predictions about inflation are nearly impossible.

Video: TGIF – Markets & Taming Inflation

Continue reading “Markets & Taming Inflation”

I-Bond Update

For a bond that must be held for a minimum of five (5) years for full interest to be received and can only be bought in amounts of $10,000 per year, I get a lot of questions.

To put the situation in perspective, for clients and friends with high levels of income, in the hundreds of thousands and much more, and high tax rates – marginal rates of over 32% – the interest at stake with an I-Bond is currently $600 to $800 per year and that is before taxes! That level of net interest may pay a portion of one car lease payment per year or weekend gas for a boat (in 5 years). BUT nevertheless, I get questions.

Continue reading “I-Bond Update”

Recession or Soft Landing?

From the recent archives of TGIF 2 Minutes – especially worth a second look as the year 2023 unfolds. Inflation recently came in at a still very high 6.5%… which seems “low” only because several months ago inflation was at 9.1%. Shelter and services (including daycare) remain the areas with highest inflation; gas, autos, computers, and sporting goods saw slower rises in still high prices. Employment remains an oddly strong component of the economy – leaving the likelihood of a “soft landing” type of economic slowdown a possibility.

Sept 2022: It is fairly safe to say that the US has entered a recession, even if the backwards looking, narrowly focused, official “National Bureau of Economics Research”, or NBER, has not declared it yet. The NBER is a private, non-profit organization founded in 1920 that somehow came to possess the distinct “responsibility” of declaring recessions in the US. Seriously?

Continue reading “Recession or Soft Landing?”

Stay Tuned for Year-End Commentary

As Christmas and Year-End 2022 approach there is a long list of topics to consider, including:

  • How to quantify the first truly down year for the markets since 2009
  • What inflation and higher interest rates mean going forward in 2023
  • How to approach higher taxes for those still working and those receiving Social Security
  • The timeless investing paradigms that have not changed
  • How much to diversify a portfolio while still paying attention to risk and liquidity
  • How to approach Long-Term Care decisions, both present and future
  • Changes made to gifting limits for 2023 (limits increased)
  • Changes made to IRA and 401k contribution limits in 2023 (limits increased)
  • What is next for cryptocurrency trading and valuation
  • What to serve for the Holiday meal (perhaps the most urgent item on the list).

What topics might be on your mind? Stay tuned for a Year-End commentary!

Thank you for reading, enjoy last minute shopping and TGIF!

Mortgage & Housing Costs

A cautionary note (please pardon the math on a Friday) on home prices and home mortgage affordability in the short- to intermediate-term future. This note can also be useful for those with HELOC loans, or home equity lines of credit, with floating interest rates.

Inflation has recently had an overlooked side effect: a decline in the amount of home that a given monthly mortgage payment buys. The obvious factor is that interest rates on 30-year mortgages have skyrocketed from around 3% about 10 months ago to over 7% today. (Note, there is a sound but painful reason for interest rates to have risen. Historically, higher interest rates are one of the most proven ways to gradually – emphasize, “gradually” – control inflation or slow down an over-heated economy).

In buying a house using a mortgage, the situation turns into kind of a “seesaw” between the amount put down and how that amount translates into the monthly payment. 

Continue reading “Mortgage & Housing Costs”

How Long Will It Take To Tame Inflation?

A question that may be on a number of people’s minds is: How long will it take to tame inflation? Unfortunately, there is very little telling how long it will take the US Federal Reserve, or any other entity or force, to tame inflation especially with respect to the short-term. Part of the reason is because inflation is always part of a complicated economy – an economy with diverse people, businesses, and governmental/fiscal forces in action. Making timing (and hard landing/soft-landing) predictions about inflation is nearly impossible.

To add to the confusion, believe it or not emotions – specifically people’s expectations of inflation – are part of what keeps inflation around. In this inflationary cycle, inflation has stuck around longer than at almost any time in US history; long enough to increase people’s expectations that inflation will not go away quickly. The US Fed had stated one of its original intentions was to lower consumers’ inflationary expectations (but the Fed may have missed this boat due to forces out of its control, namely, the pandemic aftermath).

Continue reading “How Long Will It Take To Tame Inflation?”