Opinion

Why Don’t More People Smoke?

Another prominent figure in the world of finance has declared passive investing a bubble.  Josh Brown has a good take on this here, saying that active investing is the true bubble.  I don’t think you can declare a decades-long phenomenon (as both active and passive investing have achieved) a bubble, but we can recognize that passive investing has changed the way people build wealth.  Passive investing has clear advantages over active management.  I won’t rehash it in this post, but if you’re curious I covered it here, here, and here.  It seems to me that the advent of passive investing is like the rise of health consciousness.  As we learned more about what we should (exercising) and shouldn’t (smoking) be doing, we have changed our habits.  The same is true about investing. Why Don’t More People Smoke? I recently went to the doctor and she asked me if I smoke.  My family…


Fun with TINA

I’ve heard today’s investing environment described as TINA.  There Is No Alternative.  I don’t necessarily agree that this is the case, but the argument goes something like this: US Treasurys yield around 1.50% The rest of the world is yielding zero (or less!) US stocks yield 2% and the US economy is strong Equities outside of the US have sucked for a decade and their central banks have weak hands Through this incredibly limited view (that no one should use to invest actual dollars), there is no alternative to owning US equities, especially if you are investing for income.  This did get me thinking, though… Ten Years Ago Just for fun, let’s take a look at the 10-year Treasury and the S&P 500 as though they are the only two investment choices.  Ten years ago, the 10-year yielded 3.85% and the S&P yield was about 2%.  So $100,000 invested in…


What Happened to the Recession?

Last week was recession week as the brief yield curve inversion launched a thousand headlines promising economic destruction.  Every newspaper had a recession headline or story above the fold.  Although there were several days of decent market swings, the recession story seems to have run out of gas as people looked at the actual numbers.  The minutes from the latest Federal Reserve meeting further cooled the rhetoric.  Journalists may have expected the last Fed meeting was Thunderdome as there was some disagreement among Fed members on whether to hike or not.  Instead, the minutes painted a much different view. So what do the minutes from the last Federal Reserve meeting say? Labor is strong and inflation is under control.  The rest of the world is struggling a bit, but it hasn’t made a huge impact on the US economy.  Trade policy uncertainty seems to be here to stay in the…


When the Recovery Will End, Emotion, Controversy

When Will the Recovery End? (Spoiler Alert: It’s Already Over) After 10 years, surely the end of the recovery is near?  I still see investment products pitched with this kind of wording.  It turns out that the recovery ended 84 freaking months ago.  Since then, we’ve been in expansion.  84 months sounds like a long time (7 years!), but in the context of previous expansions, it’s not remarkable in either length nor size (there’s a joke here, somewhere).  The expansion following recovery from the tech crash was just 12 months, with a gain of 14.6% on the S&P 500.  However, the two prior expansions were 135 and 134 months long and gained over 400 and 500% (see graphic).  Should we be worried about the current expansion?  Let’s break 100 months first, then three years after that let’s start worrying.  In the meantime, stick to your financial plan. Taking the Emotion…


Student Loans

$1.6 trillion of student loan debt is spread among 44 million Americans.  More than even avocado toast or a daily latte, student loans are being blamed for Millennials not being able to afford housing (even though they are the largest home-buying cohort).  Some Presidential hopefuls say they’ve got the answer in just erasing the whole thing.  This is a case of finding a gullible voting bloc and riding them as hard as possible in the hopes of building a warchest to retire on, securing a book deal, and hitting the speaking circuit.  It is a proposal along the lines of the Green New Deal – not so much a serious piece of legislation as it is something to garner mentions in the media. Cynicism aside, I’d love to see student loans wiped out.  “But isn’t this unfair to people who took out loans and paid them off?”  Maybe, but it…


Zombie Apocalypse?

The bull market is (take your pick): in the late stages of the market cycle in the late innings long in the tooth Let’s get another cliche out of the way and say that bull markets don’t die of old age.  Are we headed for a recession or a bear market?  Yes. This is like asking if we’re headed for Christmas.  We’re headed for Christmas whether it’s December 24th or December 26th. It’s impossible to prove that we’re not and I’ve been around long enough to know not to put a deadline on predictions.  It’s one thing to say there will be a recession in the future and another thing to say there will be a recession next year #timestamp. So yes, there’s a bear market or recession on the horizon, but that doesn’t mean the current bull is over any time soon.  Even if you think the market is over-valued…


ONE TRILLION DOLLARS *pinky*

The Trade War™ wiped over ONE TRILLION DOLLARS from the stock market on Monday.  Will the market ever recover from this disaster?  It turns out that a trillion bucks ain’t what it used to be.  Financial reporters showed Monday’s market movement as -2.41%.  Financial entertainers breathlessly echoed the ONE TRILLION DOLLARS talking point.  Being down over 2% in one day isn’t good, but it was a useful tool to separate news sources that are serious about their reporting from the click-bait farms.  Oh and will we ever recover?  The S&P 500 was down 0.11% on the week, as of Thursday’s close, but oddly we haven’t heard any stories of the market gaining ONE TRILLION DOLLARS over the last couple of days.  Weird. Trade War™ There is a lot of hand-wringing over the consequences of the very public negotiation with China.  Bad financial news of all sorts is inevitably traced back…


How Much Does Money Cost?

The Federal Reserve Bank of St. Louis caught my eye with a tweet the other day: “If you would know the value of money, go and try to borrow some.”  This quote from Benjamin Franklin got me thinking about the cost of money and how it impacts a few different aspects of financial life.  The St. Louis Fed was looking at what it costs the unbanked to borrow their next paycheck, but it is instructive to look at interest rates as they relate to things like the pensions and housing, too. Pensions Despite ten years of stock market gains, many pensions are underfunded.  Much of the blame has gone to retirement systems overpromising unrealistic payouts.  Their assets haven’t returned as much as expected, providing a double whammy.  The investment research guy in me wants to dig into the underlying investments and asset allocation.  Many pensions got hurt by stocks during…


Where Are We in the Current Cycle?

Glad you asked!  This is such a great question.  It makes you look smart for asking it.  You recognize that the market is cyclical and your question implies that you’re so savvy that you can sync your investing to take advantage of the market’s ebbs and flows.  You’re a force of nature and I commend you for it, especially since you preceded the question with several minutes critiquing the Federal Reserve and expressing concern about today’s geopolitical situation. I love that you asked me because now it’s a chance for me to cite a bunch of bullshit statistics that prop up my world-view and make us all feel better about ourselves.  Best of all, no answer I give is going to suggest taking any real action on your part.  It’s a win-win. So Where Are We in the Current Cycle? Definitely the late innings, but it may only be the…


Golden Paw of Fairness

My older son’s school celebrates a positive trait each month (respect, courtesy, etc) and recognizes students that embody the month’s trait at an assembly.  For February, William earned a golden paw award for fairness.  I keep thinking about this because while William may display fairness to his fellow students, life has not been fair to him.  The kid was dealt a tough hand of cards from the beginning.  He has ARPKD.  He deals with it and tries his best to show fairness and compassion to others, though, which is mind-blowing because he could use his diagnosis as a crutch instead.  Will could whine about all the things he can’t do like play contact sports or ride roller coasters.  Instead, he plays the hand he was dealt.  To see him do this day after day is inspiring and humbling. Kidney Month March is National Kidney Month.  The Wall Street Journal has…