Smart Investing is the radio show where Brent and Chase try to make investing easier to understand. They demonstrate long-term investment strategies to help you find good value investments.
Episodes
Wednesday Jul 06, 2022
Wednesday Jul 06, 2022
Investing
You may be feeling that this year so far is the worst year investing in a long time. I’m here to tell you, you are correct if you are investing in the indexes and not value investing. Regarding stocks this has been the worst six months to start the year since 1970 as the S&P 500 was down 21% through the first six months. And if you thought you were safe in bonds at the beginning of the year, well that hasn't been the case. For the first six months of the year, US Treasuries were down about 11% which according to Duetsche Bank would be the worst start since 1788. And yes, you read that correctly it’s been well over 100 years. And crypto, Bitcoin just lost more than 38% of its value in June which was the worst month ever. I have often said investing is simple but not easy. I think this year people who are investing in the indexes may have a little bit better understanding of what I was talking about.
GDP Report
I have been of the belief that we would not see a recession until 2023, but as more data continues to be presented, I believe we may now be in a recession. The most recent data from Q1 GDP now shows the economy contracted at an annualized rate of 1.6% which was deeper than the initial reading of 1.4%. My concern for Q2 is now that the consumer has not been able to keep up with inflation and a strengthening dollar will not bode well for our trade imbalance. The consumer is primarily what carries the economy as consumption makes up close to 70% of GDP. If we look at retail sales in April, they grew at an annual rate of 8.2%, but CPI came in at 8.3% for the month. In May retail sales grew at an annual rate of 8.1%, but inflation was 8.6%. I believe for June we will also see a similar picture. It is important to understand that GDP looks at real growth which factors in inflation. I believe that the inflation numbers may be too high for the consumer to provide real growth. I continue to hold the belief that this will not be a deep recession by any means, and this is not the time to sell strong companies that are trading at good valuations. The advance estimate for Q2 GDP is set to be released on July 28th.
Interest Rates
What is giving the markets so much indigestion over the last few days? Comments from Federal Reserve chairman Jerome Powell. He said he was more concerned about the risk of failing to stamp out high inflation than the possibility of raising interest rates too high and pushing the economy into a recession. Once again, I hate to say it, but he was late to the party to start raising rates and now I think he will stay at the party too long and raise rates too high. I’m in hopes that he will change his tune as he sees negative results going forward. I believe this will put investors on a bumpy road for the next couple of months.
Gasoline Prices
No surprise that the rising cost of gasoline is reducing the volume of gasoline sales. For the first full week of June gasoline sales declined 8.2% compared to the same week last year. This marked the 14th week in a row where sales have lagged compared to 2021 levels. With demand falling that could help ease prices going forward if we see a rise in inventories. Now all we must do is make sure that the federal and state governments do not temporally takeoff the gas tax which would artificially increase demand. Let market forces work through the problem.
Taxes
Individual taxpayers paid $2.6 trillion in taxes for the last fiscal year. This was a record of 10.6% of the economy which surpassed the 9.1% in the previous year. Where is all that money going?
Inflation Relief Checks
California will be issuing "inflation relief" checks that can total up to $1,050/family. Single taxpayers who earn less than $75,000 a year and couples who file jointly and make less than $150,000 a year will receive $350 per taxpayer. Taxpayers with dependents will receive an extra $350. There are a couple of reductions at various income levels and for couples that make over $500,000 and single taxpayers that make over $250,000 you will not receive a relief check. I have a couple of problems with this. Number 1, this does nothing to curb inflation and in fact could put even more pressure on prices as increased demand would only pressure the supply problems further. Have we not learned anything from all the stimulus the last couple of years? Number 2, the payments will not be issued until late October. Doesn't that seem like a strange time with elections coming up in November?
Shipping Costs
Part of inflation comes from shipping costs. We still receive a large amount of goods from China and the good news is since the beginning of the year the price of a container shipped from China to the United States has declined 34%. This could help in easing prices a little bit going forward.
Starbucks
I have been known to go to Starbucks once or twice a month but even with the 35% drop in the stock price this year I won’t be buying the stock anytime soon. It has gotten bad enough that once again Schultz who founded Starbucks is coming back once again for the third time to turn the company around. The company is facing rising prices on commodities of 30% and additional $200 million expenses from wages, training, and technology. The analysts are singing the old song about it was trading at 27 times earnings per share but now at 22 times it’s on sale. I don’t believe a business goes on sale until it trades around 12 times earnings. What that means is I would not become interested in Starbucks stock until it fell into the 40s which would be another 30-40% decline. I’ve also pointed out before my fear of labor unions coming into Starbucks and destroying the great service that they have.
Electric Vehicles
If you’re thinking about buying an electric vehicle to save on gas you may want to think again. In May electric vehicles were up 22% from a year earlier compared to an internal combustion vehicle which was up 14% and are $10,000 less expensive than an EV. That would buy a lot of gas even at current prices. People complain about all the money that oil companies are making but prices for lithium, nickel and cobalt used to make batteries are up almost 100% since the COVID-19 pandemic began. If you’re thinking about buying a Tesla to pick up that’s $7,500 federal tax credit, forget it, Tesla reached their sales cap of 200,000 and their vehicles no longer qualify. If you want an inexpensive option, look at the Chevy Bolt. GM cut the price $6000 to $27,000 after the largest safety recall. Now that the car is fixed and is a better car than before, it is on sale. Unfortunately, you can also forget about the federal tax credit here as well since General Motors also reached the 200,000 vehicles. But I still think one would be hard-pressed to find a better value for a car on the EV side than the $27,000 Chevy Bolt.
Tirzepatide for Obesity
I work out pretty regular, 4-5 days a week between 1 to 2 hours a day. Is it possible that there may be a quicker and easier way coming from drug company Eli Lilly trading under the stock symbol LLY which is very close to getting to market their obesity drug. The company presented proof at a diabetes conference in New Orleans that patients on the highest dosage drop 22% of their weight on average. The drug called Tirzepatide, did not reveal the timeframe of this weight loss but did reveal that side effects include nausea, diarrhea and also vomiting. The drug could be on the market within the next 12 to 24 months. With 42% of Americans now in the obese category sales of this drug are expected to be in the billions and the price tag on the drug appears to be about $20 per day. Even if this drug does help one lose weight exercise would still be needed to maintain muscle tone and cardiovascular fitness. Maybe down the road there will eventually be a pill one can take to replace the old fashion workout.
Harrison Johnson, CFP®: "Is now a good time for a Roth Conversion?"
Monday Jun 27, 2022
Monday Jun 27, 2022
Stock Market Value Index
It's important to remember how quickly the right stocks can move and it's one of the many reasons I don't try to time market bottoms. If we look back to the last time the market was spooked by the Fed raising interest rates, it was December 2018 and the Russel 1000 Value Index lost 15.7% from November's close to the low in December. This is when we had an intra-day bear market or a loss of at least 20% from the high. Fast forward about 2 months to the end of February 2019 and the Russel 1000 Value Index gained 18.5% from the low and was about flat compared to the November 2018 close. With so much bad news currently being factored into the current stock prices, I believe the right companies can still end 2022 on a positive note. As always when you invest think about where you will be 2-3 years down the road and don't try and predict the absolute bottom.
Tech Stocks
With the markets falling, people keep asking me if they should hold and wait for their investments to come back. I always say it depends on what you have, and it could be dangerous to hold the high-priced tech stocks we have talked about. If we look at the Nasdaq which is a good barometer for many of the tech stocks, it is now down about 33.4% from its 52-week high. I still would not be surprised if the Nasdaq fell 50% from it's high as valuations were out of control before the recent sell off. If this fall did occur, that would be a fall of another 24.9% from current levels. It's important that we don't forget history and that in the tech bust the Nasdaq fell close to 80% from its highs. If that were to happen again it would be a decline of 70% from today's level. This is one of the main reasons I stick to value investing as people forget how risky these high-priced tech stocks can be.
United States Supply Chain
Morgan Stanley conducted a survey of more than 400 executives from large corporations in the US, Germany, and Japan. They discovered the most important factors in supply chain decisions are geopolitical stability, skilled labor, physical infrastructure, and a developed supply chain ecosystem. I’m happy to share that the United States outranked Europe, China, and Mexico. The good news is 18% of the companies plan to significantly expand US manufacturing in the next 12 months and 36% have a three-year plan for doing the same. I also observed more than 40% of the US companies are working hard to onshore supply chains. This could be a big benefit in our economy over the next 12 to 36 months.
Harrison Johnson, CFP®: Deducting California taxes for Business Owners
Tuesday Jun 21, 2022
Tuesday Jun 21, 2022
May Retail Sales
The retail sales numbers were again disappointing in May as month over month they declined 0.3%. Comparing to May 2021 they increased 8.1%, but inflation in the month was 8.6% meaning spending adjusted for inflation likely decreased. Many areas in the report did not keep up with inflation as clothing and clothing accessory stores only increased 6.1%, non-store retailers increased 7%, and some areas like electronics and appliance stores actually decreased compared to last year. One other major highlight was gasoline stations which increased 43.2% compared to last year.
Good News on the Inflation Front
With the US increasing interest rates it has boosted the strength of the dollar especially against the Japanese yen. The dollar has now advanced 22% against the yen to a level not seen in 20 years.
Bitcoin (BTC) Falls Below $23,000.00
Bitcoin has fallen below $23,000.00 today. So much for being an inflation hedge or safety from investing in the stock market. It is acting as we expected, a speculative investment that will not end well.
Apple (AAPL) Revenue
There is no doubt that Apple is one of the world's best companies, however; even with that standing the stock has fallen almost 30% from its high of around $183/share. What I wonder with this company having total revenues of nearly $400 billion, what will keep the excitement going and grow revenues?
Harrison Johnson, CFP®: Rule 72(t)
Monday Jun 13, 2022
Monday Jun 13, 2022
Inflation numbers were released, there was no surprise to the upside or the downside with a year over year increase of 8.6% which is the highest since 1981. I believe these numbers will be in the high range for another few months because of the low numbers one year ago. Once we get into August and September, I believe we will see lower increases in inflation numbers, more around the 5 or 6% range because of the higher number they are compounding on and also the effects of higher interest rates.
U.S Fertility Rate & Our Economy
One major problem for the long-term US economic outlook is the fertility rate. It is now expected that a woman will have 1.66 children over her lifetime. Back in 1960 this rate stood at 3.65 and even as recent as 2007 it was at 2.1. The current rate poses a problem for growing the population as the replacement-level fertility rate which is the rate that would keep the population at a constant size without accounting for immigration stands at 2.1 children per woman. The problem here is this creates an aging population which puts stress on GDP growth and benefit systems like Medicare and Social Security.
Employee 401k
At my firm we have always recommended that employees contribute to their 401(k) with a 10% contribution as the goal and it seems like people are listening. Currently 70% of US retirement assets are in 401(k)s which is double the 35% the assets made up in 1980. Remember if you’re over 50 you can add an extra $6500 on top of the standard $20,500. Also, there is the bill in congress known as the Secure Act 2.0 with wording that adds an extra $10,000 for those 60 years and older. Invested properly, a 401K is one of the fastest ways to build good solid wealth over the long-term.
Signs in the Economy that the Supply Chain is Improving
There are signs in the economy that the supply chain is improving, and consumers could be cutting back a little bit with a rise in the first quarter retail inventories of 26% from a year earlier. This is not accounting for inflation, however; if there are more items on the shelves retailers must compete more for sales which benefits consumers with lower prices.
Monday Jun 06, 2022
Monday Jun 06, 2022
April Jolts Report
Although job openings declined in the recent JOLTs report they still remained elevated. The report showed job openings of 11.4 million in the month of April which was the second highest on record behind the upwardly revised 11.8 million in the month of March.
May Employment Numbers
Overall, the job numbers were good this morning as 390,000 jobs were recouped in the month of May. Leisure and hospitality continued to lead the way as there was a gain of 84,000 jobs.
A Major Reason Why We Do Not Recommend Leaving A 401k At An Old Employer
According to a recent estimate, at the end of 2021 nearly 25 million 401k accounts or about 20% of all 401k assets were counted as either lost or forgotten. This is a major reason why we do not recommend leaving a 401k at an old employer. Many times, your best option is to move the funds to an IRA rollover, so you take control and do not forget about those old accounts. If you are unsure if you had a 401k at a previous job, we highly recommend contacting your previous employer/HR to see if there are any funds in an account you may have forgotten about. If your old employer no longer exists, you do have a few different options. The National Registry of Unclaimed Retirement Benefits is a secure site that allows you to search for lost plans using your Social Security number. The National Association of Unclaimed Property Administrators operates a database that lets you search for plans by your first and last name. Your old employer may have rolled over your 401(k) into an IRA, in this case you can use FreeERISA to track it down. Finally, the Department of Labor’s abandoned plan database might offer some updated information on plans that have been or are about to be discontinued.
Harrison Johnson, CFP®: Tax Filing vs. Planning
Tuesday May 31, 2022
Tuesday May 31, 2022
Target (TGT) and Walmart (WMT)
We have seen companies like Target (TGT) and Walmart (WMT) get absolutely hammered this earnings season with WMT down close to 25% from its 52-week high and TGT down over 45% from its 52-week high. While valuations may start to appear attractive in the retail industry, be careful as inflation could weigh heavily on these companies. In an inflationary environment like this, you want to find companies that have pricing power and that can offset their cost inflation. In the retail space I am more interested in companies that own their own brands as I believe that right names can increase prices to offset rising costs.
Rising Interest Rates Impact the Real Estate Market
It appears those rising interest rates could now be impacting the real estate market. New home sales in the month of April fell 16.6% compared to March and were down 26.9% from April 2021. At an annualized rate of 591,000 units, the result greatly missed the estimate of 750,000 and was the slowest sales pace since April 2020. While new homes sales account for a smaller percentage of overall home sales it is based on signed contracts in the month which can be considered more up to date when comparing against closings. The slower sales pace resulted in a 9-month supply of newly built homes. A 6-month supply is generally considered a balanced market between buyers and sellers. One other major negative for builders is that they are starting to see an uptick in cancelation rates. This is just one indicator, but with affordability remaining difficult I am still looking for a small pullback over the next 6-12 months, which could present some buying opportunities.
Housing Supply
Could rising mortgage rates and cooling housing demand actually increase housing supply? According to Realtor.com the supply for homes increased 9% last week compared to the same time period last year. This was the largest gain since the company began tracking the metric in 2017. Redfin also announced new listings rose nearly twice as fast during the 4-week period ending May 15th compared to the same time last year. The concern of perhaps a housing peak could cause more sellers to try and lock in gains before prices fall. This comes as pending home sales dropped 4% in the month of April and were down 9% compared to April 2021. Again, I want to be clear.... I do not foresee a housing crash but rather a reasonable pullback in housing prices to increase affordability.
Supply & Demand in the Energy Market
Last week I discussed the supply issues that are causing price increases for gas and diesel. On the demand side of the equation, it is not looking positive for prices. The US Department of Transportation reported Thursday that total miles driven in the US surpassed pre-pandemic levels. Americans drove 277.4b miles in March, up from 272.4 billion miles during the same month in 2019 (+1.8%), and up from 269.4 billion miles in March 2021 (+3.0%). Higher demand and lower supply will continue to produce an imbalance and higher prices in the energy markets.
Harrison Johnson, CFP®: Tax Filing vs. Planning
Monday May 23, 2022
Monday May 23, 2022
Energy Prices
Energy prices continue to climb as regular gas prices at a national level hit a record $4.523/gallon and diesel prices hit $5.573/gallon. Last month gas prices were at $4.08/gallon and diesel prices were at $5.028/gallon. If we look at last year, gas prices were at $3.045/gallon and diesel prices were at $3.171/gallon. For us lucky CA residents, prices for regular gasoline have topped a record average of over $6/gallon.
Energy Market
You have seen a lot of rhetoric about price gouging from energy companies as the reason for higher gas prices. But realistically, the answer is much simpler and can be understood by supply and demand. To begin oil and gasoline/diesel are different. Oil is used to refine products such as gasoline and diesel and is an input cost. There is a correlation between the two, but oil does not fully account for changes in gas/diesel prices.
Retail Sales
Retail sales had a very similar report to last month as the growth was strong, but much of the growth can be attributed to inflation and price increases. The headline number shows April retail sales climbed 0.9% compared to March and were up 8.2% compared to April 2021.
Options Trading
Are the small investors getting smarter or did they get burnt so bad by options trading that they’re now backing away? The most recent data shows at the end of March, small investors made up 26% of total option activity. This was a decline from last year when it hit 30%. The good news for investors is with less option activity this could reduce the volatility in the market. That does not mean it will not continue adjusting downward, but it should mean the swings should not be as brutal if many small investors do not hold options and begin panic selling.
Apple
One of the famous investors from the Big Short, Michael Burry, has now turned his attention to Apple and is betting the stock will decline. Burry is utilizing bearish puts to hopefully profit from a decline in Apple's stock. Even with the recent pullback, Apple still trades at over 20x 2023 expected EPS of $6.54. For a company that is now looking at sales and EPS growth in the single digits I would not say this company is a value play. While we do not short or place bets against stocks, I would not be a buyer of Apple at these levels.
Harrison Johnson, CFP®: Estate Planning and Beneficiaries, New information from the IRS, Individual Retirement Account (IRA), Making sure your beneficiary is set up properly.
Other Companies Discussed:
Ready Capital Corp (RC)
Occidental Petroleum Corporation (OXY)
Global X MLP & Energy Infrastructure ETF (MLPX)
Camping World Holdings Inc (CWH)
Monday May 16, 2022
Monday May 16, 2022
U.S. Airline Bookings
I have said that I believe the economy will be held up by a shift from goods to services throughout the rest of this year. I was a bit worried with my prediction when I saw a headline that U.S. airline bookings dropped 17% last month from March.
CPI (Consumer Price Index)
I'm still sticking with my prediction that inflation likely peaked last month at 8.5%. All that means to me is that is likely the highest reading we will see. It does not mean that inflation will not remain a problem.
Coinbase stock (COIN)
Coinbase stock (COIN) has been absolutely hammered this year as it is down nearly 80% and in the last week alone it is down close to 50%. There was a recent disclosure in the company's recent 10-Q that is filed with the SEC that would absolutely spook me as an investor.
Harrison Johnson, CFP®: Series I Savings Bonds
Monday May 09, 2022
Monday May 09, 2022
- April Employment Numbers
Employment numbers came out on Friday and while unemployment rates stayed the same as last month at 3.6%, not as good as the expected 3.5%, the economy still recovered 428,000 jobs above the estimate of 391,000 jobs. - Declines in the Markets
If you’re feeling a little bit uncomfortable with declines in the markets, it is justified. - Foreign Currencies
It is no secret that inflation numbers are running high, but I do see inflation numbers cooling off over the next six months for various reasons. One of the reasons is a strong US dollar as our interest rates continue to increase.
- Special Guest: Robert Behic
Robert Behic runs Countywide Mortgage Lending which has been named one of the TOP 100 MORTGAGE COMPANIES IN AMERICA every year since 2012. He has been serving the community now for over 30 years, and has also been recognized as one of the top 1% producing loan officers in the country for multiple years. Over the course of Robert's career he has helped thousands of people experience the joy and benefits of owning a home. He enjoys helping people who thought they couldn't afford to buy a home and he even helps his clients with credit repair when needed. Coaching families and individuals through the process of buying a home for the first time, and helping seniors with new and improved reverse mortgages, are both areas of Robert's expertise. He is very active within the local community, including supporting military organizations and children's causes. Countywide Mortgage was proud to be recognized by the Better Business Bureau when they received the coveted Torch award for Ethics in the business marketplace. As they say at Countywide, "It all starts with a conversation".
- Discussed Topics: What is going on the mortgage market / Any important information to know about the mortgage market
- The Purchase market is still very strong. Where refinancing has slowed to a crawl.
- Our Belief the value of Real Estate will be the same or greater at the end of 2022 than it was at the beginning. 2023 could have a different outcome for home values.
- Investors continue to buy rentals.
- First Time Homebuyers and the population boom.
Saturday Apr 30, 2022
Saturday Apr 30, 2022
Big Tech Companies Start to Struggle
I'm quite excited to see many big tech companies start to struggle. I have been hesitant on the group the past few years as the valuations just did not fit in to a value investors strategy.
GDP Report
While the headline GDP number of a -1.4% missed the estimate of 1.0% growth, the underlying numbers still don't worry me about the start of a recession. If you look at the details, you'll see net exports subtracted 3.2% from the headline number.
College Students Starting Salary
Many college students in the class of 2022 are out of touch with reality when it comes to expectations for a starting salary. According to a recent survey, on average these students are expecting to earn $103,880 in their first job.
Bitcoin (BTC-USD)
You may think Bitcoin is going up because it’s becoming more popular, but it’s also becoming more popular with hackers. In 2021 there was $3.2 billion stolen in relation to cryptocurrencies.
Harrison Johnson, CFP® will be discussing The Augusta Rule
Sunday Apr 24, 2022
Sunday Apr 24, 2022
- Streaming Services
After Netflix's results yesterday that saw the company lose 200,000 paid subscribers and forecast a loss of 2 million subscribers in the second quarter, it is clear the streaming competition is catching up with the company. I do believe this loss of subscribers is going to be isolated to Netflix as other streamers continue to play catchup. For example, HBO & HBO Max saw subscribers climb 3 million compared to last quarter and 12.8 million compared to last year. - Bonds
I have recommended investors stay away from bonds over the last few years and now you are beginning to see why. As interest rates rise, bond prices fall. There has been no real safe place in bonds to start the year and I believe this is likely to continue.
- Harrison Johnson, CFP®: Working smart, not hard
Monday Apr 18, 2022
Monday Apr 18, 2022
Inflation
Comparisons of our current inflation to the late 70s in my opinion is not the same. From 74 to 79 the consumer price index was 8.1% however unemployment was at 7.9%. Recent unemployment just released is 3.6%.
CPI Report
The inflation problem has only gotten worse as CPI came in yesterday at 8.5%. This is the highest year over year gain since 1981. There is some good and bad news here.
March Retail Sales
I was quite disappointed with the retail sales number this morning. Although the March number climbed 0.5% compared to the previous month and rose 6.9% compared to March 2021, this number did not keep up with the inflation rate of 8.5%. Retail spending is not adjusted for inflation so this shows me cracks in the consumer confidence to spend on discretionary items may be starting to show.
General Motors, Ford, and Toyota Stock
If you’re wondering why the stocks of car makers like General Motors, Ford and Toyota have fallen off their highs, look no further than the first quarter sales reports.
Russia/Ukraine Fertilizer
We all talk about how the Russia/Ukraine situation has impacted the energy markets, but it is also having a major impact on fertilizer.
Harrison Johnson, CFP®– Tax Changes When You Get Married
Sunday Apr 10, 2022
Sunday Apr 10, 2022
Walt Disney
I held Walt Disney in the portfolio many years ago and I’ve been waiting for a correction to come to put this wonderful business back in my portfolio. I always liked it because it was a family type business. Now the company seems to be getting away from the family orientation.
Index Investors
It was not a good start for index investors in the first quarter of 2022. The S&P 500 fell 4.9%, the Dow Jones was down 4.6% and the tech heavy NASDAQ was down 9.1% in the quarter.
Nasdaq and Treasury Markets
We saw a quick reversal in the markets today and in particular the Nasdaq and treasury markets. I believe these two markets will be hit the hardest by Fed actions and rising rates. The reversal came after hawkish comments from Lael Brainard who is generally considered a dovish member.
Bitcoin Update
Here is a bitcoin update. Over the last 12 months investors in bitcoin are down over 22%. The global bitcoin industry is also continuing to really suck power for production of the cryptocurrency. Consumption by the global bitcoin industry is 135 Terawatt hours which is more than the entire country of Norway consumed at 124 Terawatt hours. One terawatt equals 1,000,000,000,000 Watts. Or put another way it is the equivalent of 10,000,000,000 100-Watt bulbs.
Harrison Johnson, CFP®– “Generalized” Financial Advice
Listen to More Episodes: THE SMARTINVESTING2000 PODCAST
Monday Apr 04, 2022
Monday Apr 04, 2022
March 2022 Jobs Report
To no surprise the job recoupment continued in the month of March as non-farm payrolls grew by 431,000. This did miss the estimate of 490,000, but the previous two months saw revisions total a gain of 95,000 which more than offset the miss.
Job Openings and Labor Turnover Survey (JOLTS)
The Job Openings and Labor Turnover Survey (JOLTS) continues to post elevated numbers. In the month of February there were 11.27 million job openings which compares to the total number of people counted as unemployed at 6.27 million. This now means that there is a record 5 million more openings than people that are unemployed!
Previous 401(k) Accounts
With the level of quits we have seen in the JOLTs report many are deeming this era of time as the Great Resignation or the Great Reshuffle as employees are changing companies at an elevated rate. One item to be cognizant of if you have changed jobs is your 401k at that old employer. As of last year, it is estimated Americans had about $1.35 trillion in old employer 401(k) plans.
Yield Curve Inversion
People are now worried about the yield curve inversion. This is when shorter term bonds offer higher yields compared to longer term bonds. While this has been a reliable indicator of recession in the past, it by no means is something to panic over.
Harrison Johnson, CFP®: Financing with Higher Interest Rates
Tuesday Mar 29, 2022
Tuesday Mar 29, 2022
- Apple’s New Phone: SE
I recently read about all the hype on Apple products from the recent product event and special notice was taken to the big push on their new phone the SE which starts at $429 versus $699 for the cheapest iPhone 13. - Would you fly in an airplane that uses only electricity?
The electric vehicle market has taken off, but there’s always the question would you fly in an airplane that uses only electricity? Most of the time the answer is no but there is another alternative for clean energy. General Electric developed the use of hydrogen to run gas turbines to generate power which generates zero carbon emissions. They are now adopting hydrogen to be used with jet engines - Energy Sources
Electric vehicles seem to receive all the hype, but I believe it would be best to have multiple sources for energy. If we become too dependent on the electric grid, outages or supply disruptions could cause major price spikes. - 10-Year Treasury and the Housing Market
The 10-year treasury crossed the 2.5% mark today. Last year I thought we would hit that level by the end of 2021, it came about three months later than I expected. This could cool the housing market as mortgage rates continue to rise pushing more and more people out of the housing market as the monthly payment becomes too expensive. - Harrison Johnson, CFP®: Financing with Higher Interest Rates
Tuesday Mar 22, 2022
Tuesday Mar 22, 2022
- Increases in the Economy: Retail sales came out today with a headline miss as they grew 0.3% compared to January below the estimate of 0.4%. A major positive in the report was January was revised upwards and compared to December, retail sales grew 4.9%. The initial January report showed a gain of just 3.8%.
- Oil Companies
If you hold in your portfolio oil companies like BP, Shell, or Exxon you may want to be prepared for a write down of assets against earnings in the next quarter or two if the Ukraine Russia war does not change course soon. - Inflation & Consumers
Many comparisons are being made to the 1970s with the current situation of inflation and rising gas prices. One big difference today versus then is that in the 70s food and energy costs consumed 20% of consumers budgets. - LA Ports
Things are improving at the ports of Long Beach and Los Angeles in regard to container ships. The number waiting for berths at the port has now dropped to 50 roughly half of the 100 at the peak back in January. This could be a positive for inflation as more goods hit the markets. - Harrison Johnson, CFP®: Early Retirement
Monday Mar 14, 2022
Monday Mar 14, 2022
SPACs: You may not remember about 18 to 24 months ago when the big rage was SPACs. These are special purpose acquisition companies, and many were formed back in 2020. We talked about not investing in these blind pools for fear of being hurt and losing money.
Oil Price Spikes: Russia has made a bold call that if the West proceeds with a ban on energy exports, oil prices would skyrocket to $300/barrel if not more. This would be a devastating situation for our economy, but I do not see this as likely. Currently the major oil companies and the government are playing a blame game with one another.
Tax on Big Oil Companies: I was disappointed to see congress members solution to higher oil prices is to tax big oil companies at extremely high rates. The proposal which comes from Elizabeth Warren and Sheldon Whitehouse would require oil companies that produce or import at least 300,000 barrels of oil per day to pay a per-barrel tax equal to 50% of the difference between the current price of a barrel and the average price from the years 2015 to 2019.
JOLTS: Our favorite Job Openings report (JOLTS) came out today and the openings continue to remain strong with 11.26 million in the month of January. This level is currently 4.75 million more than those that are counted as unemployed.
Tuesday Mar 08, 2022
Tuesday Mar 08, 2022
- The Right Stocks Will Do Well Over The Long Term
- US Electric Grid: The United States electric grid is becoming older by the day. In 2020 there were over 180 power disruptions
- February Jobs Report: The Russia/Ukraine news continued to dominate the markets and what was for the most part a strong jobs report flew under the radar. Nonfarm payrolls saw an increase of 678,000 in February which easily topped the estimate of 440,000 as jobs continued to be recouped from Covid.
- Harrison Johnson CFP® – Beneficiary Designations
Sunday Feb 27, 2022
Sunday Feb 27, 2022
- The SEC: Recently the Securities and Exchange Commission also known as the SEC passed a proposal that would force hedge funds and private equity funds to provide basic disclosures to their investors and guard against conflicts.
- Tax Returns: Did you have problems reaching the IRS last year? You wouldn't have been alone as the IRS had just 16,000 workers charged with fielding 240 million calls that’s about 15,000 each.
- Stop Loss Orders: Reasons to not use stop loss orders
- The Future of Money: There is an excellent book about digital currencies titled the future of money: how the digital revolution is transforming currencies and finance.
- What is a CFP?
Saturday Feb 19, 2022
Saturday Feb 19, 2022
- Inflation:
We reported last week that inflation year over year was up 7.5%. Companies are doing their best to hide these increases in many ways such as reducing the portion size at restaurants or reducing the number of ounces of a product you buy in the store. Another trick they are using is not increasing the price but adding overpriced accessories that you may buy on a car or another similar product.
- Household Debt:
Total household debt increased by $1.02 trillion last year due to higher prices on homes and cars.
- Oil:
We all know that prices at the pump are increasing as demand for oil is high and supplies are low. One thing you may not know is that spending on exploration and production in the US has dropped dramatically from before the pandemic when it was close to $190 billion to the current level around $75 billion.
- Federal Gas Tax Holiday:
The idea of a federal gas tax holiday has been floating around as a potential solution to curb energy inflation.
- Harrison Johnson, CFP® | Financial Planner: 401k Rollover