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Inflation Disappears (Again)

August 11, 2017August 11, 2017 by Finance Gourmet

Update: Yea! It looks like I was right, and everyone has come around. It’s August now, and it looks like those low inflation numbers were neither an aberration, nor temporary. There simply is no inflation, the job market, while full, is not hot, and there is no need to raise rates the rest of 2017, so say we all 🙂 The Fed has been working to raise interest rates because of the specter of inflation. However, with the exception of energy prices, there really hasn’t been much in the way of inflation. As a result, the Fed keeps explaining that they think that all those reports of low inflation were temporary. That all took a bit of knock today as the U.S. Government reported that inflation in June was zero. That’s right, zero, as in no inflation (again). And that comes after the actual 0.1% drop in inflation in May. This is of course, a far cry from the Fed’s so-called target of 2.0% inflation, and calling two months in a row of data temporary starts to look like ignoring data, so the tone has changed. A lot hinges on the July report. Check out my Credit Sesame review. Fed …

Economy Slowing Down?

August 10, 2017 by Finance Gourmet

Only have time for a quick and dirty update, so here goes. It may not be the most accurate of headlines, but there were a couple of interesting numbers out today, especially when it comes to the hawks and doves inflation battle, so I thought it would be fun to take a break from all of the doomsday articles about the stock market. Still No Inflationary Pressure It seems that inflation is falling (not rising), countering the theory that such a drop in inflation earlier this year was only temporary. Oh, and jobless claims are up. In other words, the inflationary pressures are still not there. All of this adds up to a Federal Reserve that might just be figuring out that there is no need to raise interest rates any more this year. (And the previous increase was probably unnecessary as well.) This goes double if geopolitical trouble (Trump v North Korea) spooks business and investors. It may turn out that this global instability is just the pinprick the stock market needs to head back down for a correction. If so, remember that it wasn’t any stock chart, or Shiller PE ratio, or super-duper analyst investigation that said it …

Tesla Does Not Compete With Chevy and Nissan

August 9, 2017 by Finance Gourmet

Here, they come. It looks like the Nissan Leaf will be cheaper than a Tesla, so you know what that means. More articles where so-called analysts decry the prospects for the Tesla Model 3, because Chevy Bolt, and now Nissan, have cheaper electric cars available before the Model 3. This is dumb. Comparing Tesla Model 3 to Chevy Bolt is dumb. Comparing Tesla Model 3 to Nissan Leaf is dumb. Worrying about Tesla stock because less desired offerings are coming out with still less desired new models is dumb. (If you want to worry about Tesla stock, worry about the fact that they are always slower and later than they say. — Although I wouldn’t sell my stock…) The Spec Sheet Falsity Once upon a time, Consumer Reports poorly reviewed the Apple iPad. The reason? It compared specification sheets with other tablets, and the iPad had lower specs. Of course, this completely and utterly missed the point. Turns out that Consumer Reports always does this. I found out the hard way when we bought one of their “best buy” stoves only to find out that despite the great temperature readings they got on their laser thermometers, the flame pattern was …

Mortgage Rates Climbing

July 13, 2017 by Finance Gourmet

Mortgage rates have ticked up in the this month. Despite stories saying that rates have “jumped” the rise has been rather tepid, and still hasn’t taken rates back to their post election highs in the 4.25% range. Rates had peaked back in January when some analysts still suspected that Crazy Trump was all an act and that the newly elected President would settle into the office as a regular business-friendly, regulation-busting, Republican. However, the Russia scandal has plagued the administration and health care has twice stalled out, pushing any pro-business legislation off. As a result, rates have basically trended eastbound and down, if you will. Do Mortgage Rates Really Matter? It’s always dangerous to say, “This time it is different,” in the world of finance. Such sentiments are typically used to justify things that should not be justified. However, is the world really different this time around with regards to mortgage interest rates? Consider that rates are still historically low, and that they will continue to be so long as they stay below the 5.0% to 5.5% range. A full percentage point is several Fed interest rate hikes away (a year… two?), or an economy that shakes off its slow …

Is Bitcoin For Real?

June 28, 2017 by Finance Gourmet

Recent headlines have started getting people to come out of the woodwork about bitcoin. Go to Market Watch today, and one whole side above the fold is bitcoin articles including one with the headline: “What delivered the best return of 2017’s first half?” – The answer is bitcoin (and ethereum, another digital cryptocurrency). How Is Bitcoin Worth Anything? Alright, this is a little complicated, so stay with me here. First, although you may have stopped thinking about it long ago, American dollars aren’t “real.” In reality, all a dollar bill is, is a special, paper-like fabric, printed with an intricate design in green and black. That’s it. You can’t eat it. You can’t use it as transportation, or for housing, or for anything really. It’s not even good as paper since there is almost no blank space. Dollars exist as currency, only because we as a society agree they represent value. That value is created by a limited supply regulated by the Federal Reserve, for something we give value. In other words, the only thing that makes money valuable is a limited supply that can be exchanged for goods and services. Bitcoin, works in pretty much the same way. Bitcoin …

What Interest Rate Hikes Mean for Young People

June 20, 2017 by Finance Gourmet

I got an email excitedly saying that I should be explaining how interest rate increases will affected younger investors and the personal finances of young people. I didn’t really think that was necessary, but it keeps popping up elsewhere with even more breathless writing copy, so it’s time for a real recipe for Federal Reserve interest rate hikes. Interest Rates and Young People Let’s start from the beginning. Neither interest rates, nor money, nor investments, care how old you are. It all works the same for every age. That being said, it is true that interest rates have been so low, for so long, that anyone under 35 probably has never experienced higher interest rates. So, let’s go over what higher rates are like. History of Interest Rates First, remember that while the Fed has raised interest rates several times since December 2016, they have all been small 0.25% interest rate hikes. The current rate is 1.25% (technically, the Fed sets a range of 1.0% to 1.25%, but for graphing purposes, you’ll see 1.25%.) This is not remotely “high.” In the 1980s, the Fed Funds rate was an astounding 18% to 20%, as they tried to reign in inflation, and …

Will The Fed Trigger a Recession?

May 3, 2017 by Finance Gourmet

Will the Federal Reserve trigger the next recession? The Fed is meeting and most analysts expect that they will signal that they are making no changes in their plan to move forward with at least two more rate hikes this year despite the weakest first quarter economic growth in three years. More Rate Hikes or Bust The Fed is still trying to work its way out of the “historically low” interest rate environment it has been forced to use to keep the economy upright since the Great Recession a few years ago. The trouble is that despite years of economic expansion, none of those years have come across as particularly strong. In fact, with just two exceptions in the last few years, every time the Fed thought the time was right to raise rates, new, bad economic news came out to derail their plans. This time, however, the Fed looks like it will not be deterred by any run-of-the-mill negative data. Even as inflation falls. Fed officials are blowing off the poor first quarter of economic performance. They say that they fill it is temporary and the economy will recover and continue to grow at a better rate, as soon …

Best Argument For a Coming Recession

May 4, 2017May 2, 2017 by Finance Gourmet

Recently, I wrote about how lots of various financial analysts and pundits predicting a coming stock market crash or imminent recession are more interested in trying to take credit for making a guess than in accurately predicting what the facts actually support. However, there is one very good case for predicting a recession coming in the next few years. Predicting Recessions It is as likely as not that the next recession will trigger the next stock market correction. Of course, the opposite has been known to happen as well. Most recently, the internet bubble popping took the economy with it, when it caused the bankruptcy and fire sale of dozens of formerly high-spending technology companies and sent their employees flooding onto the market, just when the demand for them vanished. On the other hand, the slow motion implosion of the housing market, and its affects on poorly leveraged, and managed, banking companies, followed by their panicked actions to stay alive, is what caused the so-called Great Recession of the Bush the Younger era. Is Acorns safe? Read this review. These days, most analysts like to predict a stock market crash based on “knowing” that the market is over-valued, or propped up …

Oil Drops Below $50 Again – Now What?

April 21, 2017 by Finance Gourmet

Not long ago, I posted about how oil prices would never see anything near $100 a barrel again, because as soon as prices started climbing above $50 or $60, U.S. producers would crank up previously idled oil fields, and that is just what happened. With OPEC’s oil production cut earlier this year, prices indeed did start rising, and U.S. producers turned the pumps back on. Prices have made it back up in to the fifties. Today, however, prices slipped back below $50 per barrel ahead of a report on U.S. oil rig count that most analysts predict will show even more U.S. production coming online. Couple that with uncertainty about whether OPEC — and Russia — will extend their supply cuts, and you have investors nervous that prices have nowhere to go but down. Oil Prices and U.S. Stock Prices The reality is that, for America, $50 per barrel is a pretty happy medium spot. At $50 per barrel, oil value is high enough for most U.S. producers to make a profit, and for banks to continue feeling good about credit backed by oil reserves. Together, this keeps the stocks of S&P 500 companies like Exxon and Shell and so …

Fed Raises Rates – More Coming

March 16, 2017March 15, 2017 by Finance Gourmet

The Federal Reserve raised interest rates one-quarter of a point, or 0.25%, in a widely expected move. The benchmark rate is now technically the range between 0.75 percent and 1.0 percent, although most people refer to this simply as 0.75%. As pretty much everyone predicted, the Fed raised interest rates at its March meeting. This is the second interest rate hike in just three months, and the third one overall since the Great Recession. Fed Chairwoman Janet Yellen said, “The simple message is, the economy is doing well.” What Happens Next? While some indicators are showing signs of inflation, there is also an increasing concern that the economy isn’t as robust as some might think. Things certainly look good right now, but few analysts look as this economy as a powerful train moving forward, so much as a boat drifting in the right direction and easily pushed off course. As a result, the guidance from the Fed continues to be for three total interest hikes in 2017, meaning that currently they expect two more hikes between now and December. Just when those hikes will come depends a great deal on how the economy fares. Another few months of good job …