News

Job Losses Now Due to Market :)

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Not too long ago, I wrote about how context in articles and statistics is critical regarding the huge boom in employment in North Dakota. Now, North Dakota and a handful of other states lead the U.S. in job losses. Of course, not too long ago, the gains in these states were due to the genius of their governors or legislatures. Now, it’s just market forces. Of course, it was the same thing both times around, the oil and gas industry. When oil was booming and drillers were hiring as fast as people would show up, job growth exploded in North Dakota. Now, that oil prices have plunged and the industry is mothballing rigs, while entirely stopping drilling new ones, employment numbers are crashing. Context is everything. Overall, nothing new is happening, good or bad, in the states with the greatest number of job losses, it is just that in one particular industry, the bottom fell out. Interestingly enough, this might be the actual bottom, meaning that there is nowhere but up for these job numbers to go. When they do start climbing, watch for the politicians who claim no blame for this downturn, come scurrying out of the woodwork to …

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10 Things That Rich People Supposedly Do

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There is an article over on Marketwatch title 10 Things Rich People Know That You Don’t. It is complete and utter garbage. Articles like this are one of the reasons I started Finance Gourmet. They give the impression that there is a trick to money and wealth, while throwing out meaningless advice. It not only doesn’t help, it makes people feel worse because it feels like they are not rich because of something they are doing, when that isn’t the case. The subtitle is that people don’t become wealthy by accident, and here’s how they do it. That’s a lie too. There is nothing in this article that tells you how people become wealthy, unless you count a guy retiring with a nice 401k as wealthy. But wait! You can stoop even lower for a few extra clicks. The URL for the article ends in 10-habits-of-high-net-worth-women, and it is even LESS about that. First, let’s start with the basic premise that rich people know something you don’t, and that’s why they are rich. This is just not true. We love to think that there is some sort of insider secret, or conspiracy, that if you could just figure it out …

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Fed Telegraphs Slower Rate Hikes

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The Federal Reserve, via its members, is out announcing that the rate hikes everyone was sure were coming this year, after the December interest rate increase are, in fact, on hold, until the markets and the economy stop being so shaky. Fed Members Nudge Wall Street Off of Hike Forecasts The St. Louis Fed President, James Bullard, said in an interview that rate hikes during 2016 were never a sure thing. He is right that the Fed often, and deliberately, said that rate hikes were dependent upon data going forward, but the markets didn’t believe them, pricing in a full 1% interest rate hike over 2016, and every analyst under the sun talking about a steady march up in interest rates. Bullard blames the previous Fed under Fed Chairman Bernanke for “mechanically” raising interest rates 17 straight times from 2004 to 2006 (and likely triggering the nationwide real estate slump that ended up all but crashing the U.S. banking system in 2007). He says that because of that chain of increases, everyone simply assumed that this year would have similar, albeit slower, rate increases. Bullard leaves out that many of the other current Fed members (including himself) could say often enough …

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Stock Market Up to Start Week

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And this week (shakes magic-8 ball) the stock market will start up! The financial news sites are all going with: because oil prices are rising. I keep telling myself I won’t write any more posts about the stock market volatility that’s going on right now, but it’s hard not to when there are so many stories out there telling you why now is the time to buy, or now is the time to sell, or how there is a recession coming, or how there isn’t, and, “Hey, squirrel! Let’s sell and buy!” Today. the U.S. stock market happens to be up. The Dow is up over 200 points, or 1.38 percent. It is still down for the year, but don’t look now, another week or two like this, and we’ll be right back where we started in January. What do they say, “A lot of sound a fury signifying nothing?” As always, daily volatility tends to be a function of computer trading algorithms rather than actual investor sentiment. The truth is that things are still dicey. The Fed doesn’t know if it should or should not raise interest rates again… sooner or later…. For extra fun, the inflation numbers look …

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Fed Thoughts Economy and Interest Rates

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Every six months, the Chairman of the Federal Reserve Board testifies before Congress. For the most part, the interesting, fact-based, information comes out in the Chairman’s open statement to Congress. After that, as all things Congress do, the hearing dissolves into a politically motivated bit of staged theater in which various Congressmen “ask questions” that end up being a lot more political posturing than actual questions. Still, there is often a lot of information in that opening statement, which is helpfully posted on the Fed’s website, if you want to read the whole thing without seeing it through the lens of the media. (or on a former financial advisor’s personal finance blog 🙂 The U.S. Economy and Interest Rates The Fed raised interest rates for the first time in many years in December. Since then, the employment picture in the U.S. continues to improve with the unemployment rate dropping to 4.9 percent in January. The economy is growing as well, with the real gross domestic product estimated to have increased about 1.75 percent during 2015. If that was the whole picture, then the rest of this talk would have been about inflation and raising interest rates. But, of course, the …

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Dow Down 300 Points for Today and…

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5 year dow chart

Your daily reminder of what this morning’s 300 point drop in the Dow Jones index looks like on a 5-year chart. Remember, your time frame and risk tolerance are what matters. If those have changed, talk to your financial advisor, or re-evaluate your current asset allocation. If you are currently investing for a shorter time frame, you should know, and accept that this kind of volatility is very likely to continue while the stock market shakes out its “too fast” run up from the Great Recession to now, as well as global instability such as the American election, structural issues in China’s economy, and whatever is going on in Europe this month. Also, this is the first time in a generation the oil industry and the economy in general has seen oil prices this low. It’s no wonder people aren’t really sure what to do. And, last, but definitely not least, don’t forget that most of this is computers trading amongst themselves. Stay smart and keep sight of your goals. Don’t overreact to short-term market news and events.    

Higher Minimum Wage in 2016

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minimum wage help wanted

We’ve talked a bit about minimum wage increases here before. In particular, I’m interested in the effects these minimum wage increases end up having. Most reports you read, whether positive or negative, are pretty much pure speculation, or cherry picking of data to fit an agenda. The reality is that the whole, higher minimum wage movement is still too young to produce the kinds of data needed to draw actual, mathematically and economically sound conclusions. Where Is Minimum Wage Higher in 2016? Part of the problem with knowing how higher minimum wage affects things is that it is nearly impossible to isolate individual geographic regions from the power of the national economy. This is particularly true for cities that are raising their minimum wage. Since employment in the U.S. is picking up after having been slammed by the Great Recession, most areas, regardless of minimum wage laws, are seeing higher employment. Still, the only way to find data is to look for it. First, the federal minimum wage is $7.25 per hour. No Minimum Wage Increase for 2016 There are seven states that either have no minimum wage laws, or a state minimum wage law below the federal minimum (Georgia, Wyoming). They …

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China Stock Market Panic – Take 2

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china crash number 2

The stock market in China is in a free fall. Everyone panic! Wait. This seems familiar. Maybe, it’s because I wrote about this same thing just a few months ago during the August Chinese stock market crash. History. Learn. Repeat. Mistakes. Bad News the U.S. Economy I wrote a nice well-reasoned article recently about how you shouldn’t let bad news force you into making rash investment decisions. Here is another way to look at it courtesy of this repeat bit of stock market news. This time we have a nice little confluence of factors. There is, of course, the plunging China stock market, but this time around we have a little extra fear in the form of a nuclear test that North Korea claims is a hydrogen bomb test. (Last time, it was Middle East instability.) Well, that doesn’t sound fun? As if that weren’t enough, oil prices are falling again, and for some parts of the stock market, that’s bad. But, should we panic? George Soros isn’t helping. He’s in the news comparing today to 2008, you know when major U.S. banking institutions were failing and the Fed had to rush in to keep the whole American economy from seizing …

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Fed Raises Interest Rates – Now What?

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interest rates federal reserve

This post was published in 2015. The Federal Reserve Raised interest rates today! It’s HISTORIC! It’s the FIRST ONE IN NEARLY A DECADE! WHAT HAPPENS NOW!?!?!  AGGGGHHHHH!!!! No Real Changes From Interest Rate Increases As we’ve discussed a bit before, there really isn’t as much big news in today’s announcement as you might think. First of all, this has been the most expected interest rate hike in history, so there is no one out there making rash decisions. In fact, there might have been more trouble if the Fed had not raised interest rates since that would have actually been surprising. In other words, the stock market, the bond market, and every market in between was already planning for, and pricing in today’s interest rate increase. This is why the stock market basically kept going the way it was already going before the meeting’s results were announced. Increases In Consumer Loans? Theoretically, an increase in the target interest rate from the Feds should raise the cost of consumer borrowing as well. However, a lot of credit products these days have minimum interest rates, and many products are still going to be at that minimum rate. For example, a credit card …

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Does Raising Interest Rates in December Matter?

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interest rates federal reserve

Usually, I caution people against paying too much attention to the Federal Reserve and when they set interest rates. For most investors, this is a distraction that doesn’t really impact, over a longer term, their investments as much as the media suggests it does. However, since the Federal Reserve has not raised interest rates in a very long time, there are those who don’t really remember what happens, and even those who weren’t adults, or investors, the last time the Fed actually raised interest rates, so let’s review a bit. How The Fed Raises Interest Rates The Federal Reserve actually sets interest rates in two way. First, the Fed sets a discount rate, which is the rate the Federal Reserve itself charges to banks for lending them money overnight. The second interest rate is the Federal Funds rate. This rate is the interest rate that federally insured banks charge either other for overnight loans. (Exactly why, banks need to borrow money in this way is a topic for another day.) As you can see, neither of these interest rates directly affects you as a banking customer or investor. However, these interest rates heavily influence other interest rates that do apply …

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