economy

Trump, Iran, and the Markets

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The stock markets aren’t sure what to do anymore about Donald Trump. As it turns out, many of the things the market thought would be devastating (trade war with China) weren’t as big of deal as originally thought. Add to that the fact that Trump changes his mind on a regular basis for no particular reason, and you have a stock market that just sort of guesses. Big news today is that the Trump administration is pulling the waivers for countries over the Iran oil sanctions. Say what? So, Trump decided he had some sort of goal with Iran that involved oil sanctions against Iran. Typically, this is what American Presidents do when they are upset with Iran. Rather than bombing them, you cut off their ability to sell oil The catch is that the world oil market is really one big pool of suppliers and cutting any of the supply into that pool raises oil prices. Most countries, especially America, aren’t real fond of higher oil prices, so the sanction thing is sort of a double-edged sword. Enter waivers. When the Trump administration put its sanctions on Iran, they made sure to tell everyone, because that is how you …

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Financial Planning 2019

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Financial Planning 2019 1

Stock Market 2019 Look Ahead 2019 is here, and it’s time for Finance Gourmet to take a look forward at what is going to happen with the market in 2019, the economy in 2019, and how you and your personal finances should be setup to weather the storm, and take advantage of the opportunities. 2019 Economy Let’s start with an easy one (Hah!). The 2019 economy looks to be a transition year. This is either the year, that the the economy and the markets consolidate their success and move forward into another expansionary period, or the year that the recession starts. Under normal circumstances we might have a pretty good idea of where things were heading, but these are not normal circumstances. The Trump Presidency alone adds a measure of volatility and uncertainty that just can’t be predicted. That being said, we do have several things to look at to help get an idea of where the economy is heading in 2019. First up is the Federal Reserve, which, at long last, appears to have finally noticed that the economy is slowing and shaking, and that inflation is nowhere to be found other than the always volatile fuel prices. That …

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Neutral Interest Rates

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on the edge

Fed Chairman Jerome Powell made some very interesting remarks where he said he thought that interest rates were “just below” neutral. This is bizarre on many levels. First and foremost, neutral interest rates are perfect interest rates unless your economy is in a recession in which case you want stimulating interest rates, or if you are trying to control inflation in which case you want interest rates that have a constricting effect on the economy to stop price increases. So, if interest rates were close to neutral, and inflation was not increasing, then wouldn’t you want to keep interest rates at neutral? Check out my notes about Ebates and holiday shopping. But, Powell and the rest of the Fed have been telegraphing a December rate increase as loudly as possible. In other words, event though interest rates are “just below” neutral, Powell and company want to raise them. Why? Economy is Teetering The other weird bit is that everyone can see the economy is slowing down, and quickly. Housing starts are way down. Housing sales are decreasing. Both are very much affected by higher rates. The stock market is falling, having erased the whole year’s gains. Also, in very large …

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Oil Price Fun (11/2018)

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oil prices

I’ve been swamped so I haven’t been able to update on here as often as I would have liked these past couple weeks, which is a shame because there is tons of interesting stuff going on out there, plus end of year stuff coming, and so on. I’m on it. Don’t worry. In the meantime, my favorite story of the past few weeks is oil prices. Since this time late year, oil prices have been trending higher (with the usual ups and downs). Since June of this year, oil was basically stuck between $65 per barrel and $70 per barrel. That price range might be considered the “real” oil price, or the non-panicked oil price based upon an established equilibrium of supply and demand. Then, Trump started talking about sanctions on Iran, and prices started climbing, topping out at over $76 per barrel. This is because taking Iran’s oil supply off of the world market would decrease supply with no corresponding decrease in demand. But, what Trump shouts and what he actually does don’t always match up, and the administration basically granted sanction waivers for all of Iran’s biggest customers including China. That means that the supply is not decreasing, …

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Stocks Have Hard Day – Just Volatility, or the Recession Knocking?

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crystal ball stock market economy

Stocks had a pretty big selloff today in response to a big drop in the bond markets. For those of you keeping score (the baseball kind, not just the points scored), here is the way the game looks so far. Check out my review of Credit Karma. US economy is still expanding, making it one of the longest economic expansions The economy itself is cyclical. It ALWAYS goes up AND down. So, if it has been going up for a very long time, sooner or later, there will need to be a correction, or recession. How hard the recession ends up being is a function of how it hits. A “pop” leads to a hard (potentially shorter) recession. A “soft landing” means markets can regroup and reprice (usually with a lot of sideways movement) without shocking the system. The Fed keeps raising interest rates because… well, because they want to be “hawks” and not “doves” and just for the barest of moments, the supposed “target” of 2% inflation was touched, so here comes the Fed. The Fed not only keeps raising interest rates, it keeps saying it is going to raise interest rates more. One more hike this year, in …

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Fed Raises Rates On Schedule

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The Fed has been telegraphing a September (2018) rate hike for quite some time now, and they followed though with another 0.25 increase today. They also anticipate a December rate hike still this year as well. I mentioned last time, this increase marks the end of the “free” rate increases that really didn’t do much to affect the economy as the rates were laughably low so much so that getting any commercially available rate meant a lot of “padding” in the rate from the Fed rates. This rate increase pretty much ends that. From here on out, ever quarter percent increase goes right into the economy as an increasing headwind. Between political uncertainty, a burgeoning trade war, and an economic expansion getting long in the tooth, it’s my opinion that the Federal Reserve is acting recklessly here pushing ahead with its rate increase timeline without any evidence of inflation, and no evidence of wage growth. In other words, the Fed is raising rates despite there being almost no inflation. Traditionally, this does not work out for the American economy. Every time the Fed starts raising rate for reasons OTHER than fighting inflation, the result is a recession, often a big one. …

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Are These The Tariffs You’re Looking For?

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tariffs imports markets

OK, so that isn’t a very search engine friendly title for this article, and I don’t really care. The tariffs in Trump’s trade war are starting to make real impacts on certain Americans, and the rest of us may start feeling the effects soon. The most noticeable, immediate impact, is that after a decade as an experienced, professional freelance financial writer, it is now necessary for me to be able to spell the word ‘tariff,’ which up until now never really came up except in examples and edge cases. Generally speaking, tariffs (one r, two f-s) have never been the kind of thing that impacted the middle of Main Street America. Now, I guess we are going big, or going home. In a lot of cases, Trump is shutting the barn door after the horse got out. There used to be real, U.S. manufacturers of solar panels, for example. Not anymore. The companies getting “protection” from Trump’s solar panel tariffs (one r, two f-s) are American, only in the legal sense of subsidies and corporations.  In other cases, maybe something like the steel tariffs could save the few remaining stell companies and mills. The second big impact is now dropping …

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Investing For Hurricanes

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I usually wouldn’t write an article like this, but I’m trying something new, so let’s do this. Do hurricanes affect the stock market, and the overall U.S. economy? How Hurricanes Affect The Stock Market Like the vast majority of stock market moves caused by news items, the actual impact on the stock market tends to be negligible when measured over any period of more than a week or two. In other words, investors love to freak out about the news, only to forget what the story was a short time later. Weather, like hurricanes, is no different. Check out my Ebates review. Consider that an upcoming hurricane, no matter how large, has a relatively small area of impact compared to the country overall. While a hurricane might completely decimate, say, South Carolina, that impact won’t be felt in Ohio, Texas, or pretty much any other state you can name. And, if we are being really honest, the biggest of hurricanes don’t really do much long-term damage unless accompanied by flooding. Whether it’s Hurricane Katrina, or Hurricane Sandy, the damage beyond some power failures, damaged roofs, and fallen tree branches was all done by the flooding. So, if you want to …

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Interest Rates Rising Into the End of the Year

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defenses economy

The Federal Reserve did not increase interest rates at its August 1st (2018) meeting. That was widely expected after the increase from the pervious meeting. Traditionally, the Fed tries not to raise rates in back to back meetings unless it feels like the economy is getting away from them. It allows the markets, and just as importantly, the economic data The Fed relies on to adjust to the previous hike before implementing another one. Rate Hike In September The Federal Reserve Bank did try and telegraph that it is currently looking at another rate hike for September. While the Fed did not raise rates, it did repeatedly say how “strong” the economy was, and how strong all the economic data was. Check out our Digit App review. And, for the first time in a long while, inflation is actually running near the Fed’s so-called target rate of 2%. While the Fed’s actions seem much more like 2 percent is a ceiling, rather than a target, recent data does suggest that inflation is running solidly near the two percent mark, so action is likely warranted. Will Higher Rates Trigger the Recession? Here is where things get tricky. While the Federal Reserve …

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The Fed, Inflation, The Economy

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is recession coming soon

Here is where things start getting tricky. For the better part of the last decade, the U.S. economy has been on an expansion back from the Great Recession. Various measures of recovery show the economy having regained its footing and moving forward. That’s all well and good, but it puts us in a rather odd spot today. The Coming Recession Economies contract and expand. Period. End of discussion. There is no new normal, not this time, not the last time, not the time before that. Every economy eventually runs out of steam and pulls back. Sometimes it’s a brutal collapse. Sometimes, it’s a more gentle, pull back, but there will be a recession. On a strict time-basis, this economy’s expansion is now very old. The official start of this economic expansion is June 2009. That makes it the second-longest expansion in U.S. history. On the one hand, YEA!, on the other hand, it’s like your dog living to be 17-years old. It’s great, but you know there aren’t many years left. If this expansion makes it to mid-2019, it would be the longest in history. Before you break out the champagne, you probably want to know that the longest expansion …

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