- - Page 6 of 12 The Finance Gourmet

The Uncorrectable Housing Shortage

May 24, 2017 by Finance Gourmet

Here in Colorado, there is a housing shortage, especially near the bigger cities where the majority of people live, like the Denver metro area, Boulder, Ft. Collins, Loveland, Colorado Springs, and so on. The problem is in many ways self-inflicted. There are only so many buyers looking for houses above $500,000. There are many more buyers looking for houses below $500,000, and even more looking for houses below $300,000. A subdivision of homes priced between $200,000 and $250,000 would likely see a months-long waiting list in just hours. Why No One Builds Lower Priced Homes Anymore During the last housing crunch, buyers (like me) lined up to by houses from builders based on models. You put your name in the lottery for a lot, and then got to customize the house. The downside was that you had to wait the better part of a year to actually move into your new home while they were buying it. Back then, different builders built to different price points on large tracts of land. If you couldn’t afford the houses being built by one builder, you went with a different builder in that development. Check out my WalletHub review. Today, most builders are …

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 …

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 …

Retail Stocks and 2017

January 5, 2017 by Finance Gourmet

Wheee! Well, looks like 2017 is going to be a lot of fun, and by fun, I mean volatile and sketchy all the way through. First up, are announcements by retail stocks such as Macy’s and Sears, both of whom announced that they would be cutting staff and closing stores. Kohls also announced sluggish holiday sales. That means that the 2016 holiday shopping season was not strong enough for a lot of traditional retailers. Look for earnings on the low side, that disappoint Wall Street for most retail stocks. This is a big deal, because this was supposed to be the “up” year for the economy. The stock market is up, closing in on 20,000. Job reports show that unemployment is as low as it’s been since before the Great Recession. The Fed even finally got to raise interest rates in December. If this holiday season wasn’t good, then things maybe aren’t going as well as everyone might have hoped. Of course, it is possible that there was still plenty of consumer spending and it just went different places like online retailers, or specialty stores, but so far, no one is pushing that theory. Trump, The Fed, Inflation and a …

2017 Finances and Money Issues

January 3, 2017 by Finance Gourmet

Welcome to 2017! Relax. Take a deep breath. There. Feel better? Good. Then let’s jump in. Finances Updated in 2017 With a new year, come some new numbers. There will be updates to the maximum 401k contributions, income limits for Roth IRAs, and others. Plus, there will be adjustments to the 2017 income tax brackets, the 2017 standard tax deduction, and more. And, of course, there is a new IRS mileage rate for 2017 as well. What about 529 plans? There aren’t a lot of updates to those numbers each year, primarily because most facets of 529 college savings plans are administered through the states, who aren’t always as keen on changing and updating everything. You’ll want to re-evaluate your financial plan for the new year, and you’ll want to review how your financial plan did in 2016. Plus, you’ll want to rebalance your portfolio, if you didn’t do it at the end of 2016. Retirement Plans 2017 A big part of most retirement plans are tax-advantaged savings accounts like your 401k plan, IRA accounts, and, for some of you, 457 plans, 403(b) plans, and various differed compensation plans. All of those need adjusted and reviewed for 2017 as well. …

OPEC Deal and the U.S. Stock Market

December 1, 2016 by Finance Gourmet

For the past few years, the strategy of OPEC has been to do nothing while Saudi Arabia pumps oil as fast as it can into the market. The idea was to cripple, or drive out of business, various U.S. oil businesses that depend on more expensive extraction methods such as fracking. With prices low, many of those businesses did indeed go into hibernation and most new drilling was curtailed. However, that still leaves tons of capacity sitting idle, waiting for higher prices before flipping the switch back on. OPEC Deal It has become apparent that overproduction will not drive out U.S. oil businesses. It seems a strong U.S. economy, plus a more disciplined approach to lending and spending has left most American producers able to hold out for higher prices for longer than the cartel may have hoped. As a result, the cheap oil is actually causing more trouble for oil producing countries like Saudi Arabia that depend on oil production to fund their government. So, for the first time in over 7 years, the 14 OPEC countries have reached a deal to reduce production. The new deal calls for a reduction of 1.2 million barrels of oil per day, with …

What Is a Trade War?

November 14, 2016 by Finance Gourmet

As part of his campaign for President, Donald Trump offered up some “tough talk” on China. Specifically, Mr. Trump has advocated for labeling China as a currency manipulator. There is a specific provision U.S. law for what happens to countries labeled as such. Labeling China would trigger those actions. Is Trump right about China currency manipulator status? As with many things in the law, there is a difference between the legal definition, and what is the common reality, if you will. China IS a currency manipulator under pretty much any definition you like, except the one that matters. Typically, a country lets the value of its currency fluctuate based upon market demand. China can, and does, ensure that the value of its currency does not vary outside of of parameters it sets. This is what currency manipulation is. The reason currency manipulation is a problem for America is that usually with a large number of imports, the exporter’s currency will start to increase in value relative to the importer. That makes the exporter’s goods more expensive and the importing country buys less of them. This keeps trade deficits smaller, and on a larger scale, makes the importing country’s own goods …

Fed Predictions

October 24, 2016 by Finance Gourmet

Predicting the Federal Reserve and the actions it takes for monetary policy is tricky. In no small part, the difficulty lies with the fact that you are actually making a dual prediction. First, you are predicting what economic news, data, and figures the Fed will receive, and THEN you are predicting how the Fed will respond to them. Getting the second part right, is probably easier than the first part because you are dealing with established pasterns of rational beings, rather than the unknowable events of a future world economy. It seems in a speech Wednesday, Fed member Charles Evans said that he thinks there will be three one-quarter percentage rate hikes. That would essentially end up with the Federal Reserve’s Open Market Target Interest Rate by the end of 2017. Curious about Mr. Evans’ track record, I did a search for his remarks in the last quarter of 2015 to see how well he did at predicting what 2016 would look like. As it turns out, Mr. Evans is pretty good at his job (based on one year anyway) having predicted the U.S. economy would grow at about 2.5 percent during 2016, and with the Federal Funds Rate ending below …

Is There a Market Bubble?

September 29, 2016 by Finance Gourmet

Recently, an increasing number of pundits (and a smaller number of actual stock market analysts) have begun using the word, “bubble,” to describe the U.S. stock market. That chatter has picked up even more lately, when Donald Trump began saying that the stock market is a bubble propped up by the Federal Reserve keeping interest rates low. But, is the stock market really in a bubble? What is a stock market bubble, anyway? How can you tell if there is a stock market bubble? What Is a Stock Market Bubble Really? Let’s start with the fact that you should NEVER listen to a politician (including candidates) when they talk about the stock market or the economy. They are always campaigning, even in off years, and getting people to think the right thing outweighs any allegiance to the truth. In the case of Donald Trump, he is campaigning on the economy being bad, but a rising stock market is shooting holes in that claim. By saying it’s a bubble, he’s trying to imply that it isn’t a REAL sign of economic growth, and that the economy actually is bad. But, beyond politicians, how can we tell if a bubble is real? …