Do you remember how much you paid for your first home? Pretty amazing how things have turned out, don't you think? If you bought back in the 70s, you probably spent some multiple of your annual salary that wasn't outrageous. Yes, you probably carried a mortgage with an interest rate many multiples higher than today's, but did you ever think you'd be where you are today? Did you think interest rates would be this low? Probably not. You were too busy. You were your own survival guy. You most likely didn't buy a home to sell it to some sucker at a higher price. You bought it because you needed … [Read more...]
Archives for December 2020
Is Tesla the Next AOL?
Chris Harvey, head of equity strategy at Wells Fargo makes the comparison between AOL and Tesla. From MarketWatch: “AOL, similar to Tesla, had a game changing technology, incredible performance… it goes into the index late in the year in December after an amazing run,” Harvey said. “But it was a seminal event.” Following its relentless rally in the late 1990s, AOL, like many causalities of the dot-com bubble, failed to keep up with the times, which is a risk that Tesla, up almost 700% this year, also faces in the coming year, he explained. “After ’99, many tech and growth companies lost … [Read more...]
Stimulus Rewards States That Have Abused Their Businesses the Most
States that have abused their businesses with the harshest COVID-19 lockdown rules are going to reap the most from the COVID-19 stimulus package. The Wall Street Journal editorial board writes: States will also benefit from the federal enhanced $300 weekly unemployment benefits, which are taxable income in most states. The jobless benefit sweetener will especially help states with higher unemployment such as New Jersey (10.2%), Hawaii (10.1%), New York (8.4%), Connecticut (8.2%) and California (8.2%). New Bureau of Economic Analysis data show how blue states that shut down more businesses … [Read more...]
Most Important Consumer Price Inflating at over 8% Annual Rate
Inflation is too low according to the Fed. That may be true when you incessantly make adjustments for quality, substitute goods, and exclude from your index, the single most important price for most consumers. That price would be the price of a home. You know, the American dream. Surely, even the PhD’s setting monetary policy are familiar. Instead of using the actual price of homes, the Fed uses a contrived proxy called owners equivalent rent. Rent inflation is falling, but home prices are going the other way. Home prices have increased over 8.4% over the last year. If you are in the … [Read more...]
You Can Be a F.I.R.E. Starter
I want you to visit my series on FIRE, Financial Independence, Retire Early, here: Living Your Best Life: FIRE!: Are you familiar with the FIRE movement? You should be, and you will be shortly. And I’m not talking about a fire where, for example, a tree falls in your backyard onto power lines, ripping them down along with a transformer and nearly burning down your house on a quiet afternoon in Newport, RI. “Dad, You’re Stressing Me Out” FIRE! (Part II): Living a lifestyle where you spend 50% less than your “normal” spending doesn’t sound like much fun. But that’s exactly what many … [Read more...]
Regulators Call for More Money Market Fund Reform
Financial regulators are finally admitting money market reforms put in place during the last crisis are insufficient to prevent runs on America’s non-Treasury money market funds. Part of the problem here is that investors bail at the first whiff of trouble. There just isn’t enough return offered in money markets to take the risk. Ultra-low interest rates are partly to blame for that. Reforms are likely to continue to fail unless the government requires an FDIC insurance guarantee for money funds. That’s a bad idea if you favor free markets, but less bad than the alternative. What’s the … [Read more...]
Enjoying Christmas in a New Home Was Pricey This Year
When new home sales are falling because there isn't enough supply to meet demand, the only short term solution to balance the market is for prices to go up. It takes time to build new supply, but many of this year's home buyers are trying to escape the city now. They want to have Christmas away from the densely crowded, COVID-filled cities, and they don't care how much it costs. A combination of rising prices and short supply actually pushed down the number of sales in November. The Wall Street Journal reports: Homes sales slipped in November as the supply of properties for sale fell to a … [Read more...]
Investors Gorging on Blank Check IPOs
Blank check IPOs, where public offerings are made with the promise to buy another company, have seen a record $78 billion raised this year. That’s more than the combined total of all blank check IPOs in all previous years. Some investors apparently don’t even care if the stocks they are buying are an actual business. If you have a business you have even thought about taking public, now’s the time. The IPO market is as hot and speculative as it has been since the dotcom bubble. Bloomberg has more: Special purpose acquisition companies, or SPACs, went from a back-of-the-shelf financial … [Read more...]
Merry Christmas!
Dividends Can Get You Through Times Like These
In times like these, dividends can get you through. My father-in-law, Dick Young, explains the power of dividends below. He writes: There are few histories as crucial to the course of my life as my awakening to the power of compound interest and the importance of dividends. Since my decision to climb on the dividend bandwagon, I have been an evangelist to hundreds of thousands of paid subscribers, and many more investors beyond. My message has been consistent and clear, and I don’t regret focusing on dividends a bit. Here’s how it all started. Back to Monterey and Woodstock I’ve been … [Read more...]
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