Having lived in Knoxville during the duration of the 1982 World’s Fair, I have enjoyed recent news reports about the world’s six-month visit to East Tennessee. Curiously, however, despite visiting the Fair at least 50 times, I don’t recognize most of the official events described in the pieces. As a 19-year-old college student with an employee’s pass and a girlfriend working at gift shop on the Clinch Avenue bridge, the unofficial experience was a bit different. I never saw any of the heads of state and other dignitaries who apparently visited the Fair, although the Secret Service did occupy the … Read More
Is the crypto Emperor naked?
If you don’t understand something, don’t put your money in it. Period. Full stop. Since last fall, the collective value of major cryptocurrencies has declined at least $2 trillion – when measured in quaint, old fashioned U.S. dollars. Multiple cryptocurrencies designed to peg their values to the dollar failed at that mission, with one (the UST stablecoin) declining more than 90 percent. Another, something called a LUNA token, dropped from $100 to $0.0001. These collapses may prove to be temporary, offering investors a chance to buy digital currencies at a significant discount to their underlying values. Or not. Perhaps I’m … Read More
Inflation winners and losers
By itself, inflation is neither good nor bad. If consumer prices increase ten percent in a year that everyone’s wages increase exactly ten percent, inflation was irrelevant to everyone’s daily budget. Of course, the economy doesn’t work like that – including the fact that for most people incomes don’t rise in lockstep with changes in consumer prices. Neither do corporate earnings or stock prices. And just as the effect of inflation depends on whether you’re buying a home, taking your first job out of college or simply trying to fill your car with gas, the implications of inflation are complicated. … Read More
Fed makes needed rate increase
I’m not accustomed to praising the Federal Reserve, but this past week the Fed avoided a tempting opportunity to make (another) major mistake. In an effort to head off worsening inflation, the nation’s central bank raised interest rates a half a percent at its May 4 meeting. After learning that the economy contracted in the first quarter and is already halfway to an official recession, I expected the Fed governors to weasel out and raise rates a more modest – and almost meaningless – quarter-point. They did they right thing. Federal Reserve has painted itself into a corner. Because interest … Read More
Will higher rates kill housing?
After increasing for the seventh consecutive week, the 30-year mortgage recently topped 5 percent. These higher rates, combined with the massive increase in home prices in the past 18 months, have some market pundits comparing the current housing market with the end of the last housing boom in 2007 and predicting an impending 2008-style crash. I understand that fear is a popular motivator, but the comparison is more than just a modest stretch. Economic fundamentals matter and the fundamentals of the housing market are completely different than they were during the last boom. In 2007, despite a run up in … Read More
ESG investing mostly for show
Investors poured $596 billion into “socially responsible funds” in 2021, bringing the total assets in ESG (Environmental, Social and Governance) funds to $2.7 trillion. That suggests that there are plenty of people for whom socially conscious investing is important. What it really means, however, is that there are a bunch of investors who have fallen prey to another marketing gimmick by the investment industry. “Sustainability” used to refer to a business’s ability to forestall failure. In today’s investment world, the word is a marketing gimmick for investment firms and a shortcut for virtue signaling. According to the Green Clean Guide, … Read More
A 401(k) wolf in sheep’s clothing
I am usually more likely to be skeptical than optimistic whenever someone from the government shows up unsolicited, promising to solve my problem, especially when I’m not aware that I have a problem. But when the government shows up arm-in-arm with Goldman Sachs and every other investment firm on Wall Street – all anxious to solve my problem – I know there is more than my welfare in play. Throw in a high-dollar, well-orchestrated behind-the-scenes PR campaign, and I know to lock my doors. A couple of weeks ago, the U.S. House of Representatives almost unanimously passed something called SECURE … Read More
Some taxing figures
Last week’s column about the relationship between inflation, spending and taxation prompted a number of reader emails, some of them humorous in their cyber-meanness. (Sticks and stones, Will Smith.) To the letter writer who blamed my misguided sense of fairness on my being an obvious child of privilege and generational wealth, please know that my first home, 6 Paradise Trailer Court, is now a roadway retention basin. To everyone else, here are some facts about the U.S. tax code that may dispel some myths. There is a difference between income tax and payroll tax. The payroll tax is earmarked specifically … Read More
Inflation gives everyone some skin in the game
The nonpartisan Tax Policy Center estimates that 57 percent of all U.S. households paid zero federal income tax in 2021. Even if there is an income level below which a person shouldn’t be required to help finance the operation of the federal government, shouldn’t at least half the people pay something? In the same way that a person is less likely to take great care of an automobile he didn’t purchase, people tend to think about their federal government differently when they don’t pay for it. If I don’t pay for government, I don’t care if it is inefficient or … Read More
Your house is not an investment
In last week’s column, I noted that the official Bureau of Labor Statistics method of measuring housing costs was so convoluted that it results in a gross understatement of the true rate of inflation in the U.S. Implicit in my comments was the assumption that few people are fans of record high inflation. Apparently, I was wrong. Several readers, most of whom appear to be related to the residential real estate industry, wrote me, arguing that inflation is good for asset owners, especially homeowners. In one email a title company employee wrote that home ownership was the best way for … Read More