Will higher rates kill housing?

David MoonBlog

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

David MoonBlog

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

David MoonBlog

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

David MoonBlog

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

David MoonBlog

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

David MoonBlog

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

Official inflation figures misleading

David MoonBlog

If you are looking for a house and are shocked at the prices, you are obviously misinformed.  While it might appear that home prices in Knoxville increased 15 percent in the past year, the federal government’s crackerjack statisticians tell us that national home prices increased only 4.7 percent. Both the National Association of Realtors and online broker Redfin report a 16-17 percent increase last year. Who are you going to believe: a bunch of PhDs on the government payroll or your lying eyes? The most recent U.S. Bureau of Labor Statistics (BLS) inflation report tells us that consumer prices increased … Read More

Punish judges who break the law

David MoonBlog

The U.S. Attorney General Merrick Garland recently offered a warning to white collar criminals who might have historically used the shield of a corporation to avoid personal criminal prosecution for their misdeeds. “The essence of the rule of law is that like cases are treated alike,” Garland said. “[There is not] one rule for the powerful and another for the powerless; one rule for the rich and another for the poor.” It’s a shame Garland can’t start his equal justice efforts by putting lawbreaking federal judges in prison – or, at least tossing them from the bench. A recent Wall … Read More

Fed inaction limits war options

David MoonBlog

Wall Street fears higher interest rates more than it fears war. That’s at least one interpretation of recent stock market moves. In the first three trading days following Russia’s invasion into Ukraine, the U.S. stock market increased more than three percent – including overcoming an initial 700-point Dow Jones Industrial Average drop in the opening minutes following the start of the invasion. The market’s reaction isn’t based on speculation that Russia will fail in its attempt to overthrow the Ukrainian government or that the assault will be short-lived. No, investors breathed a collective sigh of relief when they realized that … Read More

Market decline tempts panic

David MoonBlog

The U.S. stock market hasn’t exactly been in a free-fall since the beginning of the year, but it has certainly racked up some notable losses. The tech-heavy NASDAQ Composite is down almost 15 percent. The S&P 500 has declined ten percent. Recent Wall Street darlings such as Facebook (renamed Meta Platforms), PayPal, Netflix, and vaccine-maker Moderna have all dropped 35 percent or more this year. What action, if any, should an investor consider now? If you are one of those rare individuals who can predict when the stock market is about to change directions and for how long, you don’t … Read More