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Tuesday, September 17, 2019

US Economy Excellent Rest of World Not So Much

I took a few economics courses in my university days: micro, macro, etc.  However I am not an economist.  But I've been thinking...

Why is the US economy doing so well and the rest of the world struggling?

Looking at the present, the US is doing well - low unemployment (3.7%), stock markets at record highs, GDP growth (2.2%) and low inflation (1.7%).  Meanwhile, the rest of the world is struggling.  The Euro area has 7.5% unemployment, GDP growth of 1.3%.  Why this divergence?

My theory is that the USA is doing well because it is running up a huge national debt - borrowing from the rest of the world and spending on cars, houses, and Iphones.

  1. The US has a natural advantage that it is the world's reserve currency.  Every business and every country needs US dollars to buy and sell and invest.  Therefore, no one will stop lending to the USA unless there is a financial catastrophe.  The US can continue to run up debt.
  2. The US is running up debt at the rate of 4.7% of GDP.  This is stimulative - it increases growth.  The Euro area is increasing debt at 1.1%, a quarter of the rate of the USA.
    1. I think of it this way.  For every $1,000 an American earns, they actually get $1,047 = $1000 + (4.7% * 1000)
    2. The European gets $1,011
    3. The extra spending based on extra earnings by the American drives growth.
  3. The US economy is 70% driven by consumers due to its low taxes and low level of government services (no health insurance, little infrastructure spending, little welfare).  This means that 70% of the national debt increase is going into people's pockets and being spent.

So the US is expanding more than other countries due to its increasing borrowing.  This money is being spent on short term consumption by consumers, not long term government investments like infrastructure or R&D.  This expansion drives employment, growth in company revenues and profits, and the stock market.  Don't ask me why inflation is so low, that one I cannot answer.

What are the implications for the future?  Again, I don't know.  There could be a catastrophe that causes the world not to lend to the USA anymore?  There could be a change in borrowing by other countries to match the USA?  There could be inflation?  Stay tuned.

All statistics from the The Economist Sept 17, 2019.  Excerpt below.


Wednesday, September 4, 2019

These Jobs I Had No Longer Exist


I realized that quite a few jobs that I had during my career no longer exist.

  1. I was a paper delivery boy.  I walked or rode my bike through the neighborhood, delivering newspapers, and collected the money from the customers.  Most people now read newspapers online and delivery is done by men driving cars, bills are paid online.
  2. Delivering telephone books.  Before you had the internet, the only ways to find a telephone number were using a telephone book about 6 inches thick or calling directory assistance.  Telephone books are almost non-existent now.
  3. Mainframe computer operator.  I collected programs on punch cards from students, ran them through the terminal to run on a remote IBM mainframe, then gave the students the printout from their program.
  4. Gas station attendant.  I pumped gas into people's cars.  Other than states like New Jersey, almost all gas stations are self service.
  5. Supervisor of drawing library.  Engineering departments used to generate lots of huge blueprint drawings that were kept in a physical library or on microfilm.  Now everything is stored online.

Tuesday, April 30, 2019

Time to Rebalance Your Portfolio

5 Year Stock Price Chart for Vanguard Total Stock ETF (VTI)

The stock markets in the USA are hitting new records again. It means your stocks, ETFs, Equity Mutual Funds are probably at all time highs as well.  See the above graph of VTI - The Vanguard Total Stock ETF which covers virtually all publicly traded stocks in the USA.

You probably have a desired portfolio allocation for stocks, bonds, international stocks, cash, etc. Check your holdings and you will likely find you are over-weighted in stocks because of the market's performance.  I found I was 3% over on US stocks, and under weight on international stocks and bonds.

So now is a good time to rebalance your portfolio if your allocation is out of balance by more than a few percent. Sell some of those winning domestic equity holdings, buy bonds or international stocks or whatever you are underweight. This means "take some of your winnings off the table."

This technique of keeping a balanced portfolio is recommended by Warren Buffet, Vanguard, Fidelity, and most other respected investment authorities.

Disclaimer: this is not professional investment advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Friday, April 12, 2019

It is Impossible to Drink Coffee at Starbucks

Another day, another rant.

Starbucks and their free wifi have made it impossible to drink a coffee at Starbucks.  You can certainly buy coffee and take it out, but finding a seat and table to actually drink it is nearly impossible these days.  Almost every seat in any Starbucks we visit is full of students, people holding business meetings, budding authors, job interviews, people tutoring students (very popular in Florida), and people just browsing the web.

Obviously their business model is built on take-out, as they are not making money on people sitting for hours, using their wifi, and nursing a small blonde roast coffee.

Monday, March 11, 2019

Saver to Spender Transition


I recently saw an article on Moneywatch about a dedicated retirement saver who was having trouble changing to a spender after retiring.  This is understandable: if you spent 40 years saving for retirement, you need to change to a spender after retirement.  Changing behaviour can be difficult.  I experienced this difficulty myself.

How did my spouse and I handle it?  At first, I kept worrying about the money and underspending our budget.  We had always lived on a monthly budget.  To fix my frugal ways, we ran our financial plan including budget by a Financial Planner, who said the plan was good.  For the next year, we spent according to this budget, making sure to spend all the money in the budget.  Then we checked our financial plan and budget with a Planner again, who said we were fine.  Having spent all the money, seen that the budget was fine, and having two checkups, we (I) made the transition from saver to spender.

photo credit: flickr

Disclaimer: this is not professional investment or retirement advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Tuesday, March 5, 2019

I Don't Like South Florida

Hallandale HS (Not A Prison)


I have come to the conclusion that I don't like south Florida.  Granted, the weather is great in January, February, March and there are nice beaches, but it's not my cup of tea.

  1. Anyone with money lives in a gated community, because of the crime I guess.  You feel confined in your compound if you rent a condo or house.  You have to drive out of your guarded compound to shop, sightsee, eat..
  2. Traffic is bad and the drivers are terrible.  The roads are full of a toxic mixture of elderly drivers, lost tourists, and hotheads weaving in and out.  Texting while driving seems to be the state sport. 
  3. Inequality is everywhere.  You see lots of people sleeping on the streets or struggling to survive along with lots of Rolls Royces, Bentleys, huge yachts, and Ferraris.
  4. Lots of Trump lovers in Florida.  There is a huge billboard on the highway near our rented condo that says "God Bless You President Trump for Making America Great Again!"
  5. No one cares about the environment.  Our condo has no recycling facilities and no one seems to care about littering highways, streets, parking lots.
  6. High schools look like prisons with lots of concrete, no windows, big fences, and cops guarding the entrances due to recent massacres.  They do have big football stadiums - not sure what that has to do with education.
  7. The prime requirements to be a local TV news reporter or anchor is to be female, good looking, slim, and have large artificial breasts.  Feminism seems to have missed this state.
  8. This is the state for weird stuff.  If you don't believe me, follow Florida Man on Twitter, who reports on all the weird stuff happening in Florida.  Most recent tweet "Florida Man Seen Riding Naked on Bicycle Down I-95" , link here.

Friday, February 22, 2019

Charities Punish Me for My Donations


I regularly give to charities: animal protection, hospitals, disease research, universities, PBS, etc. 

To recognize my donations, the charities try to make my life miserable.  I think they do it in the hope of getting more money.


  1. I gave to an environmental charity.  Right after that, they started calling me to "..thank me and talk to me about their mission..".  My wife tells them I am out.  I think she should tell them I am hiking to the Arctic to save Polar Bears.
  2. I give to local hospitals.  They immediately bombard me with solicitations for more contributions and newsletters highlighting the accomplishments of their hospital.
  3. I give to a local arts charity.  They keep phoning asking for more money or asking me to buy tickets to obscure shows that I would never attend.
  4. I gave to my alma mater.  They then asked me to "host" the 40th reunion of my class.  I asked what this entailed.  My job was to raise more money to endow a scholarship at the university by soliciting my old classmates that I have not talked to since my waist size was under 32 inches and I had a full head of hair.  I said no.
Next time I send money, it will be anonymous.

Picture credit: flickr