Wednesday, June 29, 2016

Brexit Again


My thoughts on how the Brexit situation may play out:

  1. The Conservative party picks a new prime minister in 3 months.
  2. Meanwhile, the pound and UK stocks go down.
  3. A motion to trigger article 50 of the EU for exit is tabled in Parliament.  It is important enough to be considered a motion of confidence.
  4. The motion fails because the new PM cannot clearly specify what will happen if UK exits.
  5. A general election is called.  Stocks go down some more due to uncertainty.
  6. The Conservatives win a majority of about the same size as current majority, but half of the MPs elected favor staying in the EU.  Labour party is minority but all of their MPs favor staying.
  7. Motion to trigger exit again fails in Parliament.
  8. New referendum is called and Remain wins.
  9. Britain stays in EU.
Who knows if this will happen, but it is certainly feasible.

Saturday, June 18, 2016

4% Is a Pretty Good Return on Investment

Most folks lament the low return on investments these days.  1% on savings accounts, 2-3% dividend yield, 1-2.5% return on GICs/CDs.  A well diversified portfolio might return 4 or 5% these days.  Sounds terrible, right?

Not really.  We all think that inflation is around 3%, so we look at a 4% return as paltry.  Only 1% over inflation is not good we say.

Actually, the last time inflation was around 3% in the USA was 2008 (see below).  Right now, we are experiencing about 1% inflation.

So a 4% return today is more like a 6% return in the days of 3% inflation.  Feel any better?

Current Inflation Rate Table
InflationData.comCurrent Annual Inflation Rate
YEARJANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDECAVE
20161.37%1.02%0.85%1.13%1.02%NANANANANANANANA
2015-0.09%-0.03%-0.07%-0.20%-0.04%0.12%0.17%0.20%-0.04%0.17%0.50%0.73%0.12%
20141.58%1.13%1.51%1.95%2.13%2.07%1.99%1.70%1.66%1.66%1.32%0.76%1.62%
20131.59%1.98%1.47%1.06%1.36%1.75%1.96%1.52%1.18%0.96%1.24%1.50%1.47%
20122.93%2.87%2.65%2.30%1.70%1.66%1.41%1.69%1.99%2.16%1.76%1.74%2.07%
20111.63%2.11%2.68%3.16%3.57%3.56%3.63%3.77%3.87%3.53%3.39%2.96%3.16%
20102.63%2.14%2.31%2.24%2.02%1.05%1.24%1.15%1.14%1.17%1.14%1.50%1.64%
20090.03%0.24%-0.38%-0.74%-1.28%-1.43%-2.10%-1.48%-1.29%-0.18%1.84%2.72%-0.34%
20084.28%4.03%3.98%3.94%4.18%5.02%5.60%5.37%4.94%3.66%1.07%0.09%3.85%
20072.08%2.42%2.78%2.57%2.69%2.69%2.36%1.97%2.76%3.54%4.31%4.08%2.85%
20063.99%3.60%3.36%3.55%4.17%4.32%4.15%3.82%2.06%1.31%1.97%2.54%3.24%
20052.97%3.01%3.15%3.51%2.80%2.53%3.17%3.64%4.69%4.35%3.46%3.42%3.39%
20041.93%1.69%1.74%2.29%3.05%3.27%2.99%2.65%2.54%3.19%3.52%3.26%2.68%
20032.60%2.98%3.02%2.22%2.06%2.11%2.11%2.16%2.32%2.04%1.77%1.88%2.27%
20021.14%1.14%1.48%1.64%1.18%1.07%1.46%1.80%1.51%2.03%2.20%2.38%1.59%
20013.73%3.53%2.92%3.27%3.62%3.25%2.72%2.72%2.65%2.13%1.90%1.55%2.83%
20002.74%3.22%3.76%3.07%3.19%3.73%3.66%3.41%3.45%3.45%3.45%3.39%3.38%
Note: Red indicates Deflation, NA indicates data not yet released.
Get all Historical Inflation Rates since 1913 from InflationData.com          Web Masters: Get This Widget

Saturday, June 11, 2016

Why China Growth is Slowing


Lots of speculation about why China's economy is slowing.  My personal theory is as follows:

  1. China's economy relies on a lot of exports of manufactured goods: clothes, electronics, household goods, etc.
  2. China's main markets are the USA and Europe
  3. Most people in the USA already have everything they need and don't need to buy any more plastic containers, T Shirts, jeans, pots, pans, furniture, smartphones, plastic flower arrangements, computers, cameras...
    1. How can I be so sure?  Try to sell or give away anything in the USA nowadays.  No one wants it.  The Salvation Army is turning away stuff and the landfills are filling up.  We don't need another 45 GB hard drive, floating chaise lounge chair, package of athletic socks, or a 100,000 BTU BBQ with fuzzy logic rotisserie.
    2. As my wife and I downsize, we find stuff we bought and hardly used, all made in China.  I remember when it was expensive to buy this stuff and you could sell it used.  Now I can barely give it away - even students, cleaning ladies, and the charities don't want it.
  4. Some of the fastest growing businesses are self storage warehouses and "POD" style storage.  We have so much stuff, mostly from China, that you need more space than your 6000 square foot house to store it all.
So China has made so much stuff that the world is stuffed for now and can't take any more.  Anyway, that's what I think.

Photo credit: Flickr

Friday, June 3, 2016

The Difficulties of Selling a House with an Old Dog

Here in Northern Virginia, your house has to be staged to the max to sell.  Spotlessly clean, all clutter removed, all personal pictures removed, no big computer screens on desks, no old furniture, no rooms without furniture, all new stainless steel appliances and granite counter tops, no old bathroom fixtures, all blinds open, nothing on the kitchen or bathroom counters or tables, beds made, all lights on, all traces that you live there removed.

Aside from a huge amount of daily work, you have to vacate the house on 4 hours notice and stay out for an hour while it is being shown.

This works well if you are a working married couple and out of the house a lot, but not so well if you have an old pet, or children.  Our old dog cannot sit out in the Summer heat for extended periods, and most indoor places do not allow pets, and she is too old to send to "doggy day care".  During our showings, we end up sitting in a park and sitting in the air conditioned car.  The poor dog does not know what is going, paces constantly, and whines.

If you have an older pet and have to meet these draconian staging and showing rules, you should plan in advance before selling, otherwise you will be making it up like us as you go along.  Maybe get them used to sitting quietly in the basement in the utility area or something like that.