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

Thursday, February 21, 2019

I Saved Too Much for Retirement

I don't hear this statement much - "I saved too much for retirement".  However, I am beginning to think this way due to recent experiences.

We followed all the best advice on saving for retirement:

  • Live below your means
  • Save 10% of you income, spend 4% of your savings per year in retirement
  • Use tax deferred retirement plans
  • Invest in a diversified portfolio of low cost index funds or ETFs
  • Have a plan - ensure you can support yourself until you are 95 
  • Be lucky
So when we retired, we basically kept living the same way as when we worked.  We had no worries if we lived until 95 or more.

Then I got to see what life is like for people who live into their 80's.  Very very few people that I see in their late 80's are of sound mind and body.  Rather, your body goes and you cannot get out much.  Your mind goes and you are not yourself anymore.  You become a burden to your family and friends.  The only happy seniors seem to be those who are in a retirement home and like people.  That does not apply to me since I am not really a people person.  Your savings do help with these problems, if you are aware enough to spend money on a retirement home or home help to be less of a burden.  Basically, from what I can see, there is not much quality of life beyond your early 80's, if that.

So my plan is to live an unhealthy lifestyle so I don't live too long and spend more now.  There is no point in living to a ripe old age with plenty of money, losing your mind, and being unhappy.

Monday, February 11, 2019

Airbnb and VRBO Have Got to Go

My wife and I have high standards...for different things.  I want very reliable computers, high rates of return on investments, and reliable cars.  My wife wants a very clean and tidy house with everything in its place.

After two experiences with Airbnb and VRBO places in Florida, we have concluded that they don't measure up to our standards.  The places are owned by people who are making money by renting out their house or condo.  Why don't we like Airbnb and VRBO (and similar sites)?

  1. The photos always make the place look much better than it is.  They were taken when the place looked its best and no one takes pictures of the dark drab hallway with old carpet (see above) or the wornout deck furniture.
  2. The reviews are sparse and don't really tell you much.
  3. Once you are committed, there is no way to back out or get your money back unless it is a complete bust and you paid for extra insurance.
  4. There will be extra fees for things like gate passes, key fobs, cleaning..
  5. If something goes wrong like the Internet goes down, you are on your own to get it fixed.  One time, the owner told me to go the Cable company store, tell them I was her brother, and get them to give me a new cable modem.
  6. You are guaranteed that the rugs are dirty, some of the light bulbs are burned out, the towels and sheets are cheap, the pots and pans were burnt and scratched by previous renters, the mattresses are bad, the TVs are old, the walls are marked and need painting, and the blinds and curtains have seen better days.  Basically, the places are well used and there is no motivation for the owner to keep it up to a high standard unless they are getting bad reviews.
  7. The price is less expensive than a hotel, but not that much less expensive.
Both places we rented in 2015 and 2019 were OK and we enjoyed our time in the sun, but we had to adjust our high standards..

Saturday, February 9, 2019

Baack in the USA

After moving back to Canada a few years ago, we decided to avoid the winter by staying a couple of months in Florida.  It is bringing back memories of our move in 1996 from Ottawa to Dallas.

The weather is great..the shopping is fabulous..lots of roads..every product and service available..restaurants galore..mail delivery on gasoline..hundreds of TV channels..convenience..low taxes..lots of beautiful women with plastic surgery..gated communities..

But then there are the other sides of the USA:

Areas you should avoid due to crime..anyone could have a gun..TV news that sounds like we are living the apocalypse..Trump Trump Trump on the news..homeless people living on the ads..get rich quick have to drive to get anything..little recycling, lots of trash..

It just goes to show you that there is no perfect place to live.  You have to know your priorities and decide accordingly.

photo credit: flickr

Wednesday, February 6, 2019

Collecting Canadian (CPP) and US (SS) Pensions

Now that I am getting to nominal retirement age, I am investigating what pensions I might get from the two countries where I worked - USA and Canada.  I worked about 20 years in the USA and 22 years in Canada.  In summary, it's complicated to determine what you might get.


You go to the US SS website, sign in, and you get estimates of your social security pension.  With my earnings record, the pension looked really good.  Then I found out about the WEP - Windfall Elimination Provision.  This reduces your pension if you did not pay into the system for more than 30 years and you are entitled to another pension, like My Canada Pension Plan.  The place to look for information is at this link and you should do your own calculations.  I think my social security pension will be reduced by 20-50% - bummer!  It would be nice to be more precise but the WEP rule is very complicated and not explained well.

This other table seems to indicate that it is limited to a 50% reduction but the maximum decrease is about $400 per month.  I did my own calculations but this seemed to indicate a higher decrease than $400.  The only thing that is certain is that your SS pension will be decreased.

Update (March 4, 2019): A friend alerted me to a document that says that you are NOT subject to WEP if you are covered by a Totalization treaty like the Canada-USA treaty.  The link is here.  So maybe you will not be penalized.  I would recommend bringing this up with the SS administration if they try to impose WEP when you start collected US SS.  Our experience with SS is that the people are hard working, but not skilled when it comes to dealing with non-standard situations like working in two countries like the USA and Canada.


You go to this website and you can get estimates of your pension.  CPP is not very generous so the little number shocked me (less than half my nominal SS pension without WEP).  I don't think they will reduce it.  If I still lived in the USA, I could get the Old Age Security Pension at 65.  In Canada, it is often "clawed back", meaning it is taxed at 100% and you don't get anything.  I guess the small amount we paid in (less than US social security deductions aka FICA) had a downside.


Don't count on a big government pension based on SS and CPP websites if you worked in Canada and USA.  You might want to talk to a SS expert in the USA.  Yes, the system is so complex and hard to navigate that you might need to hire someone to help you.  :-(

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.