...
My friend Sam Rines gives us a wonderful illustration of that basic principle. The following is a graph of nominal GDP growth for the last six years. Normally, when we talk about GDP numbers, we talk in terms of real GDP, or GDP with inflation backed out. Even though there are various measures of inflation, real GDP growth measures the actual buying power of your dollars.
There is a great way to illustrate the difference between real and nominal GDP growth. If you bought the S&P 500 Index in 1966, it was 16 years, until 1982, before your nominal dollars recovered. But, taking account of inflation, it was 26 years later, or 1992, before you saw any increase in your buying power. Not exactly what your financial planner was forecasting for you in your retirement plan. Using the average market returns for the last 80 or 100 years to forecast your returns for the next 20 years, or until your retirement, is both foolish and dangerous. Forecasting what your portfolio will look like in a reasonable length of time, say 10 or 20 years, all depends on your starting point. If you happen to be part of the demographic that allowed you to start in 1982, you look brilliant. If you began in 1966 instead? Not so much....
...The equity markets face serious challenges and will endure a reckoning at some point, but I don’t think it will happen in 2018. In fact, 2018 could be our last calm year for some time, so we need to use it constructively....
...The chart below, based on data from Zillow, shows that the share of unmarried adults in double-up
households has increased in all age brackets, and especially among Millennials. Having a few
Millennials in my own family, and even some young Gen Xers, the need to double up is readily
apparent to me. Rents are just too high for the average person. Also notice that nearly one in three
people between ages 50 and 59 is living with someone else in order to save on rent and other
expenses.....
households has increased in all age brackets, and especially among Millennials. Having a few
Millennials in my own family, and even some young Gen Xers, the need to double up is readily
apparent to me. Rents are just too high for the average person. Also notice that nearly one in three
people between ages 50 and 59 is living with someone else in order to save on rent and other
expenses.....
...The Fed’s trickle-down monetary policy hasn’t really worked. ...
...Furthermore, nearly 5 million Americans are in default on student loans. Is it any wonder people
are doubling up on their housing?
The economy and markets are growing, but the benefits of that growth are not evenly distributed.
Supposedly a rising tide raises all boats, but it’s not working that way today....
are doubling up on their housing?
The economy and markets are growing, but the benefits of that growth are not evenly distributed.
Supposedly a rising tide raises all boats, but it’s not working that way today....
... my #1 risk factor for the US economy in 2018 is Federal Reserve overreach. I think there is a significant chance that their anticipated inflation will not appear and the Fed will tighten too much too soon...
...With 2½ trillion dollars of monetary stimulus from the world’s central banks, we still need tax cuts and boosted infrastructure spending to expand the US and global economy?...
...quantitative tightening, which is what it really is, is going to reduce M2 money growth from its current 4% to less than 2%, as Lacy Hunt pointed out to me a few days ago. That slowdown is likely to affect the velocity of money, exerting further deflationary pressure on the economy....
...Fortunately, I think another force will counteract the Fed’s actions, at least for 2018, and that’s what I will call (for lack of a better term) the “Trump effect.”...I think the combined impact of deregulation, tax cuts, and (possibly) infrastructure spending will push back against the Fed’s monetary tightening and keep the economy on roughly the same course as in 2017.
...reducing corporate taxes to help US companies compete with the rest of the world. The headline stories tend to look at the publicly traded giants, but I think the real impact will be on small and mid-sized businesses – particularly exporters and everyone who competes with imports. The lower tax rates will help them expand and even cut prices.
...if my friend GOP Rep. Jeb Hensarling can push through his reform of Dodd–Frank and ease regulations on small banks, we could see an even bigger boost. Regulatory costs are a major expense item, and companies would much rather spend that money on other things like worker training and maybe even pay raises.
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