The biggest problem facing small business owners is no longer the labor shortage — it’s inflation. That is according to a December 2021 survey release by the NFIB Research Foundation. Shortly after the release of this survey, inflation clocked in at 7 percent over the past year, the highest measure of the Consumer Price Index (CPI) since 1982. In reaction to this problem, I suspect that the Federal Reserve will combat higher prices of goods and services. Up until now, the Fed has been comfortable letting inflation run above its target of two percent. A month ago, I predicted “at least…
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Beware the hikes of March
There is a more than an even chance that the Federal Reserve Bank hikes interest rates at least 25 basis points by the end of March 2022. Several analysts expect another three hikes by the end of the year. As an equity investor, this should concern you. This week, both the Consumer Price Index (CPI), and the Producer Price Index (PPI) came in as expected. But “expected” does not mean anything like good on the inflation front. On a year-over-year basis, CPI was up 7%, while PPI hit 9.7% for all of 2021. And while economists debate whether inflation and…
Fed’s meeting notes throw markets a curve
Investors were set back on their heels this week (January 3-7) after reading the latest member comments from the Federal Open Market Committee’s December 2021 meeting. It suggests that the Fed is prepared to tighten far sooner than most expected. Members seemed to say that the Federal reserve bank central bank was prepared to shrink its $9 trillion balance sheet “much sooner and faster” than anyone expected. This is in addition to the already-announced plan to reduce its asset purchases faster than they first planned. Couple that with expectations that we could see three interest rate hikes this year and…
My dog’s medical bills are higher than mine
On the surface, it was a good year if you were in the veterinary business. Year-over-year sales grew by 9.1%, while patient visits increased by 3%. For pet owners, however, not so much. Owners found that the cost of keeping their pets healthy jumped by about 10%. Some of that price increase was due to higher fees, but consumers were also purchasing more products and services. My chocolate Labrador Retriever, Titus, is now 13 years old. The rule of thumb: every year of a dog’s life equals seven years of my life. That would put Titus’ age at 91, versus…
The top financial searches of 2021
The thing about investing is that it’s a lot easier to look back than forward. I will take the easy way out and talk about what was interesting in 2021. The website Investopedia has more than 20 million monthly readers. As you likely concluded by the website’s name, it draws a more investment-centric crowd than Google. Investopedia identified the most popular investment terms of 2021. I’ll list them and give my thoughts on why they were so popular. Were any of these compelling to you last year? Capital gains tax: Last year, investors were trying to determine if they should sell assets and…
Climate change is costing billions
In 2021, worldwide, the costs of the ten worst disasters caused by climate change totaled more than $170 billion. It was the fourth time in the last five years that we have suffered that level of damages. Scientists expect next year to be even worse. Insurance companies, like Zurich-based Swiss Re, bear the brunt of the costs of extreme weather. During the last decade, losses have been rising 5-6% per year, according to Swiss Re’s recent analysis. They expect at least one $10 billion catastrophe, such as severe flooding, a winter storm, or a massive wildfire will be part of…
Markets are heading for trouble
The continuing volatility in the stock market is troubling. It is likely signaling difficult times ahead as early as January or February 2022. As such, it is time to consider risk management. After more than a decade of steadily rising equity prices with few interruptions, investors have been lulled into believing that investing in stocks is a riskless game of never-ending profitability. Newcomers to the stock market arena, like your typical Robinhood investor, have been using stocks to supplement, or even replace earned income. Unfortunately, I believe we are entering an environment where the investment themes are changing to our…
A two-thirds chance the stock market will go up in 2022
Are you familiar with the hot hand fallacy? Gamblers fall victim to it when they convince themselves that wins or losses come in streaks, and those streaks stay that way because, well, just because they believe past performance is indicative of future results. In most cases, it isn’t. Admittedly, sometimes past performance is indicative of future results. I’ve hired people who have shown a track record of progressive responsibilities — and with the proper support, they continue to do so. A good boxer often beats her next opponent because she has developed skills and knows how to put together a fight…
Is it time to hire an investment advisor?
Individual investors have had a decade or more of gains, compliments of a stock market that has gone up with few interruptions. But as we enter a new era of tighter monetary policy, the road ahead may be a bit rockier than most investors expect. As such, it might be time to enlist a little professional help to preserve those profits. There is a saying on Wall Street that just about anyone can make money in a bull market. That may be a bit harsh. I don’t want to denigrate the efforts of so many who work hard at managing…
Has inflation hit its peak?
The Consumer Price Index (CPI) is an often-used gauge of inflation in the U.S. economy. On December 10, 2021, the CPI rate was a blistering 6.8 percent year-over-year (YoY), more than triple the Federal Reserve’s 2 percent target and its highest level since 1982. Even though energy takes up less than 8 percent of the typical household expenses, it accounted for 30 percent of the YoY gain. Vehicles, shelter, and food were the next biggest contributors to the CPI. Along with energy, those four inputs represent almost 61 percent of consumer purchases but account for 81 percent of the YoY…
Markets keep churning
As most investors expected, the Federal Open Market Committee (FOMC) announced the start of their tapering effort but doubled the pace of the monthly taper to $30 billion/month until March 2022, when the effort will conclude. In addition, FOMC members see three, 25-basis-point increases in the Fed Funds interest rate next year, and more in 2023. Faced with the end of a decades-long era of loose monetary policy, historical behavior would indicate interest rates up, equities down. That still seems a good bet despite the market’s immediate reaction to the Fed announcement. Some participants may still be scratching their heads…
Has labor found its mojo?
Workers in America are rethinking who they are and what they want. For the first time in decades, the stars have aligned to give the labor movement a much-needed lift. Will this prove to be a flash in the pan, or something more lasting? The share of American workers who claim union membership has been declining for years. There is a myriad of reasons for this decades-long decline. U.S. legislation and the court system has created enormous challenges to forming unions. The transfer of jobs to low-paying countries overseas has also devastated union membership. Labor membership can also be expensive…
Is the bounce legit?
Anything can happen between when I write this column and when it gets published. As of the moment my fingertips are tapping the keyboard (December 7, 2021), the major U.S. averages are roaring up. But is the bounce legit? The good news about the timeliness of this column is that this is a question that can apply to today, the 7th, and any bounce that may occur throughout the next month. But before we attempt to answer that question, today’s column was brought to you by the Federal Reserve’s semi-annual Financial Stability Report. According to the report, U.S. households have a…
All eyes on the Fed
The stock market snapped back from the brink this week and recouped the losses suffered since Thanksgiving. In the coming week, investors will switch their focus on just how much and how soon they can expect monetary policy to tighten. In the meantime, we have had some good news. The Omicron variant of the coronavirus seems to be less serious than first feared. Existing vaccines, according to some drug companies, should be able to handle this mutation with an added booster shot. In the U.S., those booster jabs are already working through the population. That should shore up any worries…
Holiday spending expected to stay strong
Despite the recent scare caused by Omicron, the new coronavirus mutation, retailers are hoping consumers will continue spending in December 2021. I like that bet. The National Retail Federation (NRF) is expecting a record holiday season totaling a take of between $843 billion and $859 billion in revenues throughout November 2021 and December 2021. That would be a record year for retailers such as Target, Walmart and Amazon. Time is running out, however, given that we have less than three weeks to go until Christmas Day. Remember, too, that the shopper began picking up gifts earlier than normal this year…
Reduce taxes by giving smartly
“Should five percent appear too small, be thankful I don’t take it all, because I’m the taxman … Don’t ask me what I want it for if you don’t want to pay some more, because I’m the taxman.” —The Beatles I’m not a big fan of paying taxes. I mean, I guess I like it when roads are paved, cops catch the bad guys, and firefighters save lives. I get it — I need to pay some taxes to benefit from what our society offers. But do we need to pay so many taxes? Isn’t it nice when you can get…