Coffee heat rising

Here’s Why I’m Paying off a 2% Car Loan…

...right now, without waiting.

And that is without taking into account any assessment of the clowns who have taken over the White House.

It’s easy enough to see that what goes up must come down. Capitalist economies have always been cyclical. That’s normal. But I think we’re looking at stupidity and foolhardiness that exceed normal, compounded by seditious collaboration with foreign parties who are not our friends, outright corruption, and the takeover of a national political party by ideologues who are so passionate they have taken leave of what little common sense and ethics they might once have had. Compounded, too, by a natural disaster from which this country will not soon recover.

The next economic crash is going to make the Great Recession look like…heh! A tea party. It may make the Great Depression look like a walk in the proverbial park, too. Many, many more of us are going to lose our jobs, and quite a few will never replace them — just as quite a few of us never replaced decently paying jobs and decent benefits after the Fall of the Bush Economy. You think we have a gig economy now? Wait’ll you see what’s coming up the road.

Most of what brought us the Great Recession is already back in place: and then some.

I believe we will see another major economic crash within the next three and a half years, if Trump stays in the White House through his first term. If he is impeached or if he resigns and is replaced with Mike Pence, that may slow things down a bit: then we can expect a major economic crash within the next seven and a half years.

This time, we can see it coming.

Anyone who lived through the Bush Recession would be a fool not to line things up and get prepared ASAP.

What to do to line things up?

Number 1: Pay off debt, as fast as you can and to the extent that you can. Pay off the car loan, pay off the credit cards, pay off the mortgage if you can.

Number 2: Do not assume any new debt! Do not buy a new car. Do not buy a new house. Certainly do not buy real estate at the present price point, which in many parts of the country is back in the “bubble” range. Do not charge anything on a credit card. If you can’t afford to pay for it in cash, don’t buy it.

Number 3: Build a cash emergency fund. Build it as fast as you can. Pay yourself first by putting a set amount aside out of every paycheck. You should have enough in savings to cover at least six months’ worth of living expenses; preferably a year. Even better: two years’ worth.

Number 4: Take care of routine health and dental care now, while you can afford it. If you are laid off your job, you’ll have about a snowball’s chance of getting health coverage that you can pay for.

Number 5: Stock up on nonperishable food items. And while you’re at it…

Number 6: Plant a vegetable garden.

Number 7: Enhance your networking strategies. Join business groups and make yourself known to potential employers in your field. And while you’re at it, update your resume and keep it updated.

Number 8: Start a side gig. Ideally, it should be one that could morph into a business that, combined with unemployment and a spouse’s income, can support you. Use the income from a side job to pay off debt and build cash savings.

Be prepared. If you’re not already prepared, better get that way soon…

Banner Image of the Day: Unemployed men outside a soup kitchen opened by Al Capone in Depression-era Chicago, Illinois, 1931. Public domain

Time to Batten Down the Hatches?

Cassandra before the burning city of Troy. Evelyn de Morgan, 1898

It may be time to batten down the financial hatches…even if you’re not a paranoid crazy like this blogger. Congress has appointed a special prosecutor to look into the question of Trump’s suspected collusion with Russia in subvening the US election process — if indeed any such collusion occurred. And the guy is not our honored leader’s friend: he’s a former FBI director.

Nothing good is going to come of this, no matter which side of the bob-wire fence you happen to be on. To say financial markets are unstable is to put it mildly: the Dow is in a tailspin and the dollar is dropping. Meanwhile, household debts hit a record high this quarter.

If you haven’t already done so, now is the time to review your investments and move to the most conservative position possible. If it’s not too late, shift some assets toward cash. Avoid buying large-ticket items, such as real estate, that may be overvalued at this time. If the markets sink further as this turmoil continues — as they most certainly could — this is not the time to make any major purchases or to be unduly exposed in the market.

Prioritize pay-down of debt. The less debt you have at this time, the better. Pay for day-to-day purchases in cash, and do not borrow for high-cost items unless absolutely necessary. If you can’t afford to pay for it in cash, don’t buy it.

And…you remember what I told you about stocking in propane, water, and nonperishable foods? Do it.

Obscured in the current flap over Trump is the speculation — discovery? — that the recent global ransomware hack came out of North Korea. If that is true, in normal times it would be regarded as an act of war. More to the point, if it proves to be true, it shows that we are in the crosshairs of an unfriendly power led by a demented dictator who is certifiably insane and who has stated his hostility to the US. A better designed, more targeted attack could — and one day probably will — take down the entire financial and power infrastructure.

This will cause more chaos than any of us can even begin to imagine. And what better time to launch such an attack than in the middle of our present self-inflicted chaos?

Be prepared: not just financially but in terms of daily living:

Have food and water stocked in.
Keep your car filled with gas.
If you have a long commute, plan an alternate route to get home if traffic lights and other infrastructure are down.
Keep battery-run devices fully charged.
Back up computer data to media that can be disconnected from your network — now, not later.
Have some cash on hand (if there’s no power or no computer connections, your credit & debit cards won’t work).
Stock in barterable goods, such as cigarettes, alcohol, weed, and the like.
Stock in prescription drugs, any OTC drugs you use regularly, and first-aid supplies.
If you’re a Second Amendment type, stock in ammunition, if you have not already done so.

Sure. I may be crazy. But that’s what they said about Cassandra



Dare I say I told us so?

“U.S. stocks bumped lower on Tuesday, erasing early gains and putting the market on track for its worst session of 2017. The S&P 500 and the Dow are also at risk of falling for a fourth session, which would be the longest losing streak since November.”

Heh…maybe someone noticed, at last, what a freaking disaster is rolling through Washington.

Got your propane? Your water? Your rice and beans? Your camp stove?  Heh heh heh…we’re gonna love life in the Third World…

Image: DepositPhotos, © jamdesign

Preparing for the Trump Recession?

Ghost riders in the wind?

So I had a chat with my financial advisor on Friday. Turns out I’m not the only one who suspects our gold-plated financial house of cards will not stand the test of time. He said quite a few of his clients had come in and asked to be positioned so that their assets will withstand a major recession, which they expect to occur…oh, some time in the next four years.

Interestingly, too, at Scottsdale Business Association, on Thursday our speaker was our member who’s a financial advisor. And interestingly, he spoke on instruments that will provide a (relatively) safe haven for your investments…and some that look like they will but are real or potential rip-offs. He warned against putting a substantial amount of assets in instruments that lock up your money so you can’t get it out without a penalty and that pay no more than or even less, over the long run, than equally conservative tools that keep you liquid.

So anyway, my guy is less pessimistic than I am, but still cautious. We’re invested about 40/60 in bond instruments that pay less but lose less in a crash and in stocks. Meanwhile, the investments we do have are going batshit. My investments have returned over 47% since I went with Stellar in 2000, despite the Bush catastrophe. If we hadn’t enjoyed the worst recession since the Great Depression, the return would presumably have been even higher, and today I would be able to pay for the car without worrying how I’m going to buy groceries.

Last month the big IRA returned 13 grand.

Still, I wonder. That fund is capable of losing twice as much in a month, and at times it has. The reason I survived the Bush Recession without too much long-term harm is that I bucked said advisor’s wishes and paid off  my house.

He felt I should  have kept the money in securities. I realized that once the alimony ran out, my salary would not cover the mortgage payment (at that time I had no other debt) and also my routine living expenses. As it turned out, if I hadn’t paid off the mortgage at that time, I certainly would have lost the house in the wake of the Great Recession.

So…there’s a point at which you have to think for yourself.

However, not knowing what to think as the country spins toward a colossal train wreck, I suppose the best thing is to stay the course.

It probably doesn’t matter. At this point, anything you do with your money, short of taking it all out of the market and burying it in tin cans under the roses, comes under the heading of moving deck chairs.

Image: Depositphotos, © rrraum


What to Do, Financially, to Weather the Coming Disaster?

Our country — and by extension, your finances and mine — is in deep trouble. We are about to inaugurate as President a man whose mental stability is questionable; who announces his petulance in wee-hours tweets; who gropes women and brags about it; who exploits hatred and fear to gain power; who is at odds with the country’s intelligence agencies; who denigrates the disabled, the female, and the brown-skinned; and who “owes one” to the corrupt, thuggish leader of a nation that has been our enemy since shortly after the end of World War II. He is backed by a phalanx of extremists who want to reverse not just the ACA but the entire New Deal, which has been in place for almost 80 years.

The New Deal, we might point out, came into being in response to the Great Depression. Part of its purpose was to prevent a repeat performance of the Depression.

I believe that, in the near future, we are going to see a recession that will make the Bush Recession look like a cakewalk. The reason is that the dominant economic thinking among the doctrinaire right wing riding Mr. Trump’s coat-tails is simply wrong. It was proven wrong by the Great Recession, as it was proven wrong in earlier recessions.

Since 1948, this country has seen 11 recessions. Seven of them — 63.6% — were presided over by Republicans (Eisenhower, Nixon, Ford, Reagan, Bush the Elder, Bush the Younger). Some of the economic downturns were precipitated by factors over which we had little control, such as rises in oil prices. Others correspond with rises in interest rates by the Federal Reserve or with monetary tightening in pursuit of a balanced national budget. Most egregious, from a political point of view, was the Great Recession, which was brought about by deregulation of financial institutions (a mainstay of voodoo economics). The Great Depression of 1929-33 was largely aggravated by “extensive new tariffs and other factors [that] contributed to an extremely deep depression.”

The pendulum swings. As we all know, things go one way for awhile, and then they turn around and go back in the other direction. For the past few years, we’ve seen a roaring economy. We can expect that it, like any hot economic period, will cool down. But I think the pendulum is going to swing, all right: waaayyyy in the opposite direction.

It would be good to position your investments in a balanced portfolio to include variable rate bonds and variable rate preferred stocks that pay decent income and aren’t as sensitive as stocks are in a downturn. In addition, some financial planners make it a policy to sell certain exposure to the market should it turn down below a certain level. This doesn’t protect from losses should the market sell-off, but should help cushion further losses in a market meltdown. Now is the time for you to speak with a financial planner about steps to take in managing your savings.

Additionally, you should be prepared for a period of unemployment. During the Great Recession, 10% of Americans were put out of work, a rate beat only by the Reagan recession (10.8%), the Great Depression (24.9%) and the subsequent 1937/38 recession (19%). That means having at least six months’ worth of living expenses in cash savings and possibly taking on a side gig now, not later, so that you’ll have something to fall back on should you lose your main livelihood.

Remember that many of us were never able to get jobs comparable to the ones we had before the Bush recession — large numbers of Americans are still unemployed or underemployed. After you become discouraged enough to give up seeking full-time work, you no longer register in the government’s unemployment figures, and so most of us in that category are simply not counted.

In addition to building cash savings, pay down debt and avoid racking up new debt, especially on credit cards.

Now more than ever is the time to live not just within your means but below your means. Good luck to you, folks. We’re all gonna need it.


We’re in the Money…

For the moment…

This morning the Dow was at 19,000! When it goes wacko like this, my fund will make 30 grand in a month. Woot!

Unfortunately, it’s likely as not to lose 32 grand the following month…but let’s not think about that.

Ha ha!! In amongst the stupid chatter to this YouTube video is One (count it: 1) truly inspired comment:

Sonic Ryan 1992
What it feels like to be a post-graduate who finally got a good paying job.

What I’d  like to do is tell my guy to SELL NOW! Convert about half our holdings to cash; then invest the remainder aggressively for another month or two (maybe six, at the outside), then shift that to the money market.

My son has dragged his feet on refinancing the downtown house. It frosts his cookies to have to pony up more cash to principal, and an extra layer of frosting is applied by the prospect of having to pay mortgage insurance (we don’t, on the current instrument). But I  believe the house’s value will soon rise enough to give us well over 20% equity (it’s probably that high now): the housing market is exploding, his neighborhood (as I prematurely predicted) is gentrifying, and as demand rises, so will prices.

So I’ve sicced a friend who’s a mortgage broker on him, hoping that this time around he’ll kick into gear and get that thing refinanced. The problem is, it has a 30/15 loan on it. In 2020 — just  four years, about the time I expect the Trump economy will tank — we’ll be forced to refinance or to sell. We took out that loan, which had exceptionally favorable terms at the time, because he planned to stay in Phoenix just long enough to get back on his feet after being laid off at the tail end of the Silicon Valley bust, save some money, and then go back to San Francisco. It hasn’t worked out that way. Inertia set in, and he seems to be happy enough to stay where he is.

For the time being.

At any rate, it’s hard to believe that in just four years, he will have been in that house for 15 years. Tempus fidgets, eh?

Not real thrilled, myself, about being over the barrel now to get that place refinanced. Rates are already rising, and they’re expected to head straight for the stratosphere. I expect by 2020, we’ll be lucky to get an 8% loan.

When I bought my first house here in the ‘hood, that’s exactly how I felt: very lucky to land an 8.25% loan. Everybody cooed about what a great deal it was. I only owed $80,000 on the house, and the payments were over half my take-home pay. Imagine the payment on a $180,000 loan at 8% or 9%? We are gonna see a WHOLE lot of people who simply can’t afford to buy real estate at all. Ever. And a lot who will go belly-up. Again.

Interesting times, hm?

How are you planning to deal with all this…interest?