Coffee heat rising

Brexit Repercussions

Stellar SCM logo e-mail(17)(1)Chatting back and forth with the money managers at Stellar Financial Capital Management, here in uptown Phoenix. Eventually they came forth with this interesting rumination:

From the tone of the global markets today, not many investors were expecting the result of the referendum of the United Kingdom’s (UK) membership in the European Union (EU).  Voters had to know that an exit vote would have a negative short-term impact on their financial wellbeing, and were willing to trade that to go it alone, so to speak. Immigration became a key issue in the debate amid concerns that the UK government was unable to control in-migration, as membership in the EU ensures the free movement of people between member states.  Immigration issues may well have been the straw that broke the camel’s back.

Never a member of the Eurozone (political, economic, and currency union), the UK is a member of the EU (political and economic union), which is largely based on trade and freedom of movement throughout Europe. As a result of the UK vote, that relationship is set to be adjusted within the next two years. One outcome may be to shed the political and economic union associated with the EU and retain trade benefits (the UK has 120+ European trade deals) through a continued association with the European Economic Area, where it has been a member since 1994.  This would put the UK in a similar situation to Norway, which not part of either the Eurozone or EU. But the devil will be in the details of how the EU negotiates the exit plan for the UK.   An unintended consequence of the vote may be that Scotland and/or Gibraltar have second thoughts about remaining a part the UK, as both of those regions voted to stay in the EU.

The UK represents about 4 percent of global GDP, so the global financial market reaction is likely more a reaction to the potential ripple effects amongst other EU and Eurozone members. Financial markets hate surprises, and the S&P 500 finished down about 3.50% on the day (about even for the year), and the STOXX Euro 50 index finished down 8.50% (down about 12.5% for the year), and “safe havens” (US Treasuries and gold) finished higher, about what one might expect. This will be at least a two year process between the UK and the EU, so nothing besides emotions will change quickly.

The markets went from calmed to concerned virtually overnight, and there are good odds that the impact of Brexit is now priced into the market. There are now better odds that US monetary policy remains loose for the time being, as collateral damage is assessed. Not to make light of the situation, but with the British Pound Sterling at $1.36, a London vacation may be in the cards for some.

And, if you’re with me (or not!) in feeling that this development has bilious implications for the future of American politics, you should read this extraordinary essay by former British Prime Minister Tony Blair. A brief out-take:

The political center has lost its power to persuade and its essential means of connection to the people it seeks to represent. Instead, we are seeing a convergence of the far left and far right. The right attacks immigrants while the left rails at bankers, but the spirit of insurgency, the venting of anger at those in power and the addiction to simple, demagogic answers to complex problems are the same for both extremes. Underlying it all is a shared hostility to globalization.

He has a lot more to say on the issues, and he does know what he’s talking about. You really need to read the piece.


Holy sh!t.

Y’know what really worries me about this?  If the Brits could do something that stupid and self-destructive under a populist, xenophobic impetus, so can we. In the xenophobia department, our racism “trumps” theirs, any day.

We could end up with Trump in the White House. All of a sudden, it doesn’t look at all unthinkable.

Hope you had your assets positioned for this eventuality. I know my guys have moved out of some stocks into bonds…but maybe too little, too late.

Conversation at this morning’s business networking breakfast suggested (hopefully?) that US markets may benefit because money will move out of Britain, much of it in our direction. That remains to be seen, IMHO.


Yesterday I paid $15 for a quart of ice cream and a small container of heavy cream.

Now, granted: I buy top-of-the-line stuff. But still…what is it? Milk, egg, and sugar with some flavoring thrown in. The leftovers from making skim milk. A plastic container with a screw-on lid (value: about 20 cents). A small glass bottle suitable for use as a cute bud vase or redeemable for two dollah. Nothin’ in there is worth 15 bucks.

We’re told that inflation is not only NOT rising, it may even be dropping. And  yeah, we’re all mighty happy to see gas prices under $2 a gallon, thanks to somebody somewhere finally having the sense to see the U.S. should be mining its own petroleum products instead of depending on our enemies to supply our energy needs.

But still…hmmm…

Jestjack, a favorite reader and commenter in these parts, sends this report from his part of the country:

I don’t care what the folks at the Fed say. Prices are rising and just getting crazy.

I’m working on one of my rentals on a “#@+&#!” of a job. This is the plumbing coming into the house in the lower unit’s bath….tight a wall…behind tile AND sheet rock…. Good times!

Anyway, I go to pick up the parts to do the job at my favorite store that has “toys for big boys” (Home Depot) and, I swear, a lunch bag full of parts: $50.

Had to return today to get a part to finish the job. Standing in line, I speak to a guy who has carriage bolts in his hand….the same kind I had bought at a yard sale last fall. I bought a #10 can full of carriage bolts for 50 cents and promptly used about 10 to build a set of racks for my truck with some free recycled lumber.

So as the guy is getting rung up I notice ONE of the carriage bolts is $1.19 plus tax, or $1.26. I felt faint for the guy.

Has anyone else noticed such crazy prices? The bright side is this plumbing job would have easily been $500 to $600. Just seems to me like folks are getting squeezed…

Your thoughts?

Then we have this from SDXB, who, as a professional tightwad, is exquisitely sensitive to pricing:

I busied myself today charging up the big numbers.

Well, not that big, but big enough to cause a rush of momentary anxiety.

Today I went furniture buying—not a job at which I consider myself competent. Pat provided guardian angel service as I wandered aimlessly through a cavernous American Furniture warehouse store. And then I spotted the two stuffed chairs that will soon replace the yard-sale bargains in my living room. Ding, zap: $700.

I needed a glass of ice water after that. Sipped collegially with one of my shooting pals, who commiserated about the horrors of furniture buying. Better left to women, as he shook my hand and wished me good luck at Lazy Boy.

Pat guided me through the place yesterday. I was hungry then, surly and cantankerous (as opposed to Hungry Bitch Syndrom [HBS]). I was cranky (as opposed to bitchy). And I was unreceptive (as opposed to open-minded). But we did find love seats with supportive backs and not pillows, and they were well-made by American workmen.

Do you get what you pay for, always? Only $2,200, delivered, and I think they’ll look great in the TV-kitchen entertainment area. I slid the plastic joyfully—ding, zap. I was touched deeply in my cheapest place.

What’s going on? Me, spending money?

I looked around and realized my place was looking  shabby. You can’t make a silk purse out of pig’s ear, but you can try.

You’ll like this one: for 13 years I’ve put up with a toilet seat that would slam down like a deadfall when least expected, like when I was taking a whiz. I feared for my life, where my brains dwell. Decapitation was always a centimeter away.

Ah, but now…a slow-close toilet seat proved the fix. Thirty bucks, ding, zap.

Somewhere in the past a voice said, “You deserve better furniture.” How was I to know what “better furniture” was?

“Look for bigger numbers,” an angelic voice suggested. And so I did.

Once I recovered from the strangeness of the concept of SDXB buying furniture anywhere other than a yard sale or a thrift store (or making it himself), I cruised over to the Ashley site. Ashley sells middle-of-the-road furniture, not great but not outright junk.

A typical kinda ugly beige fabric chair (little or no choice in fabrics, apparently) is $383, allegedly “marked down” from $450. A leather chair comparable in appearance to the one in my living room is $975, marked down from $1300!

Over to Pottery Barn, where I bought the leather chair in the family room lo! these many years past, when I had a job. One that’s roughly the same style? Sixteen hundred and ninety-nine dollah!

Holy sh!t.

I sure couldn’t afford that today. Nor would I have felt I could afford it when I was employed and earning 60 grand a year.

Yesterday my son remarked, in a tone of resignation, “I’m poor. And I have to deal with the fact that I’m poor.” In fact, he earns a little more the median household income in Phoenix. That’s not saying much: this is a right-to-work state with vast swaths of true slums and large working-poor tracts that are on their way to slumhood. If two typical salaries add up to what he earns, a typical salary here is a handful of peanuts.

Still… What say you, dear reader? Do you see something that looks like inflation in your parts? Or are we crazy?

Dollar$ and ¢ents, 2014

   So the year has come around the curve and is streaking toward the finish line. Time to take stock of the money predicament.

Turns out it’s not such a predic’ as expected. Really, I expected 2014 to end in Flaming Financial Disaster, what with the car bills and the dog bills and the house bills and the healthcare bills and the jacked-up property taxes and the one. freakingscreaming. EXPENSIVE. thing. after. another.

Last January, I started the year with a cushion of about $11,000 in the bank. Rather than draw down from savings quarterly, as I did in 2013, I decided to estimate the amount I would need for 12 months and pull that out of investments in January: $13,000+.

That was a gulp-making maneuver. Yanking that kind of money out of savings triggers a Bag Lady Syndrome fit in me. But in theory it would all come out in the wash — one way or another, I’d need about that much to live for a year, and trying to calculate how much to take out in Q3, when little or no teaching income is forthcoming, was a verifiable PITA.

And I will say, Q3 was damn scary. I pretty much took up residence at the Mayo Clinic, a mighty pricey hotel, and precious little income was materializing from teaching, editing, or blogging. But in the fall, the piddling pay for three adjunct sections, surprisingly, took up the slack.

I have no idea how much I’m going to end up paying for surgery after surgery after surgery after surgery. Bills come from the Mayo — eleven grand here, fifteen grand there — but they seem to have no meaning. Medicare is picking up some portion of that; Medigap is picking up more. Apparently the victim mark patient has to pay something, but it’s so difficult to tell what it is that even the billing people at the Mayo can’t figure it out. Or at least, they claim they can’t. Right now, every time a check comes in from Medicare B or the Medigap insurer, I just throw it in the Mayo’s direction. That leads them to imagine I’m at least trying to pay the bills, and that, mercifully, has kept them off my back. So far.

Weirdly, despite all the extraordinary expenses, at the end of November the balance in checking was just a few hundred dollars less than the January 1 balance: a little over eleven grand.

But now for the BIG weird:

Hang onto your hats, folks.

The balance in investments and retirement savings at the end of October  was $107,633 more than the January 31 balance.

Yeah, you read that right: one hundred seven thousand six hundred thirty-three DOLLAH!!!!!!!!!!!!!

That’s after drawing down $13,000 to live on and after paying out $7,350 for my share of the mortgage on the downtown house.

Holy mackerel. And we want to put the Republicans back in charge of the government…WHY?

Changing Climate, Changing Property Values?


Dust storm in Rolla, Kansas
Dust storm in Rolla, Kansas

Let’s dust off the crystal ball this morning. “Dust it off” is the operative term. Here in lovely uptown Arizona, gale-strength winds have been blowing every day and most nights for the past several weeks. Clean the furniture, and the next day it looks like you haven’t dusted in the past ten days.

Arizona is still mired in a decade-long drought, with no end in sight. Actually, the drought has gone on longer than a decade, and “normal” summer temperatures have been steadily rising as development runs amok and cities get bigger and more hectic. When I moved here in 1962, a 110-degree day was hot. Summer temperatures might rise as high as 112, but 114 was unheard-of. Now we regularly get 114-degree days, and we have seen highs of 118. In some parts of the Valley, unofficial backyard thermometers hit 120.

The City of Phoenix, now the eighth- or ninth-largest metropolitan area in the country, has not yet instituted water rationing, although it has raised water bills into the astronomical range, our City Parents hoping to discourage water use. It now costs as much to keep my xeric landscaping alive as it used to cost me to water lawns in front and back yards: often the water bill is higher than the exorbitant air-conditioning bill. The Valley avoids having to force residents to save water, by law, because of the Central Arizona Project, which diverts Colorado River water into the low desert.

However, the Colorado is running low, and the reservoirs that impound that water are running lower.

Outlying towns are forbidding residents to wash their cars, to refill their swimming pools (which means when your pool drops below the level of the tile rim, you have to shut off the pump and drain the pool, or let it turn into a green mosquito nest), to water their lawns, or even to use their garden hoses at all. Exceed your allotment or get caught in the act and you’ll get a stinging fine.

So…the question is, how long is this region going to remain livable?

If tomorrow the City informed me that I couldn’t run my irrigation system, couldn’t keep my pool full enough to operate the pump, and couldn’t water the trees, life here would take a decided turn for the worse. The shade and citrus trees temper the heat inside the house and help keep air-conditioning bills marginally under control. The pool, besides providing therapy for the chronic back and hip pain, makes living through a Sonoran Desert summer marginally tolerable. Without it, one would either suffer some serious misery for three or four months or, if at all possible, leave town for the summer.

The gardens and the flowering desert trees and the springtime abundance of citrus form a major part of what makes the low desert a good place to live. If suddenly we were told we could no longer have those things…well, it would no longer be a good place to live. My guess is about 90% to 95% of Phoenix dwellers would agree with that. Give us water rationing, and we’ll give you out-migration.

And, as you can imagine, if a lot of people start to move away, property values will drop as dramatically as they did during the Great Recession. Only this time they won’t come back up.

Right now, prices are back to where they were pre-Bubble. Most people are no longer underwater. And interest rates are low.

If I were a young Arizona professional, business owner, or craftsman able to make a decent living, I’d start looking right now for work someplace at least 20 or 30 miles inland – more, preferably – where they have water but no tornadoes. And precious little snow. This could be one’s last chance.

The Third-Worldization of America: Proceeding Apace

Lineman_changing_transformerThe electrician and his sidekick were here this morning to install a few outlets at hip height, so I don’t have to crawl painfully on the floor to plug in a vacuum cleaner, a laptop, or a heating pad.

This guy, Dave, has been the electrician of choice for the past 30 years, so we’ve become casual friends. We’re both beginning to enjoy the vicissitudes of old age — he more than me, I’m sure, since he does a lot of physical work. While the two men were working, I was fiddling with installing a new battery-run doorbell (one of the previous Happy Handyman homeowners took out the hard-wired doorbell!), and I remarked that compared with the one I put in eight or ten years ago, it’s a piece of junk. That, of course, kicked off the Going-to-Hell-on-a-Handcart conversation.

Dave remarked that he feels unhappy in the 21st century, because so many changes keep coming so fast. He doesn’t like either the changes or the pace of change.

I said, well, if you’ll recall that’s exactly what our parents said when they got to be our age.

He said, that’s true. But there was a difference between 20th-century change and 21st-century change. In the 20th century, the changes put people to work: people had jobs. The opposite is happening now. Fewer and fewer people have jobs, and those who do don’t have very good jobs. Then he clucked about the stupidity of sending all the decent jobs offshore — and the harm it’s doing to America.

One thing that’s good about having a trade, I said, is that they can’t offshore electrical installation.

That’s true, he said. But the problem is, when people don’t have decent-paying jobs, they can’t afford to have maintenance work and improvements, like installing outlets where you can reach them, done right. So they either don’t do them, or they just jury-rig things to try to keep them going as long as possible.

You’ve been in Mexico, he continued. You’ve seen how the construction and infrastructure are thrown together, just enough to hold it up for a few days. That’s because nobody can afford the material or the skilled labor to do a proper job. They toss things up, they patch things together just so they’ll last until tomorrow. When tomorrow comes, they’ll figure out what to do then.

Well, that kind of thing is happening here more and more. When repairs need to be done, they either don’t get done or they don’t get done right, because people can’t afford to hire an electrician or a plumber. They’re just not earning enough.

Holy sh!t.

I think I’ve talked before about the Third-Worldization of America. As Dave said in passing, the only people who benefit from the changes we’re seeing today are the very wealthy and the upper-level, extravagantly paid executives of huge corporations.

Listen to the workingmen. They’re the people who are on the ground, trying to make a living with American jobs — you could say they’re the canaries in the mine. And in my opinion, they have a clearer, truer view of the health of our country’s economy than does any theoretician in academe or any politician in Washington.

What they have to say will curl your hair.

Image: Lineman installing a new transformer. Dave Pape. Public domain.

This post was included in the Carnival of Wealth at the feisty iconoclast Greg MacFarlane’s site, Control Your Cash. Thanks, Greg! 😉