Dark Marks have been flying around recently like it’s the Quidditch World Cup. Here’s a brief selection:
And then there’s the dead unicorns.
Last month we started big - economic theory big. Now we’re going to look at stocks and bonds. More specifically, what are they and how do you know what they’re worth?
Do you ever find yourself pulled back through history and imagining what life was like for a particular group back in the day? Like the Mayans, or the Romans, or the French aristocracy? Or maybe you looked at the Super Blood Wolf Moon eclipse this January and wondered how many past regimes had been overthrown and leaders axed (literally) because such things were perceived as having lost the favor of the gods? Or maybe not and we’re just weird like that.
In any case, this is an April newsletter, so dust off that aluminum foil and let’s pull back the curtain on the collective solipsism behind the not-so-invisible hand that guides our markets. Also, put 1984 back on top of your summer reading list. Ready? Let’s go.
As beach season gets into full swing, we’ll try and keep your brains from going all washed-up-jellyfish. And we’re starting big - economic theory big.
Have you heard of Modern Monetary Theory (MMT)? It’s all the rage right now and is completely absurd. Why, you may ask? Good question! Let’s take a whirlwind tour through the history of economic theory to find out.
Happy Spring! The clocks have all been changed, the equinox is behind us, and summer fast approaches. The Fed apparently decided to get a head start on flip-flop season, however, by going full Left Shark this week.
As a reminder, this is what the Fed said just three short months ago, back in December (italicized parentheses our own):
Happy tax month! Except for a couple accountant friends on the island, tax season is generally a giant pain. But once they’re done, most people are thrilled to receive a tax refund - who doesn’t like free money, right?
Consider the flip side of that coin, if you will: a tax refund really means that you loaned your money to the government last year at zero percent. Actually zero, too, not the 0.01% “zero” your checking account earns. If you owe taxes, you got an interest-free loan from the government last year. No credit check necessary!
At a high level, here’s how taxes work: Start with gross income; subtract “above the line” deductions to get “adjusted gross income”; subtract “below the line” deductions to get “taxable income”; look up your tax in the tax tables; compare to how much you actually paid during the course of the year; done.
If you want a detailed list of all possible deductions, start with Wikipedia. Then hit the IRS website, but have a hefty supply of your favorite caffeine source handy. This article is not going to tell you why planting trees in your backyard won’t qualify for the reforestation expense deduction. But it will give you a few broadly applicable suggestions to reduce future years’ tax bills.
The number one macroeconomic question this year seems to be: When is the next recession? Or some variant thereof, like “What is going to cause the next recession” or “Are we in a recession” or “How do you prepare for a recession” or “My god, the yield curve is inverted! That means recession!” or “My god, look how close the yield curve is to inverting (depending on which part of the curve you look at), that means recession!”.
Economists are notoriously good at predicting recessions. They have accurately predicted 17 of the last 10. Plus, it’s a lot more fun to predict a massive recession than to say “menh, we’ll probably have 2% growth again this year” - it gets a lot more play in the press. Kind of like how earthquakes in California warrant more excitement (because it might fall into the ocean) than earthquakes in Oklahoma, despite the fact that there have been over 2,500 magnitude 3.0 or greater earthquakes in the last five years. Boomer Sooner indeed. Or how the Yellowstone volcano is more exciting than the 24 currently erupting volcanoes in the world, simply because it would destroy half the US.
So this month we’ll take a brief look at recessions in the US and see what we can glean about the next one.
Maaaaaarghch. We got nothin’. Monosyllabic. Not punny. The only thing mildly related is “March of Dimes”, and that has been well taken already. So without further ado, let’s continue our 2019 series in content, if not title.
“Here” looks like different things to different people. For some people, “here” might be increasing that emergency fund to 6 or even 12 months’ expenses. Nothing wrong with that, but you know what you’re doing now, so keep at it and revisit this article when you’re happy with your emergency fund.
For others, “here” is about making your money work for you, which usually boils down to a question of which takes priority: saving/investing or paying down debt? The answer is, like so many other things, it depends on your personal predilections.
Welcome to 2019! The depths of winter have arrived, and with them temperatures in the US that are literally colder than Antarctica. But fear not dear readers! We have prepared this January newsletter with you in mind, and hope you will find the content stimulating enough to keep you warm.*
Have you heard of Modern Monetary Theory? If not, you just did. And you’ll probably hear more of it soon, because it’s like an Acme Portable Hole for the government’s Wile E. Coyote. It just can’t help itself.
Understand the implications of a 401(k) loan to decide if it's the right option. By Rachel Hartman
Ha! See what we did with the title? That’s clever. It’s like we’ve got a little series going to start 2019: first it was Jan-YOU-ary, and now Febru-WHERE-y. (Looking ahead, “March” doesn’t quite fit the pattern, but that’s a problem for future me.) Staying in the present, hopefully you’ve started paying yourself first - that was what Jan-YOU-ary was all about, after all. Those of you who happened to miss that particular article or perhaps would just like a little refresher (shameless plug coming), you can read past Beachcomber issues online! Go ahead, we’ll give you time to get caught up...
Alright. So you’ve started (or will start) paying yourself first every time you get that paycheck. Where’s the best place to put that money? Bank account? Stocks? Under the mattress?
Apparently Santa came early this year! Or at least that’s what we’re telling ourselves given that top of our Christmas list every year is “less government”. So we’re going to choose to look at this Christmas, with about ¼ of the government shut down, as a happy little present and just ostrich out all the nonsense about why we’re actually in a partial government shutdown and how much of 2019-2020 will also be spent in a partial shutdown…
For the equity markets, however, it has been an absolute bear of a holiday season. Quite literally:
Whew! Nothing like waiting until the very last possible minute for a November newsletter, huh? We don’t care what science says these days, we still blame the tryptophan.
It feels like we have been writing about benefits elections ad nauseum recently, but after a quick glance back through the last few months’ newsletters, apparently that’s not true. So with a couple weeks left to make or change your elections (at least for the Healthcare exchange and likely for your own workplace benefits platform as well), let’s go through a Rundown of different places you can put your money. Just don’t eat the Konlobos, it’s worse than tryptophan.
Calendars are pretty arbitrary, especially when it comes to investing. I mean, sure, the development of the calendar as a means of tracking the passage of time makes sense, especially when it is based on observable patterns like, say, phases of the moon or positioning of the sun. But to use January 1st as the starting point for measuring investment performance is meaningless. I could just as well tell you about your portfolio’s performance since the first new moon after the vernal equinox - you’d probably look at me like I was crazy, but really there’s no difference between the two. They’re both arbitrary points in the flow of time that are equally irrelevant to you as an investor unless you actually invested your money on that particular day. And since the market is closed on January 1st, that is exactly nobody. Ever.
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