US inflation cools in October.

Overall inflation as measured by CPI rose 7.7% year-over-year (YoY), below the 7.9% estimate.

The annual inflation rate fell to 7.7 percent in October from 8.2 percent in September, according to the consumer price index (CPI), a closely watched inflation gauge. Economists expected the annual inflation rate to fall to 7.9 percent, according to consensus projections.

Core CPI, which excludes volatile food and energy prices, increased 6.3% YoY, below the 6.5% YoY change economists expected to see.

The October CPI report is an encouraging sign for the U.S. economy as policymakers rush to bring down inflation without causing a recession. While decline in inflation will not be enough to keep the Federal Reserve from raising rates, it may allow the bank to do so at a slower pace.


References:

  1. https://thehill.com/policy/finance/3729055-inflation-fell-to-7-7-percent-annual-increase-in-october/

More Than One in Four Americans Say Their Debt is Unmanageable

Nearly one in five Americans are feeling bad or very bad about their financial circumstances. ~ OppFi’s 2022 Personal Finance Study

The FinTech company, OppFi, surveyed nearly 1,100 Americans to learn more about Americans’ financial situations,.

Respondents had mixed and uncertain feelings about where they stood financially, with nearly one in five feeling bad or very bad about their circumstances.

Key takeaways

  • Half of respondents to the survey are currently in debt, and 52% of those in debt say their debt is not manageable.
  • Just over 1 in 3 respondents have frequently experienced stress or anxiety about their finances since the COVID-19 pandemic started.
  • 1 in 4 took out a personal loan during the COVID-19 pandemic, most often to cover basic necessities such as food, clothing, and housing and credit card debt.

Americans’ financial health is often measured by benchmarks such as debt, savings, spending habits, and the ability to pay their monthly bills, writes Ashley Altus, CFC, a personal finance writer for OppU. OppFi survey respondents reported having difficulty with many of these things. Half said they’re in debt, and nearly half said they can’t pay their bills on time. Almost 2 in 5 live paycheck to paycheck, and 1 in 5 said they spend more than what they earn.

Budgeting is widely considered an important aspect of personal finance, but 1 in 10 said they didn’t have a budget at all.

Fewer than half (47%) said they have a savings account or emergency fund. Of those who did, nearly 1 in 5 said they could live off it for three weeks at the most.

How COVID-19 impacted Americans’ financial situations

The COVID-19 pandemic threw the American economy into chaos, with numerous businesses closing. In April 2020, the unemployment rate reached a level not seen since the 1930s. Near the end of 2021, 10 million households were behind on rent despite three rounds of stimulus checks.

More than half the people we surveyed said the pandemic worsened their financial situation. The biggest reason? Employment – more than 1 in 5 were working fewer hours and 15% lost their job. Others cited their own illness (17%), and 15% said their credit score decreased.

Financial stressors

One result of financial difficulty may be stress. Just over 1 in 3 respondents said they have frequently experienced stress or anxiety related to their finances since COVID started, with the most common stressor being paying bills other than mortgage or rent (cited by 35%). Debt was identified as a source of stress by 28% and 26% were stressed about not having enough savings.

Other stressors included basics like having enough food, high energy or gasoline prices, and paying mortgage or rent. Financial anxieties also reach as far as retirement, with more than 1 in 10 saying they’re worried they won’t have enough to retire on.


References:

  1. https://www.opploans.com/oppu/articles/personal-finance-study-2022/

6 Common Causes of Recessions

“A soft landing is impossible. The economy is going to go into a recession fast. You’re going to see the economy just screech to a halt. That’s what the Fed needs to do to get inflation down.” ~ Mike Novogratz, Galaxy Digital CEO

The causes of recessions can vary greatly, according to the FinTech company Sofi. Generally speaking, recessions happen when something causes a loss of confidence among businesses and consumers. The recession that occurred in 2020 could be considered an outlier, as it was mainly sparked by an external global health event rather than internal economic causes.

The mechanics behind a typical recession work like this: consumers lose confidence and stop spending, driving down demand for goods and services. As a result, the economy shifts from growth to contraction. This can, in turn, lead to job losses, a slowdown in borrowing, and a continued decline in consumer spending.

According to SoFi, here are some common causes of recessions:

1. High Interest Rates

High interest rates make borrowing money more expensive, limiting the amount of money available to spend and invest. In the past, the Federal Reserve has raised interest rates to protect the value of the dollar or prevent the economy from overheating, which has, at times, resulted in a recession.

For example, the 1970s saw a period of stagnant growth and inflation that came to be known as “stagflation.” To fight it, the Fed raised interest rates throughout the decade, which created the recessions between 1980 and 1982.

2. Falling Housing Prices

If housing demand falls, so does the value of people’s homes. Homeowners may no longer be able to tap their house’s equity. As a result, homeowners may have less money in their pockets to spend, reducing consumption in the economy.

3. Stock Market Crash

A stock market crash occurs when a stock market index drops severely. If it falls by at least 20%, it enters what is known as a “bear market.” Stock market crashes can result in a recession since individual investors’ net worth declines, causing them to reduce spending because of a negative wealth effect. It can also cut into confidence among businesses, causing them to spend and hire less.

As stock prices drop, businesses may also face less access to capital and may produce less. They may have to lay off workers, whose ability to spend is curtailed. As this pattern continues, the economy may contract into recession.

4. Reduction in Real Wages

Real wages describe how much income an individual makes when adjusted for inflation. In other words, it represents how far consumer income can go in terms of the goods and services it can purchase.

When real wages shrink, a recession can begin. Consumers can lose confidence when they realize their income isn’t keeping up with inflation, leading to less spending and economic slowdown.

5. Bursting Bubbles

Asset bubbles are to blame for some of the most significant recessions in U.S. history, including the stock market bubble in the 1920s, the tech bubble in the 1990s, and the housing bubble in the 2000s.

An asset bubble occurs when the price of an asset, such as stock, bonds, commodities, and real estate, quickly rises without actual value in the asset to justify the rise.

As prices rise, new investors jump in, hoping to take advantage of the rapidly growing market. Yet, when the bubble bursts — for example, if demand runs out — the market can collapse, eventually leading to recession.

6. Deflation

Deflation is a widespread drop in prices, which an oversupply of goods and services can cause. This oversupply can result in consumers and businesses saving money rather than spending it. This is because consumers and businesses would rather wait to purchase goods and services that may be lower in price in the future. As demand falls and people spend less, a recession can follow due to the contraction in consumption and economic activity.

How Do Recessions Affect You?

Businesses may have fewer customers when the economy begins to slow down because consumers have less real income to spend. So they institute layoffs as a cost-cutting measure, which means unemployment rates rise.

As more people lose their jobs, they have less to spend on discretionary items, which means fewer sales and lower revenue for businesses. Individuals who can keep their jobs may choose to save their money rather than spend it, leading to less revenue for businesses.

Investors may see the value of their portfolios shrink if a recession triggers stock market volatility. Homeowners may also see a decline in their home’s equity if home values drop because of a recession.

When consumer spending declines, corporate earnings start to shrink. If a business doesn’t have enough resources to weather the storm, it may have to file for bankruptcy.

Governments and central banks will often do what they can to head off recession through monetary or fiscal stimulus to boost employment and spending. “It’s hard to not underestimate the huge impact that the response to COVID-19 had on all assets. We pumped so much liquidity into the markets it was crazy, we had never seen anything like it. We were throwing trillions of dollars around like matchsticks,” said Mike Novogratz, Galaxy Digital CEO.

Central banks, like the Federal Reserve, can provide monetary policy stimulus. The Fed can lower interest rates, which reduces the cost of borrowing. As more people borrow, there’s more money in circulation and more incentive to spend and invest.


Source: https://www.sofi.com/learn/content/what-is-a-recession/

Highly Processed Foods Can Result in Premature Deaths

A growing body of evidence suggests that consuming too much highly processed food — items like hot dogs, chips, soda and ice cream — can have consequences beyond obesity and high cholesterol.

Foods that are “ultra-processed” contain more artificial ingredients than those that just have added salt, sugar or oil. These foods are ready-to-consume products that are made up entirely or mostly from substances extracted from food (oils, fats, sugar, proteins), derived from food constituents (hydrogenated fats, modified starches), or synthesized, based on organic materials (dyes, flavorings, flavor enhancers and other additives used to alter the food’s sensory properties).

Source: Bing.com images

They usually have very few whole ingredients and contain flavorings, colorings or other additives. Instant noodles, frozen pizza and store-bought cookies typically fall within this category.

In the U.S., ultra-processed food makes up around 57% of daily calories, on average. Based on that, Eduardo Nilson, a nutrition researcher at the University of São Paulo and the study’s lead author, believes the U.S. could expect more premature deaths associated with food.

Many previous “ultra-processed” studies have linked ultra-processed food to other negative health outcomes, including a higher risk for diabetes, cognitive decline, heart disease and cancer. An August study found that people in Italy who consumed ultra-processed food in large quantities had a higher overall risk of death.

Maura Walker, an assistant professor of nutrition at Boston University who wasn’t involved in the research, cautioned that this study did not show that ultra-processed food consumption directly caused premature death — only that there was an association. But the connection makes sense, she said.

Ultra-processed foods can often be identified by their long list of ingredients, many of which you wouldn’t normally find in your own kitchen and are often difficult to pronounce.

But not everything in this category is harmful, according to Dr. Walter Willett, a professor of epidemiology and nutrition at the Harvard T.H. Chan School of Public Health. For example, whole grain bread and whole grain breakfast cereals are sometimes considered ultra-processed, but they are also sources of dietary fiber, which can lower the risk of heart disease or cancer.

For that reason, Willett said, it’s important to focus on avoiding particular foods that are significantly associated with a risk of premature death.

The results from this study highlight the damage to health that is arising based on the observed trend in Brazil of replacing traditional meals, based on natural or minimally processed foods, with ultra-processed foods. These results also support the recommendation of avoiding the consumption of these kinds of foods.


References:

  1. https://www.ajpmonline.org/article/S0749-3797(22)00429-9/fulltext
  2. https://www.nbcnews.com/health/health-news/highly-processed-food-linked-early-death-study-rcna55455
  3. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4544452/

Monetary Tightening

“We have overstimulated the economy by a big factor” ~ Sam Zell

Billionaire investor Sam Zell told CNBC Squawk Box that he sees no reason to be optimistic that there won’t be further severe economic (recession) and market (bear market) pains. “We have overstimulated the economy by a big factor,” Zell remarked. “We have to take the punch bowl away.”

He thinks a liquidity crisis may be up next and believed the whole “inflation is transitory” political soundbite originating from the Federal Reserve and the Biden Administration several months ago was an embarrassment and the phrase should be relegated to the dust bin of history.

Free money–monetary quantitative easing and historically low interest rates–leads to excess which leads to recession, states Zell. It’s really that simple.

Markets will not bottom until all that excess loose money bleeds out of the economy and Fed tightens its monetary policy. The pain of recession and further market decline are needed and will be good for long term markets.

The Federal Reserve maintained a too loose and easy monetary policy for too long.

“If you get really good at what you do, you get the freedom to be who you really are.” ~ Sam Zell


References:

  1. https://www.costar.com/article/1152237605/real-estate-magnate-sam-zell-moonlights-as-economist
  2. https://www.agriculture.com/news/business/risk-and-reward-a-conversation-with-sam-zell

Sam Zell, founder and chairman of Agricultural Real Estate, used to joke that his father made a life-or-death decision when he was 34 years old, and then never made another mistake again. Zell was inspired by his father’s confidence.

Daylight Saving Time

Daylight Saving Time ended at 2 a.m. on Sunday, November 6, 2022. Don’t forget to reset your clocks and watches.

Daylight Saving Time has its roots in train schedules, but it was put into practice in Europe and the United States to save fuel and to reduce electricity usage during World War I by extending daylight hours, according to the US Department of Transportation’s Bureau of Transportation Statistics.

On the first Sunday of November, at 2 a.m., clocks in most of the United States and many other countries turn back an hour and stay there for nearly four months on what is called standard time, writes CNN’s Katia Hetter. On the second Sunday of March, at 2 a.m., clocks move forward one hour back to Daylight Saving Time.

For about eight months of the year, much of the US and dozens of other countries follow Daylight Saving Time. And for the remaining four months, they follow standard time.

There’s a move in Congress to make Daylight Saving Time permanent in the U.S.

Don’t forget to reset your alarm clock.

“Fall back; Spring forward.”


Sources:

  1. https://www.cnn.com/2022/11/05/health/daylight-saving-time-explainer-wellness
  2. https://www.cnn.com/2022/03/15/us/daylight-saving-time-history-trnd

Wine Enthusiast Corner: Petite Sirah

“Wine has been a part of civilized life for some seven thousand years. It is the only beverage that feeds the body, soul and spirit of man and at the same time stimulates the mind.” – Robert Mondavi

The red wine grape, Petite Sirah (“Peh-teet sear-ah”) (aka Durif or Petite Syrah), was first found growing in France in the mid-1800’s. It is a red wine grape that was created by crossing two varieties of grapes: Syrah and Peloursin. It’s loved for its extraordinary deep color and full-bodied flavors of blueberry, chocolate, plums and black pepper.

Petite Sirah and Syrah (or Shiraz) are two wines that have very little in common. It is important to remember that Petite Sirah is not the baby sibling of Syrah and is certainly not a diluted version of Syrah either, writes Madeline Puckette, James Beard Award-winning author and co-founder of Wine Folly. The Petite Sirah characteristics are distinctive and it has a completely different tasting profile as well.

Source: Wine Folly

The wine is named after the French word petite, meaning small, and Sirah, which was the original name for the Syrah grape. And the grape’s name, Petite Sirah, comes from the berry size and not the vine, which is exceptionally robust.

These tiny berries generate a high skin to juice ratio, which can make very tannic wines. It is one of the darkest wines that are typically full bodied with intense flavors and high tannins.

Despite its popularity, Petite Sirah is an exceptionally rare grape with less than 10,000 planted acres worldwide, growing mainly in California.

Full-bodied red wineslike Petite Sirah have high tannin (bitterness and astringency) which means you’ll want to match them up with richer, more fatty foods to create balance.

With its smoky fruit flavors, Petite Sirah will pair nicely with bold exotic spices and herbs. With you should expect aromas of blackberry jam, brambles, black pepper along with notes of vanilla from oak aging. On the palate, rich and bold tannins compliment the sweet berry-like flavors and the acidity is smooth.

If there is one thing to know about pairing Petite Sirah with food, it is that the wine deserves a food as big and as bold as it is.

6 Fast Facts About Petite Sirah

  • History: Petite Sirah (or Durif, the grape’s original name) was a cross between Syrah and the even more rare: Peloursin. It was imported to America in the mid-1880s where it got it’s new name: Petite Sirah.
  • Serving: A slightly cooler temperature (65 ºF) will deliver more floral and mineral aromas along with Petite Sirah’s characteristic bold fruit.
  • Decanting: Petite Sirah with such high tannin is the perfect red wine to pour in a decanter and let it evolve for 2–4 hours.
  • Aging: This warm-climate grape often loses too much acidity and fruit within the first 7 years to make it a contender for longer term aging.
  • Value: California’s central valley (like the Lodi AVA) offer some of the best values.
  • Anti-Oxidants: Petite Sirah is one of the deepest, most opaque red wines with very high levels of anthocyanin (an antioxidant). Similarly colored wines to Petite Sirah include Tannat and Sagrantino.

At one time, Petite Sirah had a reputation of being too “over the top” for most palates and constitutions. The best way to describe this wine with its brute strength, bold flavors and dense, chewy texture was “masculine”.

Winemakers have managed to tame Petite Sirah and create a red wine variety that is full of gracious nuances. You can enjoy one of the most beautiful, opaque purple wines that boast some of the highest antioxidant levels of any wine.

Healthy and full of flavor – there is nothing petite about Petite Sirah! It display ripe, rich fruit, leans toward the more powerful end of the spectrum, and its spice notes allow it to pair with a wide range of foods. Yet, the varietal flies relatively under the radar


References:

  1. https://winefolly.com/deep-dive/petite-sirah-wine-guide/
  2. https://www.winepros.org/petite-sirah-guide/

Dividend Growth Stocks

Dividend-growth stocks typically exhibit stable earnings, solid fundamentals and strong histories of profit and growth.

Dividend Growth companies are companies that have consistently grown their dividends over the long-term, such as for at least 15 consecutive years. According to ProShares, these companies generally come with attributes of quality that investors have come to expect:

  • Durable competitive advantages, solid fundamentals, and management teams that are committed to returning capital to shareholders.
  • Higher gross and net profit margins than the broader index, with more consistent levels of earnings growth through the market’s ups and downs.
  • Lower levels of debt than companies in the broader market index.

Dividend growers have also demonstrated a history of weathering market turbulence over time. They’ve done so by delivering most of the market’s upside in rising markets with considerably less of the downside in falling ones—a valuable feature in times of uncertainty.

“Dividend growth stocks have outperformed in various market environments,” according to global investment management firm Nuveen. “Dividend growth stocks have provided an attractive combination of earnings and cash flow growth potential, healthy balance sheets and sustainable dividend policies. These stocks have historically offered compelling performance during up markets and provided a buffer during market drawdowns and in volatile environments.”

When the Federal Reserve shifts from an accommodative monetary easing policy to a restrictive monetary policy, there is often an initial period of market volatility and uncertainty.

Dividend growth has been a desirable trait for equities immediately before, during, and after past cycles of less accommodative Fed policy.

Many investing gurus recommend strong dividend payers as the way to weather dual challenges of inflation and recession, noting that the dividend stocks’ income streams are capable of offsetting inflation – even when inflation is running higher than 8%.

“Dividend growth is one of the few things that has kept up with inflation as you go back and look over the decades. So when you go back and you look at the ’70s, ’80s — which is the last time you can actually find any notable inflation — what you see is dividend growth pretty much kept pace with it,” explained Sharon Hill, the co-leader of Vanguard’s Equity Income Fund.

With the three challenges facing investors today—rising interest rates, slowing economic growth and income scarcity–dividend growth stocks could make a better choice for the current economic and market environment.

Source: ProShares, Bloomberg. Data from 12/31/05 to 12/31/21. Past performance does not guarantee future results. Index calculations do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest in an index.

High-quality companies that have consistently grown their dividends tend to have stable earnings, solid fundamentals and strong histories of profit and growth. As a result, they have been generally better positioned to weather potentially slowing growth.


References:

  1. https://finance.yahoo.com/news/investing-whiz-sharon-hill-says-155244449.html
  2. https://www.fidelity.com/insights/investing-ideas/10-dividend-growth-stocks
  3. https://www.proshares.com/browse-all-insights/insights/three-reasons-dividend-growth-may-be-the-right-approach
  4. https://www.proshares.com/browse-all-insights/insights/why-dividend-growth-mid-caps-may-belong-in-your-portfolio

Wealth is what you don’t see

“Spending money to show people how much money you have is the fastest way to have less money.” ~ Morgan Housel, The Psychology of Money

The definition of wealth, in its simplest form, is the total value of assets that are owned by an individual. Wealth is also defined as a person’s Net Worth. This is calculated by adding up all the assets and subtracting all the liabilities.

Wealth means different things to different people. The first and most obvious definition of wealth is owning appreciable and income producing assets. On the other hand, wealth can mean to some people the ability to travel wherever you want, and to do things on your own schedule. But chances are, everybody has a completely different definition of wealth.

Wealth is what you don’t see.

Being wealthy means that you have assets that generate you income as well as a store of wealth. A wealthy person is typically invested in real estate, the stock market, and might own a business or two. These individuals have assets that can be passed down generation to generation and don’t waste time keeping up with the Joneses. They focus on amassing assets and wealth.

“Wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see,” explains Morgan Housel, author of The Psychology of Money.

“That’s not how we think about wealth, because you can’t contextualize what you can’t see.

When most people say they want to be a millionaire, what they might actually mean is ‘I’d like to spend a million dollars.’ And that is literally the opposite of being a millionaire.”

Wealth defined

In their groundbreaking book, The Millionaire Next Door, authors Thomas J. Stanley, Ph.D, and William D. Danko, Ph.D, do not define wealthy, affluent, or rich in terms of material possessions. They opined that many people who display a high-consumption lifestyle have little or no investments, appreciable assets, income-producing assets, common stocks, bonds, private businesses, oil/gas rights, or timber land.

Conversely, those people whom they define as being wealthy get much more pleasure from owning substantial amounts of appreciable assets than from displaying a high-consumption lifestyle.

Bottomline, the most important parts of wealth and personal finance are how you behave with it and your related habits.

Wealth gives you freedom

Wealth give you time to do what you want and give you Freedom. When you are wealthy, you don’t have to sell hours of your day working. You can instead choose to spend your day doing the things you love and enjoy it.

And, freedom is defined as “the power or right to act, speak, or think as one wants without hindrance or restraint.” When you have wealth, you have the freedom to do things that you have always wanted to do, with minimal hindrances.


References:

  1. https://retirementfieldguide.com/wealth-is-what-you-dont-see/
  2. https://themillionairenextdoor.com/publications/the-millionaire-next-door/
  3. https://www.msn.com/en-us/money/personalfinance/definition-of-wealth-what-does-being-wealthy-mean/ar-AAWpqRq

Discipline and Patience are two great personal superpowers.

Good Relationships Equate to Happiness

“Satisfaction with relationships was a better predictor of how people would age more than cholesterol, socioeconomic conditions, or genetics.” ~ Motley Fool contributors Brian Feroldi, Brian Stoffel, & Brian Withers

Positive and strong relationships keep you happier, healthier and living longer, according to the results of a 75+ year experiment started at Harvard during the Great Depression and according to dozens of other studies.

In 2002, two pioneers of Positive Psychology, Ed Diener and Martin Seligman, conducted a study at the University of Illinois on the 10% of students with the highest scores recorded on a survey of personal happiness. They found that the most salient characteristics shared by students who were very happy and showed the fewest signs of depression were “their strong ties to friends and family and commitment to spending time with them.” The New Wallis, 2005).

“Social connections are really good for you; and loneliness kills. “People who are more socially connected to family, to friends, to community are happier; they are physically healthier; and they live longer than people who are less socially connected.”

A relative lack of social connections has been associated with depression and later-life cognitive decline, as well as with increased mortality. One study, found that lack of strong relationships increased the risk of premature death from all causes by 50% — an effect on mortality risk roughly comparable to smoking up to 15 cigarettes a day, and greater than obesity and physical inactivity.

Thus, satisfaction with relationships was a better predictor of how people would age more than cholesterol, socioeconomic conditions, or genetics.

Social connections give you pleasure, they also influence your long-term health in ways every bit as powerful as adequate sleep, a healthy whole real food diet, physical activity and not smoking.

Understanding finance and investing your personal capital are just a means to an end. The whole point of financial freedom is using that time that’s freed up to strengthen your personal relationships.

There’s nothing more important to a long-term mindset than good social relationships. The quality of your personal relations with other people is the number one factor that effects your level of life-satisfaction.

So, make it a priority to take time to foster your most meaningful relationships. Choose activities that are most likely to bring joy to you and the people you have the strongest personal relationships.

“You’ll never change your life until you change something you do daily. The secret of your success is found in your daily routine.” ~ John C. Maxwell


References:

  1. https://www.health.harvard.edu/staying-healthy/the-health-benefits-of-strong-relationships
  2. https://www.pursuit-of-happiness.org/science-of-happiness/relationships-and-happiness/