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Monetary Tightening

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“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

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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

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“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

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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

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“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

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“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/

Strong Jobs and Weakening Global Oil Demand

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Strong September U.S. job data showed that the U.S. economy is still running faster than the Federal Reserve would like, making it all but inevitable the central bank will continue to raise the federal fund interest rates through the end of the year in an attempt to curb inflation, according to Charles Schwab’s Schwab Market Perspective.

The Federal Reserve is trying to slow down economic growth to prevent inflation from becoming entrenched. WSJ

Higher interest rates imposed by the Federal Reserve don’t affect the U.S. economy only—the pain spreads around the globe as other countries’ currencies weaken against the U.S. dollar.

The Fed combats inflation by slowing the economy through tighter financial conditions — such as higher borrowing costs and lower stock prices — which curb spending, further reducing employment, income and spending.

The Fed has raised its benchmark lending rate by three percentage points so far this year, but you wouldn’t know that from the burgeoning jobs market.

Fed Chair Jerome Powell has acknowledged that the central bank’s fight against inflation will likely involve “pain for some households and businesses,” alluding to the risk of recession and rising unemployment. However, the Fed’s moves are also causing pain beyond U.S. borders.

The Fed is often referred to as the “central bank to the world” because its policies have a big influence on the global economy. Because the dollar is the world’s reserve currency, U.S. interest rate changes ripple across the globe in the form of currency volatility.

Meanwhile, this month’s announcement by OPEC+ members that they will curb oil production may not have as big an impact on oil prices and global inflation as some investors fear.

Source: Charles Schwab, Bloomberg data as of 10/8/2022.

Historically, OPEC hasn’t driven oil prices—it has followed them. OPEC output tends to lag changes in oil prices by about three months, meaning the cartel tends to cut oil production after prices fall when demand weakens, and increase it after prices are already rising when demand improves.

And demand for oil has been weakening. The International Energy Agency’s September Oil Market Report projected that oil markets would be oversupplied by 1 million barrels per day (mbpd) in the second half of calendar year 2022.

As a result, the OPEC cuts aren’t likely to be a meaningful driver of global inflation or the economy, but could instead serve as a lagging indicator of the slowing demand for oil as the global economy weakens, projects the Charles Schwab Schwab Market Perspective.

  1. https://www.schwab.com/learn/story/market-perspective
  2. Nick Timiraos, Flush Consumers Vex Fed Strategy, The Wall Street Journal, October 31, 2022, pp. A2.

November is Military Family Appreciation Month.

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Let’s celebrate how special military families are and recognize all the ways they support their service members.

November is Military Family Appreciation Month—a time when America honors and recognizes those unique sacrifices and challenges family members make in support of their loved ones in uniform.

“Military Families Serve, Too.”

No matter what rank or branch, or where life has taken them, our nation’s military families share the common threads of service and sacrifice.

November is a month to celebrate the Military Family and honor the commitment made by the families of the nation’s service members. It is a time to honor the military family – a time to celebrate their successes.

85% of military families surveyed feel the American public does not understand the sacrifices they make. ~ Source: USO

During Military Family Month, we thank military families for the tremendous contribution they make in support of our service members, the military mission and the nation.

Military life imposes unique demands on them, and during these difficult times, they have exhibited exceptional sacrifice, resiliency and courage.

The sacrifices and duty involved in service to the nation by military families often goes unnoticed by those in the civilian world. Their countless moves, school changes, friends and sports teams left behind, job changes, months missing their loved one, and nonstop deployments.

Over two million children have parents who served in Iraq or Afghanistan alone.

All Americans should share in the responsibility of caring for our military families. These families have stepped up to the plate at great personal cost, and the toll that multiple and extended deployments take can be very high.

Stress levels sky rocket, and spouses and children can struggle when service members are gone for prolonged periods, and some may even have a difficult time adjusting when the service member returns.

At a minimum, these families deserve some recognition and our appreciation.

Families provide our Servicemembers with invaluable encouragement and love, and manage the home front while their loved ones are deployed.

As we approach the winter holiday season when families across the world come together, we pay special tribute to our deployed forces and their families, who are separated this holiday season.

The dedication and strength of military families during a sustained high operational tempo, increased deployment and long separations is an inspiration to us all. The nation understands that families also serve, and is honored to pay tribute to them.

References:

  1. https://www.dodea.edu/dodeacelebrates/militaryfamilyappreciation.cfm
  2. https://www.militaryfamily.org/november-is-military-family-appreciation-month/

Have an Attitude of Gratitude

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“If you look at what you have in life, you’ll always have more. If you look at what you don’t have in life, you’ll never have enough” – Oprah Winfrey

Life isn’t always butterflies and rainbows. Sometimes life can be difficult, complicated and messy.

And, you don’t have the power to always control all the external factors to be exactly how you may want them to be in your life. However, you can choose your thoughts, feelings and words. You can choose your response or reaction to those external factors.

You have a choice when it comes to your perspective and you can decide which mindset you choose to navigate your experiences through, one of lack (fixed) or one of abundance (abundance).

Choose an Attitude of Gratitude.

It’s imperative to find and focus on the good. And allow yourself to soak up all the abundance and wonder life has to offer. It’s so much more fun than complaining and being negative all the time.

Practicing gratitude: Remember to be thankful when you wake up in the morning!

Research shows that practicing and expressing gratitude is associated with improvements to one’s mental well-being, as well as decreased stress and anxiety. Additionally, success in life starts with acknowledging what you already have.

Many successful people share a similar daily ritual that helps them achieve short-term and long-term success: making a list of what they are grateful for.

“What we focus on, what we put our attention on really determines how we feel about that particular day or our life in general,” states Arianna Huffington.

A study in the Journal of Personality and Social Psychology found that people who wrote about their gratitude over a period of time showed greater signs of emotional well-being compared to people who wrote about negative or neutral life events.

Practicing gratitude trains your brain to feel more positive emotions, appreciate good experiences, deal with adversity, and build strong relationships; all of which contribute to improved mental health.

“Gratitude is like a muscle. The more you exercise it, the more powerful it becomes. And being grateful doesn’t just make other people happy—it makes you happy, too! That’s because it focuses your attention on the positive things in your life, not the negative ones,” explains Oprah Winfrey.

When you begin to focus more on what really matters and choosing to see your reality from the lens of contentment. This allows you to eliminate unnecessary wants that could sabotage your vision and purpose. It might derail your pursuit of true happiness.

It may not feel natural at first to focus on appreciating what you already have, but by faithfully practicing the daily habits of gratitude, you’ll begin to change your conditioning and strengthen the gratitude muscle.

Bottomline: Always live in gratitude for what you have.

“Opportunities, relationships, even money flowed my way when I learned to be grateful no matter what happened in my life.” — Oprah Winfrey

References:

  1. https://www.oprah.com/spirit/oprahs gratitude-journal-oprah-on-gratitude
  2. https://www.cnbc.com/amp/2018/02/16/how-arianna-huffington-tony-robbins-and-oprah-use-gratitude-to-succeed.html

Inflation…a Monetary Phenomenon

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“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” ~ Milton Friedman.

Inflation hurts all Americans and represents a crushing blow to the pocketbooks of working families and seniors living on a fixed income.

Inflation, in its most basic sense, is a lost of purchasing power. For example, a dollar held at the start of calendar year 2021 is now worth only 88.3 cents, according to .

Unfortunately, inflation seems likely to remain higher for longer than policymakers expected, and the Federal Reserve will therefore need to maintain a tighter policy stance of raising federal fund rate and quantitative tightening for an extended period of time, according to Franklin Templeton Fixed Income CIO Sonal Desai.

Consumer inflation remains at record highs across major developed economies: in September it ran at 8.2% year-over-year (Y/Y) in the United States, 10% Y/Y in the eurozone and 9.9% Y/Y in the United Kingdom (in August).1

These numbers represent inflation rates not seen in four decades. Many incorrectly assume the causes are the energy shock and supply chain disruptions which have played an important global role.

Additionally, the United States experienced a massive fiscal budget expansion during the pandemic, and fiscal stimulus continues to flow in the form of subsidies and debt forgiveness programs.

Excess demand therefore is a major inflation driver; in September, even as lower energy prices brought headline inflation down, core inflation (excluding food and energy) accelerated above expectations to 6.6%, the highest in 40 years.

Core inflation has averaged 6.2% so far this year and shows no signs of coming down—to the contrary, it’s rising. The last time it sat below 2% was in March last year.

Meanwhile, aggregate demand remains resilient and the labor market remains as tight as it’s ever been. Excess demand is an important inflation driver—as the Fed has belatedly recognized. So, the Fed can’t stop and won’t stop hiking rates anytime soon—Americans should expect that the federal funds rate could easily go above 5%.

Simply, inflation is a monetary phenomenon. It is a result of too much money, of a more rapid increase in the quantity of money than an output. “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output,” states economist Milton Friedman.

Moreover, it’s important to recognize that governments control the quantity of money. So that as a result, inflation in the United States is made and produced in Washington and nowhere else.

It is a byproduct excessive printing of green pieces of paper we call the U.S. dollar (USD) that increases the money supply, funds uncontrolled fiscal spending and devalues the fiat currency.

References:

  1. https://www.heritage.org/budget-and-spending/heritage-explains/the-real-story-behind-inflation