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Recession and the U.S. Economy

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There is always a recession in the future. The reality is that the U.S. economy could be in a recession now.

Inflation is too high and interest rate adjustments are required, says Esther George, Kansas City Federal Reserve President. She sees consumers taking actions to combat inflation and those actions, such as not buying appetizers while dining out, are apparent to the Federal Reserve. Thus, the economic data shows that there are already signs of a pullback in consumer spending…just look at Walmart, Target and Dollar Tree sales and earnings.

There is always a chance of a recession in the future, no matter what the current economic data look like or current consumer spending is doing. The question of whether the economy slips into a recession is basically a “not if, but when“ proposition.

It’s become obvious that a recession will come to the United States economy in the future, but the essential question is when. It is important to keep in mind that recessions are a normal and unavoidable part of the economic business cycle.

A recession is a significant decline in economic activity that lasts for months or even years, according to Forbes. Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.

The National Bureau of Economic Research (NBER) generally defines the starting and ending dates of U.S. economic recessions. NBER’s definition of a recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

The reality is that the U.S. economy could be in a recession now.

The definition of a recession is two consecutive quarters of negative gross domestic product growth. First-quarter GDP decreased at an annual rate of 1.4%. Should that happen in the second quarter, that would technically place the economy in recession.

Recessions usually come from demand weakness, but supply problems can also trigger a downturn.

Consumer demand for goods and services continues to be strong, according to the Federal Reserve. Consumers have plenty of money, thanks to past earnings, fiscal stimulus payments and extra unemployment insurance. They have paid down their credit card balances. Even though they also increased their car loans outstanding as they upgraded their rides, their general condition is good. Employment will increase thanks to the spending, reinforcing the income gains that enable expenditures. Supply restraints are fueling current accelerating inflation.

The economy reacts with a time lag of about one year, plus or minus.

The greatest recession risk in the near term is that the Federal Reserve realizes that much of the recent decades high inflation is long-lasting rather than transitory. They will then ‘hit the brakes’ to control inflation by raising interest rates. Because of the time lag, the Fed may decide to raise interest rates faster, triggering a recession.

“Inflation is worst than a recession, and inflation will take us into a recession,” states Liz Young, SoFi Head of Investment Strategy.

References:

  1. https://www.forbes.com/sites/billconerly/2021/11/02/no-recession-in-2022-but-watch-out-in-2023/https://www.forbes.com/sites/billconerly/2021/11/02/no-recession-in-2022-but-watch-out-in-2023/
  2. https://247wallst.com/investing/2022/05/19/goldman-sachs-has-6-strong-buy-dividend-stocks-that-can-weather-a-certain-coming-recession/
  3. https://www.forbes.com/advisor/investing/what-is-a-recession/

Juneteenth

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June 19 marks Juneteenth, a federal holiday acknowledging the day in 1865 that slaves in Texas learned of the Emancipation Proclamation

Juneteenth – short for ‘June nineteenth’ – is a celebration marking the moment in 1865 when enslaved black people in Galveston, Texas, found out they were freed – more than two years after President Abraham Lincoln’s Emancipation Proclamation.

On 19 June 1865, Union troops arrived in Galveston Bay, Texas, to inform enslaved African-Americans of their freedom and to tell them the Civil War had ended.

Led by Union Major General Gordon Granger, the Union troops took control of the state and announced that the 250,000 enslaved black people in the state were free by executive decree. Gordon informed the residents that slavery would no longer be tolerated and that all enslaved people were now free.

Enslaved people would henceforth be treated as hired workers if they chose to remain on the plantations, according to the National Museum of African American History and Culture.

When General Granger shared the news in Texas about the Emancipation Proclamation, slaves in the remaining rebel state were unaware that President Abraham Lincoln had issued the 1863 proclamation that freed slaves in Confederate states. 

It’s important to note that slavery wasn’t actually abolished with the Emancipation Proclamation — which was passed on Jan. 1, 1863. Slavery was formally abolished through the nation’s 13th amendment to the U.S. Constitution, which was ratified on Dec. 6, 1865.

Yet, the end of slavery did not mean equality for black Americans. “The ending of slavery in a formal sense turned into less official forms of abuse of African-Americans,” says Lucy Worsley. “Racial segregation became a fact of life in many formerly Confederate states, as did using the formerly enslaved as poorly paid labour. Indeed, ‘slavery’ was still possible – in all but name.”

A collection of statutes known as the Jim Crow laws forced black people to live, work, and play separately. The laws existed for about 100 years, from the post-Civil War era, through two World Wars, until the 1950s.

Juneteenth, a National Holiday

U.S. stock markets will observe Juneteenth. While the holiday technically fell on Sunday, June 19, the New York Stock Exchange and the Nasdaq will be closed in observance on Monday. The markets will resume normal hours on Tuesday, June 21, with the regular session starting at 9:30 a.m. Eastern.

President Biden signed the Juneteenth National Independence Day Act on Thursday 17 June 2021, recognizing Juneteenth as a national holiday.

“Great nations don’t ignore their most painful moments,” President Biden said. “We come to terms with the mistakes we made. And remembering those moments, we begin to heal and grow stronger.”

References:

  1. https://www.historyextra.com/period/modern/juneteenth-history-facts-how-to-celebrate-meaning/
  2. https://www.foxnews.com/lifestyle/juneteenth-what-why-celebrate.amp

A Purpose Driven Life

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“Cherish your visions and your dreams as they are the children of your soul, the blueprints of your ultimate achievements.” – Napoleon Hill

What’s the purpose of your life? Or to be more specific, what is it that adds meaning and satisfaction to life? What is it that gives us a sense of purpose?

Like many people, you might feel that you’re simply existing in life, going through the motions without understanding what it all means. 

In living the “a purpose driven life”, you’ll start to find meaning in every moment of your life. You’ll learn to deepen your love for yourself and others, find the unique purpose you were made for, and prepare yourself for a meaningful life.

Jack Hawley writes in Reawakening the Spirit in Work, “Our life direction is about moving into the vacant upstairs flat.”

Purpose is that home within, that place where our talents, values and service to others-drive reside. It’s there all the time, waiting for your arrival. You may have been too busy “living your life downstairs” to even notice.

Successful investors and wealth builders tend to be purpose driven. They tend to have a clear vision about what to focus on and a plan on how to accomplish their wealth building and investment goals.

They have deadlines and milestones, and stick to them, holding themselves accountable for their progress or lack of progress. They focus on the prize and literally speak their reality into existence. Once they say they will do something, they do it!

People aren’t successful by chance.

People choose to be successful and then make it happen by first having a vision and written goals. They don’t ask for permission and they don’t search for acceptance from others. They win by not getting angry or making excuses. They clearly know what they want and take responsibility for for their progress or lack of progress.

No matter who you are or what you do, within, there is a purpose for life. Life may throw you heartaches and failures but your purpose drives you to persist, improve, learn and grow.

You can strive to “be better/do better”, which means to always try to be better day after day. It may only be a small percentage of improvement, but small improvements over time can compound into big changes.

Living a purpose driven life may help you to live longer, as research suggests. Scientists found that those individuals who have a purpose in life had a reduced mortality risk. In short, finding meaning in one’s life promotes positive aging and longevity.

Why is so important to have a sense of purpose?

Feeling that you’re making a difference, that what you’re doing has a meaning, can have a great impact on your life.

Having a sense of purpose can make all the difference in your life! It can help you to get up each morning, feeling excited about the upcoming day. Even more so, it can help you to confront difficulties and overcome even the biggest obstacles that lie in your path.

Personal Mission Statement

Here’s a quick way to get a sense of your life’s purpose.

By reviewing the kind of person you are and the abilities that come naturally to you, even if they got you into trouble in the past, you can gain insight into your life purpose, says psychotherapist Tina Tessina, Ph.D., author of The Ten Smartest Decisions a Woman Can Make after Forty. Do so by writing down a list of descriptions about yourself in each of the following categories:

Personal qualities (e.g., friendly, intellectual, a good communicator)

Your talents (e.g., painting, motivating people by public speaking, athletics, mentoring)

The circumstances that tend to repeat in your life (e.g., do you wind up teaching others, listening to people’s problems, working with children or technology?)

Your desires (e.g., traveling, cleaning up the environment, running for political office). If you’re doing something you’re not interested in or passionate about, you’re usually doing it with a bad attitude, a lazy demeanor, or doing the task grudgingly.

Then take the answer that is most important to you in each category and complete the following sentence:

I ________________ (your name) am designed to be a ________________ (insert personal quality) who can ________________ (insert talent) and I find myself ________________ (fill in recurring patterns or circumstances) often, because I am supposed to ________________ (desire).

Example: 
I, John Smith, (your name) am designed to be a good communicator (insert personal quality) who can motivate people through my experiences and expertise (insert talent) and I often find myself listening to people’s problems (fill in recurring patterns or circumstances) because I am supposed to operate an executive coaching company and improve their circumstances (desire).

References:

  1. https://www.success.com/8-principles-of-purpose-driven-leadership/
  2. https://www.planetofsuccess.com/blog/2016/living-a-purpose-driven-life-11-effective-tips/
  3. https://www.lifeadvancer.com/purpose-driven-life/
  4. https://www.success.com/answer-6-questions-to-reveal-your-life-purpose/

Credit Report and Score, and Credit Cards

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Credit is one of the most vital factors in building wealth and achieving financial freedom.

Building good credit is one of the first steps in creating an infrastructure for achieving financial freedom. Your largest purchases are almost always made on credit. People with good or excellent credit save tens of thousands of dollars on these purchases through lower interest rates and better terms.

There are two main components to your credit: your credit report and your credit score.

A good or excellent credit score can save you hundred of thousands of dollars in interest charges. Since if you have a good or excellent credit, it makes you less risky to lenders, meaning they can offer you a better or lower interest rate on loans such as mortgage loans and automobile loans.

Lenders charge you more or less for a loan depending on you score and credit history, which signifies how safe or risky you are.

Once a year, by law, you’re allowed to obtained a copy of your credit report free from the major credit bureaus: Experian, Equifax and TransUnion.

It’s important to plan now to monitor, manage and improve your credit before you need the auto or mortgage loan three to five years in the future.

And, never forget that one of the most important factors in improving your credit is getting out of debt and paying your bills on time.

Credit Cards

There has been a great proliferation of credit cards and people owning multiple credit cards over the past decade and more. And, the competition for consumers among competing credit card companies has become fierce.

Credit cards provide convenience and flexibility. And if you pay your credit card bill balance in full and on time each month, they can be utilized as a free short -term loan. They can help you track your spending much more easily than cash and you can download your transaction history.

Additionally, there are many benefits and rewards associated with credit cards such as cash back and travel rewards. But beware, most of the best rewards credit cards have annual fees. Only if you spend thousands of dollars per month on your credit card, the annual fee for the rewards might be worth it.

If you’re booking travel or eating out, use a travel card to maximize rewards, writes Sethi. For everything else, use a cash back card.

If you don’t completely pay off your credit card bill balance each month, you’ll incurred an enormous amount of interest at an high annual percentage rate (APR) that compounds.

It’s very easy to overuse and overspend with credit cards and find yourself in debt. One of the biggest problems with credit cards is the hidden cost of using them, says Ramit Sethi, “I Will Teach You to be Rich”. Many Americans have over spent and carry large credit card balances. The average credit card debt in the US in 2021, was $5,525, per Experian’s report. This was nearly 7% lower than the $5,897 in average credit card debt that was recorded in the same report in 2020.

To maximize the credit card benefits like cash-back, gift cards, air miles, discounts at the gas pump, or other rewards. And perks like free roadside assistance, free car rental insurance, or a free credit score and minimize the cost of credit cards, Sethi recommends:

  1. Pay off your credit card bill balance monthly. The single most important thing you can do to improve your credit score is to pay your bills on time. You’ll save thousands of dollars. If you miss one payment on your credit card, your credit score may drop, your APR can increase, you’ll be charged a late fee, and your late fee can trigger a rate increase on your other credit cards.
  2. Try to get fees on your credit card waived. A month before your new annual fee kicks in, call your credit card company and ask if they will waive the fee.
  3. Negotiate a lower APR. Call your credit card company and ask them to lower your APR. If they ask why, tell them that you’ve been diligently paying your bill in full on time for the last several years and there are a number of credit cards offering better rates.
  4. Keep your main cards for a long time and keep them active. Lenders like to see a long history of credit. Thus, the long you hold an account, the more valuable it is for your credit score.
  5. Get more credit. Do this only if you have no debt and you consider yourself financially responsible. You obtain more credit to improve your credit utilization rate, which is simply how much you owe divided by your available credit. Lower is preferred because lenders don’t want you regularly spending all the credit you have available. It’s too likely you’ll default and not pay them back.
  6. Use credit card’s secret perks. If you have very good credit, call your credit cards companies and other lenders once a year and ask them what advantages you’re eligible to receive. Often they can waive fees, extend credit and give you private promotions.

Call your credit card company and ask them to send you a full list of all their rewards.

References:

  1. https://www.iwillteachyoutoberich.com
  2. https://lanterncredit.com/credit-cards/average-credit-card-debt
  3. https://www.creditwww.com/Edu/credit-card-costs-and-benefits/

Inflation and Time Value of Money

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As time passes, the value of money declines.

Consumer-price inflation rose to 8.6% in May, its highest in forty years. This tax on households and businesses threatens the overall health of the U.S. economy. Deficit fiscal spending and supply shocks and Russian invasion are the primary causes of the current historic inflation.

Inflation is defined as the decline of purchasing power of the U.S. Dollar over a certain period of time. Inflation is usually expressed as the change in prices over a one-year period.

Purchasing power means how much your money can buy—its “buying power.” You lose purchasing power when prices go up (inflation) and gain purchasing power when prices go down (deflation). Inflation changes the value of a currency over time.

Inflation, risk and opportunity cost together reduce the value of the dollar as time passes. And, when inflation increases, the purchasing power of the U.S. Dollar decreases.

Inflation is rampant, the Federal Reserve seems poised to raise interest rates even higher than previously expected, financial markets are free falling, and there are fears of recession in the air. All this signals economic pain ahead for Americans.

A recession is my no means certain, with a strong jobs market and consumers still flush from pandemic fiscal government handouts. But inflation is sapping consumer and business confidence.

A tax increase would reduce investment and further restrict supply, which would arguably increase inflation.

Inflation is a cost spread over every American. Unemployment, a byproduct of a recession, lands especially hard on specific Americans and American families. Thus, it natural for economists to accept a little more inflation to protect employment and strive for a soft landing.

Blossoming federal role in directly supporting the consumption of a vast number of Americans is a primary driver of fiscal deficits and persistent inflation.

  • 75 million receive a combination of Medicare, Medicaid and Social Security
  • 98 million receive veteran and retired federal government benefits, college aid, rental assistance, Obamacare, food stamps, etc.

These transfers are financed by chronic fiscal deficits. To remedy the problem, politicians would face the career ending choice of benefit cuts, tax hikes or increase borrowing regardless of the worsening effect in inflation.

If prompt and effective actions are not pursued by the Federal Reserve and Administration, the nation may revisit the Stagflation of the 1970s which persisted more than a decade with great consequences to society and the economy.

References:

  1. https://debtinflation.com/how-does-inflation-impact-purchasing-power/
  2. https://www.acorns.com/money-basics/the-economy/what-is-purchasing-power-and-how-does-inflation-affect-it-/

Immunity Boosting Foods

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Food is medicine.

Food, along with exercise and adequate sleep, are done of the most powerful tools you have to help prevent disease and improve your overall health. And, a healthy body and mind begins with a healthy immune system, writes Angie Ferguson, an exercise physiologist and Tony Robbins Results Coach.

In addition to developing healthy lifestyle habits, the food you eat can help to reduce the risk and severity of infections, cardiovascular disease and diabetes. In short, healthy, nutrient dense “food can be medicine”.

When trying to stay healthy, it’s best to cut back on foods that lead to inflammation (processed meats and foods, saturated fats, refined carbs, sugary foods and beverages) and instead fuel yourself with foods full on nutrients, antioxidants, vitamins and minerals.

  • Citrus fruits – vitamin C is an antioxidant
  • Garlic – contains the antioxidant allicin, which has antibacterial properties and strengthens your immune system
  • Ginger – has anti-inflammatory, antioxidant and antimicrobial properties
  • Mushrooms – packed with vitamins and minerals and bio-active compounds called beta-glucans known to boost immunity
  • Green leafy vegetables – provide anti-inflammatory antioxidants, vitamins and minerals
  • Berries – rich in vitamin C and anthocyanins, which possess antioxidants agents, anti-inflammatory properties and support a healthy cardiovascular system
  • Turmeric – contains cur cumin which is an anti-inflammatory, antioxidant, anti-bacterial and detoxifying ingredient that’s amazing for digestive health.
  • Sweet potatoes and carrots – excellent sources of beta carotene which can reduce inflammation and boost immune function by increasing disease fighting cells in the body.
  • Olives – this fruit is an antioxidant powerhouses, which reduces inflammation and fight bad bacteria. Studies have shown that eating olives can raise levels of glutathione, a powerful antioxidant which acts as a defense against bacteria that cause airway and stomach infections. Olives possess a monounsaturated fat called oleic acid, which prevents heart diseases like atherosclerosis, heart attacks, plaque build-up, and strokes. The oil of olives is where this oleic acid is located; it can lower blood pressure and cholesterol, which reduces the chances of cardiovascular complications and general stress on the system.

Enjoy these nutrients dense foods in their different forms and see how healthy they can make you feel!

Reference:

  1. Ferguson, Angie, “First Line of Defense”, Florida Times-Union, , June 7, 2022, pg 1D.
  2. https://www.organicfacts.net/olives.html

Angie Ferguson is an exercise physiologist and Tony Robbins Results Coach.

Your Health is Everything

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Health is the greatest wealth!

People who’ve been sick and infirm understand that your health is everything and without health, nothing else like wealth and financial freedom matters.

You may wonder what being in good working order that has to do with wealth. Well, for starters, you can’t build wealth if you’re falling apart at the seams.

How bitter would it be to discover that your physical health is in tatters by the time you’ve achieved your wealth building and financial freedom goals.

So keep it simple: A healthy diet, regular exercise, sufficient sleep and regular doctor and dentist visits for checkups and at the very first sign of a problem.

Commit to a life of slow and steady wealth building, not the hope of a sudden windfall.

You might need to institute some austerity measures at first, which sounds neither fun nor glamorous. But some of the wealthiest people in the world have accumulated wealth without flaunting it.

Like a healthy diet, wealth creation must become an integrated part of your lifestyle. You’ll want to invest and build wealth for the long term. This doesn’t imply that you make an investment and hope it’ll grow miraculously on its own. Like a home, car, your kids or pets, you need to care for your investments, measure them, research them, feed them and adjust them.

Physical health is built through the long-term compounding of daily actions:

  • Exercise—daily movement
  • Nutrition—mostly real and natural foods
  • Sleep—good sleep habits

It’s never too late to start building—or restoring—your physical wealth.

Healths is wealth!

References:

  1. https://bestlifeonline.com/best-wealth-building-tips-ever/

“The trouble with most people is that they quit before they start.” ~ Thomas Edison

The Power of Dividends

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Dividends account for about 40% of total stock market return over time

Value of dividends

There are 2 ways to make money in the stock market: capital appreciation and dividends.

Capital appreciation—an increase in a stock’s price—gets most of the attention, but dividends can be surprisingly powerful.

Fidelity Investments’ research finds that dividend payments have accounted for approximately 40% of the overall stock market’s return since 1930.

What’s more, dividends can help prop up returns when stock prices struggle. For example, stock prices in the S&P 500 fell during the 1930s and 2000s, but dividends almost completely offset the decline. In the 1940s and 1970s, when inflation surged, dividends accounted for 65% and 71% of the S&P 500’s return, respectively.

“From a multi-asset income perspective, I am always seeking investments that pay a high enough level of current income to help cushion the blow during down markets. Conversely, in rising markets, this income component contributes to the overall total return of the investment. In this regard, companies that pay a sustainable and growing dividend have the potential to grow their income to keep up with inflation,” says Adam Kramer, portfolio manager for the Fidelity Multi-Asset Income Fund

References:

  1. https://www.fidelity.com/learning-center/trading-investing/inflation-and-dividend-stocks