Three Reasons Why Inflation Is Rising. Two Of Them Aren’t Going Away

 Three Reasons Why Inflation Is Rising. Two Of Them Aren’t Going Away

Notes From the Field By Simon Black  May 5, 2021  Cancun, Mexico

A remarkable thing happened yesterday that tells you everything you need to know about inflation. In the morning, US Treasury Secretary Janet Yellen stated bluntly that “interest rates will have to rise somewhat to make sure that our economy doesn’t overheat. . .”

For economists, an ‘overheating economy’ means inflation. So she was essentially saying that rates would have to rise to prevent inflation. Yet hours later, she completely reversed herself, saying that interest rates would NOT have to rise because “I don’t think there’s going to be an inflationary problem.”

You don’t need a PhD in economics to smell the BS.

Inflation is not some potential issue down the road. Inflation is already here.

As Warren Buffett told investors only days ago, “We’re seeing very substantial inflation.”

Plenty of companies have already announced price increases to their consumers--

Proctor & Gamble, for instance, announced price hikes across the board on just about everything from diapers to beauty creams.

Hershey’s announced in February that it would be raising prices.

Food giant General Mills complained in February about a “higher inflationary environment” and “input cost pressures” due to rising commodity prices.

Clorox, Shake Shack, Kimberly-Clark, Whirlpool, Hormel, and Woka Kola Coca Cola are among the many companies that have also announced price increases.

And according to Bank of America Global Research, the number of mentions of “inflation” on corporate earnings calls has increased 800% compared to last year.

Inflation is clearly a concern of the largest companies in the world. Investors are worried. Consumers can see it.

And in a rare moment of truth yesterday morning, a politician almost admitted that she was concerned about inflation too.

This is not some wild conspiracy. Inflation is real. It’s happening. Let’s look at three key drivers:

1) Capacity Constraints

Last year the entire world shut down. Businesses and factories everywhere closed, and plenty of companies went out of business.

Many companies who survived took radical steps to conserve cash-- laying off workers, liquidating inventory, and selling equipment.

One critical consequence was that the amount of capacity in the system was greatly reduced.

Here’s an example: I’ve been in Cancun for several weeks, and as you know, this place is a major tourist destination.

Last year when tourism dried up, plenty of companies went out of business. Rental car companies, for example, had practically zero customers. Many went bankrupt. Others survived by selling off most of their vehicles, believing that it would be years before the tourists returned.

But a year later, the tourists are back.

Problem is, there are now very few cars to rent in Cancun, because rental agencies either went bankrupt or liquidated their inventories.

As a result, car rental prices in Cancun have surged; supply is scarce, yet demand is back to normal.

We’re seeing similar effects across the economy. Capacity is limited because of the extreme measures that businesses took last year. And they can’t simply flip a switch and bring capacity back to normal. It takes time.

They’ll have to invest in inventory, hire more staff, etc. Eventually, these supply/demand imbalances will stabilize. But for the foreseeable future, it’s driving prices higher.

This is the type of inflation that politicians and central bankers have been calling “transitory”. In other words, it’s temporary pressure that should subside in the future.

2) COVID lunacy

Hardly anyone talks about this... but just think about all the idiotic rules that people have to follow now.

If you own a retail store in a shopping mall, for example, you have to pay employees to stand at the door ready to hose down every customer who walks inside with hand sanitizer.

And imagine how much money businesses are spending now on PPE… masks, gloves, hand sanitizer, etc. Or companies (airlines, hotels, etc) that now employ legions of workers to chemically scrub every nook and cranny of the premises.

All of this costs money, and the extra costs eventually get passed on to consumers. Most likely, these measures are not going away… which means that COVID is extremely inflationary.

3) Trillions in money printing

This is the big one. The US federal government is hoping to spend a whopping $11 TRILLION this year, between the regular budget, COVID stimulus already passed, and all the new legislation they’re proposing.

And it’s only May.

Obviously Uncle Sam doesn’t have the money. So they have to borrow it.

Their chief remaining lender these days is the Federal Reserve, which first has to ‘print’ money before loaning it to the government.

(The actual process is more modern and complex, but that’s basically what happens in a nutshell.)

The more money the government spends, the more the Fed prints (roughly $4 trillion last year). And as this freshly created money makes its way through the economy, it typically ends up in financial markets, driving asset prices higher.

It’s not a coincidence that the Fed has created record sums of money, and the stock market is simultaneously at a record high. Ditto for real estate, cryptocurrencies, collectibles, etc.

Many commodities are also at record highs. Lumber prices have never been higher. Corn is near its all-time high. Oil prices surged from MINUS $40/barrel last year to $70 today-- a difference of $110.

Higher commodity prices eventually lead to higher consumer prices.

High lumber prices, for example, mean that housing costs increase. Higher corn prices mean higher food prices. Higher fuel prices mean higher transport costs, which increases the price of almost everything.

So as long as the Federal Reserve is printing money and holding rates down to historic lows, these prices will likely keep rising.

Given the US government’s insatiable appetite to borrow money from the Fed, this inflation pressure is NOT going away.

And after what we saw yesterday, it’s clear that the government’s approach will be to ignore or dismiss inflation risks.

To your freedom and prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/three-reasons-why-inflation-is-rising-two-of-them-arent-going-away-32121/

Why Financial Strain Is So Harmful to Your Health

Why Financial Strain Is So Harmful to Your Health

A conversation with Dr. Michael Stein on the toll simply not having enough money takes on your body.

BY DREW MILLARD   March 29, 2021

A 100 bill's face is covered with a mask as a doctor would wear.  Anton Petrus

In an address to the nation earlier this month, President Joe Biden marked the one-year anniversary of the coronavirus pandemic by announcing that all American adults would be eligible for the COVID vaccine by May 1. If we all get vaccinated, he said, “there’s a good chance you, your families, and friends will be able to get together” on the Fourth of July “and have a cookout.” The implication was that we will finally have passed the apex of the virus, and that, slowly but surely, things will once again begin to feel normal again.

Except that’s not how things work, really. We have spent the past year in the throes of a public health crisis which quickly brought with it an economic one to match. Nearly a year after the initial shock of 22 million Americans losing their jobs at the onset of the pandemic, 18.7 million people are still filing for unemployment. This is to say nothing of those who have been without a job for so long that they are no longer technically counted as members of the workforce. While plenty of people are going to emerge from the pandemic in better financial shape than ever, many others have felt the sting of financial precarity in ways that affect their ability to pay for their housing or food. We will be dealing with the economic consequences of the pandemic for years.

To Dr. Michael Stein, a Boston University professor and chair of the school’s Health Law, Policy, and Management department—and who also works as a primary care doctor to low-income patients—America’s issues with physical and financial health are inextricable. “Perhaps poverty should be approached from a public health perspective, as the moral perspective alone has failed us,” he writes in the introduction of his recent book Broke:

Patients Talk about Money with Their Doctor. On the surface, Broke is exactly what it sounds like it would be—a book full of anecdotes, narrated by Stein but told mostly without commentary, about how his patients deal with money. But the format is just a narrative device, really, meant to illustrate Stein’s larger point, which is that when people are poor, their lives are hard in ways that are always unique and frequently unmanageable—to the point where day-to-day survival must take precedent over their long-term goals. It’s his professional obligation, he believes, to talk to his patients about money, help them deal with their financial problems as best he can. “Feeling a bit more in control of their finances, or less out of control," he writes, "allows patients the mental space to make clearer decisions, health decisions included."

Stein says he decided to start the book when a patient told him, “I’m so broke I have to rinse off paper plates.” The image is indelible, and in Broke it is the first thing we hear from his patients, who throughout the pages tell stories of hustling black-market watches to make ends meet, altercations with rapacious landlords, being swindled out of money by their loved ones, and falling through bureaucratic holes in America’s ragged, underfunded, and uncaring social safety net. Together, the vignettes of Broke describe a dizzying array of symptoms to the same sickness whose cure, however simple, is nevertheless out of reach. With more Americans hanging on by a thread than ever before, this is a book worth reading.

To continue reading, please go to the original article here:

https://www.gq.com/story/financial-strain-is-so-harmful-to-your-health-michael-stein

The 7 Money Personality Types

The 7 Money Personality Types, says psychology expert—how to tell which one you are (and the pitfalls of each)

Published Wed, Apr 28 2021 12:51 PM EDT  Ken Honda, Contributor

We often stress about the importance of financial literacy, such as gaining a strong understanding of how money works and having the resources to make informed decisions.  But when it comes to establishing financial health, one thing most people fail to consider is their money personality type — or their approach and emotional responses to money.

We each have our own beliefs and emotions about money, and they are mostly shaped by our individual life experiences (e.g., passed down from our parents or influenced by our current situations).

In my 10-plus years of researching the psychology of money and happiness, I’ve found that there are seven distinct money personality types. Typically, we fall into a combination of many types, and not just one.

7 Money Personality Types

Ken Honda, author of “Happy Money”

Identifying which types you fall under, and understanding the pitfalls of each, can significantly improve your relationship with money. It can help you do things like spend less on impulse purchases, be better about budgeting, invest wisely and ensure a nice nest egg for retirement.

1. The Compulsive Saver

Signs you might be a Compulsive Saver:

You put away money endlessly, sometimes with no actual end goal in mind.

You believe saving money is the only way to feel more secure in life.

You’re very frugal. (Friends will often come to you for advice on which phone company is the cheapest, which point cards are worth it, or when to buy plane tickets at the lowest price.)

Pitfalls: Some Compulsive Savers are so afraid of losing money that they go their entire lives without spending any of what they worked so hard to save. For example, they might choose to skip out on hobbies or activities that could bring them happiness and purpose.

Money advice: It’s all about moderation; learn to find a balance between saving money and enjoying life. Think about where you see yourself in the future and how you can use your savings to get there.

2. The Compulsive Spender

To continue reading, please go to the original article here:

https://www.cnbc.com/2021/04/28/7-money-personality-types-and-the-pitfalls-of-each.html

Don’t Ever Give Up: Surviving 10 Years Of Prison

Don’t Ever Give Up: Surviving 10 Years Of Prison

Updated: 12/04/2019 by Financial Samurai

When I was in high school, I got in a lot of trouble. As a result, I often wondered if anybody would ever give me a chance at life. Because I ended up receiving multiple chances despite my screw ups, I’ve learned to be more thankful and not take things for granted. I also developed an affinity for people who also had a rough time growing up, but found a way to make things work.

The following is a guest post from Bill, a man who spent 10 years in prison before getting on the path to financial freedom. Hopefully his post will give you the motivation to stick with things when times are tough and not lose faith that everything will turn out OK in the end.

I walked into my jail cell. I heard the door close behind me. I had just been sentenced to ten years in prison. It was my first time ever in trouble and I was in shock. I didn’t know what to think. The emotions came in horrible waves. I felt an overwhelming sense of relief at first. The night before, my attorney had braced me with the reality that the negotiations with the district attorney had not gone well, and that the state was going to be recommending 20 years of incarceration.

In court that day, the judged looked down at me in handcuffs and I heard him read his sentence in shock: “The state sentences you to ten years in prison. Due to sentencing guidelines, you will have no chance at early release or parole. Good luck to you.”

That night the harsh reality of being sentenced to 10 years in prison settled in my mind like slow mental torture. How was I going to survive it? How could I hold onto my sanity with such a horrible future ahead of me? I reflected how I found myself in this position. I had first used drugs when I was 14, smoked a joint, and liked it. For years, drugs and parties provided an escape from my otherwise normal life, and drugs provided me a fantasy of happiness I thought was real. But that illusion was shattered after a friend left my college apartment one night after partying, overdosed, and died in his sleep.

The next morning, I was arrested and charged with “reckless homicide by delivery of a controlled substance.” I had provided some of the drugs that contributed to his death that night, and that’s all the state had to prove to convict me of the charge.

I had gotten high hundreds, or thousands of times, but I never meant to harm anyone. It was a terrible accident. Everyone involved in the tragedy lost. I learned that when you play with fire, you don’t get to decide how badly you get burned.

Life as I knew it was over. No one was going to fight for a comeback for me.  My life was now a mission to prove that I was a better human being than the one they threw away for a decade.

The Awakening: Step 1

The morning following my sentencing hearing, I was driven to prison in a van filled with 5-10 other inmates I’d never seen or met.  We rolled across the highway in blaze orange jumpsuits, and chains wrapped around our wrists, ankles, and waists. When we arrived at the prison intake dock, we were given a badge displaying our prison inmate number. 

To continue reading, please go to the original article here:

https://www.financialsamurai.com/dont-ever-give-up-surviving-10-years-of-prison/

Be Prepared For The Next Black Swan

Be Prepared For The Next Black Swan

By Larry Swedroe

 “Measures of uncertainty that are based on the bell curve simply disregard the possibility, and the impact, of sharp jumps… Using them is like focusing on the grass and missing out on the (gigantic) trees. Although unpredictable large deviations are rare, they cannot be dismissed as outliers because, cumulatively, their impact is so dramatic.”

— Nassim Taleb, The Black Swan: The Impact of the Highly Improbable

Over the course of the first two decades of the 21st century, equity markets faced three “black swan” events: the attacks of September 11, 2001, the Global Financial Crisis that began in late 2007 and the COVID-19 pandemic. Each resulted in steep falls in equity prices. The term “black swan” was a common expression in 16th-century London that described impossibility. It derived from the old-world presumption that all swans must be white—because all historical records of swans reported that they had white feathers.

Thus, a black swan was something that was impossible, or nearly impossible, and could not exist. After the discovery of black swans in Western Australia in 1697 by a Dutch expedition led by explorer Willem de Vlamingh on the Swan River, the term metamorphosed to connote that a perceived impossibility may later be found to exist.

With the publication of Nassim Nicholas Taleb’s 2001 book, Fooled by Randomness, “black swan” became part of the investment vernacular — virtually synonymous with the term “fat tail”. In terms of investing, fat tails are distributions in which very low and high values are more frequent than a normal distribution predicts.

In a normal distribution, the tails to the extreme left and extreme right of the mean become smaller, ultimately reaching zero occurrences. However, the historical evidence on stock returns is that they demonstrate occurrences of low and high values that are far greater than theoretically expected by a normal distribution.

Thus, an understanding of the risk of fat tails is an important part of developing an appropriate asset allocation and investment plan. Unfortunately, many investors fail to account for the risk of fat tails. Let’s look at some evidence on their existence.

Javier Estrada, author of the 2007 study Black Swans and Market Timing: How Not To Generate Alpha, examined the returns of 15 stock markets and more than 160,000 daily returns. He sought to determine the likelihood that investors can successfully predict the best days to be in and out of the market. Following is a summary of its findings:

1. Stock Returns Are Not Normally Distributed

Black swans appear with far greater frequency than predicted by normal distributions. For example, for the Dow Jones Industrial Average, 29,190 trading days (107 years) produced a daily mean return of 0.02 percent and a standard deviation of 1.07 percent. Under the assumption of normality, 39 days would produce returns above 3.22 percent, and 39 would produce returns below -3.17 percent.

However, there were six times the number of returns outside that range—253 daily returns below -3.17 percent and 208 above 3.22 percent. Note that the maximum and minimum daily returns were 15.34 percent and -22.61 percent. The returns exhibited a high degree of negative skewness (the left tail of the distribution curve is larger) and excess kurtosis (fat tails)—clear departures from normality.

To continue reading, please go to the original article here:

https://www.evidenceinvestor.com/be-prepared-for-the-next-black-swan/

How People Get Rich Now

How People Get Rich Now

April 2021

Every year since 1982, Forbes magazine has published a list of the richest Americans. If we compare the 100 richest people in 1982 to the 100 richest in 2020, we notice some big differences.  In 1982 the most common source of wealth was inheritance. Of the 100 richest people, 60 inherited from an ancestor. There were 10 du Pont heirs alone. By 2020 the number of heirs had been cut in half, accounting for only 27 of the biggest 100 fortunes.

Why would the percentage of heirs decrease? Not because inheritance taxes increased. In fact, they decreased significantly during this period. The reason the percentage of heirs has decreased is not that fewer people are inheriting great fortunes, but that more people are making them.

How are people making these new fortunes? Roughly 3/4 by starting companies and 1/4 by investing. Of the 73 new fortunes in 2020, 56 derive from founders' or early employees' equity (52 founders, 2 early employees, and 2 wives of founders), and 17 from managing investment funds.

There were no fund managers among the 100 richest Americans in 1982. Hedge funds and private equity firms existed in 1982, but none of their founders were rich enough yet to make it into the top 100. Two things changed: fund managers discovered new ways to generate high returns, and more investors were willing to trust them with their money. [1]

But the main source of new fortunes now is starting companies, and when you look at the data, you see big changes there too. People get richer from starting companies now than they did in 1982, because the companies do different things.

In 1982, there were two dominant sources of new wealth: oil and real estate. Of the 40 new fortunes in 1982, at least 24 were due primarily to oil or real estate. Now only a small number are: of the 73 new fortunes in 2020, 4 were due to real estate and only 2 to oil.

By 2020 the biggest source of new wealth was what are sometimes called "tech" companies. Of the 73 new fortunes, about 30 derive from such companies. These are particularly common among the richest of the rich: 8 of the top 10 fortunes in 2020 were new fortunes of this type.

Arguably it's slightly misleading to treat tech as a category. Isn't Amazon really a retailer, and Tesla a car maker? Yes and no. Maybe in 50 years, when what we call tech is taken for granted, it won't seem right to put these two businesses in the same category. But at the moment at least, there is definitely something they share in common that distinguishes them. What retailer starts AWS? What car maker is run by someone who also has a rocket company?

To continue reading, please go to the original article here:

http://paulgraham.com/richnow.html

Feel Better

Feel Better

Jonathan Clements  Humble Dollar|  April 10, 2021

WARREN BUFFETT doesn’t have the best investment record over the past three decades. That accolade apparently belongs to Jim Simons. Buffett also isn’t the world’s richest person. In fact, he hasn’t held that title for the past dozen years and currently ranks No. 6, with barely half the wealth of today’s richest person, Jeff Bezos.  I doubt Buffett feels bad about this. Is your surname neither Simons nor Bezos? I don’t think you should feel bad, either.

Money can be maddening—if we let it. There will almost always be some parts of our portfolio whose performance disappoints. There will always be some folks who are wealthier. But whether it’s our investment performance or our overall net worth, we shouldn’t let ourselves be bothered by our relative standing. Why not? Here are five reasons.

1. We likely made more good decisions than bad. Just 52.6% of American households own stocks, according to the Federal Reserve. If you count yourself among that group, your investment performance has almost certainly been better than that of the stock-less 47.4%.

What’s your net worth—the value of your assets, including your home, minus all debt? If it’s greater than $122,000, you’re wealthier than half of all U.S. households. Yes, all of us throw the occasional pity-party for ourselves. But the fact is, if you’re reading this article, you are likely in far better financial shape than most of your fellow citizens.

2. What’s valued economically changes. Those who have been paying attention will remember me telling this story before: When my father graduated from Cambridge University in 1956, he took the highest-paying job on offer, which was £800 a year working as a reporter for the Financial Times. That was £100 more than he could have made as a management trainee for Royal Dutch Shell, which was the next highest-paying job he was offered.

By contrast, when I graduated Cambridge in 1985, my starting salary as a junior reporter was £6,500, less than half what my university friends earned by joining financial firms in the City of London. For today’s would-be journalists, the wage disparity is likely to be even greater. My point: The price that the economy puts on particular skills changes over time.

If we have a set of talents that aren’t particularly well-rewarded by today’s economy, we could try a different career and perhaps that’ll prove necessary. Still, pursuing a high-paying career for which we’re ill-suited is likely to be a miserable endeavor—and probably an unsuccessful one.

3. Don’t overlook the role of luck. With good savings habits and a little financial savvy, I think almost anybody can amass at least a modest nest egg. But we all know people who have done far better. Oftentimes, they appear to have lucked out, whether it’s because they have wealthy parents, a high-earning spouse, a single lucky stock pick, or a boss who takes a shine to them and pulls them up the corporate ladder.

To continue reading, please go to the original article here:

https://humbledollar.com/2021/04/feel-better/

10 Bad Money Habits You Learned From Your Parents and Need To Break Now

10 Bad Money Habits You Learned From Your Parents and Need To Break Now

Cynthia Measom   Tue, April 27, 2021,

An “Invest in You” savings survey by CNBC and Acorns found that some Americans are harboring what could be viewed as bad money habits. For example, 27% of Americans rarely discuss their personal finances with family. And 75% of Americans manage their own money, whereas only 17% hire a financial advisor.  So if these Americans aren’t forming their money habits based on help from a financial advisor, who is their financial role model? According to the survey, 37% of respondents said it was their parent.

Does that mean that the financial habits your parents have are bad? Maybe so and maybe no. It depends on what those financial habits are.  Some bad money habits are glaringly obvious. You know, like paying only the minimum on a maxed-out credit card each month or always spending extra money on wasteful items. But some aren’t so obvious — especially if you’re following the example set by a parent who serves as your financial role model.

To find out where you stand, check out these 10 bad money habits people learn from their parents, and see if any of them ring true for you.

Focus On Saving Your Money

Kristin Burton, founder of Strive Coaching, believes that one bad money habit learned from parents is to save your money.

“At first glance, this looks like great advice, but if you dig deeper it is missing a fundamental piece of wealth building,” Burton said. “Saving money should be reserved for an emergency fund (three to six months of monthly expenses set aside for unforeseen events) and “sinking funds” (money set aside for large, planned purchases). Aside from that, you can never save your way to wealth! You have to be investing. All money that is not specifically for an emergency fund or sinking fund should be invested, not saved.”

Max Fund Your 401(k) Instead of Paying Off Debt

Chuck Czajka, founder of Macro Money Concepts, said that max funding your 401(k) when you have credit card debt or student loans is one on a long list of bad money habits taught by parents.

“The 401(k) earns interest, but the whole account is taxable when you take the money out,” said Czajka. “So, you’re losing interest to credit card debt and student loans, and going to continue losing in the future to taxation on your 401(k) or IRA. It’s better to pay off that debt first, then save for retirement.”

Be Ashamed of Money Mistakes

Gretchen Caldwell, CFP and president of Pure Planning, believes that one bad money habit parents teach is to be ashamed of money mistakes.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/10-bad-money-habits-learned-110038180.html

Confessions of an Overnight Millionaire

Confessions of an Overnight Millionaire “I constantly ask myself, Do I deserve this money?”

By Anonymous

What Is the Meaning of All This Money?

A series about the ever-more-chaotic future of finance.

Since July 2020, nearly 750 companies have gone public, raising more than $200 billion and minting thousands of new paper millionaires. Amid the frenzy, one millennial tech worker on the verge of unexpected wealth shared what was going through her mind.

When I joined my company, I theoretically knew there were only two exit paths — an acquisition or an IPO. And a third, where the company implodes, like WeWork, but you’re hoping for one of the first two. I didn’t really think about it when I signed on. I thought that I’d make a little bit from an IPO, maybe $200,000. You don’t think much about $200,000; it’s not life-changing.

After I joined, people would say things like, “I think I’ll retire off this money.” I thought they were delusional. Then, last year, a friend called and said, “Are you ready to be a millionaire? Check the news.” That’s how I learned my company was IPO-ing. I had no idea. I would be making north of $6 million.

It’s not purely a celebratory time. It’s a stressful time, too, because of the constant decisions. The amount of money is so large that if I make a 5 percent fuckup, that’s hundreds of thousands of dollars.

I’ve been interviewing wealth managers, and honestly I couldn’t be less impressed. If I were a wealth manager, I’m exactly the client I would want. I’m young, and I could be a client for 50 years. So these people should be thirsty, but they’re not. The wealth-management firms are old school — I don’t think they’re designed for people like me.

I was video-chatting with one guy, and he didn’t know how to do a screen-share properly, so he was showing his entire screen, including windows that I probably shouldn’t have seen. And I was like, I’m going to trust you to oversee my millions? I was asking another, “How do you evaluate a tech stock?” You can’t just look at the financials — you have to look at the market, how the technology is unique. There’s a lot of industry understanding they lack. They’re using principles from the 1990s.

There are things that rich people do, and hiring someone to manage your money is one of them. I’m wondering, Is this something rich people do because other rich people are doing it? Is this industry a farce?

To continue reading, please go to the original article here:

https://archive.is/P5S5A#selection-1209.0-1521.628    

Are You Guilty of This Financial (and Lifestyle) No-No?

Are You Guilty of This Financial (and Lifestyle) No-No?

By Alexa Mason

The other day, one of my good friends was telling me about his money situation. To put it simply, he was waiting on his next paycheck to be able to pay for his son’s baseball pictures.  I felt kind of bad for him, and my initial reaction was to start dishing out financial advice. You know: Tell him how he can stop living paycheck to paycheck, and that kind of thing.

But I bit my tongue.

My friend wasn’t looking for my sympathy or my advice. In fact, he’s one of the most frugal people I know. He already knows what to do. What he needed was somebody who would just listen; listen without judging; listen without telling him how he should be living his life.

While driving home, I was extremely grateful I’d kept my mouth shut and been a good friend. I haven’t always done this, though, so I started to think about how often I dish out and receive unsolicited advice.

Are you guilty of the same thing?

When You Shouldn’t Offer Financial Advice

In the case of my friend, he works 40+ hours per week for $10/ hour and he is raising two kids. He’s also frugal beyond frugal. In the wintertime, he blocks off heat to all but a couple of rooms to save on electricity. And when his kids aren’t home, his house feels like a freezer. There may be some more places he can find some extra savings, but in his case, it’s mainly an income problem.

He knows he needs to earn more money, which is why he picks up overtime whenever possible. He is also actively looking for another job. But for a sizable chunk of the population, the pandemic hasn’t treated their job prospects very well. The economy is picking up and more companies will hopefully continue to keep hiring. The stimulus checks also helped a ton, but he has a long journey ahead of him and he knows it. He doesn’t need my advice at all. He needs my support, and I’m so glad I was able to recognize that.

To continue reading, please go to the original article here:

https://moneyning.com/better-yourself/are-you-guilty-of-this-financial-and-lifestyle-no-no/

This Is Not The Time To Procrastinate

 This Is Not The Time To Procrastinate

Notes From the Field By Simon Black  April 27, 2021  Cancun, Mexico

In early 387 AD in the eastern Roman city of Antioch, a local bureaucrat stood outside of the city council chambers to read a new decree that had just arrived from Emperor Theodosius I.  As the anxious crowd gathered, the bureaucrat began reading aloud--  Just as the crowd had feared, the new decree was a series of debilitating new taxes, ranging from heavy taxation on commercial activities, to mandatory donations to the Emperor himself.

The crowd became furious.

Antioch had already suffered immeasurably. The imperial government had depleted the city’s grain, killed off a large number of the youth from endless war, and already exacted heavy tolls and taxation.  These new taxes were too much to bear. And a riot ensued almost immediately.   People all over Antioch (in modern day Turkey) poured into the streets ripping down monuments of the imperial family, burned their portraits, and destroyed public buildings.

Naturally in our modern times we would call such activities “mostly peaceful”. But back then it constituted treason, and the rioters were ultimately put to death.

But the tax protests didn’t stop.

Throughout most of the next century, in fact, the Western Roman Empire was in a near-constant state of civil war and insurrection, quite often over the imperial government’s exorbitantly high tax rates.

Farmers, who were among the most heavily taxed citizens, abandoned their lands and sought refuge with northern barbarian tribes. Even soldiers and Roman noblemen fled the empire to escape the totalitarian regime, extreme corruption, and usurious tax rates.

Salvianus, a contemporary writer and historian at the time, wrote

“the name of Roman citizen, once not only much valued but dearly bought, is now voluntarily repudiated and shunned, and is thought not merely valueless, but even almost abhorrent.”

But taxes kept rising, and compliance became more of a hassle. For example, Valentinian III decreed that all transactions be conducted in the presence of a tax collector. This further hampered commerce, since economic activity had to be planned around the bureaucrats’ schedules.

In his book Decadent Societies, historian Robert Adams wrote, “by the fifth century, men were ready to abandon civilization itself in order to escape the fearful load of taxes.”

Today we are entering a similar era of extreme taxation that marked the morally and financially bankrupt late-stage Roman Empire.

At the state level, places like California have proposed all sorts of idiotic ideas, from hiking the already-high individual and corporate rates, to a statewide wealth tax, to even an ‘expatriation tax’ for anyone who leaves California.

The State of New Jersey is chasing away its highest income earners by raising taxes from 8.97% to 10.75%, and dropping the income threshold from $5 million down to $1 million.

What a surprise-- wealthy people and businesses are leaving California and New Jersey!

Then there are all the new ideas for federal tax policy, many of which are colossally stupid.

This week the Biden administration plans to unveil a proposal to tax up to 43.4% of capital gains, even though the history of taxation in the United States shows that capital gains tax increases actually result in LOWER tax revenue.

Plus many politicians still want to tax ‘unrealized’ capital gains, i.e. you have to pay tax on an asset that has appreciated in value BEFORE you sell it. Genius.

In addition, they’re working to not only raise corporate taxes, but to push other countries around the world to raise their corporate tax rates as well.

And last month I outlined their new proposal to raise estate taxes, AKA the death tax.

The legislation wouldn’t just raise the percentage of an estate the government takes. It would also lower the exemption to just $1 million, which is sure to affect small family business.

With even just a few of these changes taking place, many people will be paying upwards of 50% to 60% between state, local, and federal taxes.

And let’s be honest-- the decisions about how they spend it are appalling.

These are the same politicians who spend billions of dollars to build a website that doesn’t work… or who pay people to stay home and NOT work to save everyone from a virus with a 99% survival rate.

As I’ve been saying for some time, they are coming for your money, one way or another. Desperate, bankrupt governments always do.

But the good news is that this is not the 5th century. No one needs to “abandon civilization itself in order to escape the fearful load of taxes.”

There are still plenty of legal ways to pay a very low tax burden. With proper planning, you don’t have to be the Bolsheviks’ piggy bank.

Puerto Rico still offers extraordinary tax incentives-- and not just for US citizens. Business owners from around the world can set up a company that’s subject to a mere 4% corporate tax rate, with no further dividend or withholding tax.

And US citizens are able to enjoy tax-free capital gains on assets like stocks, bonds, and cryptocurrency.

If Puerto Rico isn’t your cup of tea, there are still plenty of ways to legally reduce what you owe; you can set up a more robust retirement plan and maximize contributions, for example, potentially taking tens of thousands of dollars per year off the table.

The Foreign Earned Income Exclusion allows US taxpayers living abroad to earn $108,700 this year, tax free, and married couples $217,400, plus receive extensive tax benefits on their housing.

People may also think about maximizing their lifetime gift tax allowances, or any number of more structured options like captive insurance or foreign pension plans.

Yes, it can be scary to constantly watch crazed politicians screaming about how they want to take your money.

But there are plenty of solutions if you have the right information and the willingness to take action.

The important thing to recognize is that this is not the time to procrastinate. If the last year has taught us anything, it’s that everything can change VERY quickly.

To your freedom and prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/international-diversification-strategies/this-is-not-the-time-to-procrastinate-32041/