Why are We Seeing High Inflation? -- The Block is Hot

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments) HOW TO SEARCH MY BLOG:	Get Updates to Your Email When I Create A New Post:

Inflation is Coming, No Inflation is Here:

I have never really looked back over time to understand when and why I post. I have a feeling it probably aligns over time with when our economy is at its highest and lowest. I've come to conclude that if I put my thoughts in writing and it has a historical time stamp on it, then eventually over time I can change minds (by looking at my past thoughts). I have molded myself over time to being a contrarian...and this means I appreciate going against the grain. I don't try to follow the crowd. The crowd is like a herd and in fact where and when I see a stampede I run away. 

I believe this is how I see risk, protect myself from negative risk, and then eventually use leverage to capitalize on risk. I take these life lessons and simply apply them to the stock market. I try to create habits and repeatable practices that can be applied to the game of life and carry these concepts over to the stock market game. Notice, I purposefully called them a game. There is an ebb and flow to everything in my opinion and you have to know how the game is played. I take time to find, learn, and observe this lifecycle in everything. Whether it's the game of life, the stock market game, sports, or our economy you will notice they all have cycles. Why this repeats OR cycles like a clock is unbeknownst to me, but I'd be a liar in telling you that understanding this concept has made me successful.

I clearly am a broken record because over the years, I've posted about how the economy roughly goes up and down in cycles. From observing the stock market, I can tell you LIKE CLOCKWORK, we roughly have periods of boom and busts that cycle OR repeat every 8-10 years. Read my blog and I think I've thoughtfully documented the following:

• 1987 - Savings and Loan Crisis | Black Monday Crisis - The stock market (via the Dow) was down 22% in one day
• 1995 - 2000 Dot Com Stock Market Soars - It gave us Amazon, Semiconductor Stocks
• 2002 - Dot Com Bubble Busts - Every business added a Dot Com and many did not survive
• 2004 - 2007 - The Hot Housing Markets Soars - Homes prices and buying skyrocket, and no interest loans become the norm
• 2008 - Financial Crisis - We lose Lehman Brothers and financial markets are in turmoil; I used this downturn to finally purchase my first house in 2010 thanks to the First Time Homebuyers credit led by the Obama administration; I also started buy stocks again when the Federal Reserve started lowering interest rates
• 2014 -18 - I wrote in 2014, that the Dow should take a bow. It reached all-time highs. I was starting to plan for a slowdown but then President Trump surprised me and many in 2016 by vocally telling the Federal Reserve NOT to raise interest rates (which slows the economy down) and he doubled down on cutting business taxes which created a Trump era boom after we already had a Obama era boom. Remember unemployment and minority unemployment were at record lows during the Obama presidency and then the set new record lows during the Trump presidency
• 2019 - COVID-19 Crisis led a to a health crisis, stock market meltdown and the entire globe was under siege
• 2020 - COVID Stimulus + Payment Protection Program + Child Tax Credits - because the Federal Reserve could not lower interest rates as they were at 0%, Congress stepped in literally made it rain. 

If you look at this historical backdrop that I documented, the Federal Reserve talked about raising interest rates in 2016 as the economy was doing great 8 years after the financial crisis. But when then President Trump vocally broke the separation of powers and vocally told the Federal Reserve in as many words to not raise interest rates...I believe it led to 2 things:

1) Our economy never really cooled down from 8 years of doing well and started to get hot. I remember in my 2017-18 search for my second home getting outbid and racing to find the next house. Only come to find out this would get even worse in 2020.

2) When COVID-19 hit and shocked our economy we could not lower interest rates. By creating all those stimulus programs and most being for businesses who did not have to pay them back, the US economy was flooded with cash. This is equivalent to pouring gasoline on an already white hot fire.

The gasoline lead to something similar to the Dot Com Bubble, only this time you might call it the Cryptocurrency and Housing rise. Don't believe just look at the headlines:

1. Gamestop, AMC Theatres, and Crypto ruled the day. haha Gamestop and AMC were virtually closed during the pandemic and they are skyrocketing more than our most valuable companies in the world. Crypto which is backed by nothing and can't be used to pay for toilet paper and groceries is now one of the most valuable currencies in the world? Notice what bubbles and inflation begins to do. It makes the unreal -- real, the unfathomable -- possible, the unrationale -- rational. 
2. The 10 richest persons in the world are worth more than 40% of the bottom 40% of the world, which is roughly 3.1 Billion people. 
3. 88 bids were made on one home; 25% of homes in the US were bought by corporations

Pouring gasoline on a white-hot economy did not cause these strange investment scenarios or market inequities...it exacerbated and amplified them. We are now at a point where the only tool we have to slow things down is the Federal Reserve. They pour water on the fire by raising interest rates and this doesn't cause slow burn rather a cold shock. For the last 5 weeks the markets have dropped sharply, convulsing their way down. Interest rates have jumped from 3% to 5%. So I started to dip my toes back into the real estate market to see if I could take advantage of the situation. Nope, the open house I went to was visited by other and I was greeted by the agent telling me this house was already under contract. This tells me the market is still to hot. To change habits, the Federal Reserve will continue to hike rates until it makes you feel sick. 

Crypto hit all-time highs of $60K and now its below $30K

ROKU was at $400 at one point, now decimated to $below $100

 The goal is to raise rates to stop your buying of homes, stocks, crypto which is fueling inflation. 

This is why I moved my retirement funds to inflation - protected investments last year in anticipation. This is also why I'm disappointed in myself when I didn't sell Spotify and ROKU at their highs. I saw it coming and didn't do enough. These stocks have been decimated and are down big time. The funniest is the Federal Reserve told you this is exactly what they wanted to do.

Please Don't Kill My Investing Vibe...

Thanks to Kendrick Lamar for producing one of my favorite tracks out there and describing my approach right now to life and investments.  Plainly said, I don't want anyone messing up my vibe of working hard, making quick and thoughtful decisions and reflecting on it all to ensure that I'm focusing on things that will make me better.  My investing vibe right now is to sit back and ride out this amazing economic and stock market recovery.  I remember how bad both were years back and we must take a moment to give props to resilient people (workers), companies, and yes even 'some' of our politicians that promoted a pro-growth environment.  I firmly believe if we had engaged in less stimulus and more cost cutting we would've been in BIG trouble.  This is what makes the field of economics and behavioral analysis so interesting to me. But before I put you to sleep...follow my vibe:

Tax Cuts...Yes or No??

I am a market guy but I must write here in this article that I am surprised about how often every issue that the administration embarks on is severely attacked. The rule of thumb is you have reached a good level of compromise on Wall Street or in Washington when you pass a bill that has both sides of the debate a little unhappy. So my perspective of the Tax Cut debate is simple. We've officially reached the level where we have too many whiners and not enough leaders. Especially ones that will tell the truth. In my opinion, President Obama has done a decent job of navigating the water of a highly politicized atmosphere and prime example are the tax cuts.

This deal and its timing are both solid! First both people on the left and on the right are complaining, check. Second, unfortunately since you can't believe the moving lips of many in Washington listen to outside people. I'll listen to Mohamed El-Erian, CEO of Pimco, who has a great perspective on the markets. He points out that the market is headed in the right direction and even increases his overall outlook for next year, DUE to the actions of the White House. The tax cuts are extended for every for the next 2 years and while that may not be the smartest move for the deficit, the KEY element for also extending the cuts for the top 2% (which is what the Republicans want) was getting a series of main street and business tax cuts that STIMULATE the US economy going forward. Tag on the extension of unemployment benefits and this may truly be a multi -pronged jolt that our economy needs to beef up growth. Look at the reaction of the markets...they are responding well hope, now lets hope us folks on main street feel the shock. To be fair, he notes two main themes are the results of a higher outlook:

Fiscal Policy - This would be actions led by President Obama on tax cuts, which contain many parts that will stimulate our weak economy.

Monetary Policy - This would be the Fed's QE2 money printing policy which juices the markets.

This is a great move by President Obama to turn the political posturing into an economical bang for our economy.

Wall Street - The PULSE

Hey everybody I am back to hit you with a quick post to keep you in the loop with what's going on in the stock market. By now, I know the average person is paying attention on a daily basis because I get a weekly call from my sister asking me about why things are falling or more importantly what should I be doing with my money. And if you recall when you don't hear much from me I am usually doing one thing and that's reading. I am constantly reading about what everyone has to write and listening to what everyone has to say...to get a feel of the market's temperature. How can you do this?!?! Well simply start by tuning in here as often as you can to get a pulse, not always daily but a frequent pulse as to what may be changing out there. And if you get tired of reading, check out CNBC's homepage and select the VIDEO tab for very frequent video posting of their on air show.

Wall Street's Pulse - Awhile back I compared Wall Street to a prized fighter that was down and out, maybe like one of my favorite fighters Roy Jones Jr. The latest prognosis is still not that good...the patient needs help getting up in the ring right now and the count keeps going to about 8 (get to 10 and the fight is over). For those of you that don't know what a knockout blow is for Wall Street, well its would be a depression. And the trainers right now are the Obama Administration, The Treasury Department, and The Federal Reserve. They are constantly looking at the fighter, checking its vitals, and assessing how to help him keep fighting. But right now the vitals of Wall Street do not look good:

• Unemployment numbers continue to rise and have now been estimated to reach over 10% within the next year or so.
• Companies continue to cut jobs left and right and give not so rosy outlooks for the rest of 2009
• Consumer Savings rates were above 5%, which is at levels that we haven't seen in a long time!
• Retail Sales numbers are barely off their lows, which means people ain't buying!
• The consumer and companies are still having difficulty getting access to capital.

Investors (who are like the fans in the stands) have sobered up to these realities and almost given up on the fighter, but the trainers keep working. And their work seems to be helping the fighter get a little bit better:

• Banks are receiving more and more capital
• The stimulus plan and housing bills are aimed at helping home owners and generating jobs
• There is talk about adjusting mark to market (how banks place a value on assets they own)

What this has done is given the investors a little bit of hope that the fighter may come through and still win the fight. So they have started cheering louder and louder and the fighter has responded. The stock market has rebounded off of its March 9th lows and the banks have come back roaring. But its almost as if the crowd (investors) forgot that the fighter is still hurt and hurt badly. That's why may believe that the stock market is in a BEAR RALLY. This means alot of people think the fighter is healthy but in reality he's not. And soon those cheering fans will see the fighter get knocked down again and they will not cheer as loud.

Now onto what I believe and what I'm doing:

I believe the fighter is still hurt badly which means don't cheer (or buy stocks just yet). I truly believe that safer alternatives are out there and should be evaluated for your portfolio. I still like OWNING CASH, and not doing a whole lot especially in your retirement portfolios...don't be the hero or the only one cheering when the fighter just got knocked down again. Invest in safer alternatives:

Cash
Gold (GLD)
High Yield Corporate Debt (LQD)
Municipal Bonds (TFI)

And if you feel like you need to be in the markets, be careful and be a bottom feeder...the nastiest thing out there. Wait until things gets really bad and nibble on the most beaten down sectors. For instance I do this when the banks look really bad, like when everyone though Citigroup was going out of business and I buy just a little bit of the bank stocks ETF on steroids (FAS)...it gives me 3X the returns of bank stocks, but I bite just a little. And when things start to look like they are on a roll I sell. I don't panic about selling to early because in a few days I start to look for a point to be a top feeder and bet that things will come back down and buy the FAZ, which bets the banks will fall...TIMES 3X! But don't stick around to long in these trades or else you'll be writing me with heartburn as I have often had, but irrational fans sober up eventually.

My Reality Show: Pt. 2 First Pick in The Stimulus Bill Draft

I have decided to announce my first pick in the economic stimulus bill draft! After reviewing the contents of the bill, I realized the Obama administration did some things right in crafting the stimulus bill. For me, there is a provision in the stimulus bill that has the upside of a Lebron James. Yup, there is some first round potential in the First Time Home Buyer Credit. A close second, my Chris Paul pick, was the Higher Education Tax Credit. I tip my hat to the administration because the bill provides just enough incentives for me to help do my part and stimulate the economy. Although I would have loved to take advantage of the original amount, I am glad that $8000 in credits will be available to assist me in possibly buying a place in the expensive city of Chicago. I was surprised after rereading my own post that I had missed the provision on going back to college and the assistance that is provided there. So we'll see but after I get a place...maybe I'll start studying for the GMAT. Now I will likely miss the 2009 credit but I could take advantage of the 2010 credits.

A little Love for Barack Obama

What does Obama and Girls Gone Wild have in common.

Exactly nothing as far as I can see. But if you check out the video at barelypolitical.com, you may be thinking that the two go hand in hand. A 24 year old busty young lady has decided to declare her love for Obama, well more like his political campaign. It is pretty creative in my book and whatever it takes to give more press to Barack and his movement...I support it. In the video, the Obama-girl dances and shakes to a catchy song that professes her love. She professes her love in the office, on the train, in the park, and with random strangers all while the camera manages to focus on Obama's...sorry can't lie Obama-girl's assets.












Lastly I'm in the process of reading Barack's first book and so far its been hard to put down. Please pick up this book as read his interpretation on the impact race and inheritance plays in America. The book is "Dreams from My Father" by Barack Obama. More to come as I complete the book.