I’m shocked that reporters try to sell panic…

Posted on May 1, 2023 by jdtharp

A certain segment of the media is busily peddling fear and angst about the banking sector. One headline asks, “Fed says don’t worry about banks, but why should anyone believe them?”

Well, mostly because the Fed is doing precisely what it’s supposed to do when a bank finds itself teetering on the edge of collapse. Most recently, with First Republic Bank being seized by regulators and mostly sold off to JPMorgan. Depositors – the mom and pop Mr. and Mrs. Mainstreet that reporters are so fond of citing – were protected up to their federally insured limit and FRB’s investors were left with their dicks in their hands. This morning, FRB’s branches opened as scheduled and depositors had full access to their funds. That the system is working as advertised is precisely why the vast majority of depositors shouldn’t be worried about their chosen bank.

I’m not entirely sure what else we should reasonably expect the Federal Reserve and the whole laundry list of financial regulators to do under the circumstances. Protecting depositors while allowing the market to punish corporate officers and investors feels like the right approach. That’s the “risk” part of the risk and reward dynamic of the market at work.

By all means, improve the financial stress tests imposed on banks and change the rules to discourage managerial incompetence in the executive suite. Beyond that. I’m not sure what financial reporters are up to beyond trying to gin up panic and worry where none appears to be justified.

Nowhere near the panic button

Posted on March 13, 2023 by jdtharp

Maybe if I were more financially savvy, I’d be alarmed by the collapse of several banks over the weekend. As it stands, I’m mostly just preparing myself to ride out some choppy financial waters in the short term. The markets don’t currently seem to be in a panic, so I’m opting not to be either. After all, if the markets do decide it’s time to panic, it’s mostly too late for me to do anything about it anyway.

Over the last 20-odd years, I like to think my approach to most financial contagion has been to shrug and keep buying every other week. As a young, new investor, I bought into the teeth of the collapse of the dotcom bubble, then through the Great Recession, and most recently through the panicked COVID-19 sell off. Not being a finance guy or an economist, most of what I know comes from history – and that’s that every squirrely period of economic chaos eventually ends. Over a sufficient enough period, every bad time, including the Great Depression, has ended with markets making new highs.

The trick, of course, is simply to hang on and don’t even think about locking in your losses. It’s a trick, because, as they say, the markets can absolutely remain irrational longer than you the individual can remain solvent. Assuming the House of Representatives doesn’t insist on allowing the federal government to default in a few months, I’m not especially worried about staying solvent. If it goes the other way, how well my philosophy holds up gets a bit murkier.

In any case, I’m nowhere near the panic button despite how much the finical news reporters insist on wringing their hands.

The death of downtown is greatly exaggerated (probably)…

Posted on December 6, 2022 by jdtharp

I read an article this morning that more or less decried the death of the downtown business district due to the continuing popularity of remote work. The percentages cited are hard to get around.

The city I’m most familiar with, having spent three years commuting into DC five days a week for three years back in the early stretches of my career, it looks like the in-person workforce is about 65% of its pre-pandemic high. Back when I worked in DC, my regular commute involved a 30-minute drive, a 40-minute Metro ride on the Green Line, and a 10-minute walk. So that was an 80-minute one way trip under perfect conditions and assuming I left the apartment no later than 5 AM. That time could easily double if there was even the hint of trouble on 95, 495, or the BW Parkway. The trip home in the afternoon? I never made that in less than 90 minutes and the worst day was 3.5 hours from door to door.

You’ll forgive me, I hope, if I’m not surprised that the average employee isn’t knocking down the doors to get back into their downtown cubicle, burn up fuel, buy expensive downtown lunch, or generally feed the beast when they don’t need to do those things as part of getting their respective jobs done. It’s not captured in any of the articles or studies I’ve read, but if the downtown businesses that supported armies of office workers are losing out, it feels intuitively like there should be a corresponding uptick in the money being spent by these workers at the shops and stores closer to home. Those are more diffuse, of course, and necessarily harder to track. They’re not the story that the big players want to tell.

The death of the great urban downtown is, I suspect, being greatly exaggerated… but maybe there really is a crack in the idea that downtown must be synonymous with gleaming office towers only occupied from 7 AM to 7 PM five days a week. There really is a better way… of course that would involve real estate investors and management companies spending some money to bridge the gap between what was and what will be. Whether they’ll want to do that instead of just paying for bitchy articles about how much better it was when office buildings were full remains to be seen.

At least he’s entertaining…

Posted on November 30, 2022 by jdtharp

Elon Musk has always engendered my curiosity. From Tesla and The Boring Company to his new role as chief of fucking around and finding out with Twitter, the man may be a lot of things, but dull and uninteresting isn’t generally considered one of them.

As much as he captures my interest, I wouldn’t exactly call myself a fan. I tend to think he’s a guy whose demons are at least as big as his better angels. Still, he’s undeniably entertaining to watch if you come at it from a slightly nihilistic perspective.

Elon’s most recent hot take, that somehow Freedom of Speech equals buying ads on Twitter, is one of those times where he just makes my head hurt. He’s obviously smart enough to know that what we commonly call “freedom of speech” precludes the government from sanctioning you, the individual, (or you the company) from things you say. It doesn’t in any way protect you from other people or businesses deciding you’re absolutely crammed full of shit and opting to not work with you.

While Elon is perfectly free to say anything he wants and use Twitter in whatever way he chooses, what he isn’t, and can’t be, is free of the natural consequences of his words and actions. In the free marketplace of radical individualism that he seems to espouse, people (and companies) voting with their feet and their wallets, should be the thing he most welcomes. The fact that the big advertisers have left in droves, is sending a message, but Elon seems determined to misinterpret the signal.

The profit motive…

Posted on November 2, 2022 by jdtharp

About once a day you can count on President Biden tweeting about evil oil companies making money hand over fist while “excess profits are going back to their shareholders and their executives.”

As much fun as it is to watch the president attempt to turn “profit” into the next dirty word, I respectfully suggest he’s out of his damned mind on this track. I mean it’s not as if oil companies are chartered non-profit organizations. The whole point of investing in a company is the expectation that you’ll receive a return on that investment. The board and corporate executives would probably have some legal liability if they weren’t actively trying to return value to shareholders. The shareholders are the ones bearing the risk that accompanies running a business after all.

I know that POTUS and his Twitter account like to pretend it’s just the 1% getting dividends… but according to a Gallup report dated May 12, 2022 the number of Americans who hold individual stock shares or who are invested through mutual funds or IRAs is in the neighborhood of 58%. That number probably ticks up a bit if you account for the various and sundry pension plans that also invest widely across the whole market. Even without accounting for pension funds, that’s a majority of Americans who stand to gain when businesses profit, dividends are paid, or stock is bought back by the company. That large percentage of Americans being “in the market” in some way would seem to indicate their belief in the power of growth and profit.

Maybe the big buy backs and dividends would be moderated a bit by a political environment that was more encouraging of entrepreneurship, of R&D, or of exploration. As it is, Big Energy doesn’t have much incentive to spend money on those things under an administration that would very much like to kill off their entire sector. Companies tend to invest when they have a nice stable regulatory environment, rather than when the government keeps threatening to yank the rug out from under them.

Our president, it seems, wants to have it both ways. He wants the cash cow to fund the welfare state but he also wants to butcher it and sell off the pieces. Having said that, if President Biden were serious about any of this, he’d be working with Congressional leaders to cut off federal subsidies to the energy industry and the broader system of subsidies in general instead of Tweeting about it every afternoon. I’d be the first one on board if he made that pitch. Until then, I’d appreciate it if Mr. Biden could give it a rest with trying to demonize the profit motive.

Global wealth, exceptionalism, and mediocrity…

Posted on September 21, 2022 by jdtharp

According to an article in The Guardian, in 2021 the number of millionaires in the United States increased by 2.5 million, bringing the total of millionaires in the US to 24.5 million. Put another way, approximately 7% of the people living in this country have a net worth of at least one million dollars. That number is so high compared to historical levels that according to the article “the number of millionaires was becoming so large that it was becoming ‘an increasingly irrelevant measure of wealth.’”

In my mind, having 39% of the world’s millionaires knocking around the country is a good news story. It speaks to the unprecedented level of wealth creation the American economy and global trade have fostered. We’re creating wealth in greater amounts and more quickly than ever before in history and it’s a testament to what’s still possible with brains, effort, and a bit of luck.

The Guardian, of course, takes pains to point out that the largess of the global economy hasn’t been fairly distributed. As if anything in the world has ever been distributed fairly. Natural resources aren’t sprinkled evenly across the world. Intellect isn’t awarded equally at birth. Gnashing your teeth over issues of equity is, of course, the trendy take, but it’s not how the universe works.

Personally, I’m far happier knowing it’s possible to be exceptional, somewhere towards the right end of the bell curve, than knowing for a certainty that we can all look forward to an equal share of mediocrity.

Buy and hodl, buy and hodl…

Posted on May 3, 2022 by jdtharp

For a stretch there from April 2020 until January of this year, any schmuck with an E-Trade account could make money in the stock market. It was very easy for people to get the impression that they were an investing genius thanks to what was probably the hottest market in my lifetime carrying the freight. Since January, though, there seems to be a whole lot of people who are confounded that the market can move down as well as up.

I’ve got my own records going back to 2003. Looking at the charts, I can see clearly at least three other “big” down periods – 2008, 2015, and early 2020. The rest is slow, steady, upwards progress. Something about time in the market versus timing the market, I suppose. Looking at my May report, I can see I’m down a little more than 12% year to date. Sure, I’d be happier if it were 12% up for the year so far, but nothing I’m seeing feels like cause for panic. Pulling the charts back to look at the 5-, 10-, or 20-year trends tells me the important part of the tale.

Before long, I expect we’ll increasingly see stories about people bailing out – “fleeing to safety” – in some alternative investment. From where I’m sitting, panic decisions are just about the worst thing anyone could do to themselves. Over a long enough horizon, despite every historic crash, dip, and period of stagnation, U.S. markets have never gone down and stayed down. Past performance is no guarantee of future results, of course, so maybe “this time it really is different.” I doubt it.

So, yeah, I’m 12% down. From where I’m sitting, it’s mostly a shrug and a so what. With at least 13 years to run before I could need a nickel of those funds, why wouldn’t I want to buy today at a solid discount to what I was spending on January 1st? If I were planning to retire on May 31st 2022 instead of 2035, I’d probably be more worried. If I had pulled the trigger and gone off into retirement at the beginning of the year, I’d probably be horrified at what it means for my sequence of returns… but I also wouldn’t have started that adventure all in on index funds instead of shepherding my lot into dividend payers, bonds, and allocations designed to preserve capital rather than chase growth.

The wider universe is going to do whatever it’s going to do. Our politics will swing between the extremes. Climate will continue to shift. There will be great breakthroughs and horrendous failures. Through it all, I’ll be over here quietly buying a little every week, planning for the best case and not-so-best-case future, and doing my level best to make Fortress Jeff my own haven in a turbulent world. As far as I’m concerned, reports of the end of history and impending financial doomsday have been greatly exaggerated. Through it all, there’s very little new under the sun.

Dodging a brick…

Posted on February 16, 2022 by jdtharp

I’ve been vaguely aware that 2022 was the year 3G wireless service was going to be discontinued here in the US for a while now. Other than being aware, I really didn’t put much intellectual rigor into wanting to know more about it. That was true until I glanced at an article yesterday warning that some cellular-based home security systems among other “background” services could be impacted.

After a quick check, it turns out that my system is going to be one that dropped offline sooner rather than later. Turns out, thanks to AT&T taking their network offline later this month, I was about a week away to losing my system.

I’m not mad at them. Technology marches on and needs to be upgraded from time to time. I’m am, however, pissed as hell that I didn’t even get a warning notice from the monitoring company I’ve been paying every month for the last seven years to keep any eye out for home intrusion, flood, and fire.

They were quick to confirm that I was about to have a problem when I called last night. If I hadn’t noticed that article and then taken the initiative to call them, though, there’s no telling how many monthly fees I’d have paid for them to monitor dead air. In all likelihood, I’d have never known it until the point when an alarm should have triggered but didn’t.

That’s aggravating on any number of levels.

To their credit, the company in question was quick to offer me an upgraded base station at no cost (as long as I was willing to sign a new one-year contract). No big deal there, as I’ve been going month to month with them for at least the last four years and don’t have any interest in building a new system from the ground up. Aside from this one pretty glaring issue, their customer service and equipment has been just about flawless.

I should be at least temporarily future proofed by the end of the week, but if you rely on cellular as a primary or backup link for your alarm system and it’s of a certain age, you might want to give your provider a call and make sure you’re not about to be bricked.

That math can’t be right…

Posted on February 15, 2022 by jdtharp

My Tundra is 12 years old. It’s in fine mechanical shape. Aside from a few chips and minor scratches the body looks great. It’s been in one major and one minor incident. Thanks, most likely, to fanatical devotion to preventative maintenance, it still runs like a top even as it closes in on 140,000 miles on the clock. At some point, though, I know I’m going to need to buy a new truck.

Just out of sheer curiosity, I recently used the Toyota website to price out what more or less replicating exactly the truck I currently own would cost if I were in the market right now. It came out to $61,103… before taxes. So, we’ll figure a nice round $65,000 all-in cost for a middle of the range Tundra here in 2022.

I’m sorry. What?

Part of the trouble, I know, is it’s been 12 years since I bought a truck… and back then it was in the middle of “all time high” gas prices and they were almost begging people to take the big V8s off the lot. Add in 12 years of inflation, plague related supply shortage, and the general growth in popularity for the pickup form factor. Intellectually there’s no reason I should be surprised at where the price points are now.

Emotionally, though, I’m stunned. Maybe some of it is just age. I’m old enough now to remember when $60,000 was the price of some of the most luxurious vehicles then widely available on the market. Way back in 1995, my used ’91 Chevy Cavalier cost the princely sum of $5,700. Sixty grand would have put me into a brand-new Cadillac Deville with $20,000 to spare. It would have put me in a C-class Mercedes and still left me with $5,000 or $10,000 in change.

I’m having trouble getting my head wrapped around it. Sure, I mean I could buy something that isn’t a truck or look for something coming off a lease, which leads to many other considerations… or maybe I’ll just keep Big Red on the road until the wheels fall off and the floorboards rust through. I damn near bought a whole house in 2001 for what a new truck would cost me 20 years later and just the thought of it is making my brain hurt.

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