1. Explosive pagers. Look, the Israelis having the wherewithal to make pagers, radios, and cell phones explode across the region on command is an undeniably slick piece of work. I’m in awe. I’m also suddenly very aware of exactly how many bits of electronics I have in close proximity to me every minute of the day… including the AirPods literally sticking into my head. I’m duly uncomfortable about this new tactic that’s now getting widespread attention thanks to its apparent effectiveness. It’s not something I’d want to see sweeping the world in the future.
2. Shutdown talk. It’s the magic time of year when the media is floating talk of a government shut down when funding expires at the end of September. All they’re going to do for the next two weeks is get my hopes up that a few free days of vacation time are in the offing before the political class pulls out a “save” at the last possible moment and we all boot up our computers on October 1st as usual. Years ago, I was more bitter about the prospect of a shutdown. Now that my finances are considerably more stable and the prospect of missing a check isn’t a stark raving nightmare, all I can tell these bubbas who want to shut it down is “bring it on.” I look forward to yet another opportunity to mock them mercilessly for being consistently unable to do one of the very few jobs that they’re required to do under the Constitution. If they’re going to be so incompetent, giving federal employees worldwide a few extra days off in the fall feels like the least they could do. Of course, until that sweet furlough notice shows up in my inbox, it’s all just talk.
3. Interest rate cuts. In keeping with my tradition of being a contrarian, I’m a little sad to see the Federal Reserve start cutting rates. Yes, I’m sure it’ll be good for anyone looking to buy a house or car and is a sure sign that the Fed thinks the worst of the inflationary pressures is over… but for the first time in my adult life, there was a reasonable return for cash parked in a “high yield” emergency savings account. Another few quarters of cutting and it’ll be back to looking for other savings options that preserve liquidity, compensate for inflation, but don’t introduce additional risk. Those 5% interest rates were good while they lasted.
Tag Archives: interest rate
Fleet management…
I’m trying to mentally nudge myself in the direction of accepting that I’m going to need to buy a new vehicle in the not terribly distant future. With both the Tundra and the Wrangler approaching a point where they should be let go, I’m starting to poke around the margins at what might replace them.
And that, of course, is where it gets complicated.
Is the right answer a 1:1 trade of old Tundra for new Tundra? The price point of doing a straight up replacement of my current truck runs me somewhere north of $65,000… and that feels like an absurd price to pay for a pickup truck.
Maybe I should be looking to bundle my trade and let both the Jeep and the Tundra go to bring home… something. The math gets more involved when I remember that the Jeep is where all my trade in value is. A 12-year-old tundra, wrecked once, with 145,000 miles on the clock it is always going to have a limited audience even when it looks remarkably clean and has otherwise been well maintained.
There’s the question of whether I need another truck at all. I’ve had a truck in the fleet for 15 years, but the bed stays empty aside from running the trash to the dump once a month, bringing in canned gas for the lawnmower once or twice a summer, and periodically hauling flat packed bookcases home from IKEA. It would certainly be less convenient, but is it more cost effective just to rent a truck when I really need one or plus up my budget for big item delivery?
If the right answer for the next vehicle isn’t a truck, what is right? A SUV? Something low slung? Certainly not a sedan.
I haven’t quite convinced myself that I wouldn’t terribly miss having a truck, even if I don’t strictly need one. That said, I’d be lying if I said I wasn’t a little attracted to having a fully enclosed vehicle… and perhaps on that had a less temperamental top… and windows that didn’t scratch if you brush against them… and maybe something that behaved with just a bit more polish on the highway.
Cutting the fleet by 50% would create obvious operations and maintenance savings – costs that are bound to increase the longer I hang on to a 12-year-old pickup and a 6-year-old Jeep. Is that cost savings enough to convince me any reasonable person can get by with just one vehicle? Hard to say.
As it is, interest rates are probably too high to consider anything seriously… but the ideas are definitely percolating. I’ll either get a wild hare and pull the trigger on something or I won’t. I honestly have no idea which way I’ll break or when it might happen.
Reversion to the mean…
If you frequent news sites or have a passing curiosity about real estate or investing, it’s hard to miss the hand wringing stories about mortgage interest rates. Phrases like “soaring” or “crashing up” or any kind of alarmism you can think of are the order of the day for financial reporters.
Maybe it’s because I’ve reached a certain age and have started recognizing cycles and trends from living memory, but none of it fills me with alarm or dread. Twenty years ago, when I was buying my first place, I was thrilled to get a mortgage in the 7% range. The number stuck in my head is 7.25%, but that’s without spending an hour trying to find my original paperwork from way back when.
Mortgage interest rates ranging from 2-3% over the last few years are, frankly, and aberration to what could be considered normal at any time in the last 30 or 40 years. The 2.9% rate I refinanced the current homestead into was a fluky gift of history rather than something I expected to be able to do at any time indefinitely into the future. Even as I was signing the papers, I didn’t expect to ever be able to get a mortgage that cheaply again in my lifetime.
The problem, it seems to me, is that we collectively have an absolute shit capacity for anything beyond short term memory. Because of that, when conditions revert towards the historic average or swing past that mark in the other direction, there’s a tendency to think the sky is falling. Like most things, the trick is to not buy into the hype.
Timing, as they say, is everything. We just lived through what could easily be a once in a lifetime interest rate environment. There are a metric shit ton of people who want to tell you exactly what will happen from here. Maybe one of them will get it precisely right. All I can tell you is interest rates will increase, then they’ll decrease, and then they’ll increase again. If you’re in the market, the most you can ever be expected to do is figure out the math, know your budget, make the best deal you can, and find the best rate available… and maybe try not to get tied up with one of those “exotic” mortgage options that can blow up your life if the most minor thing doesn’t go exactly as planned.
Don’t get me wrong, I’m glad I’m not in the market for house right now, but casting the current environment as the end of the world is just a little bit disingenuous and a whole lot short sighted.
This time it’s different…
History doesn’t repeat. Sometimes it doesn’t even rhyme. There are, however, in my estimation, any number of trends we see again and again. Often, though, those trends flow across such long sweeps of time that there’s little or no “generational memory” of the last time they happened.
COVID-19 was a great example. Confronting widespread plague or communicable disease isn’t something that was fresh and new for 2020. Humans have been dealing with pandemics since the rise of civilization. The last time we faced a pandemic of such scope and scale was a hundred years previously with the Great Influenza of 1918. Given the hundred-year interval, it was an event that had nearly passed out of living memory. Although civilization had seen pandemic many times before, “this time is different.”
The major stock market indexes are down 20% from their highs in 2021. Business reporters and talking heads are wringing their hands about wealth destruction, there being no floor, and the end of capitalism. They’re obviously ignoring the fact that bear markets are a normal part of the economic cycle. In fact, we’ve seen 14 bear markets since 1945. It generally takes about two years for markets to regain their previous high-water mark. We’ve been there and done that, but “this time is different.”
Currently, the United Sates is experiencing a year over year rate of inflation of 8.6%. It’s driving prices of all manner of goods and services higher at the fastest pace we’ve seen since 1981. Many of us are too young to remember anything from 1981, but there it is, right there in the recent history books. In all likelihood the Federal Reserve will crank up interest rates to and a little beyond the pain threshold, pull money out of circulation, and inflation will cool to a manageable level. You can already hear the cries that “this time is different.”
I hate to throw cold water on the almost gleeful panic, but the only thing different this time is that we’re the grown ass adults who happen to be the ones experiencing these events rather than our parents or grandparents. Nothing that’s currently dominating the news is new. It’s the same shit different day that people have been dealing with as best they can for hundreds of years – it’s just that our lifespan is too short to effectively pull back and see the whole board. It’s far easier to believe we’re living through special and unique circumstances that could happen only to us.
Let’s all come back in about 30 months and check my work.
Be not afraid…
It’s hard to miss all the current reporting on the growing impact of inflation on the overall economy. Even without the reporting, rapidly rising prices for petrol, food, and other consumer goods, the impact of our inflationary economy would be hard to miss.
Most of the major news outlets paint a worrying picture – particularly for retirees, anyone sitting on a lot of cash (in a savings account or in certificates of deposit, for instance), or those who loaded up on variable rate debt (like your average credit card). That’s a fair concern, but it’s only part of the bigger picture.
If you happen to be a homeowner – especially one who locked in a mortgage when fixed interest rates drifted down under 3% – inflation gives you the bonus of paying back your loan on an appreciating asset with devalued dollars. If you happen to be holding equities as opposed to cash (including things like 401k, IRA, and other retirement savings vehicles), values should largely increase as the cash value of the underlying companies is inflated. All of that, of course, presupposes that your income also paces the rate of inflation, or at least doesn’t entirely stagnate during a period of sustained inflationary pressure.
I’m obviously not calling for a return to the bad old days of inflation, sky high interest rates, and 10% unemployment… but by read is that there are things out there a hell of a lot more frightening than a little pop of inflation every now and then, so for the time being my motto is “be not afraid.”
JEFFREYTHARP.COM 