Common Cents # 39 - The Stock Market

 

The Stock Market

 

A lot of people are wondering why the stock market is hitting all-time highs while the overall economy is struggling. The short answer is that the stock market is not an indicator of what the economy is doing, but rather a predictor of what investors think it is going to do. In other words, a strong stock market does not mean the economy is doing well, it means that most investors think it is going to get better.

This is a reasonable position. The world’s economy has been devastated by a worldwide pandemic. As tragic as this has been for thousands of people, by definition, this is a short-term problem. Throughout history there have been pandemics, plagues, hurricanes, floods, earthquakes, and locust infestations. None are indictors of systemic problems and they all had a start and end date. We know that this pandemic will be over sooner or later, and with thousands of people being vaccinated every day, it will hopefully be sooner than later. The best guess is that the pandemic will be over when at least 75% of the population has been vaccinated or has recovered from the virus. This will likely happen sometime this summer. Investors look months ahead so there is plenty of reason for optimism.

Furthermore, investors like stability. With the election behind us and what is hoped will be a stable government ahead, it should be a comfortable time for investors. Buying stock is putting our hard-earned money into somebody else’s business. No one wants any surprises. For that reason, the business community has leaned toward conservative politics. But more than that, they want predictability and fair treatment which comes from professional government and solid decision making regardless of which party is in power.

For individual investors, this would appear to be a good time to invest because bank interest rates are near zero and the long-term expectation of economic growth is very positive.

My wife and I set up a TD Ameritrade account this week and moved a little money from our bank savings account that was not really not making any interest into a mutual fund that we have followed for many years and had good experience with in the past. This was one of the decisions that came from our New Year’s Day Annual Meeting. It was as easy as opening a bank account. The minimum initial amount was $250 so a person doesn’t have to be rich to make good investments.

The new year is always a good time to look at how we spend, save, and invest our resources.  Seeking out good counsel is always a great idea to help achieve a great and exciting financial future. Then, take action to make the hopes and dreams come true.

 

Common Cents # 38 - Retirement

 

Retirement

 A common discussion at our house is how much longer we are going to work on a full-time basis. My wife and I are both in the 15% of the population that are over 70 and still in the workforce. Of course, there is no law nor any requirement that we should quit working just because we attained a certain age. And just because we are no longer working at our current occupation, we may not consider the new opportunities we have in front of us as retirement from an active life.

There are some arbitrary numbers out there. We became eligible for Medicare when we turned 65 which means that we don’t feel the pressure to work at a job that provides health benefits. It is possible that the government will lower that age in the future because it causes a barrier for those who wish to retire earlier and then have to pay very high premiums for individual medical insurance. For many, they continue to work for an employer perhaps doing work that is not as satisfying as it once was simply to cover the cost of health benefits.  Medical care costs usually do rise as we age even if we can maintain good health.

We became eligible for full Social Security benefits at age 66. There is plenty of discussion about when to start taking Social Security because the monthly amount received goes up if we wait to as late as age 70. Generally speaking, I believe that the best idea is to start drawing Social Security at full retirement age and invest any received that is not needed to live, but that decision varies for each person based on their specific situation.

But those are just technical issues. The bigger question is, “What would I rather be doing?” If our self-worth and social life are connected to our job or profession, there may be no good reason to quit. There are plenty of people who continue to work at their chosen profession well into their 80’s and older. Dr Anthony Fauci, the infectious disease expert, just turned 80 and has accepted a new role in the Biden Administration.  He is in remarkable health and is obviously providing a great service based on his expertise and years of experience in his field.

If there is something we would rather be doing and we can afford to do that when we are 58, by all means we should do it. The point is, we must not let arbitrary numbers like 62, 65, 66, or 70 control the decision.

A few years ago, I wrote a book titled, “The Fourth Quarter” for people who are in the fourth quarter of life. We don’t head for the showers in the fourth quarter of a football or basketball game, we keep playing until the final whistle. Why should we live our life any differently?

For a copy of the book, “The Fourth Quarter,” go to: MathisBooks.com

Common Cents #37 - eBay

 

eBay 

About 25 years ago, I was in my brother’s office when he asked me if I had seen the new online auction site, eBay. I hadn’t so he gave me a quick tour about how easy it was to list things and bid on other people’s listings. After a few minutes of observing the site I exclaimed, “This changes everything! Everything is now liquid. Anything can be sold and converted to cash in a week using this global marketplace.”

My dad was an auctioneer and I had grown up, literally, in a sale barn. I knew that an auction was the fastest way to sell a lot of stuff in a short amount of time and that the exact fair market value of an item, at that particular time and place, could be determined in seconds. I realized the potential of a world-wide market, an auction, particularly for antiques, collectables, of hard to find or hard to sell items.

I immediately set up an eBay account and started selling things. Over the past twenty-five years I have sold thousands of dollars of merchandise, mainly antique cameras and collectibles on eBay. Things that we thought were extremely rare or unique, turned out to be rather common on the world stage. An item that we had never seen before in Kansas might be a common item in a Paris Flea Market, for example.

It is also possible to get a pretty accurate idea about what something is worth by watching the eBay auction prices. Remember that an auction will determine the market value based on what a willing seller is willing to take and what a willing buying is willing to pay, not what one party thinks it is worth.

My experience is that eBay is best suited to items worth at least $25 but not more than a few hundred dollars and items that can easily be shipped using UPS. About a fourth of my sales have been international. I could never have sold an antique camera to a customer in Japan without eBay or a similar international marketplace.

There are people who make a living buying at garage sales and selling on eBay, but that requires a lot of knowledge of the market and a huge amount of patience. A better idea is that before you put your old stuff on the sidewalk, do a little research using eBay to see if you have anything that a collector might want to pay good money for. Collectors’ legends are made up of garage sale finds that were later sold for thousands of dollars. I know people who have done that, but I haven’t traipsed through enough garage sales to do that. If we do see something of great value at a garage sale, the honorable thing to do would be to tell the seller or at least offer them the fair price for the item.

Most eBay aficionados start by buying and later turn to selling. Personally, I think selling is more fun. Whatever, if you are not familiar with eBay and have some family heirlooms or other things that might be of value and you are ready to turn them into cash, check it out.

 

 

Common Cents # 36

 

All of us need money to live in a modern society. There are several ways to make money. The most common way is to sell our time. “I have eight hours today to spare. You can have it for $15 an hour, $120.00.” To make more I need to work more hours or convince somebody that my time is worth more.

We can also sell our skill or perhaps a special ability that somebody else needs. For example, I might need to have my automobile repaired, or maybe I need to have a cavity in my tooth filled, or perhaps a surgical procedure completed. In that case, I am not paying someone for their time as much as I am for a specific skill. That person might make hundreds or even thousands of dollars an hour, except neither they nor us look at it that way. They are paid for their skill or knowledge. In this case they can increase their income by increasing their skills.

Both of those methods of making money require us to be there and do what is required of us. Eventually most of would like to do less or even do nothing and still have enough money to live well. In that case we need to own some things that will get up every day and go to work for us. We need to put our assets to work.

We call those types of things investments. If we don’t have any investments, we will need to work every day of our lives to earn money to live if we need more than Social Security will provide. It is that simple.

Beginning in the 1930’s the government began making some investments for us in this system called Social Security. Social Security is not an investment as much as it is “Old Age Insurance.” Many people have some sort of investments through their employer with a 401(k) or other pension plan. But the vast majority of us should be making investments of our own on a regular planned method in addition to any employer-sponsored accounts we qualify for.

The secret to financial peace and not having to worry about money is having your money in investments that do their share of the work. There is wonderful calculator on the internet that will tell you exactly how much you need to accumulate to have the kind of income you want, based on how long you think you might live, and the return you expect from your investments. It is: https://www.bankrate.com/calculators/investing/annuity-calculator.aspx. Plug in the numbers you know, or your best estimate, and the calculator will tell you the other number. For example, if you know how much money you have, how much money you need per month, and the rate of return that is expected, the calculator will tell you how long the money will last. This is a great tool to use to see how you are doing. Have fun!