Sunday, November 27, 2022

Treasury Bills - You Can Now Get At Least A Little Interest!

It is not an earth-shattering amount that we should be jumping up and down about. Still, it is good news that it is now possible to get a little return on your money and you should consider making the effort. This is something that has happened recently due to the Fed raising interest rates rather abruptly in an effort to halt inflation. This situation has gone unnoticed by many people. That is why over the holidays I brought it to the attention of several family members that are interested in such things. 

Even making a few dollars on your savings is better than nothing. It is also important you do this in a way you do not put your capital at risk. T- bills also known as treasury bills are considered among the safest investment as it is backed by the American government and released by its finance department. A treasury bill is a government-issued short-term debt instrument. The government pays back the amount you invest with interest. 

An example of how this works is the Treasury auctions T-bills to investors, who purchase the security at a discount to the face value. Meaning, an investor purchases a bill with a $1,000 face value and a six-month maturity for $950. In six months, when the investment matures, the investor receives $1,000, producing $50 in profit. One of the people I spoke with said, "I will be getting over $4,000 more a year and it's easier than trying to pick up pennies in front of a steamroller."

Currently, U.S. Treasury bills are a good investment option for those of us not looking to have our money tied up for long periods of time.  A person can purchase T-bills directly from the U.S. Treasury’s auction site,, or through a broker, bank, or dealer. Simply go to the site and click on "Treasury Marketable Securities" at the top. If you would rather gather information on this investment option on your own it is easy to do. What you will find is that you can

  • Buy U.S. Treasuries directly from the Treasury Department
  • Investing in T-bills is commission free
  • You cannot resell here, you must hold until maturity
The 3-month treasury yield hovered near 0 from 2009-2015 as the Federal Reserve maintained its benchmark rates at 0 following the Great Recession and during Covid-19. Today, the 3 Month Treasury Bill Rate is 4.21% for Nov 22, 2022. This is much higher than banks are offering. While still nothing to brag about as inflation rages on,  this can translate into hundreds or thousands of more dollars in additional yield for many consumers.
For Years, The Treasury Offered Savers Little, That Has Changed

Even higher is the yield offered on Treasury Inflation Protected Securities, also known as TIPS. These generally carry a term of 5, 10, or 30 years. TIPS are a special kind of bill designed to protect you against inflation. Unlike other Treasury securities, when the TIPS matures, if the principal is higher than the original amount, you get the increased amount. If the principal is lower than the original amount, you still get the original amount. TIPS pay a fixed rate of interest every six months until they mature. These can be held until they mature or be sold earlier if you choose to do so.
With the possibility looming that T-bill rates may move higher and inflation remain with us I still find the longer-term instruments unappealing. Carved in the back of my skull is the memory of how treasury yields soared to over 20% in 1980 under then-Fed Chairman Paul Volcker. The needs of other people of course are different. That is why I have a strong aversion to buying longer-term bonds. Government-backed or not. Again I point out, a huge risk comes with locking yourself into any long-term investment.
 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Real Estate - Is A Yes, Even If Its Value Can Drop

The real estate market, by its nature, always seems to generate the narrative that over time prices will go higher. Partly because those putting together this message have an agenda and that is to make money. This tends to become a problem when prices slide into reverse. Real estate is no different in this regard from most other markets but being a somewhat illiquid market dependent on many factors, moves in real estate prices can last a while and be devastating to those trapped on the wrong side of the current trend.

Expect a tremendous number of opportunities in real estate during the next economic downturn. This sector of the economy is very sensitive to interest rates. Not only because of the barriers related to buying and selling real estate, but the large number of dollars involved, when losses develop, they can be a ball buster. This is why most investors shy away from owning property. Many of these transactions are highly leveraged and even if not, when maintaining a structure is involved the cost and burdens such as taxes and general upkeep can be staggering

Adding to the problem is the fact empty buildings, housing or commercial, spoil like a basket of fruit. When there is a chance a building may sit empty for years, financing dries up. Since most real estate is financed with a long-term mortgage, an inability to get financing drastically thins the number of buyers in any market. Another issue is that since real estate is generally illiquid, prices tend to be reflected by the last piece of similar property sold in your neighborhood or area. The phrase is, REAL ESTATE IS SOLD AT THE MARGIN. This is especially true in housing.

This is a market known for its excesses, historically, real estate has gone through many boom and bust cycles. Anytime we reach a situation where things are overbuilt, the bottom can fall out of the market and prices tumble. Real estate valuations are linked to borrowing costs and rental demand. With this in mind, when borrowing is easy and money is cheap, higher real estate valuations often soar. The market is currently a bit strange in that even with higher rates and monetary tightening, I'm still getting calls from people wanting me to sell them my properties. One person cursed me, and people like me, for not giving them the opportunity to get into this market, this makes me feel rather lucky.

With all its downside risk, why would anyone in their right mind choose to enter this sector of the economy? The answer is that it's real, it's basic, and when all is said and done people need it. People need a place to live, and businesses need a place to conduct their daily affairs, and this translates into it being valuable. Also, while values may ebb and flow, the overall direction is upward based on replacement cost and high entry barriers.  

When it comes to real estate the most common type the average person is likely to own is a residential unit, The collapse of home prices has a greater impact on the economy than lower stock prices because it affects more people and reaches deeper into the consumer's psyche. This can generate financial insecurity that causes owners of property to reduce spending and send the economy into a recession. It is the wealth effect in reverse. 

It seems, no matter how many times it happens, we still love pumping up real estate valuations only to watch them collapse again. Still, in my opinion, if you have the skills and temperament to handle such an investment, it is where you should stash the bulk of your wealth. To clarify, you should buy only when prices are super low and plan to hang on to the property for a long time. You should also purchase property that will generate revenue and has the potential to eventually rise in price.

As in all investments, real estate presents a challenging learning curve and is not for the faint of heart. When empty it drains away your wealth and  the competition from market insiders is not to be discounted. These insiders, agents, attorneys, bankers, REITs, and big money have several strong advantages over independent owners. The place they fall short is they often have to endure huge inefficiencies within their organizations and tend to get mired in red tape.  

Two great opportunities were squelched by my over cautious-attorney years ago, these guys can be deal killers. When all is said and done, I paid this fella to teach me this valuable lesson. The reason I like real estate and view it as a solid piece of an investment portfolio is that it will still be there after paper promises have been proven worthless and vanished. The reason they call it "real estate" is that it is"real."


 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Sunday, November 20, 2022

The CPI Inflation Number Is A Lie, And That's A Fact

It is important to remember the CPI inflation number is a lie. This means even if the CPI falls dramatically in 2023, we may, or most likely will still have inflation. When economic growth is slow and unemployment rises, inflation takes on the moniker of stagflation. Currently, the website ShadowStats claims real inflation is closer to 17.15% rather than the 8.5% that the media, the Biden administration, and the Federal Reserve claim.

America’s inflation is now the highest since 1981. The number slightly above 17% is based on calculating inflation the same way economists and politicians did in the 1980s. Yes. inflation is a problem and indicators such as the inverted yield curve in the bond market are screaming that we should expect a recession. Considering what we are seeing and the fact Fed Chairman Jerome Powell has warned of pain ahead, there is good reason to think he is telling the truth. 

The crux of this issue is that there is a huge difference between these two views of inflation and accepting the wrong number as fact could greatly impact your future. This rapidly becomes apparent in retirement for those older Americans fortunate to have accumulated some savings. The problem is that unless their investments perform at least as well as inflation they face seeing their wealth vanish into the deep dark hole of inflation.

This Chart Indicates The CPI Inflation Number Is A Lie

Decades ago, politicians and those concocting this system created it as a way to reduce the cost of living adjustments for government payments to Social Security recipients, etc. By moving to a substitution-based index and weakening other constant-standard-of-living ties those reporting inflation have muddied the water lessening the impression of just how much our cost of living is being impacted by inflation. The general argument used to promote this change was that changing relative costs of goods results in consumers could easily substitute less-expensive goods for more expensive goods, the reality is that this assumption is often false.

Allowing for a substitution of goods within the formerly "fixed-basket" supposedly allows the consumer flexibility in obtaining a “constant level of satisfaction." This adjustment to the inflation measure was touted as more appropriate for the GDP concept in measuring shifting demand and weighting actual consumption. Other tricks were also used to give the illusion of less inflation. In cases where the quality of the product is deemed by the government to be "improved" prices in the CPI, calculations are now adjusted lower to offset the higher quality. Extending this idea the Baskin Commission Report, December 4, 1996, actually used steak and chicken as its substitution example. 
While substitution-related alterations to inflation methodologies were made beginning in the mid-1990s the introduction of major changes to concepts geared towards making us feel better about things began in the 1980s. The aggregate impact of the reporting changes since 1980 has been to reduce the reported level of annual CPI inflation by roughly seven percentage points meaning there is no question as to the understatement of inflation. If the methodological changes did not reduce CPI inflation reporting significantly, the politicians would not have pushed the changes through. Where the rubber meets the road is that without these changes, Social Security checks would be more than double what they are today.
Basing Decisions On A False Inflation Premise Is Problematic

Of course, if you concede the real rate of inflation is higher than the CPI indicates, charts such as the one above become invalid. Higher inflation than reported also feeds into the Fed being forced to raise the interest rate to destroy and slow demand. Expect a hard landing, wild rallies in the markets in my view are more a reflection of investors taking short positions using tight stops. This means those shorting this market often paint a target on their back and become sitting ducks for the algorithms generated by computer trading. These rallies are not a sign of a strengthening economy. All this translates into volatility and a somewhat unstable investment landscape. 

The ugly reality of inflation is apparent during a shopping trip to a grocery store or stores such as Walmart. Sadly, what we see is the type of inflation that directly impacts many of the consumers that can least afford it. Recently product manufacturers like Coca-Cola, Pepsi, and Procter & Gamble all started raising prices across the board, which means that "something has to give." Retailers can only absorb so much of these increases before being forced to pass them on to consumers. Walmart values low prices and it is a key part of its marketing strategy but higher wages, transportation costs, and e-commerce investments have all pressured Walmart to bump many prices higher.

Years ago when America was experiencing what the late economist Allen Meltzer described as "The Great Inflation" his take was that inflation generally was not considered a major problem until it rose into the double-digit area. Still, I maintain the view the manipulation of data to artificially lower the official rate of inflation is very harmful in that it feeds into the illusion of economic stability. This helps both politicians and central banks sell the idea that inflation is not and will not become an issue. 

The problem comes when these bogus CPI numbers are used by individuals to plan and make decisions concerning their investments and retirement needs. I further contend that inflation would be much greater if more money was flowing into tangible goods rather than paper investments and promises. For proof of the real rate of inflation just look at the surging replacement cost resulting from recent storms and natural disasters. 
Beware, taking the CPI numbers reported to heart may cost you dearly in the coming years. We are lied to about how invasive inflation has become and how our currency is being debased. The only way we can protect ourselves is to invest in places that give us a chance to move with inflation. This is not easy and the risk associated with doing so is often great. How to protect our wealth from the scourge of inflation has become the most crucial economic issue individuals face. Good luck with that.
 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Monday, November 14, 2022

Yes, 3D Printed Steaks Are A Thing

Believe it or not, 3d printed meat may soon be on its way to a store near you. Reuters recently reported that Israel's Redefine Meat has struck a partnership with importer Giraudi Meats to drive the distribution of its 'New Meat' steak cuts produced on 3D printers. At this time, they will be targeting the European market.

Redefine hopes to reach thousands of restaurants by the end of next year with its plant-based whole cuts of alternative meat. Their product, which mimics meat, or as they say, flank steak, is a mix of soy and pea protein, chickpeas, beetroot, nutritional yeasts, and coconut fat.

The Israeli company has been working with about 150 restaurants in Israel, they say the whole cuts they offer will broaden the appeal of alternative meat products. These, up until now, have mostly been limited to ground-beef dishes, including hamburgers and sausages.

Is This What We Want?
As the larger cuts of alternative meat which are more complicated to produce evolve, companies are gearing up to meet the demand which could reach $140 billion by 2029, according to Barclays. This would account for about 10% of the world's market for meat.

"We're scaling up the capacity. Every batch that we make is five times larger than the previous batch. So we're changing ... the machines, the flow and we're also changing the product attributes." Redefine Meat's CEO Eshchar Ben-Shitrit said.

To be clear, Redefine Meat, is not the only company moving in the direction of what some of us see as "fake meat." In fact, competition in this sector is growing, players include California's Beyond Meat (BYND.O) and Impossible Foods as well as Spain's Novameat, and Israel's Aleph Farms, which is developing a method to cultivate meat in the lab from cow cells.

Adding New Meaning To, Where's The Beef?
It is likely that if Europe does not reject this concoction, it will soon reach our shores. To many Americans and other people across the world, this will most likely be viewed as an abomination pushed upon us by climate change activists that see cattle as harming the environment. 

This move to produce food in ways foreign to nature can also be framed as proof that mankind is moving further from its roots and off into some strange bizarre future. The following link; takes you to a video about Redefine Meats and its products. This is certainly not something our ancestors would not have seen coming.

Tuesday, November 8, 2022

Inflation May Remain Around 5% For Years

The view that inflation will be around for some time is growing. Many people in the inflation camp see at least 5% inflation will stay with us for most of the next ten years. This is something we should consider and note because the ramifications would be huge. It is a prediction that is likely and lives in the area between runaway hyperinflation and deflation.

The whole inflation regime dictates how everything is valued. It is important to remember inflation affects everything but not equally. My premise is that wealth will flow out of paper promises and fiat currencies and into tangible assets. Such a shift in where money is invested is a game changer. If I'm correct, this will result in a fundamental change in the economy.

The recent CPI numbers have come in hotter than expected. Headline CPI month over month was double expectations with core numbers rising 6.6% year over year. These numbers are the highest since August 1982. Going forward it is likely we will see inflation in services and "fees" continue to rise as the prices of goods begin to slow. Adding to our pain as consumers is the fact the CPI routinely understates inflation by using a formula based on the concept of a “constant level of satisfaction.” This was concocted by politicians and their advisers to reduce the cost of living adjustments for government payments to Social Security recipients, etc.

Services Inflation Continues To Rise As Prices Of Goods Slow

Source: Bloomberg

The argument for deflation is very clear, we have too much debt and when defaults occur it will trap us in a deflationary vortex. Most deflationists think by the time you factor in demographics we will find ourselves trapped in a long and painful deflationary cycle. The general consensus is that as people age they buy less and spend less. This leads people to see an aging population, such as we have in America, will add to the forces favoring deflation. 

The flaw in their thinking may lay in the fact that a lot of money will be spent by the government to maintain both their health and support those retiring with little or no savings. Also, when people retire most no longer contribute to the supply side of the economy but move completely to the demand side. How can we say older people consume less when they generate huge medical bills and have other special needs? Even if the cost is shifted to the government it still shows up as consumption.

Some people are predicting inflation will soon drop based on the idea much of the data reflecting inflation flows from past numbers that reflect what is already behind us meaning we are looking in the rear-view mirror and retail prices are about to drop due to high inventories. Still, some problems refuse to fit into the narrative that inflation has peaked. How do you pull forward rent, health insurance, energy, etc? 

Sure some deflationary numbers may be coming out on the retail side of things due to heavy inventories but this may not be enough to offset prices rising on the things we need. The problem is, inflation does not always cure itself. You can't tamp down inflation by merely talking about how high prices destroy demand. Many things driving inflation, such as rent increases are not all behind us. As leases expire each month renters are brought up to the current pricing. The same thing can be said about utility bills and other needed services. Do not expect the cost of shelter to fall. Too many of the costs feeding into this sector are still moving higher.

Unfortunately, those seeing deflation ahead base it on a horrible economy, falling liquidity, and the destruction of demand rather than improving supplies. We have to recognize the difference between supply-side and demand-side inflation. With this in mind, you could say, a broken supply chain also feeds into the inflation picture and could make a case that the supply chain is the economy.   

Recent "hotter than expected"  PPI data indicates inflation will be with us for some time. It seems to have deeper roots and may prove stickier than originally thought. The idea we may see both a weak economy and stagflation dovetails with a recent piece put out by David Stockman. Of course, this debate is far from settled. There is a lot going on and few pundits or economists agree on where this is headed. 

Below is a sampling of a few financial headlines from last month that indicate economy watchers are all over the place as to where the economy is headed.

             Fed’s Williams sees steep decline in inflation ahead
             Oct. 3, 2022, at 3:27 p.m. ET by Greg Robb

The 4% retirement spending rule may be too high. Could you get by on 1.9%?
            Oct. 3, 2022 at 10:59 a.m. ET by Mark Hulbert

           Europe’s red-hot inflation numbers may be ready to cool off, says Morgan Stanley
           Oct. 3, 2022, at 10:40 a.m. ET by Barbara Kollmeyer        


The elephant in the room remains that restrictive monetary policy  means that liquidity is vanishing and the risk-reward for loaning money on a promise is breaking. When credit fails to grow the economy rapidly falls into a recession or depression. When credit is a problem, how do we move the economy forward? The big question is whether destroying the wealth effect in certain sectors of our economy will offset the redeployment of wealth in others enough to halt inflation.

The massive mindless "exchange-traded-funds" trade where all ETFs own the same ten stocks has supported this market over the years. Unfortunately, this sector seems greatly out of wack and hugely overvalued. If money starts to flow out of the ETFs and this sector breaks markets may go into a free fall. This would be an indication the markets may be underpricing the duration of high-interest rates. 

Footnote; The following AdvancingTime article details how the CPI understates inflation by using a formula based on the concept of a “constant level of satisfaction” that evolved during the first half of the 20th century in academia. Politicians touting the benefits of this system created it as a way to reduce the cost of living adjustments for government payments to Social Security recipients, etc.


 (Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)

Sunday, November 6, 2022

Lotto Madness Has Again Been Unleashed!

Again many Americans are being inflicted with "lotto madness." The US Powerball jackpot is now a world-record $1.9 billion after there was no winning ticket for Saturday's prize. The previous world-record jackpot was set in 2016, was $1.59bn, and split between three winners. 
For many people a Powerball ticket is a cheap trip down fantasy lane for the poor it is throwing away money they can't afford. The odds of winning the jackpot in Monday's draw stand at one in 292.2 million, according to Powerball. Tickets cost $2, and a winner can choose a lesser lump sum payment or choose to receive the full amount in an annuity paid over 29 years, most winners opt for the upfront cash option. A ticket must match all six numbers drawn to win the jackpot and if more than one winner has the same combination of numbers they share the jackpot.
The failure of anyone to win America's premier and largest lottery ever has caused the Powerball jackpot to soar creating a phenomenon that could be called "Lotto Madness." The fact this has spread like a fire and swept across America reveals something very significant about our culture. While this might not reach the level of needing a post-event "debriefing" a closer look at how these large lotteries affect our culture may be important and meaningful. 
How people react to the idea of winning a large sum of money exposes more than a few flaws and insight into our values and the way we think. It seems that society has reached the place where it thinks the road to riches is not through the valley of hard work and savings and that wealth can be achieved without sacrifice.

Family Guy Wins The Lottery!
When we have a large jackpot, lotto madness has a way of extending into the media and even influencing television shows like the animated comedy "Family Guy." During one of the big payouts years ago, an episode had the Griffin family living on a strict budget until a local news story on the lottery influences Peter to buy a ticket in hopes that he will win and set the family on a better financial platform. Peter reveals to his family that he has not bought just one, but several thousand lottery tickets, admitting that he has taken out a second mortgage on the house in order to buy them. After watching the results of the lottery that night, they discover that they have indeed won, they have obtained the American dream.

Articles occasionally appear that reveal and compare incomes and salaries across the nation. Such articles show, an athlete making $15,900,000 a year, next to a government employee making $130,000, a CEO at $120,000,000 a year, and a business owner earning $24,000. This should give us pause. No wonder we as a society are screwed up as to how we value and relate to money. It reflects on not only our values but the fairness and income inequality. I feel it is hard to measure the discontent generated by such fluff pieces and irresponsible articles like these that are often inaccurate or fail to tell the full story.

It is clear that many people feel the trade-offs we face by living in a free market-consumer-based society and it wears away at them. The fact is economic growth is accompanied by  “wheel spinning”, inefficiencies and waste.  While the benefits of our system often outweigh the negatives we find society is paying a toll through increased rates of addiction, depression, and economic inequality.  On the emotional side, many people are not achieving the degree of happiness or contentment they had hoped for, instead, they are left feeling insecure and unfulfilled. This all contributes to the phenomena of people going  completely bonkers and off the deep end at the prospect of winning a great deal of money even if the odds are massively against them doing so.

Government-sanctioned gambling and especially lotteries send a message to the populace that conflicts with many important cultural values and can have far-reaching effects. These messages promote a "let it roll" mentality.  Simply allowing such activities and promoting them are two different issues.  The government has climbed into bed with the devil to gain revenue from taxing these activities.  Gaming does not benefit the average man.  Truth is the laws of nature and the odds are against you, that’s why they call it gambling and not winning. It might be interesting to place more focus on how many people suffer post-lotto depression when they are unlucky enough not to win.

Huge sums of money from lotteries are unmanageable by the average man and often cause adjustment difficulties, resulting in pain and not happiness. Large jackpots also result in a disconnect between true and associated values causing unrealistic expectations.  Thoughts that jackpots above one hundred million dollars can be ours create a false impression of reality that is harmful in cultivating positive work ethics and makes a mockery of those who toil to produce a better life. In the past, some winners have used the line "be careful what you wish for" after having their life turned upside-down and disrupted by good fortune. The infamous Jack Whitaker is often quoted as saying he wished he had torn up his ticket after he was afflicted numerous times by the "lottery curse."
Robert Ringer, wrote a book titled "Looking Out For #1." In it, he wrote, "I've never met a billionaire, but I have had the opportunity to know many people in the $5 million to $100 million range, and there's one thing that stands out in my mind about all of them; not only do they refrain from tossing money around loosely, they're even careful about the way they speak of it. There's even respect in their voices at the mention of even $10."
You must adjust for inflation but successful hard-working people have a respect for money that many people have failed to acquire. A tenant who sometimes fails to pay his rent on time, but has had to borrow a few dollars on occasion recently told me he is working on a couple of things and is going to be a "billionaire", to my surprise he totally skipped over the millionaire stage of the process. Prediction! The pawnshops will be crazy busy going into the next drawing because a slew of losers produced last week are all tapped out. If they can get any money at all many of these people will double down.

Our modern consumer-based society has made us slaves to material objects and producers of waste.  Many economists urge us to consume, even when we must borrow to do so, saying it creates ever more jobs. We follow Governments and leaders that we often neither like nor trust.  Today’s youth grow up besieged by marketers and are then vilified for being materialistic, marred by too little perspective, it is little wonder so many find themselves angry and disappointed. During times of massive well-publicized jackpots, people use money that was intended to pay rent and even the food stamp money given to them by taxpayers to buy tickets. Bottom-line this is indeed madness.