May Market Commentary: The Fed Owned It, But Can They Control It?

April Recap and May Outlook

COVID concerns took a definitive backseat as mask mandates on flights ended, and the concerns about the economy turned to how bad things will get. The concerns over the disruption of the ongoing war in Ukraine, 40+ year record inflation, and the resulting amping up of the Fed’s intentions on rate increases moved distinctly into the foreground. Let’s look at some headlines:

The IMF released projections for the impact of the war in Ukraine. Global growth will likely slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January.
The war isn’t just impacting growth. The IMF also reported that war-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5.7% in advanced economies and 8.7% in emerging market and developing economies—1.8 and 2.8 percentage points higher than projected last January.
In remarks at a panel discussion at the IMF on April 21^st, Chairman Powell reiterated that it is appropriate “to be moving a little more quickly” on rate hikes. That translated into guidance on the first 50-bps rate increase in 22 years.
Economists began talking about “stagflation.” Stagflation is high inflation, high unemployment, and slow or negative real economic growth. Stagflation fears rise out of the potential for the Fed to overshoot and tip the economy into recession. Another way to think of stagflation is a circular firing squad. In stagflation, the moves the central bank makes to rescue the economy push it further into recession.

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A Note on the Invasion of Ukraine

The news about the invasion of Ukraine is distressing on a humanitarian level and unsettling when thinking about the impact of increased volatility on investment portfolios.

Added to already high inflation and the market’s uncertainty around the Federal Reserve’s future interest rate increases, markets are now reeling from the added pressure of what will likely be more aggressive sanctions.

Let’s break it down and look at some of the threads we’re tracking.

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GMB Ep #114: Behavioral Economics With Professor John Howe

When confronted with significant decisions, our thoughts frequently stand in the way of rational decision-making. Today’s episode of Grow Money Business features John Howe, a finance professor at the University of Missouri. He is an award-winning educator and researcher with expertise in investments, behavioral economics, household finance, corporate finance, and corporate governance. He is also the author of the book The Foolish Corner: Avoiding Mind Traps in Personal Financial Decisions. Throughout this episode, he shares his expertise and wisdom on behavioral economics, focusing specifically on the behavioral biases we all have regarding investing.

Show Notes

[03:36] Behavioral Economics – Prof. Howe discusses his background, career, and current activities.

[07:23] Kahneman’s Nobel Prize – Behavioral economics is a field of study that lies at the nexus of economics and psychology. Prof. Howe discusses how the Nobel laureate’s teaching of behavioral economics impacts his teachings.

[10:53] Diversified Portfolios – Prof. Howe highlights the importance of diversifying one’s investments.

[15:00] Confirmation Bias – Confirmation bias is a term that refers to our natural predisposition to be receptive to new information that confirms our existing beliefs. Prof. Howe explains how confirmation bias affects the decisions we make on a day to day basis.

[20:19] Transitions – Individuals frequently undergo transitions, such as selling a business they have built over the years or acquiring another. Prof. Howe shares his insights on what should be considered during such a transition.

[26:43] More on Biases – Prof. Howe explains the reason behind biases by presenting examples from evolutionary psychology.

[30:00] Reproducibility – One of the trademarks of the scientific method is the ability to replicate an experiment and obtain the same results. Prof. Howe broadly discusses the reproducibility issue in psychological research.

[40:49] Better Decisions – Prof. Howe explains how being well informed on biases can help us making better decisions in the future.

[49:31] The Future – Prof. Howe discusses the current research going in the field, as well as the future of behavioral economics.

[57:59] Research – Prof. Howe shares the current scientific issues that pique his interest.

[01:02:29] Mental Health – Prof. Howe shares his observations concerning the state of mental health in the United States and the way it affects people’s financial decisions.

[01:06:28] Gamblers – Prof. Howe outlines his view on gambling and how this relates to the human capacity for pattern recognition

[01:08:52] Books – Prof. Howe shares several books that are worth reading.

Resources

Connect with Professor John Howe:

LinkedIn: linkedin.com/in/john-howe-1013498/

Newsletter: johnhowe.substack.com/welcome

Mentioned in the episode:

Your body language may shape who you are | Amy Cuddy:

youtube.com/watch?v=Ks-_Mh1QhMc

The Foolish Corner: Avoiding Mind Traps in Personal Financial Decisions:

amazon.com/Foolish-Corner-Avoiding-Financial-Decisions/dp/099851070X

Science Fictions: How Fraud, Bias, Negligence, and Hype Undermine the Search for Truth:

amazon.com/Science-Fictions-Negligence-Undermine-Search/dp/1250222699

Rationality: What It Is, Why It Seems Scarce, Why It Matters:

amazon.com/Rationality-What-Seems-Scarce-Matters/dp/0525561994

Misbehaving: The Making of Behavioral Economics:

amazon.com/Misbehaving-Behavioral-Economics-Richard-Thaler/dp/039335279X

Thinking, Fast and Slow:

amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness:

amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681

GMB Ep #113: Leveraging Mindset to Build & Sell Businesses With Dominic Rubino

Regardless of what profession or industry we’re in, our mindset is a crucial factor that defines growth. Today’s podcast deviates slightly from the norm in terms of technical content and delves deeper into the philosophical domain. Our guest, Dominic Rubino, is an entrepreneur with a unique background. Dominic has worked in various enterprises and is now a coach, supporting employees in the construction industry in developing a positive attitude and increasing profits. Throughout the episode, he shares his expertise and experience on aligning your business activities with your personal life and creating the life you desire through your business operations.

Show Notes

[02:55] Dominic’s Background – Dominic explains his background, his current endeavors, and how he got to where he is today.

[05:58] Mindset – Dominic discusses how our success or failure is determined by unique perspective, and the lens through which we view the world.

[10:35] Business Coach – Dominic discusses the importance and role of a business coach.

[12:47] Success – Dominic shares his thoughts on defining success and suggests ways for individuals to plan strategically toward it.

[17:49] Circle of Friends – Dominic emphasizes the importance of having a supportive community of friends.

[20:42] Strategic Planning Process – Dominic discusses the strategic planning process, and highlights simple exercises and reading material to help you along the way.

[26:21] Personal Experience – Dominic shares personal experience gained from his entrepreneurial endeavors.

[38:21] Mindset in Coaching Business – Dominic discusses how he maintains his mindset as a coach.

[41:28] Dominic’s Podcast – Dominic talks about his podcasts and what inspired him to start them.

Resources

Connect with Dominic:

LinkedIn: linkedin.com/in/dominicrubino

Website: profittoolbelt.com/

Mentioned in the episode:

Traction:

goodreads.com/book/show/8549192-traction?from_search=true&from_srp=true&qid=L77ID7gyYk&rank=2

Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm:

goodreads.com/book/show/16120.Mastering_the_Rockefeller_Habits?from_search=true&from_srp=true&qid=wctFOxvrHH&rank=1

The Ultimate Playbook On Building A Profitable Construction Business:

constructionmillionairesecrets.com/

GMB Ep #112: Deferring Taxes Using 1031 Exchanges & Delaware Statutory Trusts with Jamie & Patrick Furlong

1031 Exchanges and Delaware statutory trusts are both nifty instruments for financial planning. In today’s episode, we explore more about the deferring taxes using 1031 Exchanges and Delaware statutory trusts with Jamie & Patrick Furlong. Jamie & Patrick specialize in 1031 Exchanges with DST’s and other securitized real estate investments. They exclusively serve clients seeking to acquire replacement properties in a 1031 exchange, navigate the complexities and time restrictions in the ever-changing 1031 environment through their company, Legacy Investment Real Estate.

Show Notes

[04:05] Story of Jamie & Patrick – Patrick shares their origin story, what they do, and how they do it.

[11:32] Delaware Statutory Trust – Jamie and Patrick explain Delaware statutory trust in detail, sharing compressive real-life examples.

[19:37] Importance of DST – Jamie talks about the significance of Delaware statutory trust and why someone should invest a property into a Delaware statutory trust in the first place.

[33:15] Holding Period – Non-traded real estate investment trusts can bring you a vast misfortune. Jamie discusses the holding time you should consider when contemplating real estate investment trusts.

[37:46] Role of the Manager – Patrick talks about the manager’s role in Delaware statutory trusts.

[46:49] 1031 Exchange Tax Code – Jamie and Patrick talk about the predictable changes in the 1031 Exchange tax code.

Information provided today is for educational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice.

Please consult the appropriate professional regarding your individual circumstance.

DST 1031 properties are only available to accredited investors (typically defined as having a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years; or have an active Series 7, Series 82, or Series 65. Individuals holding a Series 66 do not fall under this definition) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney.

There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Legacy Investment Real Estate is independent of CIS.

Resources

Connect with Jamie and Patrick:

Website: legacyire.com/

Jamie

LinkedIn: linkedin.com/in/jamie-furlong-927b9658/

Email: jamie@legacy1031exchange.com

Patrick

LinkedIn: linkedin.com/in/farmranch1031exchangennn/

Email: patrick@legacy1031exchange.com

GMB Ep #111: Diving Into Crypto With Tim Picciott

Cryptocurrency has been one of the most popular topics in the financial media in the last few years. It is a transferable digital asset or digital form of money exclusively available online based on blockchain technology. My guest today, Timothy Picciott CFP® CRPC®, Wealth Advisor in Innovative Advisory Group, is a pioneer in cryptocurrency wealth management solutions. He works with Bitcoin and cryptocurrency early adopters to give innovative financial planning solutions, enabling them to pay a minimum tax on their highly appreciated asset as legally possible, while also educating crypto fans on investing in “Crypto IRAs” through self-directed IRAs and 401(K)s.

Show Notes

[03:19] Tim’s story – Tim shares details about his career and how he came to be in his current position.

[10.48] Fiat Currency – Tim expresses his thoughts about the evolution of fiat currency.

[14:41] Bitcoin and Blockchain – Tim elaborates on his views on Bitcoin and blockchain technology.

[16:57] Opinions – Tim discusses the significance of studying Bitcoins properly and thoroughly.

[22:11] Double-Spend Problem – Tim explains Bitcoin’s potential of solving the double-spend problem.

[27:58] Tech Aspects – Tim goes into greater detail on the technical aspects and benefits of Bitcoin.

[31:00] Electricity – Another objection leveled with Bitcoin is the electricity required to mine them. Tim evaluates the effect of power on bitcoin mining and the resulting implications.

[34:43] Smart Contracts – Tim discusses how smart contracts enabled by blockchain technology have the potential to transform lives.

[36:00] Geopolitical Implications – Tim shares his insights on current world trends along with his take on the US and China’s movements on Bitcoin.

[46:59] Future of Bitcoins – Tim goes to great length on his predictions for Bitcoin’s future.

Resources

Connect with Tim:

Website: thelibertyadvisor.com/

Website: innovativewealth.com/

LinkedIn: linkedin.com/in/timothy-t-picciott-cfp%C2%AE-crpc%C2%AE-547b0b8/

Instagram: @the_liberty_advisor

Podcast: The Liberty Advisor Show W/ Tim Picciott: podcasts.apple.com/us/podcast/the-liberty-advisor-show-w-tim-picciott/id1238430499

Mentioned in the episode:

Ep #107 – Central Bank Digital Currency: Dangers & Possibilities with J Scott Christianson: growmoneybusiness.libsyn.com/website/ep-107-central-bank-digital-currency-dangers-possibilities-with-j-scott-christianson

GMB Ep #107: Central Bank Digital Currency: Dangers & Possibilities With J Scott Christianson

Money has taken a lot of different forms over time, including gold & other metals in addition to fiat paper currencies. It’s arguable whether bitcoin and other decentralized currencies are the next version of money. What’s clear is that governments around the world are in an arms race to create their version of “centralized” digital currency. In today’s episode of Grow Money Business, J Scott Christianson joins us to describe central bank digital currencies, the arms race to create them, and potential uses and misuses in the future.

Show Notes

[02:44] Digital Currency – While digital currencies have become relatively recent mainstream phenomena, they have existed for decades. Scott discusses this new endeavor of developing digital currency.

[07:28] Adopting Digital Currency – Scott highlights the gravity of adopting digital currency in a country by assessing its dangers and possibilities.

[10:39] Transition – Scott outlines how moving from a conventional reserve system to digital money works logistically.

[13:37] China and Digital Currency – Scott broadly talks about China’s stance on digital currency from various angles.

[19:37] China and El Salvador – While China prohibits bitcoin transactions and mining, El Salvador accepts Bitcoin as legal tender. Scott shares his perspective on this schism.

[23:36] Role of USA – Scott discusses the options that the US may have in its arsenal to delay China’s deployment of programmable money.

[28:25] Banking System in the Future – Scott discusses the potential of more authoritarian counties attempting to implement controlled digital currencies, and his predictions for the global banking system in five years.

[35:23] Fiat Currency and Cryptocurrency – Scott shares his thoughts on that intersection between fiat currency and cryptocurrency.

[40:42] Artificial Intelligence – Scott briefly discusses artificial intelligence and his predictions for where it will go in the next five to ten years.

[48:48] Life with AI – Scott shares what applications he believes AI will enable in the following years.

Resources

Connect With Scott:

Website: christiansonjs.com/

Newsletter: frtech.substack.com/

LinkedIn: linkedin.com/in/jscottchristianson/

Instagram: instagram.com/jscott_mo/

Mentioned in the Episode:

China’s Second Continent: How a Million Migrants Are Building a New Empire in Africa:

goodreads.com/book/show/18373202-china-s-second-continent

Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth and How to Fix It:

goodreads.com/book/show/36204377-edge-of-chaos

GMB Ep #105: All About Inflation

From October 2020 to October 2021, the Consumer Price Index for All Urban Consumers grew by 6.2 percent, which according to the Bureau of Labor Statistics, was the most significant 12-month gain since November 1990. In relation to this data, we have dedicated today’s episode to exploring more about inflation. Throughout this episode, Grant shares his thoughts about the impact of inflation on the present economic environment and numerous ways to mitigate the risk of inflation.

Show Notes

[04:21] CPI – Grant explains what CPI is and its relationship with the inflation rate.

[06:40] Inflation – Grant explains inflation in simple terms, pointing out several misconceptions about it.

[09:20] Will the History Repeat? – Grant analyzes and compares the current economic context in the US with the economy in the late 70s and early 80s.

[10:12] Gold and US Dollars – Grant broadly explains the evolution of the relationship between gold and US dollars.

[15:30] Present Economic Situation – Grant delves deeply into the current economic climate in the United States from various perspectives and then provides his thoughts on those observations.

[20:55] TIPS – Grant discusses how increasing your allocation to Treasury Inflation-Protected Securities can act as an inflation hedge.

[23:32] Series I bonds – Grant identifies investing in these types of bonds as an excellent alternative to hedge inflation.

[28:26] Investing in Gold – Grant discusses the potential of investing in gold and shares his thoughts on the matter.

[32:12] Equity – Grant identifies equities as an excellent inflation hedge in the long term.

[34:52] Asset Allocation– As a final remark, Grant discusses his ideas on asset allocation in general.

Resources

Bureau of Labor Statistics & CPI-U: bls.gov/cpi/

Treasury Direct & Series I Bonds: treasurydirect.gov/indiv/products/prod_ibonds_glance.html

GMB EP #102: Don’t Let Cap Gains Distributions Catch You Sleeping

Every year mutual funds are required to distribute capital gains to shareholders – whether you like it or not. Even though “gains” are typically a good thing, they can also leave you with a big unwanted tax bill. This week we cover everything you need to know about mutual fund capital gains distributions, including how to forecast, plan for, and avoid them.

Show Notes

[02:35] Important Period – Grant starts the discussion by mentioning the parties that need to stay updated about mutual funds during this time of the year.

[05:45] Structure of Mutual Funds – Grant provides a broad description of the structure of mutual funds from various perspectives.

[11:16] Capital Gains Distribution – Keeping an eye on the company portfolio in the mutual fund is important as an investor. Grant shares his thoughts on how to benefit from capital gains distributions.

[14:12] Options for the Investors – Grant explains the numerous options that the investors have at the year-end related to mutual fund investments.

[16:45] Active Mutual Funds and Passive Mutual Funds – Grant analyzes the effect on the distributions of capital gains by active and passive mutual funds, giving numerical examples.

[19:48] Exchange Traded Fund – Capital gains distributions of exchange-traded funds are quite different from the above. Grant dives into exchange-traded funds explaining it with several examples.

Resources

Capital Gains Roundup: 2021 Edition | Strong performance and outflows generate some big taxable distributions: morningstar.com/articles/1065314/capital-gains-roundup-2021-edition

Fund Capital Gains Distributions: What to Expect in 2021 |A strong year suggests that a decent amount of capital gains will be paid out: morningstar.com/articles/1063488/fund-capital-gains-distributions-what-to-expect-in-2021

GMB Ep #100: Reducing Small Business Health Insurance Costs With John Butler

Health insurance is an essential aspect in recruiting and retaining employees as well as sustaining productivity and employee happiness in a small business. In today’s episode, we have a distinguished guest, John Butler, joining us to take a deep dive into what business owners should know about health insurance. John is a national C-suite health benefits consultant, strategic coach, and the author of “Health Insurance Sucks,” the number one ranking book on Amazon in its category. Throughout this episode, John shares his insights on how businesses can reduce the cost of the health insurance they provide to their employees.

Show Notes

[02:22] John’s background – John shares his journey and what inspired him to write the book “Health Insurance Sucks.”

[05:25] Healthcare Costs – John explains his observations and findings on numerous methods to reduce healthcare costs.

[07:05] PEO – John describes how small businesses can benefit from Professional Employer Organizations.

[08:20] Custom Plan Solutions – With a comprehensive analysis, John points out how a custom health plan assures the highest quality service with a reasonable cost.

[18:56] Insurance Companies and Brokers – John talks about the relationship between insurance companies and brokers, and shares his thoughts from the perspective of each party.

[34:15] Federal Requirements – John explores the federal requirements and penalties related to employees’ health plans.

[38:54] Health Sharing Programs – John emphasizes the significance of health sharing programs.

[48:28] Current Social Context – The healthcare insurance industry consists of many complex layers. John shares his take on the healthcare plans in the current social context.

Resources

Connect with John Butler:

Website: jb-benefits.com/

LinkedIn: linkedin.com/in/jbbenefitsconsulting/

Mentioned in the Episode

Health Insurance Sucks – The Moral Case for Better Business Healthcare: goodreads.com/book/show/58502517-health-insurance-sucks—the-moral-case-for-better-business-healthcare?from_search=true&from_srp=true&qid=KIWCNRWz38&rank=1