Bits and Pieces

So many threads to today’s news. A tidal wave of news items that alone mean nothing until someone comes up with a catch phrase or a fearful word associated with the item. Mostly it is the fear element.

Here’s what I mean:

Interest Rate Hikes: interest rates have been much too low in recent years. Unthinkably low rates. Mortgages for 30+ years at 2.7%? Are you kidding? I would have loved paying that low rate over the many years I had a mortgage! But low rates also harm investors in treasury notes and bonds, loans and anything related to interest rates. A retiree, for instance, needs a return on investments well over 5% if interest income is to have any weight in a monthly budget. Interest rates affect us all; some more, some less. It all depends on if you are a net borrower or net investor.

Will the Federal Reserve hike core interest rates by 1 full percentage rate? Maybe, most likely 75 basis points. This will not be inflationary unless you refinance debt at the higher rates, or you have an adjustable-rate loan. Producer prices could inch up due to interest costs embedded in their producer costs. Most likely the interest hike will slow investment and commercial activity. This will give pause to rising prices when transactions soften. [ Note: The Fed did raise rates 75 basis points.]

Gas prices: I tried to fill my gas tank this morning, but only got three-fourths of a tank because the debit card app for the gas pump shuts down at $99. I don’t know why, but it does. I could have had another 4.5 gallons, but at $6.57 a gallon, that would have added another $30 to my $99 debit transaction. $129 for a fill up. This is a 20-gal tank on an old V8 car, 91,000 miles on it, using premium gas. Its gas mileage is a low 15.5 mpg. Our answer? Drive less, much less. We drive maybe 325 miles per month. That’s less than 4000 for the year. At least the auto insurance cost is down!

The fear of gas prices is real for those without public transportation and working at a job site. Commuting is a budget buster for those households. But the fear is temporary. Prices will decline as a percentage of household income eventually.

Shortage of new cars: the shortage of new cars helped me. I had a young vehicle on lease. I had arranged a price for 15,000 miles per year for 3 years, for a total of 45,000 miles. Near the end of the lease, my total mileage was only 17,000. I bought out the lease and in two weeks sold it for about the cost of the used vehicle we now drive. It is a wonderful old car that suits our space and hauling needs. Both of us use walkers and soon one will be using a wheelchair. The car will serve us well. No auto loan. Repair bills, sure, but no loan payments.

COVID surges to expect: COVID infection rates go up and down. The declines are celebrated as masks are whipped off and fun returns. Then family gatherings return and large parties. Then shortly after the infection rates soar. Who would have thought, huh? Well DUH! Of course, the rates bounce back! So, wear the mask and be smart.

Housing markets unstable, scary: too many people chasing too few houses. Solution? Stay put and make your current home better to live in. Freshen it up! Learn to live in small spaces. Remember the Tiny House Movement? 200 to 300 square feet was the norm. People complain about living in 700 or 800 square feet. No wonder the Tiny House Movement stalled.

June 17, 2022

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