Love, Money + Real Estate #15

The July 4th Edition: Fireworks, food, and some hope-filled optimism

Hello. Welcome to Summer.

I’ve always felt that Independence Day is the official start of Summer. We throw all our cares (of which there are plenty) to the side and celebrate our country’s birth with renewed vigor. Fireworks, if you’re lucky enough to find them this year, help. They’re actually my favorite thing, so I’ll go a long way to see them.

So, does a large plate of BBQ Salami (a family favorite, recipe below) and perhaps a charred dog fresh off the grill.

This doesn’t exactly square with my feeling that my birthday, which is 9 days later on July 13th, is the middle of summer. But, there you have it. We’re all on Covid time.

Unless you’re on a plane headed for somewhere and it gets canceled. That’s happening, too, in which case you’re on airline time.

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Where I’ve been these last few weeks…

I intend this newsletter to be a regular commentary on news relating to money and real estate - of which there has been an avalanche these last few weeks. (Congrats to Colorado, btw!)

But I’ve been overloaded with our busy season at Best Money Moves.

Q2 (and over the last few years, this has bled into Q3) is the time when many companies begin to make their decisions about what benefits to offer employees. It can happen quickly, which means we’re signing contracts. Or, it can be a slower dance, as our team does demos of the product, provides proposals, answers questions, and then does a second or third round of demos for different stakeholders.

Given the record amount of interest we are fielding, it looks like 2022 will be a pivotal year for financial wellness. The year companies finally get that if their employees are financially stressed, they’re not going to be focused on the jobs employers are paying them to do. Simple as that.

I’m happy to say that our time has been fruitfully spent. Despite challenges in the marketplace, Best Money Moves is thriving. Expect some exciting announcements from us in the next few weeks.

(And, if your company needs an award winning financial wellness platform with fabulous content, tools, courses and innovative benefits, all powered by advanced algorithms that personalize benefits, please reach out.)

And, onto the news…

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Recession is already here…

While we wait for the official diagnosis of the economy, some have already begun to bang the drum for a recession. As recently as a few weeks ago, the Fed said it expects a recession in 2023 or even 2024, but my sense is that functionally, the recession is already here.

I’m not alone in this thinking. Cathie Wood, CEO of Ark Invest, has said it. Elon Musk has said it’s inevitable (among other things). The inverting yield curve has projected it. But, now, a leading economic indicator seems to have flipped from barely positive to negative, indicating a second quarter of GDP contraction, the technical definition of a recession.

On July 1st, the Federal Reserve Bank of Atlanta’s GDPNow model published its latest forecast, a -2.1% reading for Q2, down from -1.0% on June 1st.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -2.1 percent on July 1, down from -1.0 percent on June 30. After this morning's Manufacturing ISM Report On Business from the Institute for Supply Management and the construction report from the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth decreased from 1.7 percent and -13.2 percent, respectively, to 0.8 percent and -15.2 percent, respectively.

The next update is July 7th.

Tom Fortino, my co-host on “This Week in Wealth,” and I have been discussing what this recession might look like for the past few weeks and what you can do about it. The best thing to do seems to be happening organically: You’ll want to pull back on spending, save as much as you can, and focus on what really matters to you.

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Inflation is taking a toll…

Over the past few weeks, a number of new surveys have documented that Americans are already struggling to match paychecks (even higher paychecks) to the reality of their living expenses.

Two-thirds of Americans are now living paycheck to paycheck. That grim statistic comes from LendingClub, which reports that 64% of Americans are struggling to pay their monthly bills, just shy of the all-time high of 65%.

But PYMNTS.com’s new data shows that number might get a lot worse in the near future.

More than half of the U.S. population — nearly 150 million adults — currently live paycheck to paycheck, making it the most common financial lifestyle in the U.S.

70% of Millennials are living paycheck to paycheck.

77% of those annually earning less than $50,000 and 62% annually earning $50,000 to $100,000 were living paycheck to paycheck in May 2022, up from 72% and 53%, respectively, in May 2021.

A significant portion of U.S. consumers have experienced financial stressors in the past three years, with 38% facing a life-cycle event such as retirement or moving residences and 33% experiencing a life-altering event such as job loss or disability.

Fewer consumers in the highest income brackets reported living paycheck to paycheck in May 2022 compared to April 2022. The share of consumers annually earning $250,000 or more living paycheck to paycheck decreased from 36% to 30%.

[This last point is what passes for good news in the report.]

With inflation at 8.3%, near a 40-year high, there’s a lot of screaming from all corners of the globe:

• Rising interest rates (which surpassed 6% for a 30-year fixed rate loan in recent weeks, moved down below that level, according to Freddie Mac) have put tremendous pressure on first-time buyers, in particular.

• Food shortages and continuing supply chain issues mean new parents are worrying about feeding their babies.

• Gen Zs and younger Millennials have decided saving money for the future is a fool’s game, and are spending it on food, travel, and even tending corals in the living room. (Plus, it’s apparently more fun to be an influencer and life coach.)

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Will your 401k ever stop feeling like a 301k?

Everyone is wondering whether the stock market has hit rock bottom. To get to that answer, I have some questions:

• Will inflation continue even through a recession? That sounds like a recipe for more losses in the stock market.

• If the best job market in 25 years does an about face and people start losing their jobs, will that keep the Fed from raising interest rates further?

• If housing prices fall in some of the hottest markets (Boise, Las Vegas, Austin, etc.), inflation keeps rising and job losses begin to accumulate, how will that affect consumer confidence? As you can see in the chart below, the University of Michigan Survey of Consumers hit the lowest reading on record.

University of Michigan Survey of Consumers, June 2022

At the end of the day, if consumer sentiment stays this low, and we’re technically in a recession, my guess is the stock market will see further declines.

Two schools of thought: Famed economist Nouriel Roubini, who was one of the people who called the last Great Recession, thinks we could see half the market value wiped out. He said what we’re about to face is what you get if the worst of the Great Recession combined with the worst of the 1970s. He doesn’t think it will necessarily be a recession that’s shallow, brief or benign. And while equally famous economist and Wharton professor, Jeremy Siegel, thinks we’re already in a mild recession, he also believes that now is a good time to buy stocks.

Psychology plays a big part, though. Because so many people are motivated by fear, especially now. So, if we believe a recession is coming, then we’ll stop spending and hunker down. Which in turn will bring on a recession.

And stories like this one, about how Apple’s former top lawyer pled guilty to insider trading, don’t help. (Not to pick on Apple, but this isn’t the first time Apple employees have run into trouble with the SEC for issues relating to backdating and insider trading. Really, isn’t it enough to just make millions, billions or (soon) trillions?)

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Financial stress + Covid rising

At my financial wellness company, Best Money Moves, we can see from user data that financial stress is on the rise. This has happened with the rise of each Covid variant during the pandemic: Initial outbreak, Delta, and Omicron.

And now, at least one, and possibly two new variants are causing concern: BA.4 and BA.5. (I’ve had a first-hand look at one or the other this past week, and I can tell you it’s no fun.)

During the pandemic, the federal government responded by sending people home to stay safe and sending them cash at the same time. That won’t happen now, not with inflation running high and the Federal Reserve cutting its balance sheets, so don’t bother asking.

It’s interesting how different perspectives set the table: In California, a newly announced $100 billion budget surplus will soon fund a variety of cash gifts to help residents cope with rising fuel and food prices. In Chicago, 5,000 families will soon receive $500 per month as a test to see how universal income might help families cope with a variety of social and financial problems.

The Biden administration is still dithering about whether to cancel student loan debt while putting the federal gas tax on hold for three months. Watch for a move on student loan debt closer to the election.

If you want to know how much financial stress American is under in real time, watch the lines at food banks nationwide. They’re starting to grow everywhere. (Here are a few recent stories about food bank lines growing in the Ohio Valley, Kansas, Spokane, WA, Texas, and Michigan.) Longer lines at food pantries and food banks tells you everything you need to know about the real state of the economy. Because if you don’t need one, you don’t go.

Could we see a return to April, 2020, when lines to pick up a bag or box of food stretched for miles and miles? I guess that depends on how this recession, whatever it is, whenever it officially comes, plays out.

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Good reads from Best Money Moves, Think Glink, and LawProblems.com

A brother bought a home with a friend, who sold his share to the brother’s sister. He’s learned that buying a home with family doesn’t always work.

How much is your home worth? This reader paid $700,000 for a Florida home in 2007. And, today it’s finally above that level. She wants to know why her home isn’t worth more. Don’t you?

Gen-Z and Millennials are the largest portions of the workforce. Want to know how to get them to submit their applications?

Thinking about the tax implications of splitting inheritance money? One sibling had her name on everything. The other didn’t. What do you think happened?

A follow-up story on the benefits of water shut-off valves. Given the way the world is going, this is a relatively inexpensive way to protect yourself from dealing with the expense and mess of a major water issue.

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On a Personal Note

I don’t know how you’re planning to celebrate the Fourth of July this year, but I’m guessing charring some sort of protein and vegetables might be on the menu.

In a different year, we’d be grilling up some BBQ salami, a recipe that consists of slicing a beef salami and grilling the slices on the grill until the salami becomes crispy. Then, paint both sides with your BBQ sauce of choices and continue to grill until it carmelizes. Serve hot with plastic forks, toothpicks or just use your fingers. It’s a guaranteed crowd pleaser.

Ilyce’s Beer Can Chicken - a Fourth of July Favorite

I was looking for a photo of my BBQ salami, but I can’t find it. So, instead, I’ll share the other recipe I’ll be making soon, for Beer Can Chicken:

• Whole chicken

• 4 tbs kosher salt

• 3 tbs brown sugar (packed)

• 2 tbs paprika

• 2 tbs garlic powder

• 1 tsp (or to taste) cayenne

• black pepper to taste

Tall can of beer or Weber chicken poultry roaster (greatest invention ever!).

Directions: Mix all the dry ingredients together. Wash and dry your chicken. Get a can beer and using a can opener, take off the entire top. If you’re using the Weber poultry roaster, just pour enough beer into the well to fill it. Take the chicken and rub the dry mix inside and out and cover well. Put the chicken on the Weber or beer can (I typically have it over a foil lined baking sheet) and let sit until it comes to room temperature, so the seasoning infiltrates the bird. Dump the rest of the mix on top of the bird and even under the skin. Prepare your barbeque for 350F heat. If using chips, be sure to soak them. (I typically use mesquite or apple chips.) Create an area where the bird can cook over indirect heat.

For a 4-pound bird, this will take roughly 45 minutes to an hour. To burn the time, drink the rest of the beer. You may have to turn around the bird if one side is getting cooked faster than the other, so be sure to check it from time to time. If the chips stop producing smoke, add some dry chips to the wet ones. Use an instant read thermometer to test for doneness. Let rest for 10-15 minutes before carving. (If you can wait that long….I never can.)

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Thanks for reading. Here’s hoping your Fourth of July is filled with fireworks, food, and some hope-fueled optimism. See you next week.

Ilyce