3 Signs the Economy is Worse Than We Think
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- čas přidán 25. 07. 2024
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CPI came in hotter than expected last month, but in general people believe the economy is doing better than expected. But there are 3 signs I saw that the economy might actually be worse than we think. In this video we go over those 3 signs, what it might mean for stocks, and what we should be doing about it.
00:00 Inflation might be worse than we expect
04:06 Credit Card delinquencies
05:49 401k withdrawals
08:18 What should we do about it?
*I am not a licensed professional or a financial advisor. This content should not be taken as financial advice. It is meant for educational and entertainment purposes only. All opinions and perspectives are based on my own personal financial situation, experiences, and goals. Please ensure that you do your own due diligence before making financial decisions and/or meet with a professional. Links above include affiliate links, which means I may receive a commission at no additional cost to you.
Always learn something new from your videos; thanks!!
No worries!
Terrific contact Matt. You’re in my financial CZcams rotation pretty heavy lately. Keep up the analysis. You mix the perfect balance of making content for both the novice, the expert, and everyone in between.
Thank you, much appreciated!
Agreed. Good job Matt.
I’ve never seen the weighting.
Can’t believe the 2 most important things, food/energy are so low.
Why?
I’ll answer for the original poster. Core inflation = inflation if you don’t eat or drive.
The BLS recently began adjusting the relative importance of the goods in the CPI basket on an annual basis. That relative importance is essentially represents the percentage of dollars out of a total budget expended on those items. Each year through surveys, the BLS adjusts the relative importance using a two year rolling average (It was once done every 10-15 years). Yes, food is pretty important, however, the percentage of income we spend on food or energy is relatively minor to what we spend on shelter. It's also important to note the CPI is a very broad average covering almost everything we buy (homes & homeowners insurance as it relates to replacement cost and liability are excluded). One's personal CPI may be quite different from the national average if they dine out a lot, have shared rent expense, regularly replace vehicles, drive 30 miles to work versus work from home, etc.
Food energy are a low percentage of an average americans spending. So that makes sense.
Excellent -Thank you!
No worries!
Home insurance in Florida is thru the roof and has been since 2022. A dozen companies have moved out of the state completely… our home finances have been solid. Cash for everything too. We have an Iceland trip in September that will be completely paid off before we even take off.
You are so correct about sometimes you just have to do what you can to survive, it’s amazing the span of a couple months we’ve gone from 6 rate cuts to 3 now 1 for 2024, I wonder when people will broach the possibility of more rate increases? That’ll be fun…😨. As an old guy I allot about 35% to cash and bonds, floating rate ETF’s and Vanguard’s 5.3% MM Fund have served me beautifully the last 18 months.
Guidance got cut, valuations came down a bit, stocks were too rich. Rates won’t affect these large companies, its the future expectation for earnings that hurt them more so
Hello Matt. Great in depth video. I kept watching CNBC and Yahoo Finance talk about CPI to rationalize the stock market movements. Now I know it’s limitations because of the % and exclusions (ie. homeowners insurance). When you eat in a restaurant, the “expected” tips starts at 18%, then 20% and 22%. Is that even factored in the CPI?
It’s a good question, I’m guessing it’s not included since price data likely doesn’t include gratuity, but that’s just my guess
Good assessment. There are a lot of other indicators as well. The number of households living paycheck to paycheck is on the increase. A Forbes story suggests 78% of households fall in this category. ATTOM reports home foreclosure starts are up 4% in the first quarter over the same period last year. CFO magazine reports first quarter commercial bankruptcy filings have increased 43% over the same period from 2023. Marketwatch reports personal bankruptcies have increased 13%. In regard to the market, there may be another factor at play and that is the Emotional Cycle of Investors.
As a CPA the biggest complaint I get from clients is the increase in Homeowners insurance. Of course being in a hurricane prone State. That is understandable
I think inflation is way higher than the Government is saying.
Some times i think the Play between the Federal Reserve and this Administration gives the impression the Fed hands are tied as to whether to increase or Decrease interest rates as this is an election year.
That relationship is not unique/limited to "this" administration.
meanwhile in the midwest my insurance barely went up but I got a huge raise, so we are doing much better than Floridians. Its all relative.
Strong choice for Lulu. Def feel like its an overeaction with how strong their fundamentals are + zero net debt and stellar margins.
100%. To me biggest risk short term is if consumer discretionary gets hit harder if economy issues start to deteriorate. Overall feel good about it long term
Jack Bogle said if you want to see what the market is going to do, look at GDP growth. All this other stuff is noise.
You bought a used Mitsubishi? Hard times ☹️
That is correct 😂
What's wrong with buying a "used mitsubishi"?? Buffett himself drives a cadillac. Your mindset keeps you poor
@@johnmonk3381 comparing a used Mitsubishi to a Cadillac is…a stretch??? Lol
@@mattderron Well not to me. A vehicle just gets you from A to B. Nothing else. Actually a bicycle performs exactly the same function. Using a mode of transport as a gauge of personal wealth seems rather shallow and materialistic minded to me. Making endless comparisons like these can only result in perpetual cycle of self-induced mental suffering because you'll always want "other" things and whatever you have will just never be good enough for you although they perform exactly the same basic functions. Just a piece of my thought, no offense meant.
@@johnmonk3381 sure but there’s still an element of value to cost and I’m sorry but a bicycle is not the same if you have kids and other things. Plus most importantly this was more of a joke then anything lol
Yep. Both our auto and homeowners insurance increased. Also our workplace health insurance premiums increased by about 15% cumulative since 2021, but I hadn't been paying attention to it and we've heen notified of increases by our employer. And life insurance quotes are getting higher because of the uncertainty of certain experimental use authorization treatments in 2020 that have resulted in higher mortalities of younger individuals, i.e., actuaries not accounting for it and higher payouts for unplanned deaths.
So as long as we don't buy food, gas or energy to heat/cool our homes we'll be fine? Got it.
my insurance is up 5 bucks a month but I got a 20k raise, some are out inflating others
Real Inflation vs reported inflation .. good message.
Thank-you!
real inflation is imaginary. You are thinking that everyone spends the same amount. Car prices are doubled in the past years but I have a paid off car so I dont experience it. Do you see that you are imagining that there is a "REAL INFLATION"
I 1,000,000,000,000% agree with you. My strategy has been simple, dollar cost averaging and stockpiling cash because there’s going to be valuable companies at a cheaper price when this crash happens.
Wouldn't higher inflation indicate the economy is doing well? People are actually spending and so the numbers remain elevated to reflect this. In general, people go out and spend because they feel good about themselves, their future prospects and they have confidence in the economy
Or maybe the prices for food and insurance keep going up so they keep spending, putting it on credit but not paying their bills and pulling from their 401ks to make ends meet?
Schwab ad before the video starts: "Schwab will now let me invest in stocks based on trends!"
What could possibly go wrong with that?
p.s. you were definitely punching above your weight class when you landed her. 😉
lol I definitely was / am
Pay yourself first. And oh by the way, I think the entire inflation model is flawed. Beef too expensive, I buy pork. I have a long term apartment lease with fixed escalators, I don’t feel owners equivalent rent (a stupid metric imho). We need a better dynamic model for inflation measurement. Finally, a lot of the inflation data are being driven by auto insurance rates and auto repair. This is a small component of most consumer’s monthly expense.
Numero #1
I have slowly cut down the amount of individual stocks I owned. A year ago i was at around 50% SP500 ETF and 10 individual stocks, I am now down to 4 and soon will be down to just 2. Goal from now will be to mainly focus on SP500 and Nasdaq ETFs, keeping it simple and forget the rest. Best of luck to everyone, market is crazy!
That’s cool - but now I want to know - what are the 4? 🙂
@@mattderron I still currently own APPL avg cost $181, AMZN avg cost of $151, V avg cost $263, and ABBV avg cost $164. These 4 individuals stock make up about 30% of my portfolio, the other 70% is a combination of SP500 and Nasdaq ETFs.
Nice, which 2 are you planning on keeping?
@@mattderron most likely Amazon and V.
@@mattderron Apple avg cost of $181, Abbvie avg cost of $164, Visa avg cost of $263, and Amazon avg cost of $152.
I actually think that when in a high tax bracket, using a 401k to start a "six month emergency" fund is the best way to get that going. You can either attempt to do this after tax and put off investing, which would take a really long time, or you can do it 401k, dump the funds in a cash equivalent instead of the stock market, and get the six month reserve built up much much faster. Further, if you have no emergency after getting this going, you can eventually shift that money into the market for tax free growth. It can be a win win win. if you do have to withdraw for a long term emergency, you'll have to pay penalties, but it is likely the taxes you saved depositing that money will cover that.
I agree it’s a tool that can be used effectively. Obviously many won’t and hurt themselves long term, so I understand why people say to never do it. But can be very helpful and I agree that if you have nothing saved, having money somewhere, especially one that gets matched by your employer is a good way to start
Not as bad as a target date retirement fund 🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣
😂
Didn’t like the haircut NVIDIA got today. 😕
Yeah was a big one today. I’m not worried about my position though, still feel good about NVDA
It’s the reason why timeline matters. Someone who’s bought in the last 6 months isn’t happy, someone who’s been holding for 5 years sitting on a 1,600% gain is likely still pretty happy with it.
go buy VTI