Opportunity cost is the how you would spend your time or money if you chose your favorite alternative to the choice you are making. For example, I am tempted to add the extra sports package to my Sling TV account, but it costs an additional $11 per month. $11 doesn’t seem like much, but if put into my retirement account instead, $11 per month is $6,000-8,000 in future value. Using the 4% rule, that’s about $300 in future annual income, or about $25 per month in retirement income. So an $11 per month now costs me $25 per month later. That’s a heavy opportunity cost that one might not consider before making a seemingly small financial decision.Continue reading “A Christmas Carol Is a Lesson in Opportunity Cost”
There has been a lot of attention around President Trump’s director of the Environmental Protection Agency (EPA), Scott Pruitt. It was clear when Pruitt was appointed that the Trump administration was not taking environmental protection seriously. Pruitt has proved this assumption right by spending taxpayer money frivolously as well as using his post to help his wife find a job. While the Obama administration took the EPA’s responsibilities more seriously than this administration, it had its own share of failures, including taking 10 months to act on information that the city of Flint was not properly treating its water to prevent toxic lead contamination. The EPA has needed better direction for a long time. Let’s explore why that is so important. Continue reading “The Constitutional Case for the EPA”
- Investors feeling safer than they should is the primary cause of market crashes.
- Consumer debt is at unhealthy levels, but it is not reflected in consumers’ credit scores.
- Bonds in every sector have the potential to be much riskier than their credit ratings indicate.
- It may be a good time to avoid long-term bonds and securitized debt and to look for investments less exposed to high levels of debt.
Stock market crashes, like those that hit the U.S. markets in 1929, 1987, and 2008, tend to follow the same formula. This makes people wonder why they keep happening and we cannot prevent or even predict them. In fact, the act of thinking that we can prevent or predict them can at least partially be credited with causing them.
The formula is essentially as follows…
Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, wrote a startling article on “the economic side effects of the student loan crisis.”
1. Homeownership is on the Decline
2. More Student Loan Debt Among Older Age Groups
3. College Education is Still Key to Employment and Earnings
So you have to have a college education to earn decent income and steady employment, but the cost of that degree makes it nearly impossible to purchase a home, save for retirement, etc.
Rieder offers some excellent perspective on why this is some seriously alarming data for the economy.