Bill’s By The Number$

Posted by: Lisa Navarro | Posted on: June 13th, 2022 | 0 Comments

DOWN A LOT – The S&P 500 is down 17.6% YTD (total return) through the close of trading last Friday 6/10/2022. The last year when the index suffered a “double-digit” loss was 2008, losing 37.0% that year. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

FUNDING A RETIREMENT – The S&P 500 has averaged +9.8% per year (total return) over the 25 years ending 12/31/2021. A lump-sum of $865,656 (in a pre-tax account) will sustain a 20-year payout of $100,000 per year (i.e., $2 million of gross distributions before taxes) assuming the funds continue to earn +9.8% annually. This mathematical calculation ignores the ultimate impact of taxes on the account which are due upon withdrawal, is for illustrative purposes only and is not intended to reflect any specific investment or performance. Actual results will fluctuate with market conditions and will vary (source: BTN Research).

SPENDING MORE, SAVING LESS – The nation’s personal savings rate, which soared during the early months of the pandemic, has now fallen back to below its pre-pandemic levels. The savings rate was 7.8% in January 2020, rose to 8% in April 2020, and now has dropped back to 4.4% in April 2022. The 4.4% rate is the lowest recorded in the United States since September 2008 (source: Bureau of Economic Analysis).

WHERE OUR TAX DOLLARS GO – The Congressional Budget Office projects that the spending of the US government for fiscal year 2023, i.e., the 12 months beginning 10/01/2022, will be $5.87 trillion, split between mandatory spending (62.6%), discretionary spending (29.9%) and interest expense (7.5%) (source: CBO).

MUST GET IT SOMEWHERE – China is the # 1 importer of crude oil and the # 2 consumer of crude oil among all countries in the world (source: Energy Information Administration).

IN THE RED – The Social Security Trust Fund (OASI) paid out $59.1 billion more than it received in 2021, only the 2nd time in the last 25 years (1997-2021) that costs exceeded income (source: 2022 Trustee Report).

GETTING WORSE – The projected 75-year shortfall in the Social Security Trust fund has more than doubled in the last 10 years. The 2012 Trustees Report forecasted a $8.6 trillion present value shortfall between payroll taxes anticipated to be collected and projected benefits to be paid out over the next 75 years. The 2022 report, released 6/02/2022, projected the present value shortfall at $20.4 trillion (source: 2022 Trustees Report).

GOOD SHAPE NOW – The Disability Insurance (DI) Trust Fund was projected to be depleted by the 4Q of 2016 per a 7/22/2015 trustee report. This forced Congress to allocate to the DI fund more of the 12.4% combined payroll taxes collected from employers and employees for 3 years (2016-17-18). The extra funds have pushed the DI Trust Fund’s exhaustion date to 2096 or 74 years out (source: Social Security Trustees 2022 Report).

MEDICARE – Per an 6/02/2022 report, the trust fund supporting Medicare Part A (hospital insurance) is projected to be depleted by 2028. The long-term (75-year) present value shortfall in the trust fund could be corrected by an immediate o.70 percentage point increase in combined Medicare payroll taxes (from its current 2.90% to 3.60%) or an immediate 15% reduction in Medicare expenditures (source: Medicare Trustees 2022 Report).

CONSTRUCTION – An index that tracks the cost of building materials and supplies has increased +69.9% between January 2020 and April 2022, i.e., since the start of the pandemic (source: Bureau of Labor Statistics).

TOO EXPENSIVE FOR MANY FOLKS – The median single-family home price in California today is $790,475 (source: Zillow).

MORTGAGE DEBT – As of 12/31/2021, 62% of US homeowners had a mortgage on their primary residence. 51% of homeowners with debt on their homes have a mortgage rate less than 4%. The national average rate on a new 30-year fixed rate mortgage was 5.23% as of 6/09/2022 (source: Federal Housing Finance Agency).

RUSSIA – The US Office of Foreign Assets Control (OFAC) did not renew a waiver on 5/25/2022 that had allowed Russia to make principal and interest payments on bonds held by US investors. Lacking that waiver, Russia is more likely to default on its foreign debt, its first such default since 1917 or 105 years ago (source: OFAC).

BE CAREFUL – 46,000 Americans reported being scammed out of an estimated $1 billion from cryptocurrency cons over the period from January 2021 to March 2022 (source: Federal Trade Commission).

HE SCORES!! – The Colorado Avalanche will play for hockey’s Stanley Cup. The Avs last won the championship in 2001, led by Joe Sakic’s 54 goals and 64 assists. Sakic is the Avs’ general manager today (source: NHL).