Bill’s By The Number$

1. MADE A LOT OF MONEY – Probably my favorite bullet of all-time was the 53/47 split between “up” and “down” trading days in the US stock market over the last 50 years (1972-2021), and the realization that in spite of the near “every-other-day” volatility, the S&P 500 still generated an +11.1% per year return (source: BTN Research).

2. I’M NOT THAT SMART – Document (in writing) your predictions once a year, e.g., direction of the stock market, interest rates, cryptocurrencies, etc. Then a year later, “score” yourself and evaluate how you did.  Repeat every year.  It’s a humbling experience but you’ll understand quickly how difficult it is to predict the future.  If you don’t write things down and you rely on your memory when “scoring” your predictions, you’re just fooling yourself.

3. LUCK PLAYS A PART – The bullet that had me shaking my head every year when I updated it compared the fortunes (or misfortunes) of 2 retiring individuals exactly 9 years apart in age. The first person with $1 million invested 100% in the S&P 500 as of 1/01/1973 who was withdrawing an inflation-adjusted $100,000 per year would be out of money in just 9 years, i.e., as of 12/31/1981.  The very next day, a 2nd person also with $1 million invested in the S&P 500 as of 1/01/1982 who is withdrawing an inflation-adjusted $100,000 per year would have $7.72 million remaining after 40 years, i.e., as of 12/31/2021 (source: BTN Research).

4. THINK DIFFERENTLY – Humans are predisposed to “straight-line” their future expectations. g., when the stock market is on a bull run, many investors (and advisors) see their good fortune continuing unabated.  Conversely, when the stock market is in a bear market fall, many investors (and advisors) can’t see the rout ever ending.  Both assumptions are wrong.

5. WHICH PERSON WILL BE RIGHT? – Gloom-and-doomers always sound smarter than the prognosticators who are optimistic.

6. GOOD ADVISOR – If I know 5 things about a person, I can give them advice about investing. Age, time horizon, risk tolerance, tax bracket and (most importantly) objectives.  Without those 5, I can’t help you.

7. WHICH ONE HURTS MORE? – Is now the time to invest? To decide what’s right for you, ask yourself this question: if I go in today and the investment falls 40% in the next 6 months, does that “hurt” more or “hurt” less than if I stay out of the investment today and it goes up by +40% in the next 6 months without me?

8. KNOW WHEN TO FOLD THEM – Think about “selling early” (whether it’s the stock market, the real estate market, or a business) as analogous to leaving a party early, even though there is a chance that the party may continue for hours. But there is also a chance that the police show up in a few hours to break up the party.

9. POTUS IS NOT THAT IMPORTANT – Warren Buffett was quoted in 2008 as saying “buy into a business (i.e., stock) that’s doing so well an idiot could run it, because sooner or later, one will.” I’ll tweak the advice to read “buy into a stock that’s poised to do well regardless of the man/woman who is occupying the White House.”  Instead, worry about sales/revenue.

10. COMMUNICATION – To make sure your audience (e.g., your spouse/partner, your kids, your employees) understands the message that you think you just articulated so eloquently, ask them to “say it back” to you.

11. CURIOUS – Want to learn? Ask open-ended questions, i.e., never ask a question that can be answered with a “yes” or “no” response.

12. BORING – If you do any public speaking, be wary of “E.G.O.,” i.e., “my eyes glaze over,” in your listening audience. It’s probably not their fault.  You probably need to improve your presentation skills.

13. YOUR REPUTATION IS EVERYTHING – Make it easy for new clients to start doing business with your firm, while at the same time make it easy for existing clients to stop doing business with your firm. Then it’s your job to deliver such a powerful product/service that clients don’t want to leave.

14. TIME FLIES – For my 4-year old granddaughter, the next year of her life represents an increase of +25% of her time on earth. For my 66-year old body, the next year of my life represents an increase of just +1.5% of my life.  No wonder the years are zipping by so quickly for me.

15. I’M OLD – You are old when your last car purchase exceeds in price your first home purchase.

16. THIS IS WHAT REALLY MATTERS – Teach your kids self-confidence and how to be happy with themselves. Everything else follows those 2 skills.

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Bill’s By The Number$

1. WE DON’T TRUST THEM – 63% of 2,005 registered voters surveyed in January 2022 support a complete ban on stock trading for all members of Congress (source: Morning Consult – Politico).

2. FED ACTION – As of Friday 8/19/2022 at noon ET, the bond market was priced to reflect a 54.5% chance that the Fed will raise short-term interest rates by 0.50 percentage points on 9/21/2022, and a 45.5% chance that the Fed will raise short-term interest rates by 0.75 percentage points on 9/21/2022 (source: CME Group).

3. UNDER THE PILLOW – From 1/01/2020 (before the pandemic) to 5/27/2020, the size of the money market fund industry in the USA (both taxable and tax-free) had grown from $3.6 trillion to $4.8 trillion. From 5/27/2020 to last Wednesday 8/17/2022, the size of the money market fund industry had dropped off to $4.6 trillion but is still up $1 trillion from its pre-pandemic levels (source: Investment Company Institute).

4. MUST BE DONE – The last time the “normal retirement age” for monthly Social Security benefits was raised was in 1983. 75% of 2,545 registered voters surveyed in April 2022 support raising the “normal retirement age” again in order to protect the financial solvency of the program (source: Program for Public Consultation).

5. SOLID INDICATOR – The US economy contracted by 0.9% in the 2nd quarter of 2022 (i.e., quarter-over-quarter performance expressed as an annualized result) on the heels of a 1.6% contraction in the 1st quarter of 2022. That’s the 8th time the United States has suffered 2 or more consecutive down quarters since 1960, meeting one often-used definition of a recession.  Officially, the United States has experienced 9 recessions since 1960 (source: National Bureau of Economic Research).

6. SOME OWE NOTHING – Total household debt in the United States reached a record $16.15 trillion as of 6/30/2022. 70.5% of the total is mortgage debt of $11.39 trillion, also an all-time record.  However, an estimated 23% of all US households are debt-free (source: Federal Reserve Bank of New York).

7. JUST ANOTHER TRILLION – From 12/31/2021 to Tuesday 8/09/2022, the US national debt increased from $29.617 trillion to $30.652 trillion, i.e., it has increased $1 trillion YTD (source: Treasury Department).

8. WHY SO DIFFERENT TODAY? – The number of job openings in the United States was 10.698 million as of June 2022, off from an all-time peak of 11.855 million in March 2022. A decade ago (June 2012), the number of job openings in the United States was 3.911 million (source: Bureau of Labor Statistics).

9. THEY HAVE COVERAGE – The percentage of Americans lacking health insurance coverage fell to just 8.0% (26.4 million people) in the 1st quarter of 2022, the lowest percentage ever for the United States. In 2010 before the “Affordable Care Act” (ACA) was implemented, 16.0% of Americans did not have health insurance, a total of 48.3 million people (source: Department of Health and Human Services).

10. HAS HOUSING PEAKED? – After reaching an all-time US high of $457,000 in April 2022, the median sales price of new homes sold in the USA has fallen during the last 2 months to $402,400 in June 2022, its lowest level since June 2021 (source: Census Bureau).

11. WASN’T ALWAYS THIS GOOD – The average home price in the United States increased +8.1% per year for the 10-years ending 5/31/2022 but that included an +18.3% increase in price for the 1-year ending 5/31/2022. In the previous decade, American home prices increased just +1.4% per year for the 10-years ending 5/31/2012 (source: Federal Housing Finance Agency).

12. IT STARTS OUT WEST – California had 563,070 electric vehicles (EV) registered as of 2021 or 39% of the US total. No other state had as many as 100,000 registered EVs (source: National Renewable Energy Laboratory).

13. SPENDING MONEY YOU DON’T HAVE – As of 6/30/2003, credit card debt in the US was almost 3 times the size of student loan debt, i.e., $690 billion to $240 billion. By 6/30/2010, credit card debt ($740 billion) was smaller than student loan debt ($760 billion).  As of 6/30/2022, credit card debt ($890 billion) has been overwhelmed by student loan debt ($1.59 trillion) (source: Federal Reserve Bank of New York).

14. ALL IN THE FAMILY – One political party has controlled the White House, the Senate and the House of Representatives in 24 of the last 65 years (37%), i.e., 1958-2022. Republicans last controlled the White House, the Senate and the House in 2018.  Democrats control all 3 this year (source: BTN Research).

15. BIG BUCKS – The 2022-2023 PGA golf season begins on Thursday 9/15/2022 and runs through Sunday 8/27/2023, made up of 47 events that will pay out a record $428.6 million (source: PGA).

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Copyright © 2022 Michael A. Higley.  All rights reserved.  Email mick.higley@mahbtn.com for subscription information.

Bill’s By The Number$

1. STARTED OFF REALLY BIG – The legislative journey of the “Inflation Reduction Act of 2022” (IRA) started with Bernie Sanders (I-VT). In June 2021, Sanders pushed for a 10-year social spending package projected to include $6 trillion of outlays over a decade-long period.  His proposal followed the American Rescue Plan Act (HR # 1319), a $1.9 trillion spending bill signed into law by President Biden on 3/11/2021 (source: Congress).

2. REDUCED IN SIZE – Within 2 months (by August 2021), the original $6 trillion spending idea was trimmed to $3.5 trillion and was called the “Build Back Better Act” (BBB). The 2,465 page bill would impact federal income taxes, education, social welfare, climate change and foreign policy (source: Congress).

3. GETTING EVEN SMALLER – Senator Joe Manchin (D-WV) effectively shut down the $3.5 trillion proposed structure when he drew a “line-in-the-sand” at $1.5 trillion as the maximum 10-year spending size that he could support. A 9/06/2021 New York Times article described the $3.5 trillion BBB proposal as a “cradle to grave” expansion of the US social welfare safety net (source: New York Times).

4. HOW ABOUT NOW? – Recognizing that BBB (HR # 5376) was stalled in Congress, House Speaker Nancy Pelosi (D-CA) forced her members to “make tighter decisions.” The result: a slimmer 2,135 page document scored at $1.75 trillion over 10-years that kept electric vehicle subsidies, free pre-K education and a corporate minimum tax, but eliminated paid leave, free community college and an expansion of Medicare (source: Congress).

5. PASSED IN ONE CHAMBER – The House passed BBB on 11/19/2021 (220-213 vote) in spite of House Minority Leader Kevin McCarthy’s 8-hour speech, protesting that the legislation would send the country into an economic tailspin. However, the $1.75 trillion BBB bill stalled in the Senate, never coming to a vote (source: Congress).

6. IT’S BACK – To the surprise of many in Washington, HR # 5376 resurfaced on 7/27/2022, the result of closed-door negotiations between Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV). The newly named “Inflation Reduction Act of 2022” (IRA) included $433 billion of spending, offset by $739 billion of new revenue raised through a 15% corporate minimum tax, prescription drug pricing reform, increased IRS tax enforcement and the elimination of “carried interest” taxation paid by hedge fund managers (source: Senate).

7. THE VERY LAST VOTE – Kyrsten Sinema (D-AZ), the one Senate holdout preventing the passage of IRA, secured 3 changes to the bill. Sinema eliminated the “carried interest” taxation used by investment managers (worth $14 billion), added a modification to the 15% minimum tax on large corporations that stopped the removal of accelerated depreciation (worth $55 billion) and added $4 billion for “drought relief” (source: Senate).

8. PASSED THE SENATE – Senate Democrats survived a grueling 27-hour session before passing the 755-page “Inflation Reduction Act of 2022” (HR # 5376) on a party-line vote on Sunday 8/07/2022 (source: Senate).

9. CLIMATE – IRA injects $369 billion over the next decade into climate and energy programs, spending that is forecasted to reduce US greenhouse gas emissions by 42% below our 2005 levels by 2030 (source: Senate).

10. EV – IRA includes a $7,500 tax credit for the purchase of a new electric vehicle (EV) and a $4,000 credit for the purchase of a used EV. The credits are limited to purchases of cars costing no more than $55,000 and trucks maxed out at $80,000, and the batteries must contain minerals from a short list of countries (source: Senate).

11. CORPORATE MINIMUM TAX – IRA is expected to raise $258 billion over the next decade via a 15% minimum tax on the 150 US companies that have annual profits of at least $1 billion (source: Joint Comm. on Taxation).

12. PRESCRIPTION DRUGS – IRA will allow Medicare to negotiate directly with drug companies for lower prices on 10 prescription drugs beginning in 2026, including inflation caps for the drugs it purchases. These changes have been scored to produce $288 billion of savings over the next decade (source: Senate).

13. MORE AUDITS – IRA includes $80 billion in the next decade for the IRS, money that will be used to hire 87,000 new IRS employees by the year 2031, increase enforcement efforts, and upgrade the agency’s technology and its taxpayer services. The $80 billion cost is projected to result in $124 billion of new tax revenue (source: Senate).

14. INSURANCE – In health insurance, IRA extends for 3-years the premium subsidies introduced by the 2010 Affordable Care Act at a cost of $64 billion over the next 10 years for 13 million insureds (source: Senate).

15. BECOMING LAW – The House of Representatives returned to Washington on Friday 8/12/2022 and passed the “Inflation Reduction Act of 2022,” sending the climate, healthcare and tax bill onto President Joe Biden for his signature. HR # 5376 is projected to reduce our deficit by $294 billion over the next 10 years (source: House).

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Copyright © 2022 Michael A. Higley.  All rights reserved.  Email mick.higley@mahbtn.com for subscription information.

Bill’s By The Number$

1. MISS A LITTLE, MISS A LOT – Over the last 30 years, i.e., 8/01/1992 to 7/31/2022, the S&P 500 gained +10.0% per year (total return). If you remove the best 22 trading days over the entire 3 decades, i.e., 22 trading days out of 7,554 trading days, the return for the S&P 500 drops in half to +5.0% per year (total return).  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).

2. DO THE MATH – The S&P 500 is a cap-weighted index, i.e., the largest capitalized stocks carry a disproportionate impact on the index’s performance calculation. As of the end of July 2022, the 42 largest stocks in the index carry the same weight as the other 462 stocks in the index.  Note there are 504 stocks in the S&P 500 today because 4 different stocks each have 2 share classes (source: S&P).

3. DOWN BUT STILL UP – The cost of shipping a 40-foot container from China to the west coast of the USA has gone from $2,500 (June 2020) to $20,000 (September 2021) to $9,500 (June 2022) (source: Freightos).

4. THE DOLLAR RULES – 40% of the world’s imports and exports are invoiced in US dollars (source: Patterns in Invoicing Currency in Global Trade).

5. FINALLY SOME INFLATION – Over the decade from 7/01/2011 to 6/30/2021, US export prices (i.e., all commodities including agricultural products) rose just +4.6% (in total, not per year). Over the 1-year from 7/01/2021 to 6/30/2022, US export prices rose +18.2% (source: Bureau of Labor Statistics).

6. THE VERY WEALTHY – On Thursday 7/28/2022, House members Steve Cohen (D-TN) and Don Beyer (D-VA) introduced the “Billionaire Minimum Income Tax Act.” The proposed legislation would impose a 20% annual tax on the “total income” of households worth at least $100 million.  “Total income” as defined by the bill includes unrealized capital gains.  Any taxes paid as a result of unrealized capital gains would serve as a credit against any future capital gains taxes owed when the asset is sold (source: Congress).

7. REALLY BIG – The annual increase applied to Social Security retirement benefits as of 1/01/2023 is based on “Consumer Price Index” inflation over the 12 months ending 9/30/2022. Inflation over the 9 months from 10/01/2021 through 6/30/2022 has been reported and is +8.7%.  The Social Security “cost-of-living” adjustment has been at least +10% just twice in history: +14.3% in 1980 and +11.2% in 1981 (source: Department of Labor).

8. SHORT OF MONEY – Social Security benefits are 96% funded by payroll taxes and 4% funded by income taxes paid on Social Security benefits. Payroll taxes have been 6.2% for employees and 6.2% for employers since 1990, i.e., no change for the last 32 years (source: Congressional Budget Office).

9. WORSE OVER THERE – Consumer inflation in Turkey on a trailing 1-year basis as of 6/30/2022 was up +78.6% (source: Turkish Statistical Institute).

10. LOWEST EVER – In June 2022, 8 states (Alabama, Georgia, Kentucky, Louisiana, Minnesota, Mississippi, Missouri and New Hampshire) each recorded their lowest state jobless rate in history (source: Bureau of Labor Statistics).

11. WE’LL NEED MORE CHAIRS – When the Federal Open Market Committee (FOMC) unanimously voted 12-0 to raise short term interest rates by 0.75 percentage points on 7/27/2022, it was the first time in 9 years (7/31/2013) that the FOMC was fully staffed by 12 voting members (source: Federal Reserve).

12. WILL POTUS MAKE IT SEVEN? – Since repayments of federal student loans were suspended for 6 months by the CARES Act on 3/27/2020, Presidents Trump and Biden have extended the initial end date 6 times (twice by Trump and 4 times by Biden), most recently just 4 months ago by President Biden on 4/06/2022. The suspension of repayments is effective through the end of this month, i.e., to 8/31/2022 (source: BTN Research).

13. WHO NEEDS STATE INCOME TAXES? – Nevada took in more than $1 billion of gaming revenue each month during fiscal year 2022, i.e., July 2021 through June 2022, a total of $14.63 billion for the 2022 fiscal year (source: Nevada Gaming Commission).

14. PLAN ON VOTING – The 2022 midterm elections are 3 months from today (11/08/2022). All 435 House seats and 34 of 100 Senate seats are up for reelection (source: Congress).

15. GREAT VOICE – Vin Scully, the voice of the Los Angeles Dodgers for 67 years before retiring at the end of 2016 regular season at age 88, died on 8/02/2022 at age 94. Scully was in the broadcast booth for 21 no-hitters during his career, including 14 thrown by Dodger pitchers (source: Los Angeles Daily News).

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Copyright © 2022 Michael A. Higley.  All rights reserved.  Email mick.higley@mahbtn.com for subscription information.

Bill’s By The Number$

1. JULY’S PERFORMANCE – The S&P 500 gained +9.2% (total return) in July 2022 but remains down 12.6% YTD (total return). July’s performance was the stock index’s best monthly result since November 2020.  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).

2. DOWNGRADE – This Friday (8/05/2022) is the 11th anniversary of the day S&P downgraded the USA on 8/05/2011 of the top-rating that America had held for 70 years. The yield on the 10-year T-note was 2.57% on 8/05/2011.  The yield on the 10-year T-note closed at 2.64% on Friday 7/29/2022 (source: Treasury Department).

3. INVERTED – Each of the 8 recessions that have occurred in the USA since 1969 have been preceded by an “inverted” yield curve, i.e., the 2-year Treasury note yield exceeding the 10-year Treasury note yield. As of last Friday (7/29/2022), the 2-year note yield has exceeded the 10-year note yield for 18 consecutive trading days.  The 2022 inversion is a function of the 2-year note yield quadrupling since the beginning of this year, reacting to Fed rate hikes that are expected to drive down inflation (source: Treasury Department).

4. FED ACTION – The Fed raised short-term rates by 0.75 percentage points last Wednesday 7/27/2022, its 4th rate hike since 3/16/2022, making it a total of 2.25 percentage point increases this year (source: Federal Reserve).

5. STOCKS AND RATE HIKES – Between 2/04/1994 and 2/01/1995, the Fed raised interest rates 7 times. 4 of the 7 rate hikes were at least 0.50 percentage points, a total increase of 3 percentage points for all 7 rate hikes.  That took the Fed’s target short-term rate from 3.0% to 6.0%.  From the close of trading on 2/04/1994 to the close of trading on 2/01/1995, the S&P 500 gained +3.0% (total return) over the 1-year (source: BTN Research).

6. HOME SELLING – When the pandemic started (January 2020), the median sales price of existing homes sold in the USA was $266,300. In June 2022, the median sales price of existing homes sold in the USA reached a record $416,000 (source: National Association of Realtors).

7. OOPS! – The city of Chicago decided in 2020 to raise property taxes in 2021 and beyond based on our nation’s rate of inflation up to a maximum increase of 5% in any single year, i.e., inflation to be measured by the nationally calculated “Consumer Price Index” (source: Property Tax Extension Limitation Law).

8. THIS WILL CHANGE IN THE FUTURE – 91% of the 128 million households in the USA own at least 1 car, SUV or light-duty truck, a total of 250 million vehicles. Surprisingly, electric cars and trucks make up just 2 million of the 250 million vehicles in our country today (source: Census Bureau).

9. BETTER THAN LAST YEAR – The budget deficit of the US government after 9 months of fiscal year 2022, i.e., the 9 months from 10/01/2021 through 6/30/2022, is $515 billion. Over the same 9 months during fiscal year 2021, the budget deficit was $2.24 trillion, while over the same 9 months during fiscal year 2020, the budget deficit was $864 billion (source: Treasury Department).

10. YOU PROMISED – The “aggregate funded ratio” of state and local pension plans across America is 77.9%, i.e., the pension plans’ assets divided by the present value of the pension plans’ liabilities. Since 2001, the ratio has been as high as 95.1% (2001), as low as 62.4% (2009) and was 84.8% in 2021 (source: Equable Institute).

11. SAVING FOR THE WINTER – The 27-nation European Union announced on 7/26/2022 that all member countries are to reduce their natural gas consumption by 15% over the 8 months that begin today, i.e., 8/01/2022 through 3/31/2023. The EU is concerned that Russian-supplied natural gas could end with little notice (source: EU).

12. THEY NEED MORE TIME – On 7/20/2022 Ukraine received preliminary approval from its government creditors and from the bondholders of its sovereign debt to suspend all debt repayments for at least 17 months, i.e., from 8/01/2022 through at least 12/31/2023 (source: Financial Times).

13. NOT HERE – 30 years ago, 37% of the semiconductors made in the world were manufactured in the USA. Today just 12% of semiconductors made in the world are manufactured in the USA (source: Aspen Ideas).

14. GREENER GRASS? – 40% of 13,000 workers surveyed worldwide between February and April of this year are “considering quitting” their current jobs within the next 3-6 months (source: McKinsey and Company).

15. HE’S AMBIDEXTROUS – Jim Kaat won 283 games as a major league baseball pitcher over a 25-year pro career (1959-1983). Kaat, inducted into baseball’s Hall of Fame at age 83 on 7/24/2022, “shot his age” in golf both as a left-hander and as a right-hander over a 2-week stretch in 2013 after turning 75 years old (source: MLB).

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Bill’s By The Number$

1. TIME IN THE STOCK MARKET – If you selected any single month at random to invest in the S&P 500 during the 30-years ending 6/30/2022, you achieved a positive total return 67% of the time. If you extend your investment time horizon to just 1 year, you achieved a positive total return 83% of the time.  If your time horizon was 5 years, you achieved a positive total return 84% of the time.  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).

2. NEXT TWO MONTHS – The next 2 months (August and September) have been the 2 worst performing months for the S&P 500 over the last 30 years, i.e., 1992-2021. August and September are the only months that have a negative average total return over the last 3 decades, losing 0.15% and 0.30% on average since 1992 (source: BTN Research).

3. BACK IN BUSINESS – The number of active oil and natural gas drilling rigs in the USA was 792 as of Friday 3/13/2020, the day President Trump declared a national emergency due to COVID-19. That number fell to a pandemic-low of 244 operating rigs just 5 months later (8/14/2020) but has rebounded to 758 operating rigs as of last Friday 7/22/2022 (source: Baker Hughes).

4. STRONG BANKS – As of 7/20/2022, the last bank in the United States to require a bailout from the Federal Deposit Insurance Corporation (FDIC) was the Almena State Bank of Almena, KS on 10/23/20 or 21 months ago. That’s the 2nd longest stretch without a bank failure in the country in the last 20 years (source: FDIC).

5. ZOMBIES – An estimated 1 out of every 6 companies (17%) domiciled in industrialized economies worldwide have been able to stay in business throughout the pandemic (and avoid bankruptcy) to a great degree because of low interest rate debt that was made available to them (source: Committee on the Global Financial System).

6. BIG BUMP – The bond market was priced on 7/22/2022 to reflect a 78.7% chance that the Fed will raise short-term interest rates by 0.75 percentage points on 7/27/2022 following its upcoming 2-day meeting (source: CME Group).

7. ANNUAL INCREASE – The “cost of living adjustment” (COLA) made to Social Security benefits is calculated based upon the year-over-year increase in prices from the 3rd quarter of subsequent years. The COLA that will be applied to benefits paid in January 2023 will be based on the change of prices from the end of the 3rd quarter 2021 to the end of the 3rd quarter 2022.  The COLA increase implemented at the start of 2022 was +5.9%, Social Security’s largest increase since 1982 (source: Social Security).

8. WORKERS NEEDED – The Social Security Administration estimates it needs a “worker-to-beneficiary” ratio of 2.8 for the system to function on a “pay-as-you-go” basis. The ratio was 3.3 in 2005 but has slipped to 2.8 in 2021 and is forecasted to be just 2.1 workers per beneficiary by the year 2040 (source: Social Security).

9. YOU TOO? – Inflation in the Eurozone, i.e., the 19 countries that use the Euro as their common currency, is forecasted to be +7.6% in 2022, up from a spring 2022 prediction of +6.1% (source: European Commission).

10. CHINA – The 2 worst quarters for China’s economy in the last 30 years have occurred since the pandemic began: a decline of 6.8% in the 1Q 2020 and a gain of +0.4% in the 2Q 2022 (source: Nat’l Bureau of Statistics).

11. TOP SPOT – China and India are 1-2 in terms of population today, a ranking that is projected to flip-flop next year (2023) when India becomes the world’s most populous nation with nearly 1.5 billion people (source: UN).

12. MORE IN THAN OUT – The USA’s $845 billion trade deficit in 2021, i.e., $3.40 trillion of imports in excess of $2.56 trillion of exports, was our country’s 46th consecutive year of trade deficits (1976-2021). Between 1960 and 1970, the US ran a trade surplus every year (source: Department of Commerce).

13. TIME TO BUY MAY BE NOW – Of the 10 major US cities where the housing market is “cooling off” the quickest, 6 cities are in California. The San Jose market tops this analysis based on price drops and the length of time that a listing is staying on the market.  Sacramento and Oakland are ranked # 2 and # 3 (source: Redfin).

14. PAY YOUR MORTGAGE – Lenders repossessed 20,750 properties during the first 6 months of 2022, up +113% from 9,739 repossessions in the first half of 2021. Just 5 years ago (2017), 169,124 properties were repossessed in the first half of the year (source: ATTOM Data Solutions).

15. SON OF MATT – Jackson Holliday, the # 1 pick in the MLB Draft on 7/17/2022, is the son of former big leaguer Matt Holliday. Matt played 15 years for 4 teams, earning $159.9 million in salary (source: Baseball Reference).

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Bill’s By The Number$

1. THIS STUFF HAPPENS – At last Friday’s (7/15/2022) closing of 3863, the S&P 500 stock index is at the same level it first closed at on 2/04/2021 or 17 ½ months ago. 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).

2. ONE AFTER THE OTHER – The S&P 500 was down on a total return basis in both the 1st quarter of 2022 (down 4.6%) and the 2nd quarter of 2022 (down 16.1%), off 20.0% YTD through 6/30/2022. That’s the first back-to-back “down” quarters for the index since the S&P 500 suffered 6 consecutive quarterly declines from the 4th quarter of 2007 through and including the 1st quarter of 2009 (source: BTN Research).

3. CHANGE FROM Q.E. TO Q.T. – The Federal Reserve began a reversal of “Quantitative Easing” on 6/15/2022 with its program of “Quantitative Tightening,” i.e., changing from monthly purchases of $120 billion of bonds to a monthly runoff of $95 billion of bonds. Fed analysis suggests that every $1 trillion of reduction of bonds from the Fed’s $8.5 trillion balance sheet would have the same impact as a 0.20 percentage point increase in interest rates (source: Federal Reserve).

4. AND YOU THINK NOW IS BAD – Inflation, as measured by the “Consumer Price Index,” was up +9.1% on a trailing 1-year basis as of 6/30/2022. That’s the 7th consecutive month that has reported inflation of at least +7% on a trailing 1-year basis.  Between June 1978 and February 1982, the US suffered 45 consecutive months that reported at least +7% inflation on a trailing 1-year basis (source: Bureau of Labor Statistics).

5. HOW ABOUT YOUR CITY? – Since peaking at $5.02 a gallon on 6/14/2022, the nationwide average price of a gallon of gasoline has fallen 31 consecutive days to $4.58 a gallon as of last Friday 7/15/2022 (source: AAA).

6. INDICATOR OF WHAT? – The price of copper peaked at $4.92 per pound on Saturday 3/05/2022 but has since fallen 34% to $3.23 per pound on Thursday 7/14/2022. Copper is used in nearly all household appliances, in automobiles and in HVAC systems (source: MoneyMetals.com).

7. THEY TALK TO JUST A FEW – The monthly report compiled by the US government of “job openings” and “quits” is based on data collected from 20,700 American businesses. Those numbers are then used to extrapolate the “job openings” and “quits” for all 9.4 million businesses across the US, i.e., less than ¼ of 1% of businesses actually report information that is used to create the report (source: Bureau of Labor Statistics).

8. COLLEGE DEBT – 43 million Americans have student loans. Just 3 million of the 43 million borrowers each owe at least $100,000, while 32 million borrowers each owe less than $40,000 (source: Department of Education).

9. LOTS OF PEOPLE NEED HELP – Medicare covers 63.8 million Americans, while Medicaid covers 80.9 million low-income Americans. The US population is 332.9 million (source: Centers for Medicare & Medicaid Services).

10. END OF LIFE – More Americans died in 2021 (3.459 million) than in any year in US history (source: National Center for Health Statistics).

11. OLD FOLKS – 1 out of every 10 people in the world in 2022 (10%) is at least age 65. A projected 1 out of every 6 people in the world in the year 2050 (16%) will be at least age 65 (source: UN World Population Prospects).

12. COLLECT EARLY – Workers who are eligible for Social Security retirement benefits can take a reduced monthly benefit at age 62. Widows or widowers of deceased workers can begin a reduced benefit at age 60 (source: SSA).

13. LATE AGAIN – Work will continue this week in the House on 6 of the 12 spending bills required to authorize discretionary spending by the US government for the upcoming 2023 fiscal year, i.e., the 12 months that will begin 10/01/2022. The Senate has yet to take any action on the spending bills.  Discretionary spending has been estimated to be $1.76 trillion in fiscal year 2023, 30% of total spending of $5.87 trillion.  The last time Congress approved all 12 spending bills by the start of a fiscal year was October 1996 or 26 years ago (source: Congress).

14. NOT HAPPY WITH THOSE IN WASHINGTON – 77% of 900 registered voters surveyed in early June 2022 believe that “most members of Congress” do not deserve to be reelected to another term in office (source: Gallup).

15. BETTER THAN DAD – Over a 16-year NBA career with 5 teams, Dell Curry shot 45.7% from the field over 1,083 regular season games, scoring 11.7 points per game. Over his ongoing 13-year NBA career, Golden State Warrior superstar Stephen Curry (Dell’s son) has shot 47.3% from the field over 826 regular season games, scoring 24.3 points per game (source: Basketball Reference).

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Bill’s By The Number$

1. LOOK-BACK – As of 6/30/2022, the total return of the S&P 500 was down 10.6% for the trailing 1-year, +10.6% per year for the last 3-years, +11.3% per year for the last 5-years and +13.0% per year for the last 10-years. The S&P 500 consists of 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).

2. DOWN TEN, AND THEN WHAT? – The S&P 500 was down 10.6% (total return) for the year ending 6/30/2022, the 40th time in the last 400 months that the index has been down at least double-digits on a trailing 1-year basis. In the previous 39 times that the index was down at least 10% (total return) for the previous 12 months, the average return for the next 12 months was a gain of +4.2% (total return) (source: BTN Research).

3. DOWN TWENTY, AND THEN WHAT? – The S&P 500 has been down at least 20% (total return) for the trailing year at the end of 20 months in the last 400 months, most recently as of 6/30/2009. In the 20 times that the index was down at least 20% (total return) for the previous 12 months, the average return for the next 12 months was a gain of +17.1% (total return) (source: BTN Research).

4. BIG DECLINE – The NASDAQ Composite index has suffered a total return loss in 5 of the first 6 months in calendar year 2022 (only March was up), down 29.2% YTD (total return) as of 6/30/2022. The month of July has provided some performance recovery, up +5.5% (total return) as of last Friday 7/08/2022 (source: BTN Research).

5. DOUBLE-DOUBLE – The size of the US economy was $718 billion as of 3/31/1965, doubled over the next 9 years to $1.5 trillion as of 3/31/1974, doubled over the next 7 years to $3.1 trillion as of 3/31/1981, doubled over the next 10 years to $6.0 trillion as of 3/31/1991, doubled over the next 11 years to $11.9 trillion as of 3/31/2002 and doubled one last time over the next 20 years to $24.4 trillion as of 3/31/2022 (source: Department of Commerce).

6. SOMEBODY WAS UP – 13 of the top 14 YTD performers in the S&P 500 as of 6/30/2022 are in the oil and gas business, with YTD performances ranging from up +24.3% YTD to up +103.1% YTD (source: S&P).

7. RISING COST OF MONEY – The yield on the 10-year Treasury note nearly doubled YTD after the first 6 months of 2022, rising from 1.496% as of the close of trading on 12/31/2021 to 2.973% as of the close of trading on Thursday 6/30/2022. Over the last 60 years (1962-2021), the yield on the 10-year note has never doubled over the course of an entire calendar year (source: Treasury Department).

8. CRUDE OIL – The highest closing price ever for West Texas Intermediate crude oil (WTI) was $147.27 a barrel, set 14 years ago today on 7/11/2008. WTI crude oil closed at $104.79 a barrel last Friday 7/08/2022, but closed at $123.70 a barrel just 4 months earlier on 3/08/2022 (source: NYMEX).

9. YOU DON’T GET IT – If you were born on 12/31/1941, by the time you turned 40 years old on 12/31/1981, you had lived through 9 calendar years with at least +7% inflation (as measured by the Consumer Price Index, aka CPI). If you were born on 12/31/1981, by the time you turned 40 years old on 12/31/2021, you had lived through just 1 calendar year with at least +7% inflation, i.e., +7.0% in calendar year 2021 (source: Department of Labor).

10. THE BARE MINIMUM – The federal minimum wage was last increased to $7.25 an hour nearly 13 years ago on 7/24/2009. 30 states have minimum wage requirements above the federal level while the other 20 states continue to use the $7.25 an hour amount as their wage floor.  As of 7/01/2022, San Francisco, CA requires a minimum wage of $16.99 an hour (source: CBS News).

11. BIG HOUSES – 46% of the 970,000 new single-family homes built nationwide in 2021 (a total of 444,000 homes) have at least 4 bedrooms (source: Census Bureau).

12. LIVE TOO LONG – 35% of 994 workers interviewed in November 2021 identified their biggest retirement concern was that they may “outlive the retirement savings” accumulated during their working years (source: Principal).

13. ARE THEY RIGHT? – The average response by 53 economists surveyed in June 2022 puts the chance of a recession in the next 12 months at 44%, up from just 18% in January 2022 (source: WSJ Economic Survey).

14. ANNOYING PHONE CALLS – 58% of the delinquent debt attempted to be recovered by 3rd party debt collectors in 2021 was outstanding medical debt (source: Consumer Financial Protection Bureau).

15. PLEASE BUY MY FAVORITE TEAM – Stan Kroenke owns the LA Rams, winners of the 2022 Super Bowl. Kroenke also owns the Colorado Avalanche, winners of the 2022 Stanley Cup.  Kroenke, 75 years old later this month, married Ann Walton in 1974.  Walton is the niece of Walmart co-founder Sam Walton (source: NFL, NHL).

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Bill’s By The Number$

1. STILL MADE SOME MONEY – The S&P 500 has suffered 2 “bear” markets since the beginning of the pandemic, i.e., in just the last 30 months. However the S&P 500 has gained +20.4% (total return) from the close of trading on 2/19/2020 (at the peak for stocks before the first “bear” began) through last Friday 6/24/2022 (8 days after the second “bear” bottomed).  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).

2. HALF OWNED BY JUST ONE PERCENT – The top 1% of American households own 53.9% of equities in the United States as of 12/31/2021, through direct ownership of individual stocks or through pooled funds (e.g., mutual funds) that invest in the stock market (source: Federal Reserve).

3. ALMOST NOTHING – The bottom 50% of American households own just 0.6% of equities in the United States as of 12/31/2021, through direct ownership of individual stocks or through pooled funds (e.g., mutual funds) that invest in the stock market (source: Federal Reserve).

4. HAS A REAL IMPACT – Every 1 percentage point increase in mortgage rates reduces property sales by 10%. The average rate on a 30-year fixed rate mortgage was 5.81% on 6/23/2022, up from 4.42% just 3 months earlier on 3/24/2022 (source: Federal Reserve Bank of New York).

5. A RECORD TOTAL – As of 3/31/2022, US single-family homes were worth $39.0 trillion, outstanding mortgages totaled $11.2 trillion, resulting in $27.8 trillion of home equity, an all-time record (source: Federal Reserve).

6. MAKE IT EASY – Legislation has been introduced in the Senate (in March 2022) and the House (on 6/16/2022) that would make it easier for US small businesses to offer retirement plans. The “Starter-K Act” would allow for pre-tax employee contributions up to $6,000, but would include reduced up-front employer set-up costs, and a provision that would make matching contributions optional for employers (source: Congress).

7. WHAT THE FED DID THEN – Inflation, as measured by the “Consumer Price Index,” was up +13.3% in 1979 and up +12.5% in 1980. The Fed funds rate, 8.5% as of 6/05/1980, was increased by the Fed to 20.0% just 6 months later (12/05/1980) to bring inflation under control.  Inflation was up +7.0% in 2021 and the Fed funds rate is 1.75% today after 3 Fed rate hikes already in 2022 (source: Federal Reserve).

8. ALL IN THE SAME BOAT – As of 6/16/2022, central banks in 45 nations globally have raised interest rates in an effort to bring down the spending demand of consumers in their respective countries. The Federal Reserve has raised rates 3 times this year, most recently on Wednesday 6/15/2022.  The hikes were 0.25 percentage points, 0.50 percentage points and 0.75 percentage points (source: FactSet).

9. TWO YEARS – Cleveland Federal Reserve President Loretta Mester, a current voting member of the Federal Market Open Committee (FMOC), said in a television interview on 6/19/2022 that it will take “a couple of years” for domestic inflation to drop down to the Fed’s +2% annual target rate (source: Face the Nation).

10. TRAVELING OVERSEAS – The US dollar has risen in value foreign currencies this year. E.g., 1,000 Euros cost $1,056 last Friday 6/24/2022.  1,000 Euros cost $1,193 on 6/24/2021 or a year ago (source: BTN Research).

11. THAT’S GOING TO HURT – The annual interest cost on the US national debt is forecasted to be $399 billion for the current 2022 fiscal year (i.e., the 12 months ending 9/30/2022), then rising to $1.194 trillion a decade down the road during fiscal year 2032. 10 years ago (fiscal year 2012), the annual interest cost on the national debt was $220 billion (source: Congressional Budget Office).

12. WE DO LIKE TO SPEND – The US national debt, $30.42 trillion as of Thursday 6/23/2022, is forecasted to increase +49% to $45.35 trillion as of 9/30/2032 or 10 years from now. The national debt was $16.07 trillion as of 9/30/2012 or 10 years ago (source: Congressional Budget Office).

13. THIS WILL GET MORE EXPENSIVE – Average credit card debt per household in the United States as of 3/31/2022 was $6,600 (source: Federal Reserve).

14. FLY AWAY – 2.43 million people went through TSA screening last Thursday 6/23/2022, quadrupled the 623,624 that did so 2 years earlier on 6/23/2020 (source: Transportation Security Administration).

15. OUT OF HERE! – Angels superstar Mike Trout hit 4 game-winning HRs in a 5-game series with the Mariners that ended on 6/19/2022, becoming the 1st player in history to hit 4 game-winning homers in a series (source: MLB).

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Copyright © 2022 Michael A. Higley.  All rights reserved.  Email mick.higley@mahbtn.com for subscription information.

Bill’s By The Number$

1. ANOTHER BEAR – When the S&P 500 closed at 3667 last Thursday 6/16/2022, the index was down 23.6% from its all-time closing high of 4797 set on 1/03/2022, i.e., qualifying as a “bear” market decline of at least 20%. The drop was the index’s 11th “bear” since 1950 but its 2nd since the start of the global pandemic.  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).

2. IT MAY TAKE AWHILE – After suffering 10 separate “bear” markets between 1950 and 2021, the S&P 500 recovered and eventually achieved a new all-time closing high each time. The average length of time it took to retrace its steps from a “bear” market low to a new closing high was 25 ½ months or more than 2 years.  The quickest recovery for stocks took place over just 3 months (in 1982) while the longest recovery took 70 months or nearly 6 years (between 1974-1980) (source: BTN Research).

3. TREASURYS – As of the end of fiscal year 2021 (9/30/2021), the Fed held more than twice the level of Treasury securities ($5.4 trillion) as held by Japan ($1.3 trillion) and China ($1.0 trillion) combined (source: CBO).

4. WOW – The yield on the 10-year Treasury note has more than doubled YTD, rising from 1.496% as of the close of trading on 12/31/2021 to 3.222% as of the close of trading on 6/17/2022. Over the last 60 years (1962-2021), the yield on the 10-year note has never doubled over the course of a calendar year (source: Treasury Department).

5. BORROWING FOR DIFFERENT REASONS – Mortgages that were originated during the 1st quarter of 2022 were split between 53% for borrowers who were refinancing an existing debt and 47% for borrowers who were purchasing a home (source: Attom Solutions).

6. GOING DIGITAL – The weekday daily circulation of US newspapers has fallen 57% over the 2 decades between 2000 (55.8 million) and 2020 (24.2 million) (source: Census Bureau).

7. NOT A HAPPY CAMPER – “Consumer sentiment” of the American shopper, an indicator of how optimistic consumers feel about their finances, fell in June 2022 to its lowest level “Consumer sentiment” has been tracked monthly since January 1978 (source: University of Michigan).

8. THIS IS NUTS – 36% of US households making at least $250,000 a year in before-tax income are living “paycheck-to-paycheck” (source: Pymnts.com, LendingClub).

9. NOT PART OF IT – An estimated 5 million American workers are not covered by Social Security. The group, comprised of state and local government workers, are not required to pay “payroll taxes” but are guaranteed by law to receive “comparable” retirement benefits from their employer (source: Center for Retirement Research).

10. PLEASE STAY AND TEACH – After losing 1,250 full-time teachers at the end of the most recent school year, Omaha Public Schools decided to pay a $4,500 bonus per year to all full-time teachers in their system for each of the next 2 school years, i.e., 2022-2023 and 2023-2024 (source: Omaha World Herald).

11. TRIPLED IN TWO YEARS – The price of West Texas Intermediate (WTI) crude oil closed at $37.96 a barrel on 6/17/2020 (i.e., 2 years ago). The price of WTI crude oil closed at $109.56 a barrel on 6/17/2022.  The all-time record closing high for WTI crude oil is $147.27 a barrel set on 7/11/2008 (source: NYMEX).

12. STILL EXPENSIVE – The price of lumber more than quadrupled during the pandemic before falling 65% from a 5/02/2021 high but is still +45% higher today than where the price was at the end of 2019. Lumber was trading at $403.60/thousand board feet (MBF) on 12/29/2019, rose to $1,686/MBF on 5/02/2021, but has since fallen back to $585.70/MBF as of Friday 6/17/2022.  One board foot is equal to a piece of lumber that is 1 foot in length, 1 foot in width but just 1 inch in thickness (source: Chicago Mercantile Exchange).

13. END OF LIFE – The median cost of a semi-private room in a nursing home facility is $7,908 per month or $94,900 per year, based on data collected nationally in August 2021 (source: Genworth Cost of Care Survey).

14. DOWN ON THE FARM – Soybeans were trading for $17.69 a bushel on Thursday 6/09/2022, the highest price ever for the commodity. That broke the previous record for soybeans of $17.68 a bushel set almost 10 years ago in September 2012 (source: Chicago Board of Trade).

15. THANKS DAD – Rob Walton, the 77-year old eldest son of Sam Walton, bought the NFL’s Denver Broncos for $4.65 billion on 6/08/2022, an all-time record for an NFL franchise. The previous record purchase price was $2.275 billion paid by David Tepper for the Carolina Panthers in May 2018 (source: NFL).

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