Alchanati Campbell & Associates
I have this unquestionable desire to disappear. Dissolve all trace and presence. Cut connections and relationships. Be born into a new environment in a new time. Why does it seem like a paradise? I’m getting away from all of the noise and responsibility. I’m going at my own pace, doing what I want to do, with nobody controlling me besides my own ambitions, goals, and work ethic. What would you do if you had no responsibilities? Nothing holding you back besides the limits of your potential. I would vanish without explanation or warning- go off the grid. A big part of living a fulfilling life is doing so in a way that is true. Living a fortunate life is not hard, but when it’s not your life that you’re living, what are you living for? Everybody talks about life and how to live it correctly, but only a few actually live what they preach. It’s better to have a short life that is full of what you like doing than a long life spent in a miserable way.
The Market. America’s elderly are twice as likely to work now than in 1985. 20% of those age 65 and up haven't retired yet because they do not have enough money to retire. Researchers say climate change makes poor countries poorer and widens the global inequality gap. Half of 16-year-olds in the US had a driver’s license in 1983. Only 25% of 16-year-olds do now. The US tightens the ban on Iranian oil. Junk bonds act similarly to stocks. If junk bonds continue to decline, that can be an indicator that large-cap stocks decline as well. Fed policy is guided by the theory that high unemployment equals low inflation and vice versa. The most valued skills for an employer: problem-solving, collaboration, customer service, adaptability, culture fit, growth potential, in-demand technical skills, being curious and communication.
Behavioral Finance. “The human mind is fundamentally not a logic engine, but an analogy engine, a learning engine, a guessing engine…” The study of behavioral economics allows us to understand the decisions we make. Behavioral finance aims to influence and improve our financial decisions. We are more sensitive to losses than gains and overly influenced by short-term considerations. We seek to conform to group behavior and prevailing norms. We overweight the importance of recent events. We are poor at assessing risks and gauging probabilities. We over-estimate our own abilities. We focus on outcomes. We are often persuaded by captivating stories. Have a long-term investment plan. Automate your savings. Rebalance your portfolio. Don’t check your portfolio too frequently. Don’t make emotional decisions. Don’t trade, invest. Save more tomorrow. Individuals should build reserves that can provide an acceptable standard for living in retirement. To achieve this, they should start saving early. What’s hurting us is our tendency to think that the present is more important than the future, and limits to our self-control. Ask yourself these questions: What is the problem or issue? What is the rational or optimal decision? How do you actually behave? What is causing this difference between what you should do and what you actually do? How can we alter behavior to deliver better outcomes?
A Never-Ending Work Life. In 2017, 32% of people ages 65 to 69 were working and 19% of people ages 70 to 74 were employed. In 2024, it is projected that 36% of people ages 65 to 69 will be in the labor force. There are two reasons why a 75-year-old would still be working: they love their job; they are active, healthy and want to work due to longevity OR they need to work; they cannot pay off their current debt and expenses, and they do not have enough saved to be able to retire and survive. The first reason is not the issue, but there is a debate between living longer and not working and living longer and continuing to work. If your job is stressful, physically demanding, and lacks meaning, then it will have a negative effect on longevity and your health. But staying mentally, socially, and physically active is good for long-term health. The real problem is people working past the “retirement age” due to them not having enough money. You cannot rely on the government to fund your retirement. Starting to save earlier in life, being frugal and disciplined with your money, and enforcing saving by auto-enrollment or forced/auto contributions will help ensure your ability to have the choice of retirement in the future.
Orange and LA Real Estate. Home sales volume in Orange remains weak. The low turnover rate will continue until 2022 when renters of Millennials start buying and Baby Boomers start retiring. Homeownership remains low with the state average being 55% and Orange being 57%. Home sales volume in Los Angeles remains low. The homeownership rate in Q4 2018 was 50%. With the increase of interest rates (that increase mortgage rates), which caused the prices of houses to fall because people are having a harder time affording real estate.
Debt and Equity. What is the cheapest financing option, a company selling debt or a company selling equity? The answer is debt financing. Reasons: you get an income tax benefit on the interest component that is paid to the lender. If the firm goes bankrupt, equity investors lose everything, but the debt holder has the first claim on company assets. You do not give away ownership or a stake in the company. The cost of equity is more expensive due to its riskiness (cost of debt is lower than the cost of equity). Generally, companies in stable industries with consistent cash flows use debt financing (taking out a loan or selling bonds) more than equity financing (selling shares of the company).
Tesla. On Earth Day, Tesla invited representatives from their largest investment partners to check on the progress the company has made and their plan for a fully self-driving car. Tesla has just begun to manufacture its first in-house self-driving computer which boasts an impressive 142 trillion operations a second. The new FSD computer is said to be the last piece of hardware Tesla needed to achieve full self-driving by the end of the year through over the air updates. Once FSD is accomplished, Tesla plans to launch a ride share network similar to Lyft and Uber, but driverless. The idea is while you are at work you can activate your Tesla and allow it to give rides to people and earn you some extra cash. Tesla plans to launch their RoboTaxi service next year and if so, Uber and Lyft stand to lose big. Tesla has a massive competitive advantage over Uber and Lyft because they are closer to reaching FSD capability, already make the cars and self-driving hardware in-house, plan to offer their own insurance, will not have to employ human drivers, and will run on a completely electric fleet who's cost per mile are less than half of current costs. Tesla owners stand to make upwards of $10,000 a year while Lyft and Uber stand to lose billions. It's a race to the future of self-driving cars.
The Alchanati Campbell and Associates Team
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