Jonathan Clements's Blog, page 29
August 11, 2025
The spreadsheet conundrum when the stakes are high.
See, I told you so, those darn spreadsheets will find any answer you like.😱😁
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August 10, 2025
The Cloth Seller Who Invented Social Security
He was a 17th-century cloth seller from London who had a very strange hobby. Before starting his workday, he liked to study the Bills of Mortality, which were weekly records compiled by parish clerks, detailing births, deaths, and their causes.
Over time, he started to compare causes of death with age and gender. His first key insight was noticing that although more males were born in London, the actual adult gender ratio was roughly balanced because of lower female mortality rates. This act of statistical inference—of looking for trends in what seemed like random data—is what makes him the father of demography and a pioneer of actuarial science.
Graunt's work didn't stop there. He created one of the first life tables, a revolutionary concept that used his mortality data to estimate survival rates to a certain age. This innovation was the direct ancestor of modern actuarial tables, which insurance companies use to calculate premiums. He was the first to scientifically show that longevity and death followed predictable patterns within a population—a foundational idea that was entirely new at the time.
This little-known person established the very foundations of the discipline that directly impacts your Social Security and the baseline income you build your retirement from. Alongside this, the very systems used to price your insurance policies to give you peace of mind evolved. Next time your Social Security deposit hits your bank account or you're glad for insurance after an accident, maybe tip your hat to the pioneering work of John Graunt and his odd little hobby.
The sad irony of his life is that although he developed the tools and ideas that applied not only to actuarial science but also the same principles that were co-opted by the developing insurance industry, it was sadly too late for him. The misfortune of the Great Fire of London destroyed his house and livelihood, making Graunt a victim of a risk that his own work would help others mitigate just a few short years later, leading him to a life of poverty before his death.
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August 8, 2025
Smart Move?
What’s a stablecoin? It’s similar to a cryptocurrency but differs in one important way: Bitcoin and other cryptocurrencies have exhibited wide price swings. That makes them interesting to investors but less-than-useful as currencies for everyday transactions. Just ask Laszlo Hanyecz, an early adopter of bitcoin.
Back in 2010, Hanyecz paid for a Papa Johns pizza order with 10,000 bitcoin. At the time, this translated to about $40, an appropriate price. But today, those same 10,000 bitcoin would be worth more than $1 billion. That’s why the term “cryptocurrency” has become somewhat of a misnomer. Even in the past 12 months, bitcoin has nearly doubled in value. It’s also experienced steep declines. In 2022, it lost more than 60%. This volatility makes bitcoin and other cryptocurrencies impractical as currencies.
Stablecoins intend to solve that problem. To be useful as currencies, they promise to maintain a perfect 1-to-1 exchange rate with the U.S. dollar. But that raises a question: If stablecoins never deviate from a fixed price of one dollar, what purpose do they serve? Why not simply hold dollars in the bank?
Stablecoins turn out to have potentially broad appeal.
For consumers, the pitch is that stablecoins offer a better way to transfer funds than any other existing method. Credit and debit cards, for example, are ubiquitous, but they aren’t practical for payments between individuals.
PayPal, Venmo and Zelle allow for person-to-person payments, but they too have limitations: They require some setup, and they cap the size of transactions, making them infeasible for things as basic as rent payments.
Wire transfers are quick, but they’re cumbersome, and many banks charge fees to send—and sometimes even to receive—wires, making them impractical for day-to-day use. Most people use wire transfers infrequently, if ever.
While it can be cumbersome to transfer funds within the U.S., it’s even more costly and complicated to send funds internationally. Services like Xoom (owned by PayPal) have made this easier, but these services carry fees, and also charge a “spread” on the currency conversion. By contrast, stablecoins would have no fees and no conversion costs.
Because stablecoins aren’t encumbered by any of those limitations, they represent a potentially promising alternative for consumers.
The government is also interested in stablecoins. The reason is interesting. A White House press release notes that “the GENIUS Act requires 100% reserve backing with liquid assets like U.S. dollars or short-term Treasuries,” then adds: “By driving demand for U.S. Treasuries, stablecoins will play a crucial role in ensuring the continued global dominance of the U.S. dollar as the world’s reserve currency.”
That’s stablecoins’ primary appeal to the government’s. Because stablecoins need to be backed on a one-for-one basis by either U.S. dollars or U.S. Treasury securities, stablecoins have the potential to generate new global demand for U.S. currency. And proponents argue that stablecoins have the potential to turn the dollar into a currency that can be used in everyday transactions worldwide. While this vision may sound like a stretch, it need not be all-or-nothing. If the GENIUS Act can increase demand for Treasury bills or extend the reach of the dollar by any amount, that would be positive for the U.S. economy.
A third constituency that’s very interested in stablecoins: retailers. For businesses that accept credit cards, processing fees average about 2%. For years, retailers have battled with Visa and MasterCard, which are responsible for setting these rates, but without much luck. It’s no secret how profitable the credit card business is. Visa’s gross profit margin is about 98%, and its net margin (after all expenses and taxes) averages about 53%. By way of comparison, Microsoft—itself an extremely profitable company—has net margins in the neighborhood of 35%.
For this reason, there’s speculation that large retailers, including Amazon and Walmart, will accept stablecoins and might even issue their own coins. Shopify, a company that provides back-end shopping cart tools for millions of ecommerce sites, already allows retailers on its platform to begin accepting one type of stablecoin.
Part of the motivation for the GENIUS Act is that stablecoins don’t have an unblemished history. Most notably, in 2022, a coin called TerraUSD, which was supposed to be pegged to the dollar, crashed disastrously, losing most of its value. The new rules, which require that each stablecoin have a dollar of collateral, should help consumers avoid this outcome. Terra failed because it didn’t have that collateral.
Should you try stablecoins? The good news is that there’s no rush. Since stablecoins are intended to maintain a fixed value, there’s no risk of missing out on price appreciation. For that reason, consumers can afford to take it slow, and watch and wait to see how things develop.
One reason I’d take it slow is stablecoins may not be entirely without risk. Even though they’re intended to remain pegged to the dollar, that link isn’t guaranteed. Why? Short-term Treasurys, which stablecoins are permitted to hold as collateral, can lose money. Yes, they’re generally very stable but, as we saw in 2022, when interest rates spiked up, these bonds lost about 4%. So there is a scenario in which stablecoins could lose value. That’s why I’d wait for the bugs to be worked out before committing more than a small amount to stablecoins.
That said, I see this new technology as a positive development. Whether it’s stablecoins or something else, advances like this may help put downward pressure on the high fees that continue to be stubbornly embedded in the traditional credit card system.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.The post Smart Move? appeared first on HumbleDollar.
A Harsh Truth, or a Contrarian View
“It feels like the economy has gone through three cycles in the past six years. The future looks very messy and uncertain, yet there’s no shortage of pundits that claim to know what will happen tomorrow.
But predicting the short-term direction of the economy has always been that way. ….
The media and investors alike are subject to recency bias: the tendency to place more emphasis on recent news and events than on older circumstances. There has been no shortage of economic disruptions over the past six years. Since mid-2019, the global economy has endured a pandemic, multiple supply chain disruptions, a short bout of inflation, and geopolitical tensions. Through all of that, real US GDP grew at about 2.3 percentage points annualized between July 2019 and March 2025.
It’s easy to get hung up on past problems and miss what’s important….
The US economy’s current situation has never looked better. Economic output, as measured by real GDP, currently sits near an all-time high. Real GDP broke $23 trillion in early 2024, and it is on pace to surpass $24 trillion in the next year. Inflation has cooled down to about 3% over the past 2.5 years, which is slightly lower than the long-run 3.5% average the US has experienced in the post-World War II era since January 1948.
Employment figures also look great by historical standards. The unemployment rate has hovered around 4% over the 12 months through June 2025, or below the long-term average of 5.7% dating back to January 1948. Further, the US economy has continued to employ more and more people as it has grown. It employed nearly 160 million Americans (excluding volunteers, farmers, and those self-employed) at the end of June 2025—an all-time high….
There are two major lessons that investors can glean from that data. First, publicly traded corporations perform most of the heavy lifting. Investors benefit by getting exposure to the market and reducing, if not eliminating, anything that drags on performance.
The second lesson is remaining steadfast when the inevitable drawdowns occur. Charlie Munger, Warren Buffett’s late business partner, summarized it best:
“I think it’s in the nature of long-term shareholding with the normal vicissitudes in worldly outcomes and in markets that the long-term holder has his quoted value of his stock go down by say 50%. In fact, you can argue that if you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you are going to get…”
Munger spoke a harsh truth, but it’s one that all successful investors eventually make peace with. Shareholders are compensated for bearing risk. Some of those risks come from individual companies or market segments, while others are consequences of the economic cycle.”
https://www.morningstar.com/funds/big-secret-long-term-investment-success
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I am aware of a few dark clouds. The full impact of tariffs is not yet known. AI will displace workers. We simply don’t know how many and which skills. For example, Microsoft is laying off about 4% of its workforce, about 9,000 people. Other large corporations will do the same. Housing remains a problem. The home price-to-income ratio has risen from 3.5 in 1985 to 5.0 in 2025. (Years of income to buy the typical home). However, a 30 year mortage is about 6.8% whereas in 1985 it was 12.4%.
I also know that the recent economic reality isn’t what some were hoping to hear. There are those who were convinced otherwise and are betting on disaster. Of course, if that occurs they will go down with the ship, too. The most perverse are actually wishing for disaster. But, for long-term, rational investors, things have been very good.
Yes, a market correction is coming and there will be a recession. You can bet on that. But, while waiting for the inevitable don't hold your breath and don't get ahead of your skis.
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Hedge funds, venture capital. private equity, etc. in a 401k. BAD IDEA!
President Trump signed an executive order Thursday 8/7 to allow 401(k) participants to invest in private assets.
The directive instructs the Department of Labor and the Securities and Exchange Commission to draft guidance for defined-contribution plans to incorporate private-market investments, including private equity, venture capital, hedge funds, real estate, and possibly gold and crypto.
Plan sponsors are not required to offer these investments-and I hope they don’t. This is a bad, short-sighted idea.
That's all we need in 401k plans, more complexity, more choices few people understand. The idea is participants can achieve better growth on investments.
More like the other side of the coin and bigger losses.
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Supercharging Your Retirement with Crypto: A Wise Move, or a Risky Bet?
With crypto in my mind I was interested to read an article this morning about how your President Trump has just signed an executive order that could change things up. It seems he's directing federal agencies to make it easier for retirement plans to include alternative assets like crypto and private equity.
It seems to be a big shift from the previous administration's approach. Supporters say it gives more choice and a shot at higher returns. But critics warn it's a risky move, exposing everyday savers to the wild swings of the crypto market
I'm assuming it will take a while to happen. But the question begs to be asked: Is this a smart way to supercharge your retirement, or a dangerous gamble? What do you think?
My view is that crypto should be treated as a long term gamble with money you can afford to lose. I'm really not sure of it being a suitable position in someone's retirement account. Would a financial advisor even be able to square this with the duty to advise in the client's best interests? I think it could probably expose them to possible lawsuits. It seems like a new can of worms is about to hit the ground. Any thoughts?
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August 7, 2025
An Excellent Morningstar Article on CCRCs
I just read an excellent synopsis of continuing care retirement communities on the Morningstar website. I figured since this a frequently addressed topic on the Humble Dollar this article may be helpful for some. I have already bookmarked it for myself for future reference.
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Reacting to the Tariffs
A NEW TARIFF REGIME takes effect today. If the costs are passed along to buyers, the price of cars, orange juice, clothing and Swiss chocolates could increase, possibly dramatically.
I dealt with price shocks earlier this year. It gives me some insight into how we might behave if prices rise suddenly. Although I could have afforded the higher prices, the strong emotional impact made me highly adaptive. The price shock mobilized me to take action, even though it was only over a dollar or two.
In February, Patricia and I flew to the remote Hawaiian island of Molokai, which is about the size of Manhattan but with only 7,000 residents. We flew on an eight-seat plane that resembled a giant grasshopper. Before taking off, a couple of other passengers shoved big tubs of groceries into the plane’s cargo hold. A trip to the island’s grocery store explained why. Prices there weren’t just high—they seemed absurd.
I kept taking items off the shelf and then putting them back after I saw the price, such as $12 for a small jar of mayonnaise. Pineapples cost $8, more than double what we paid at home in Pennsylvania. Eggs were $12 a dozen.
A local acquaintance explained that Molokai was at the tail end of the global supply chain. Everything costs more at the grocery store because it has either been flown in or shipped over the rough seas from other Hawaiian Islands.
I had a startling reaction. Prices seemed so out of line that it became a game to stock our kitchen with less costly foods. We pursued several methods that shoppers might adopt if the tariffs start to pinch. Here are some hacks we developed over our two-week stay:
Buy local. A man sold local fruit from a card table set up on the sidewalk between the island's two grocery stores. Three mangos were $5. They became my breakfast staple. I bought lettuce and pygmy bananas from him as well. I found local eggs at the farmer’s market for $10 a dozen—not a bargain, but less than at the grocery store.Trade down. We chose simpler fare for our home-cooked dinners. Two nights we had omelets, two nights spaghetti with red sauce. We ate fish only once.The prices of alcohol and ice cream seemed comparable to those on the mainland so we bought them with abandon. We blended tropical drinks from local mangoes and rum. Pints of ice cream made for a refreshing lunch after a morning of snorkeling.Do without. There were a lot of brands that we just didn’t buy in Molokai. Rationally, I could have afforded them. The price shock, however, had me tut-tutting and putting them back on the shelf.Given my strong emotional reaction, I think people will respond quickly to any price increases that flow down to them. Based on my island sojourn, I expect that even well-off Americans will find cheaper stores, trade down and do without some things—even little things—whose price seems too high compared to yesterday.
It’s possible that consumers’ strong reactions may blunt the impact of tariffs if retailers and manufacturers decide to share the expense of them in preference to losing too much business. Let's hope so.
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My Money Memories
1. My older brothers—who are identical twins—and I were regulars at the local community pool, starting when I was age four. Our parents or our au pair would throw pennies into the pool, and we’d dive in and fish them out.
How much were these pennies worth? It seems they were worth far more to Nick and Andrew than to me. I discovered they kept the pennies and had a jar with 35 cents. I was shocked my older brothers had stolen a march on me—and, during those childhood years, I never caught up.
2. Starting around age 10, we spent summers on the Devon coast, in southwest England, where my parents had bought a holiday home. On a Saturday morning, I’d often get up early and walk the half-mile to my grandparents’ house. Why? My Uncle Peter was often staying there for the weekend, and I knew he was always good for 50 pence. My brothers were furious when they found out and complained bitterly to my parents.
3, As a teenager, I had a savings account at the Bank of Baltimore, as did other family members. We’d often head there on a Friday evening, depositing our earnings from babysitting, raking leaves and cutting grass, after which my mother would treat us to a fast-food dinner at Roy Rogers. I loved the clatter of the bank’s computerized typewriter’s keys, as my latest deposit and the interest owed were added to my balance. But it was always the same story: Whatever my balance, my brothers’ hoard would be significantly larger.
4, My first job after graduating college was with Euromoney, a London-based magazine devoted to the international financial markets. After all deductions, I received £90 a week, later increased to £100. After paying rent for my bedsit, I had some £60 each week for food, beer and my London Underground pass, hence my burgeoning credit-card balance.
5. When my first wife and I bought our starter home in 1992, I studied the mortgage payment coupon and noticed a line for extra-principal. I added $10, a sum that grew in subsequent months. I ended up paying off the 30-year mortgage in 13 years.
6. Every penny we had went into buying that first home. What happened next? After the closing, I ran the washing machine in the basement for the first time and, while I was still down there dealing with other issues, the water was expelled from the machine and down the sewer line, only to come flying back into the house. It felt like getting kicked in the stomach. The sewer line was blocked with roots and had to be replaced at a cost we could barely afford.
7. In the early 1990s, I had a hand in editing a Wall Street Journal article that triggered a massive libel suit against the paper. The case went to trial in 1997 in Houston, I had to testify, and we lost bigtime—to the tune of $223 million, the largest libel award in U.S. history. On the day the verdict came down, I had the strange feeling of walking to dinner at a nearby restaurant, knowing news that few others were aware of—remember this was the early days of the internet—but which would be front-page news the next morning. The good news: In 1999, the verdict was thrown out on appeal because the plaintiff withheld evidence.
8. I stayed a few times at the home of someone who had amassed $100,000 of credit-card debt. Creditors called constantly, so no one ever answered the phone. It was a tortuous barrage of noise that I can still remember—and stands as a reminder of the mental agony caused by financial mismanagement.
9. How can someone end up owing so much? Sometimes, it’s misfortune. But sometimes, such spending is a costly emotional outlet, boosting the purchaser’s spirits, but only briefly. An example: Someone I knew went to the supermarket to pick up three items for lunch, but came home with $300 of groceries. This was at the end of a weeklong buying binge. The sad result: $20,000 of credit-card debt.
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August 6, 2025
Did the Era You Grew Up In Influence Your Financial Plan?
Does the larger societal era from your childhood influence your financial outlook as an adult and beyond into retirement? This question came to mind while I was responding to a comment by bbbobbins on an article I'd posted to The Humble Dollar forum.
For example, my childhood was set against the immediate backdrop of social and civil unrest in my local community in Ireland. This was compounded by the overarching global tension of superpower rivalry during the Cold War, with the specter of nuclear annihilation looming over our young minds. This sharply brings to mind the scary "shelter under the desk" drills during class. Combining this with the local tension, I think it must leave some footprints on your financial mindset.
The "Epistemology of the Bunker" by anthropologist Catherine Lutz found that low-level Cold War childhood trauma could lead to a bunker mentality, prioritizing risk mitigation and building a durable, resilient financial plan, even if it meant forgoing more lucrative but riskier opportunities. A Queen's University Belfast study on Adverse Childhood Experiences echoes these conclusions.
Numerous studies have highlighted a "Carpe Diem" versus "Saving for a Rainy Day" divergence in personal outlooks on financial thinking. If we combine these different studies and conclusions, we can profile a possible financial mindset for a person who grew up during the high-tension era of the Cold War and the Irish Troubles.
This suggests the likely outcome is a person who saves for a rainy day, prioritizing a resilient financial plan and awareness of risk mitigation with a tendency to forgo risky opportunities and behavior. It sounds familiar; it sounds like me.
This is possibly an example of how macro-level historical events can interact on a personal level to shape personal identity, in this case, a financial one. It challenges the idea that financial decisions are purely rational and highlights the deep psychological roots of our attitudes toward money, risk, and security.
While my experience is unique to a childhood in Cold War Ireland, I feel the underlying theme is universal. It could help in the quest to understand our financial motivations and journeys. Perhaps we are more a product of the era we came of age in than we like to believe.
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