Jonathan Clements's Blog, page 40
May 9, 2025
Go for the Gold?
To answer this question, let’s start by looking at the arguments favoring gold. Supporters typically point to two key attributes, both of which have contributed to its rise this year. First, gold has a reputation as being an effective inflation fighter. Second, it’s viewed as a safe haven during times of economic uncertainty.
Gold’s reputation as a bulwark against inflation stems mainly from the 1970s. Decades prior to that, the exchange rate between gold and the U.S. dollar had been fixed at $35 an ounce under an agreement known as the Bretton Woods system. But that system became untenable, and in the early 1970s gold prices were allowed to float freely. What happened next cemented gold’s reputation.
In less than a decade, gold jumped nearly 20-fold, from $35 to $650. This jump coincided with a period of unusually high U.S. inflation, which at one point hit nearly 14%. Many investors concluded that gold and inflation must be linked. Because the 1970s were also a period of stock market malaise, the decade ended with gold looking like an ideal investment.
While the 1970s were an exceptional period for gold, enthusiasts point to a much longer history. When archeologists excavated tombs from ancient Mesopotamia, they found gold jewelry, including headdresses, bracelets and earrings, dating back some 5,000 years. They found the same thing in the tombs of Egyptian pharaohs. (Tutankhamun’s mask contained more than 20 pounds of gold.)
In other words, gold is arguably the world’s oldest store of value in continuous use, and that, too, has contributed to its unique reputation.
A reason for its longevity is perhaps that gold, unlike traditional paper money, isn’t under the control of any government, helping to preserve its value. By contrast, it’s easy for governments to issue new currency, which has the effect of debasing the value of existing money in circulation, including consumers’ paychecks and savings. We witnessed that during the pandemic. To support the economy, the Federal Reserve created approximately $3 trillion, much of which Congress distributed in the form of stimulus checks. This was a key contributor to the inflation spike we saw in 2022.
Unlike paper currency, which can be created at the whim of any government, the supply of gold grows very slowly due to the cost and effort involved in mining. Indeed, the World Gold Council estimates that if all of the gold ever mined were fashioned into a single cube, it would measure just 72 feet on each side.
To illustrate the stability of gold, fans cite the notion that an ounce of gold has always translated—more or less—to the cost of a men’s suit. They argue that this rule of thumb has held true at least since the Roman empire. Does the data really support this? It’s debatable. True or not, stories like this contribute to gold’s reputation.
Gold’s longevity, scarcity and independence from government control help explain why it’s earned its unique status as a safe haven during periods of uncertainty, which is the second key benefit cited by gold supporters.
We’ve seen that dynamic this year. The White House’s new tariff policies have upended global trading patterns, and that’s impacted the stock market, as would be expected. But because of the resulting economic uncertainty, the value of U.S. Treasury bonds has also been affected. In the midst of all this, gold has become relatively more attractive to investors looking for an alternative to stocks and bonds. That explains a large part of gold’s recent rise.
The gains this year have been particularly impressive, but gold has generally moved to the beat of its own drum, which contributes to its appeal as a way for investors to diversify. In statistical terms, on a scale where zero indicates no correlation and 1 indicates perfect correlation, gold’s correlation to stocks has been quite low, averaging just 0.24 over the past 10 years.
Thus, gold seems uniquely appealing. Still, I don’t recommend it. Why? Despite its reputation, gold hasn’t always been a reliable hedge against inflation. It certainly did well in the 1970s. But aside from that, gold hasn’t always delivered. Even in 2021 and 2022, when inflation was high, gold investors didn’t do terribly well. And when inflation began to subside, gold gave up whatever gains it had achieved.
In a 2022 interview, a hedge fund manager described the frustration for gold investors. “It’s been a horrible experience,” he said. “You have high inflation, the Fed behind the curve, and gold going down rather than up…. It’s enormously disappointing.”
Why didn’t gold deliver more for investors in 2022, when inflation hit a 40-year high? In my view, it’s because gold lacks intrinsic value. That is, it doesn’t produce income. That’s in contrast to other investments like stocks, which produce dividends; bonds, which deliver interest; and real estate, which provides rent. Because gold doesn’t produce any income, its price is driven largely—if not mostly—by emotion.
There is no math that an investor can do to determine an appropriate price for gold. It’s worth only what other investors are willing to pay for it, and that, in my view, is why its price can fluctuate so widely. Gold gains in value when the economic environment seems uncertain. But when the bad news passes, its value as a safe haven suddenly becomes less valuable, cancelling out its prior gains. That’s why a long-term chart of gold prices looks a lot like a rollercoaster, lacking the same overall upward momentum as the stock market. For that reason, I would be wary of buying gold—except as jewelry.
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 Go for the Gold? appeared first on HumbleDollar.
Shoppers Spend Average of $260 on Mother’s Day??
In this weekend's Barron's, Jack Hough wrote that '.... shoppers say they’ll spend an average of $259.04 per person on Mother’s Day this year, up exactly $5 from last ..."
Sadly, my mother died several years ago. But my wife and I have two children, and they are getting her a gift. However, I can promise you that total the pair spend on their mother won't begin to approach $520+.
Does the average shopper really spend an average of $260 per person for their mother? Not that mothers don't deserve it. I always told my mom and dad that no matter what I did for them, I could never fully repay them for what they did for me.
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May 8, 2025
Tax Efficient Investing for Retirees with High Net Worth: Direct Indexing?
A recent 60-yr.-old retiree with a pension over $100K/yr. and rental income of ~$30K/yr. My expenses are ~$70K/yr. As you can see I have no need to withdraw any $ from my retirement accounts (~$1.09M in trad. IRA and $2.2K in Roth) or two brokerage accounts ($1.5M-a bunch of mutual funds (18) & $500K- Schwab Intelligent Portfolio-robo advisor; overall asset allocation of 85% stocks & 15% bonds.) Seriously considering doing Roth conversions before reaching RMD at 75.
I have a checking account and some emergency cash held in MM muni funds in the four accounts mentioned. All of my assets are held at Schwab. I am a DIY, "buy-and-hold" investor who likes to manage a portfolio with no/low fees and expenses, and I've had the mutual funds (index funds from Vanguards, T. Lowe Price, and some mid & small cap funds) for a long time and they have appreciated greatly over the years with serious tax consequences; it appears that some/many of them are not tax-efficient!
Due to large distributions and gains from the mutual funds, last year my taxes were very high (tail end of 32% fed. & 9.3% CA brackets). I was recommended to gradually sell the mutual funds and invest in a direct-indexing product, such as Schwab Personalized Indexing or Fidelity's "SMA- Direct Indexing, both of which have 0.4% advisory fee. Tax-loss harvesting was the major reason these products were recommended.
What are your thoughts on these products? There are pros and cons of this strategy, but directly owning hundreds of stocks will create a nightmare when unloading or discontinuing in the future. Also, pages of 1099 to upload during tax preparation!
How about robo advisors (Betterment, M1, Wealthfront) that do tax-loss harvesting automatically for a fee (~0.25%) or direct indexing, like Wealthfront's S&P 500 Direct Indexing with .09% fee?
Any feedback, thoughts or recommendations would be deeply appreciated, for I'm having a hard time making a decision on how to invest in tax-efficient products that cost very little or have no/low fees.
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Let’s revisit an important retirement living topic. How’s it going? Great expectations
I hear about this topic on YouTube retirement videos. It has also been a topic on HD from time to time. We all know about the process of preparing financially for retirement, but it seems that for many people facing a retirement lifestyle is equally challenging.
Honestly, I can’t relate. I never thought about what retirement living would be like. I had no expectations. Perhaps taking phased retirement for 18 months was a factor, but even when I decided on doing that it wasn’t with a plan to prepare for retirement, it was purely a financial move - collecting a pension, Social Security and half my pay simultaneously. Admittedly it gave me a taste of more free time and a loss of work related status.
It may be retiring at 67 was a factor as opposed to taking the leap at 55 or even 60, when the retirement years might be longer. Still, I have been fully retired over 15 years with no disappointments or regrets.
Why did I retire? I liked my job, that’s not it. I felt I had accomplished all I could. The senior leadership changed and in the process the company culture changed. At a meeting with the CEO about an incentive compensation issue he whipped out a flip chart and started writing formulas. It could have been Sudoku as far as I was concerned. That was it.
Perhaps I just have a dull personality. The older I get, the more mellow I seem to be. I am happy doing nothing if that happens. Connie maintains a pocket calendar with everything she (we) will be doing. There are two main activities. Family events and doctors visits. I write in “golf” twice a week. When there is a open date, I’m happy.
I’m equally happy traveling, even a road trip. I look forward to the five hour drive to Cape Cod, even driving to Florida in the winter.
SO, FOR THOSE RETIRED, how was the transition? Are you all settled into a comfortable retired life routine? Do you seriously miss any part of your pre-retirement life? FOR THOSE NOT YET RETIRED, what are your expectations?
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Do It for the Kids
That’s a phrase I often use when talking about helping the next generation. But my efforts have been mostly focused on my children and grandchildren. What about others in future generations, especially those from less affluent families?
Welcome to the Jonathan Clements Getting Going on Savings Initiative and the accompanying book, The Best of Jonathan Clements: Classic Columns on Money and Life.
The savings initiative aims to get young adults started in the financial markets with $1,000 contributions to Roth IRAs, with those contributions funded by both direct donations and the royalties from the book. The book consists of more than 60 of my old Wall Street Journal columns.
I’d love to take credit for all of this, but my involvement has been modest. After my cancer diagnosis, there was a move to establish a journalism award in my honor. I suggested the savings initiative instead.The heavy-lifting was then done by five luminaries of the personal-finance world: Christine Benz, Bill Bernstein, Karen Damato, Mike Piper and Allan Roth. I consider all five to be friends, and all have some involvement with the John C. Bogle Center for Financial Literacy. Also working on the initiative are two other groups: J-PAL North America and the City of Boston’s Summer Youth Employment Program.
Meanwhile, the fine folks at publisher Harriman House assisted with the book's design, and The Wall Street Journal allowed my old columns to be reprinted at no cost. Indeed, the program is being supported by both the Dow Jones Foundation and News Corp., the Journal’s publisher.
You can read more about the savings initiative here, and also in Jason Zweig’s Wall Street Journal article from earlier today. Just to be clear, I’m not making any money from the book, and nor are any of the other participants. Want to pitch in? There are two ways:
Buy copies of the book or purchase the Kindle edition.
Make a tax-deductible donation.
I don’t know of any other program that takes young adults and gets them so directly involved in the financial markets, providing not just the money to get started, but also the investment vehicle as well. Will it lead some of these young adults to become regular savers and investors? If it does, lives will have been transformed. How cool is that?
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier posts.The post Do It for the Kids appeared first on HumbleDollar.
The Wrong-Sided Man by Dennis Friedman
I usually go for my four-mile walk before sunrise. I like to get an early start to my day. I’ve gotten to know a few folks who I see on my way around the neighborhood. We exchange pleasantries as we pass each other.
But there’s one gentleman who is not so friendly. He looks like he’s in his early thirties—about forty years younger than me.
All the people I encounter walk on one side of the sidewalk, as if they’re walking on a moving walkway at the airport or driving a car. This guy is determined to walk on the same side as me, even though we’re going in opposite directions.
I was surprised the first time we met that he was reluctant to move over. The other times, he would move over at the last second to avoid a collision. The last time, we came to a dead stop and stared at each other. Then he intentionally bumped my shoulder as he went around me. Each time, I kept thinking he would finally get it and walk on the opposite side, like the rest of the folks in the neighborhood.
One morning, I was late for my walk and saw him walking, as he usually does, on the wrong side. Another younger man, about his age, was approaching from the opposite direction. This time, the wrong-sided man moved over in plenty of time to let the other guy go by. There was no confrontation like there was with me. He knew what side of the sidewalk he belonged on.
I really don’t know what I would do if I ran into the wrong-sided man again. If I move over, I feel like I’m letting him push me around and not standing up for myself. If I don’t, then we might get into an altercation.
My wife says I’m too old to confront him. “Just move to the other side when you see him coming. He doesn’t care that you’re an elderly person. If he did, he wouldn’t be acting this way.”
My wife is probably right about him not caring how old I am. One day, I was walking from the parking lot to Trader Joe’s. A fairly young man in his car was waiting for an elderly woman to walk by. He was laughing. At first, I thought he was laughing about something he heard on the radio. But he was actually laughing at the elderly lady because of the way she was walking as she struggled to get to the store. He had no sympathy for her plight.
I read in the newspaper that two women beat up and killed an elderly man while he was waiting for a train. He was about my age.
Scammers and con artists see the elderly as easy marks, too. When my mother was alive, I always told her not to answer the phone if she didn’t recognize the number. Now, I find myself susceptible to the same criminals I warned my mother about.
I received a phone call from the Geek Squad, saying they were going to renew my service contract unless I called a certain number. I had once used them to help with a computer problem, but I didn’t know I had a service agreement with them.
I called the phone number I used before when I needed help. I told them what had happened. The man said it was a scam and to ignore it. I asked him how they knew I had used their service, and how they got my number. He kept saying, “Ignore it and don’t call them.” He sounded like me when I was taking care of my mother.
We should all beware of the wrong-sided man — especially the elderly, who may be more vulnerable. Don’t assume because you’re a senior someone is going to be kind and thoughtful.
Meanwhile, I changed my route so I don’t run into the wrong-sided man again. I thought it was childish to get into an altercation over something so meaningless. But I also knew that if I met him again, I wasn’t going to budge.
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Wall Street Journal Article about Jonathan’s New Initiative
Today's WSJ has a Jason Zweig article about the the Jonathan Clements Initiative.
This will be paywalled. https://www.wsj.com/finance/investing...
Intrepid readers can also find a link or two about how to donate if you are not buying the excellent new book.
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Generational Perspective
Many Humble Dollar readers, including myself, are on the older side - approaching retirement or already retired. Readership tends to be relatively affluent and educated. Our financial and social perspective may at times be influenced by a generational outlook. At the risk of overgeneralizing, here are some possible baby boomer versus Under 40 year old viewpoints:
Artificial Intelligence
Baby boomer: A new development with many unknowns and exciting possibilities. AI could play a dangerous role in future scams targeting them.
Under 40: A helpful resource for day-to-day usage. AI could pose a threat to their jobs and future career path.
Social Security
Baby boomer: A dependable economic safety net which hopefully will not change.
Under 40: An employment tax which may or may not provide benefits by the time they retire.
Homeownership
Baby boomer: A foundational investment which provides a major source of savings and wealth.
Under 40: Limited inventory and priced out of certain markets. It could feel unattainable without some parental support.
Work / Life Balance
Baby boomer: An entitlement after a lifetime of hard work.
Under 40: Why should they have to wait until they are older to enjoy life? Will working even harder matter anyway?
Economics of Family
Baby boomer: Having a family has been part of traditional planning.
Under 40: When is the right time (if at all) for children given financial challenges?
Have you noticed any differing perspectives between generations which may be interesting to explore?
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EO 14249 Mandated Electronic Payments
The fact sheet states that, effective September 30, 2025, the Federal government will cease issuing paper checks for all disbursements, including intragovernmental payments, benefits, vendor payments, and tax refunds.
The fact sheet also states payments made to the Federal government, such as fees, fines, loans, and taxes, must also be processed electronically where permissible under existing law.
You can read the full Executive Order as it appears in the Federal Register here and the White House Fact Sheet which summarizes the Executive Order here.
If you are still writing paper checks to pay your estimated tax payments or the balance due then you may want to switch over to electronic payments sooner rather than later to avoid the learning curve.
I was stationed in Germany in 1973 and the first half of '74 in a maintenance company for the Army's Third Armored Division. When my company XO was promoted to CO, I was his personal clerk and driver for a while. The standard process to pay enlisted troops on our base was that once a month the XO, his driver and a appropriate armed detail would go to a nearby Kaserne where we received and counted the cash to pay everyone who did not have direct deposit which I would guess to be 90%+ of the enlisted men in our company of about 200 men (we had no women assigned to our company).
When we returned to our base we then divided the cash into the amount each man would receive. At that point usually mid-morning the company would fall into formation. After announcements those with direct deposit would be dismissed to go to their assigned duty post and then the XO and his clerk would pay those without direct deposit, man by man. I would count the money out and then the payee would also count the money and then sign their paper check to acknowledge payment in full as the XO supervised. The XO and I hated payday. When the XO was promoted he did something about this procedure.
On the first payday after his promotion to CO we had our normal formation but then things changed. No one was dismissed and the entire company walked (marching would not describe this) to the Kaserne at Erlensee from the Fliegerhorst Kaserne at Hanua a distance of about 7Km a little over 4 miles. We paid the men without direct deposit at Erlensee, and then the entire company walked back to Fliegerhorst. When we arrived back near the end of the day, we had another formation and my CO announced that he hoped everyone had enjoyed the day and noted that we would be following the same process every month until at least 90% of the company had elected direct deposit.
We did not have to make the walk again as most everyone had elected to have direct deposit by the next payday. My CO had found the right incentive. Yes, the CO and I also walked.
So, what motivates you best, the carrot or the stick?
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Don’t Go Breaking My Heart by Marjorie Kondrack
Love and heartbreak are human experiences. Heartbreak is not restricted to the end of a relationship. It can be unrequited love, the death of a loved one, divorce, unmet expectations we have of another. Or other severe emotional conditions.
Harvard Medical School recently published an article about a phenomenon known as Broken Heart Syndrome. It is a real condition known as Stress Cardiomyopathy or Takotsubo syndrome, and can be deadly. But most people recover quickly without any long lasting effects. Although it mimics a heart attack, the key difference is that in broken heart syndrome there are typically no blockages in the coronary arteries
While dying from a broken heart sounds like something that happens only in romance novels, it can grab the headlines. In 2016, actress Debbie Reynolds unexpectedly died four days after the passing of her daughter, actress Carrie Fisher. Headlines blared, “Can Someone Die of A Broken Heart?”
Broken heart syndrome isn’t what the media has painted it to be, but it can be fatal for about 1% of people who experience it. Previously it was thought that it affected mainly women over the age of 50, but a recent study by the New England Journal of Medicine indicates a marked increase in the percentage of men affected as well. Researchers attribute this to the likelihood of, at some point beyond mid-life, the response to stress can weaken or stun the heart.
An ultrasound (echocardiogram) of the heart can show how well the heart is contracting and whether the heart has taken on what has been officially termed as the Takotsubo shape. Your heart suddenly changes shape and weakens.
While older women are the most likely to develop broken heart syndrome they also have the best chances of recovery. Men and younger people are less likely to get the syndrome, but their outcomes are typically worse when they get it.
Broken hearts can heal. Some may need ongoing treatment and stress management techniques. It’s important to follow up with a cardiologist who can tell you when your heart muscle has fully recovered. To reduce your risk of this and other heart related condition, you can invest in self care practices that will enhance your emotional well being:
Improve or eliminate stressful circumstances (toxic relationships, isolation, taxing jobs)
Prioritize sleep
Invest a little time in stress reducing routines, such as deep breathing, meditation and tai chi.
My favorite: A walk outdoors in nature.
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