Jonathan Clements's Blog, page 54
May 25, 2025
Is it possible to achieve financial well being without a plan or even a spreadsheet?
Neither is the case, so either we are just lucky or all the worrying, detailed analysis and planning aren’t as important as they appear - at least in every case.
Yes, I have a good pension- the foundation of income in retirement. On the other hand, we were a one income family our entire marriage. I have never stopped saving and investing since my first job at age 18 and I did make foolish and risky financial moves like buying a vacation home with a 9-3/4 % mortgage the year before our oldest child started college.
Is it possible to just be a tad frugal, a prudent spender, a persistent (even if inefficient), investor, not follow conventional ideas on them all and still with success?
While I don’t recommend do as I do, it is possible. KEEP CALM and CARRY ON.
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Listen to the Markets
That’s why I think it’s worth paying attention to how the stock, bond and currency markets react to news. Are tariffs a big concern for investors? What about the new tax bill? Has the latest economic report rattled folks?
For answers, don’t ask your neighbors and don’t listen to the TV talking heads. Instead, simply observe the reaction of investors, as reflected in the financial markets.
For instance, based on how markets have been moving, tariffs are more unnerving to investors than the big tax bill making its way through Congress. In both cases, however, the reaction has been quite muted. Are you freaking out over the latest developments in D.C.? It seems most investors aren’t. Despite all the media handwringing over the current administration’s actions, the S&P 500 is down only modestly in 2025.
That doesn’t mean I approve of the current administration’s policies—or that I disapprove. Rather, I’m sanguine because of something that’s long been known, which is that financial markets have historically done equally well no matter who’s in charge in Washington, and that political machinations are just one driver of stock and bond prices, and a relatively unimportant one at that.
I fear that, in response to these words, folks will start posting political commentary. But that only proves my point, which is that some investors can't separate their investment portfolio from their political beliefs. How many investors have sold stocks this year because they hate the current administration's policies, only to miss out on the market's partial rebound? My advice: Stop investing based on your political views—and listen to the market.
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May 23, 2025
Feeling Moody
How did Truss lose public confidence so quickly? The bond market forced her out. Shortly after taking office in the fall of 2022, Truss proposed substantial tax cuts for both corporations and individuals. That would have been a popular move, except that her budget didn’t include any offsetting spending cuts.
This spooked investors who worried about Britain’s debt load. Markets immediately responded: The pound sank to a 37-year low, and bond yields jumped more than 1.5 percentage points in the space of a few days. With that, Truss was out.
There’s the notion that governments can never actually run out of money, because they have the power of the printing press. Modern Monetary Theory argues that deficits don’t matter—that large economies like the U.S. and the U.K. can, more or less, spend freely.
Liz Truss’s experience is a testament to the fallacy of that theory. As early as ancient Rome, there’s been evidence that deficits eventually do matter. But Truss’s story isn’t well known in the U.S. Why? I believe the reason is that we tend to view ourselves in a different economic category. Because the U.S. economy is so large, there’s the perception that we have limitless resources and the crisis that hit the U.K. is a crisis that would only happen elsewhere.
Since public spending ballooned during the pandemic, this seemingly impermeable facade has begun to show cracks. Budget deficits that used to be measured in billions are now in the trillions. Today’s federal government spends approximately $7 trillion a year and collects only about $5 trillion in revenue. Congress is now debating a new tax bill that would add to the annual shortfall.
Nonetheless, there was a surprise eight days ago when the rating agency Moody’s announced it would downgrade U.S. Treasury bonds, stripping them of their triple-A status.
Moody’s blamed this decision on both political parties and on both ends of Pennsylvania Avenue. The downgrade, the rating agency wrote, “reflects the increase over more than a decade in government debt and interest payment ratios….”
Moody’s continued: “Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs…. As deficits and debt have grown, and interest rates have risen, interest payments on government debt have increased markedly.”
Unless changes are made, Moody’s wrote, “federal interest payments are likely to absorb around 30% of revenue by 2035, up from about 18% in 2024 and 9% in 2021.”
These numbers are certainly alarming, and there’s no easy way to explain them away. To some degree, Moody’s action was indeed a lagging indicator. As one Bloomberg headline put it: “Moody’s Tells Us What We Already Know About U.S. Debt.”
There’s been concern for more than a decade over lawmakers’ ability to manage the budget responsibly. Back in 2011, Standard & Poor’s was the first to downgrade U.S. Treasury debt. In 2023, Fitch, another rating agency, took away its own triple-A rating. Concern has been building, and it now seems to have reached a tipping point. While not as severe as that which hit Liz Truss’s government, the dynamic has hit the radar here. We can see that in the trajectory of interest rates.
Late last year, the Federal Reserve lowered its benchmark federal funds rate three times. Yet rates on longer-term debt—which are determined by the market—have gone up, not down. While the Fed has dropped short-term rates by a total of one percentage point, from 5.5% to 4.5%, market rates have risen by a percentage point. Last fall, the yield on the 30-year Treasury bond was around 4%. This week, after the Moody’s announcement, it reached 5%.
Market rates typically follow the Fed’s lead. But in this case, investors are communicating—in no uncertain terms—their worries about fiscal mismanagement in Washington and, by extension, the riskiness of federal debt. Investors are no longer willing to buy bonds at the same low rates as before.
What does this mean, and how concerned should we be? While there are no clear answers, we can make several observations:
1. The importance of bond yields. Compared to the stock market, the bond market might seem dull. But its importance to public policy is far more significant because of the direct connection between bond rates and the federal budget. Today, the federal government’s outstanding debt totals about $36 trillion. If it were forced to pay even 1% more to nervous lenders, it would bump up federal spending by another $360 billion a year. For that reason, while it seems somewhat arcane, the bond market is worth watching.
2. Whether to lose sleep. Some commentators ask whether the Trump administration might try to “renegotiate” government bonds as a way to cut the nation’s debt load—in other words, to pay bondholders less than 100 cents on the dollar. While the president has alluded to this idea before, I believe it’s unlikely because economic history has shown that borrowers who default have a very hard time borrowing again. Despite the concerns about the federal budget—which are justified—I don’t believe investors should lose sleep over Treasury bonds.
3. Investors’ best defense. I don’t worry about the long-term viability of Treasury bonds. Still, it isn’t an easy situation. Wrangling in Congress could cause disruptions in the short term. My advice: Keep in mind what economist Harry Markowitz called “the only free lunch” in investing: diversification. Because it doesn’t cost anything, it's worth reviewing your bond portfolio to see if any changes might be in order.
If you want to manage risk, you might include a mix of individual Treasury bonds of various maturities, along with positions in Treasury bond funds. Without adding too much more risk, you might also consider a short-term municipal bond fund. While municipalities do depend in part on the federal government, they’re largely independent, and that could make highly-rated municipal bonds a reasonable choice. Moving some cash into a certificate of deposit or a high-yield savings account—within FDIC limits—could also help spread the risk.
4. Keep risk in perspective. There are 21 levels on Moody’s rating scale. Although U.S. Treasurys have been moved down one notch, they’re still very close to the top. Moody’s message: U.S. Treasury bonds used to carry virtually no risk, but now they carry a very tiny level of risk. For that reason, as the old saying goes, I’d be wary of going from the frying pan into the fire. Steer clear of financial salespeople hawking alternatives, such as cryptocurrency, commodities or private debt funds, which may carry far more risk.
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 Feeling Moody appeared first on HumbleDollar.
fix an old car
i have a 2013 honda accord V6 143,000 miles. smooth as silk !!!
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Is Remembered for…..
I’ve been retired from the practice of law since 2017, but I still receive the State Bar of Texas monthly magazine, The Texas Bar Journal. Towards the end of each issue is the Memorials section which contains obits for our fallen brothers and sisters of the bar. (There are a lot more brothers than sisters listed since most of the departed are older types who came of age when there was a much larger skew towards men in the legal profession.)
The obits are brief and contain the basic information such as city of practice, law school attended, area of legal concentration, etc. But towards the end, just before survivors are listed, there’s a sentence that begins: “(Last name of deceased) is remembered for…….”, and then a few particular things are mentioned. Oftentimes this is a predictable and anodyne list and might consist of “his love of his family and the practice of law” or some such.
But sometimes there are quite interesting nuggets. Just from the edition I received in the mail today are these:
“….remembered for possessing an encyclopedic knowledge of rock n’ roll history”
“.…remembered as a fan of Rudyard Kipling, with a lifelong interest in the history of the British and Indian armies during the Victorian era, amassing a sizeable collection of related books, firearms, military prints, and toy soldiers.”
“.…remembered for his love of family, the legal profession, and….racehorses.”
The Bar Journal is not generally known for its creativity, but I’ve always been intrigued with the idea of describing a deceased’s essence in a single sentence. And I’ve wondered what that sentence might be for me when I shuffle off this mortal coil and go on to my reward (or some might say, for lawyers, my eternal punishment). If I come up with something I think fitting, maybe I’ll send it in to the magazine ahead of time. But I’m still working on it.
For any of my fellow HDers who think more quickly than me, please feel free to post what your one sentence would be.
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How have you decided when it’s worth it to fix an old car?
My 2014 Honda Accord recently hit 99,000 miles. It’s nothing fancy to look at, but it drives well. Recently I’ve been having an issue with the starter. The push start works intermittently. Sometimes it starts on the first push, sometimes it takes multiple tries. I think the most it has taken is 6 tries. I’ve kept up with the maintenance, but I drive it infrequently, so the time between service has spread out. It was due for an oil change, so I decided to have the starter checked out.
Long story short the car needed a new starter. It also needed brake work, new calipers, and a few other things. The total cost (after some discount coupons) was about $2,500. I elected to have the car repaired and plan to drive it for a while. It’s a reliable second car. But it got me thinking about the age-old question of when is it worth it to repair an old car?
I did some research and the Kelley Blue Book private sale value ranged from about $9,800 to $11,900, depending on the condition. Carvana had similar cars for sale in the $16,500 range. So, the repairs are at most 25% of the car’s private sale value. I checked a few sources on the web and a general rule of thumb indicated that if the repair was more than 50% of the car’s value, it’s not worth it. I also found recommendations that said it was worth it if the repair cost was below the total value of the car.
Obviously, there are a number of considerations in this decision, many of them personal. Is the car generally safe and reliable? Are there likely to be other major repairs coming soon? Does your wife hate the car? Is it the ugliest car on the block? I know many in the HD ecosystem drive their cars for as long as they can. How did you know when it was time to move on?
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May 22, 2025
Missouri Eliminating Capital Gains Tax on Stocks
Rep. George Hruza, R-St. Louis County said this is one of the best things the legislature could do for Missouri.
Now I'm not sure it really is the best thing the legislature could do in a state that is #5 in the country in "gun death rates," but it's the best thing they could do for me, as it will save me ~$1,000/year. I'm hopeful they will eliminate taxes on dividends next year.
It seems like a tax cut for rich people, though maybe I'm missing something?
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Sad news about T. V. Narayanan, a writer for HD
Here is an article he wrote for HD: https://humbledollar.com/2023/07/come-a-long-way/
He says in this article that he must have read just about every column that Jonathan Clements wrote as a personal finance columnist for the Journal and learned much from them. He has read every investment book he could find, including those by Jonathan, Burton Malkiel, John Bogle, Charles Ellis, William Bernstein, Larry Swedroe, Jeremy Siegel and many others. This financial knowledge helped him very well. He advised many on investments. He was one of the most humble persons, I have ever met.
He introduced me to Humble Dollar, for which I am very grateful.Our thoughts and prayers are with his family. May his soul rest in peace.Sundar Mohan RaoThe post Sad news about T. V. Narayanan, a writer for HD appeared first on HumbleDollar.
401k participants want annuities – some form of guarantee – RDQ
I have expressed my opinion on the need for and desirability of a steady income stream in retirement, as guaranteed as possible. Next Friday my pension will be deposited in our bank account. On the second and forth Wednesday each month our Social Security will be deposited. All that has happened each month for the last seventeen years.
I don’t worry about withdrawal strategies, withdrawal percentages, guard rails, tip ladders or any similar strategy. The IRC tells me what I must withdraw from my IRA.
I realize that most Americans will need to deal with all that planning, but I can’t imagine it is preferred. DIY may be fine fixing a sink, but given an alternative, for life income?
We are very fortunately among retirees with a pension. Only about 19% of all current workers have a pension.
Pension coverage is significantly higher for state and local government workers (75% participation) compared to private sector workers (11% participation in pension plans).
According to data from the Federal Reserve's 2023 Report on the Economic Well-Being of U.S. Households, 56% of current retirees in the U.S. received income from a pension.
Given the choice between any form of lifetime annuity income and managing your investments, withdrawal strategy, and with at least the possibility of running out of money, which would you choose?
It appears a large number of workers may agree that annuity income is desirable.
A new survey reports that about 90% of participants surveyed said they would enjoy the inclusion of a fixed annuity in their 401(k) plan. A majority also favored integrating fixed annuities into target-date investments.
93% of 401(k) plan participants said it is important that they have the option to convert their savings into guaranteed monthly payouts, according to a Nuveen and TIAA Institute study.
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May 21, 2025
The Victim Might Be You
Who Is the Victim of a Ponzi Scheme?
Age: Often 50 or older, particularly retirees looking for stable income or to preserve capital.Education: Many victims are college-educated—some with advanced degrees.Financial Status: Typically middle to upper-middle class, with meaningful retirement savings or liquid assets.Investment Experience: Usually have some experience, but not deep technical knowledge—confident, but not always skeptical.Sounds like a typical HumbleDollar reader, doesn’t it?
Each year, 20 to 40 Ponzi schemes are uncovered in the U.S., though the true number may be higher due to underreporting and undetected cases. Based on historical patterns:
Small schemes are usually exposed within 1 to 3 years.Mid-sized schemes tend to last 3 to 5 years.Large-scale frauds can run unchecked for 10 to 20 years.Notable examples:
Bernie Madoff: Operated for 17–20 years, defrauding investors of an estimated $65 billion (including fictional profits).Allen Stanford: Ran a 15–20 year scheme involving about $7 billion in losses.Tom Petters: Lasted roughly a decade, with losses around $3.65 billion.If we assume 30 schemes are discovered each year and each one lasts around 5 years, that implies there may be about 150 active Ponzi schemes in the U.S. at any given time.
With each scheme affecting 50 to 200 people, that puts an estimated 7,500 to 30,000 people currently invested in active Ponzi schemes—completely unaware their money is at risk.
How Much Do Victims Lose?
Typical individual losses range from $20,000 to $100,000, though some victims—especially retirees or those targeted by trusted advisors—lose far more.
In 2020 alone, over $3.5 billion in losses were tied to reported Ponzi schemes, according to data compiled by regulatory agencies and sites like Ponzitracker.com.
In larger schemes, victims have lost entire retirement accounts, life savings, or in some cases, millions.
Who Are the Schemers?
Ponzi schemers are rarely shadowy outsiders. More often, they’re familiar faces with impressive résumés:
Demographics: Predominantly male, ages 35 to 65, operating at the peak of their professional lives.Education: Often hold degrees in finance, business, law, or accounting.Credentials: May have—or falsely claim—licenses like Series 7, CPA, or CFP.Persona: Appear polished, confident, and successful. They often embed themselves in religious, social, or professional communities to cultivate trust.The victims often look like you—and the perpetrators often resemble a fiduciary advisor you’d gladly trust with your financial future. Ponzi schemes don’t just rely on greed—they thrive on familiarity, trust, and social credibility. Victims are not fools; they’re often prudent, responsible individuals who were deceived by people who knew exactly how to earn their confidence.
If this makes you uneasy, that’s not a bad thing. It’s a reminder to ask tough questions:
What systems do I have to verify the people managing my money?
Be skeptical of investments offering consistently high returns with low or no risk—that’s the most persistent red flag of all.
Note: AI tools supported the research and drafting of this article. I wrote it because several of my friends have been deeply affected by Ponzi schemes, and I want to raise awareness about their devastating impact.
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