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Welcome to the 'No-Guilt' blog!
People come to here because they want to build financial confidence and take meaningful action. We provide the context for those things that affect your financial health. Our goal is to help you live in the 'No-Guilt Zone'.

Inflation, Inflation, Inflation.

Are we headed to runaway inflation? That question seems to be top of mind these days. Inflation is already here. No duh, right? Many companies are reporting strong demand for goods and services following the 2020 pandemic lockdown. Everywhere we look, everything we see and hear says prices are rising substantially. Are the price increases we are currently experiencing a signal for a coming wave of broad and persistent inflation? (Baby boomers may be having flashbacks to the 1970s and 80s). Or is this just a temporary adjustment following the unusually sharp economic downturn in 2020 and a major disruption to the supply chain?

So, what is really driving inflation?

Is it Federal Spending or the money supply? Is it too few goods? Or is it something else? If you listen to the pundits and media prognosticators, you’d believe the answer to the questions are yes. That’s not true. I read a book called “Free Money: Plan for Prosperity” back in 2013 that examined multiple facets of our monetary system. One topic covered in depth was inflation. The author, Rodger Malcolm Mitchell, analyzed the relationship between Federal government spending, the money supply, and a variety of factors that many people believe lead to increasing inflation. Mitchell provided charts, graphs, and sources that showed there was no relationship between federal deficits — even large federal deficits — and inflation. The chart below shows that the peaks and valleys of deficit growth (blue line) do not match the peaks and valleys of inflation growth (red line): CPI vs Federal Debt 2021  Mitchell did similar analyses for other factors looking for potential drivers of inflation. He found no immediate relationship between money supply (i.e., too much or too little money in the system) and inflation. Nor did he find a relationship between too few goods and inflation. Nor increasing labor costs and inflation. Time after time, analysis after analysis, he found no relationship among the things we hear in the “news” and from the pundits that drive inflation higher. None.

Except: Oil

Mitchell found a relationship between changes in energy prices—driven by oil prices—and inflation. Oil has worldwide usage and affects the prices of most other products and many services. The graph below compares overall inflation (red line) with changes in energy prices (blue line) over the last 51 years from 1970 through the end of 2021. CPI vs Energy Prices Do you see what I see? More specifically, when oil prices rise, inflation also rises. When oil prices fall, inflation also falls. I’m going to make an obvious and not so bold statement: When production costs increase, manufacturers pass along those costs to consumers. No duh, right? If this is true, then we should see skyrocketing energy costs in the current inflationary environment to support this claim. The graph below shows the percentage increase of prices in the Consumer Price Index from December 2020 to December 2021. The overall year-over-year price increase for all items was 7.0 percent. CPI 2021 vs 2020 Now look closely. Did you notice that nearly everything above that 7 percent line are energy and transportation-related costs? If you drive a gasoline powered vehicle, does it now cost you almost twice as much or more to fill up your car as it did in late 2020 and maybe early 2021? Just sayin’. When we look toward the future of the markets, remember that inflation is just one of many factors that investors consider. Given the markets general response to changing conditions, the potential consequences of inflationary pressures and similar issues are already reflected in current market prices. The current view of inflation points to a moderate pickup in consumer prices in the coming years. Treasury Secretary Powell’s view and that of many economists hold, however, that the recent spike in inflation will be brief. And, we are resolving many supply chain issues. Investors don’t need to outguess markets or undermine their portfolio objectives to outpace or hedge against inflation. If you already have a well-crafted personalized financial plan and investment plan, maintain your discipline. Let your plan work for you. Markets go up and markets go down. When you stick to your plan and exercise patience as an investor, a well-diversified, global portfolio has historically delivered positive results. No need to overreact to short-term fluctuations in consumer prices.  

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Rebar to Cement Your Financial Foundation: Easing the Burden on Survivors

Coping with the loss of a loved one is difficult enough in itself. When you compound the death without enough financial resources…whew!…That’s tough. I’ve witnessed the devastation of these situations both emotionally and financially on family, friends and classmates. It is painful and some families never recoup financially.

Having adequate life insurance can help ease the burden and provide your survivors with greater financial peace of mind. Your family can use life insurance proceeds to take care of many types of expenses for your family and loved ones, including:

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Do Studies Still Mean Anything? (Part 1)

I often cite studies, reports and other research when posting my blogs.  One question that has come up is do these studies actually mean anything.   It’s an excellent question.

Because of my innate curiosity, I’m always trying to poke holes in my logic and the research I’ve read over the years.

I’ve been lucky enough to spend a lot of time around some of the leading thinkers and brightest minds in financial planning as well as reading peer-reviewed articles and research.  Naturally, this has led me to delve deeper into the data.

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It’s Gonna Cost You One Way or Another

Back around 2009-10, I came across a quote from Ben Feldman, one of the most prolific salespeople in world history, who said:
 

"Doing something costs something. Doing nothing costs something. And, quite often, doing nothing costs a lot more!"  

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The Most Common Pitfall I See in Personal Finance

In personal finance insurance is perhaps the most difficult subject to address because it forces us to think about the unknown.  In particular, our own mortality and sense of invincibility.  Bad things happen to other people—not me. 

Further, because insurance is about protecting against a future unknown, it’s difficult to determine or calculate how much protection you and your family will actually need.  Then there’s the issue of estimating how long will you need the protection. What is known is that you will pay premiums month after month and year after year. What is unknown and uncertain is whether the event you’re insuring against will ever occur.

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