Cheat Sheet Q & A:
Topic: Impact of QE on average American:
You say that QE has reduced the buying power of the $. Inflation, the traditional measure of buying power of a currency has remained low.
Bottom Line: There are two facets to the US dollar and buying power. Foreign and domestic. Commodities (that are US dollar denominated around the world) and core inflation costs.
It’s true that “core” inflation which excludes food and energy has remained low (under 2% per year since the QE began in December of 2008). You will see QE related inflation show up in commodities. As I’ve indicted, according to my estimates 23% more US currency has been created artificially through QE.
- The price of oil when QE started: $46.18 per barrel
- The price of oil today: $96.43
- The price of corn (per bushel) when QE started: $351
- The price of corn today: $436
- The price of gold when QE started: $822 (ounce)
- The price of gold today: $1260
- Lean Hog futures (for Jim): $56 when QE started
- Lean Hog futures today: $82
That’s just a cross section and smattering of commodities which reflect significant inflation that’s well beyond the 1-2% inflation per year that’s been reported by our Government. Then there’s the impact abroad. While the US dollar hasn’t declined significantly in value against some foreign currencies (as many foreign countries have been doing their own version of QE); if you compare the US dollar to a currency like the Australian dollar (which hasn’t been watered down) you’ll find that the US dollar is worth 31% less today (than it was when we began QE).
When you buy products that are imported or convert the dollar into a foreign currency you feel the impact. The key has been to take advantage of the assets that have been inflated by QE (stocks and housing). The impact of QE is unquestioned by any half credible economist in those two investment classes. Thus it’s been good for those who can and do invest, while leaving behind the poorest Americans.
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Don't use your email address as a username for any account:
Bottom Line: Many companies and services will either use your email address as a default username or will allow you to use your email address as a username. In either case you should change it.
With as much data gathering as has recently occurred by hackers, there is a really good chance at least one hacker organization has your email address. What many hacker organizations are doing is running automated computer programs with the info they’ve collected attempting to access accounts of would be victims. If they have your username in the form of your email address, your odds of being compromised increases by at least 50% (because the computer program would only have to come up with the right password to access your account).
These days we have to maximize our security by minimizing risk where we can. For that reason your username should act as a second password.
Unpaid internships may not worthwhile:
Bottom Line: The conventional wisdom has been that if you can get a foot in the door with an employer, you should do so. If that would mean an unpaid internship as part of a school program – so be it. You still should have a leg up on getting a job when you’re finished with your education. Or does it?
The National Association of Colleges and Employers produced this recent survey showing a big surprise. Unpaid internships provided virtually no benefit to those who were in them. Here are the findings:
- Job placement for those working as paid interns: 63%
- Job placement for those who were unpaid interns: 37%
- Job placement for a person applying for the same job without an internship: 35%
So… There is only a 2% benefit to working as an unpaid intern. Meanwhile working as a paid intern increases one’s odds of getting the job by 80%. Hmm… So what gives?
I have a hypothesis. We happen to operate an unpaid internship program with multiple local schools. I’m always looking to hire from the pool of unpaid interns. By the time someone has completed an internship you have a pretty good idea of what they’re capable of and what their work ethic is like. That carries less risk than hiring untested entry level employees. However here’s an observation. I believe that many unpaid interns treat an unpaid internship as though they’re not being paid. In other words they won’t put full effort into their work because they aren’t being compensated. That can actually hurt their odds of being hired (vs. the average non-intern). I think the key is to treat an unpaid internship with the same work ethic and determination that you would if it were a paid opportunity.
Who is doing a good job protecting your credit cards & who isn’t?
Bottom Line: So is there a difference in your credit card security based on who’s banking the credit card? The answer is an astounding yes.
Javelin Strategy & Research released a study with the following findings:
- On a scale of 1-100, the average credit card protection by the institution backing it is a 55
- Banks do a far better jobs thwarting and preventing fraudulent activity on their cards than retailers
So to begin with you can tell that only a little more than half the time will you be protected from attempts on your card (again about the need for ID protection). There are specific stories:
- The best overall protection comes from Bank of America backed cards with a score of 70
- The worst overall scores come from Target with a meager 22 and Nordstrom at 18
When you consider what just occurred with Target and you see this story it does appear as though they aren’t even close to doing as much as they could be to protect their users. Even the best protection being provided by credit card backers is only likely to stop illegal use of your cards about 70% of the time. All the more reason you have to do what you can to protect yourself and your information.
Borrowing costs hit three month lows on weak economic news:
Bottom Line: While the financial markets roil in the US and around the world on economic fears… Something good is coming out of it. Cheaper interest rates. Especially mortgage rates.
- Mortgage rates just hit a three month low at 4.2%
This is especially significant given that the Federal Reserve is scaling back the amount of mortgage bond buying (QE) right now. If the economy really is hiccupping, rates should stay down. If the economy really is just a victim of the extraordinary winter weather the past couple of months, you’ll see rates pop higher at some point in the near future.
The economy - Blame it on the rain (snow):
Bottom Line: Remember Milli… anyway. It really may have been the weather that caused an economic hiccup. Usually when a company or economist blames the weather for less economic activity, I look right past it as an excuse. This year really has been different however. To illustrate just how extensive the weather issues have been:
- 22 million Americans had flights cancelled in December
Sounds like a lot right?
- 30 million Americans had flights cancelled in January
These are record numbers. In other words the weather really has been that sever the winter thus far. That really may explain some of the recently weaker economic info that’s been coming in of late. Yesterday the financial markets sold off severely after manufacturing was barely a positive number. I’m willing to believe that once the weather isn’t a story, economic growth will resume. Here’s the question though. Will the sell off in financial markets on the short-term weaker economic info become a self-fulfilling prophecy? We account for 70% of US economic activity and if we get nervous and don’t spend as planned the US economy could slow down in a non-weather related way.