Month: June 2020

Special Relativity

© Can Stock Photo / Alexis84

A friend wrote to me recently about the two kinds of time. The time that gallops onward in an undistinguished blur, versus the time that resolves itself into perfect crystal moments that stretch on to forever. Haven’t we all had those kind of peak moments?

We seem more prone to the ‘undistinguished blur’ sort of time as the years go by, and routines get set. Perhaps breaking the routine, new experiences, are what sets those forever moments apart.

My friend concluded that if there is a secret to keeping time in a bottle, it must involve moving forward – a special kind of special relativity. This notion has some interesting aspects, including one that bears on our work for you, I believe.

Many financially independent retirees have noted that they spent much time when younger worrying about having enough money in later years. Then, when they get there, they discover that money is abundant, compared to time, which is finite.

If we spend our working years on a treadmill of accumulating a fortune for enjoyment way down the road, perhaps we live life in a routine, in which time is an undistinguished blur. This shortens the subjective experience of our lives.

Alternatively, we can work to understand and perhaps moderate what “enough” means, and balance living in the moment against our longer-term objectives. Would this leave us open to more new experiences, new ways of thinking and being, and that sense of moving forward that might bring about more of those ‘forever’ moments?

Hey, I don’t know either. But I’m in favor of more special moments, and less undistinguished routine. Clients, if you would like to talk about this or anything else, please email us or call.

The High Cost of Low Interest

© Can Stock Photo / AndreyPopov

Savers might remember the 1990’s with great fondness. For most of the decade, money earned 4 to 6% in bank certificates and other safe and liquid forms. Even in the first decade of this millenium, at times there were interest rates above zero on deposits.

After the financial crisis that began in 2008, interest rates plunged. The Federal Reserve adopted a Zero Interest Rate Policy (ZIRP) in an attempt to spur economic activity. Some foreign central banks even went to NIRP, a negative interest rate policy. For most of the time since then, short term rates in the US have been close to zero. (Federal Reserve Bank St Louis)

After a tentative, brief return to rates above zero, the economic disruption caused by the coronavirus has slammed rates back to near nothing. Rates may stay lower for longer. Savers and investors are affected.

• The difference beween 5% and zero on $100,000 in the bank is about $400 in monthly income. Savers used to enjoy cash income on their balances, income that could make a difference.
• In order to get income returns on money, people face volatility in market values or greater risk of loss or reduced access to funds.
• The competition for income-producing investments creates market distortions, which may increase risk.
• Artificial stimulus for goods or services could result in lower growth later, when monetary conditions return to normal.

Against those challenges, low interest rates appear to benefit one group of people: borrowers. Many people have been able to refinance home mortgages to rates lower than they might have imagined years ago. But even this silver lining has a cloud around it: low mortgage rates may have increased home prices.

Bottom line, as with all of the challenges in life, the key is to make the most of it. We work to understand alternatives and strive to sort out how to balance the needs for income, and growth, and preservation of purchasing power. Finding the opportunity in the challenge is our goal.

Clients, if you would like to talk about this or anything else, please email us or call.