Take a look at the latest edition of The Nest Egg!
Nest Egg
THE
APRIL 2021
I get calls from clients asking when the market will crash. It’s a common question not just from clients, but from a lot of people. There is always concern about the next crash. I’ve talked about some of this before, but with the Fed continuing to print money at a steady rate and keeping interest rates low, I’m wondering if we’re riding another bubble. Part of the problem, too, is that we’re seeing something of a market mania. In 1996, the then Federal Reserve Chairman Alan Greenspan used the term “irrational exuberance” as the markets began to inflate. ‘Irrational Exuberance’ Makes a Comeback Is It the ‘90s All Over Again?
When the Fed keeps rates low and pumps money into the economy, it has a tendency to cause asset bubbles. Today, there’s a lot of talk about the bubble that’s about to burst. But we’re also in very unusual times. Pre-COVID-19, if you were worried about an impending bubble burst — and you decided to get out of the market — you likely missed out on huge gains. Last year didn’t play out as anyone expected. One of the challenges investors face is the fact that people have been expecting the bubble to burst for years now. There has been a steady stream of analysts on TV, radio, and online telling us the bubble is about to burst. Then COVID-19 hit, and it turned into a black swan event. It almost seems that we’re in the era of black swan events. Things are happening that no one could have predicted. Now, the “end” of COVID-19 is in sight, and the Fed is continuing to feed into the asset bubble. There are many variables in play. It brings us back to the question: When is the market going to crash?
Part of today’s mania is exactly what happened to the GameStop ($GME) stock in recent months.
When you see a stock go up so fast and so high, you don’t want to miss out on it.
These kinds of situations are not normal. The price of GameStop was inflated and people took advantage of that. GameStop’s P/E ratio was (and is) way off.
The price to earnings ratio, or P/E ratio, is something to take into consideration when investing. The numerator in this ratio (P) is the price of the stock. The denominator (E) is the earnings per share of a company. When you divide P by E, you get the ratio. This is a tool financial analysts use to find if a company is undervalued or overvalued. The average ratio on the S&P 500 is typically around 17. Right now, it’s double that at 35. What does that mean? It usually means stocks are overvalued. Investors are probably paying a premium for companies right now — and that very much includes GameStop. The last time the average P/E ratio was this high was before the crash of 2000 — and only a few years after Greenspan used the term “irrational exuberance.” As the tech bubble of the late ‘90s expanded, many companies were massively overvalued. We all know how that turned out.
The parameters show us it could be happening soon. Does that mean it will? No, but it does mean we can prepare. So, what do we do with our portfolio?
For most people who have money in the stock market, it’s a long-term game, and we treat it as such. You’re not in it to quickly grow and quickly sell. We’re heavy into stocks because that makes sense for our goals. Of course, we monitor the data closely and follow algorithms to identify trends in order to mitigate losses.
Increasing Income and Decreasing Taxes in Retirement
With this approach and general mindset, we won’t eliminate losses when the next crash occurs — that is simply not possible — but we can put ourselves
into a position to make sure we’re not losing substantial amounts of money. And that’s what it comes down to: being prepared — and not letting irrational exuberance drive your investment strategy.
April 13 at DeFrancesco’s (Shelby Twp.), 6:30 P.M. April 14 at DeFrancesco’s (Shelby Twp.), 6:30 P.M. April 20 at Filippas (Utica), 6:30 P.M. April 22 at Filippas (Utica), 6:30 P.M. Register today at BridgeriverLLC.com! Free dinner provided.
-Dan Casey
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SPROUT YOUR KIDS’ IMAGINATION WITH 3 FUN EARTH DAY PROJECTS
With spring officially underway, April showers starting to bring May flowers, and Earth Day on April 22, now is a great time for outdoor family activities.
This easy project just requires rinsed eggshell halves, some lightly moistened potting soil, and seeds of your choosing. Note that smaller seeds, like those for herbs, lettuces, peppers, or tomatoes, work best for this project. For full instructions, visit GardenBetty.com and search “starting seeds in eggshells.”
One for the Birds Making a pine cone bird feeder is a fun and inexpensive project. In addition to creating and hanging your bird feeder, you’ll get hours of extra entertainment from watching the birds it will attract to your yard. If your kids are older, take photos of the birds or note their colors and features and look them up in a field guide or online. This craft just requires a pine cone (the bigger the better), peanut butter, and some twine or string. Top the peanut butter with “sprinkles” of mixed birdseed or small pieces of nuts and fruit to appeal to even more birds. For full instructions, visit TheSpruce.com and search “pine cone bird feeder.” An Egg-cellent Planter Save those eggshells from breakfast (and the paper carton, too!) and use them to start a garden! Your little ones will enjoy planting some seeds, watering them, and watching them sprout and grow into something new. When the sprouts are big enough and it’s warm enough outside, you can plant the shell and carton directly into the ground!
Stick With Magic Nature is a magical place. Many kids know this instinctively and often point out things adults take for granted or overlook, like bright-colored leaves, fun-shaped rocks, and acorn “hats.” Making a nature wand is a great way to let your kids explore their environment, whether that’s in your backyard, on a neighborhood walk, or in your favorite park. Let their imaginations run wild with what their magic wand can do! This simple project starts with a stick and masking tape. Your kids add all the extra flair by hunting for natural treasures and sticking them onto their wand. Complete instructions can be found at LaughingKidsLearn.com/ nature-wands-outdoor-play .
IS THE HUMAN HAIR TRADE ETHICAL?
GROWING TREND TO CONSIDER CAREFULLY It takes about two years for hair to grow to a harvestable length, and as countries develop economically, their female residents become more hesitant to give up their hair. As a result, harvesters have turned to less economically developed countries in search of more product to meet the growing demand. In Myanmar, where the minimum wage is $2.70 per hour, women are wooed into selling their hair at a rate over 50 times that. Some heads of hair fetch up to $140, which goes a long way in the region, but they also pay an unfortunate price of shame and embarrassment when they cut their hair. Then, there’s the separate issue of the labor needed to process these products. According to The Hustle, workers in Myanmar and Bangladesh who used to farm now work processing hair for a mere $1.40 a day. By contrast, these products sell for $100 to upward of $1,000 to consumers. And the work isn’t easy. It involves washing, detangling, hand-knotting, and sewing the delicate strands. Just as apparel companies have faced mounting pressure to fairly compensate those producing goods in factories abroad, the human hair trade faces growing concerns about the ethics of the labor required to keep up with rising demand.
You’ve probably heard of fair-trade coffee and seen companies tout transparency for products like eggs and burger meat by allowing consumers to trace them back to the farm, but the production methods of
many consumer goods still remain opaque. This includes products made from human hair,
a market currently valued at nearly $7 billion.
Wigs, weaves, and extensions aren’t new, but the demand for them is increasing as beauty influencers like the Kardashians show off their — or rather, someone else’s — locks online. Major women’s magazines like Vogue and online outlets like Refinery 29 praise products from places like The Hair Shop, which sells ready-to-wear clip-ins for at-home use and extensions for salon professionals. While there’s nothing inherently wrong with dressing up your tresses with someone else’s, the current market for these products is ripe with inequities. The vast majority of hair production — or “harvesting” (the industry term) — and export is concentrated in two places: Hong Kong and India. And the U.S. has the highest import rates of human hair products.
If you’re looking to add some gain to your mane, do some research first and consider all that’s gone into the locks you find online.
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The concept of mindfulness has fully saturated mainstream culture at this point. Though it’s more likely to conjure up an image of someone sitting cross-legged with closed eyes than sitting at a table looking wide-eyed at mealtime, it’ll serve you just as well on your dinner plate as it will on your yoga mat.
hormone levels and even slowing down your metabolism. Kristen Smith, a registered dietitian and the spokesperson for the Academy
HOW INTUITIVE EATING CAN HELP YOU QUIT DIET CULTURE
of Nutrition and Dietetics, says it’s also linked to disordered eating habits. Intuitive eating may just be the antidote. Singer Demi Lovato, who has been open about her struggles with an eating disorder and body-image issues, credits a more mindful approach to eating with helping her overcome harmful eating patterns.
What is intuitive eating?
Eating mindfully, also known as intuitive eating, is trending in the health and wellness world. But it couldn’t be more different from fad diets or other trends like fasting and cleanses, which have restrictive lists of rules and foods to eat or avoid. Intuitive eating starts by simply tuning in to your body’s needs and cues, but it goes further than that. As a Harvard Medical School article put it, “In essence, mindful eating means being fully attentive to your food — as you buy, prepare, serve, and consume it.” And that includes focusing on how different foods and eating habits make you feel, both physically and mentally. While this may feel … intuitive ... it’s easier said than done in a culture with consistent and often confusing messaging around what constitutes healthy eating. Even the tried-and-true method of calorie counting has raised doubts in recent years due to inaccuracies in calorie calculations for the nutrition labels and research on how calorie restriction can backfire by changing your
How does it lead to better health outcomes?
Having a regular exercise routine and eating well have long been known as the two pillars of physical health. When it comes to the latter, intuitive eating helps you create healthy and sustainable eating habits. The upshot is that when you eat better, you’ll feel better. Being attuned to that connection is the foundation of mindful eating. Most of us know that we should eat whole foods, including lots of fruits and vegetables, but feeling the outcome of increased consumption of these foods will help you stick with and build the habit.
HAVE A LAUGH
Spring Vegetable and Chicken Pasta Bake
Inspired by TheSeasonedMom.com
Ingredients
• 1 cup cooked chicken, diced • 1 14-oz can artichokes, drained and quartered • 1 cup fresh asparagus pieces • 1/2 cup carrots, grated • 1 1/2 cups uncooked penne pasta
• 1 3/4 cups chicken broth • 1/2 cup fresh chives, chopped and divided • 1/4 cup fresh parsley, chopped and divided • 2 tsp minced garlic • 1/4 tsp salt • 1/4 cup grated Parmesan cheese, divided 3. Cover the dish tightly with foil and bake for 35 minutes. 4. Uncover and stir. At this point, check the pasta to make sure it is al dente. If it’s undercooked, cover the dish and return to the oven until pasta is tender. 5. Remove from oven and garnish with remaining Parmesan, chives, and parsley. 3
Directions
1. Preheat oven to 425 F and grease an 8-inch square baking dish with cooking spray. 2. In the prepared dish, stir together cooked chicken, artichokes, asparagus, carrots, uncooked pasta, chicken broth, half the chives, half the parsley, garlic, salt, and 2 tbsp Parmesan.
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INSIDE This Issue Are We Living In Another Era of ‘Irrational Exuberance’? 3 Fun Earth Day Projects for Families A Look Into the Human Hair Trade What Is Intuitive Eating? Spring Vegetable and Chicken Pasta Bake 2 Easy, Effective Budgeting Strategies
2 SIMPLE BUDGETING STRATEGIES YOU CAN IMPLEMENT TODAY
No Spreadsheets Required Paying off debt and saving money are the building blocks of a healthy financial life, but the statistics are dire: One-third of Americans haven’t saved a single penny for retirement, 38% of households have credit card debt, and 44% don’t have enough cash saved to cover a $400 emergency expense. If you see yourself in those numbers, there’s no better time than now to start working on healthier financial habits because April is Financial Literacy Month. Even with myriad apps available to help, budgeting can still feel intimidating. So, why not keep it simple with these two systems you can implement today? The 50-30-20 Strategy Before she was a U.S. senator, Elizabeth Warren was a tenured law professor at Harvard, specializing in bankruptcy. During that time, she published the widely acclaimed personal finance book, “All Your Worth: The Ultimate Lifetime Money Plan.” Some 16 years later, her advice still holds up. That’s because Warren’s approach to money is simple and flexible. She suggests allocating 50% of your income to needs like housing, groceries, and utilities; 30% to wants like entertainment, vacations, and eating out; and 20% to savings, which starts by building a
three-month emergency fund and then allocating savings to a retirement fund thereafter. If you have credit card debt, Warren suggests allocating that final 20% to debt repayment before you start saving. Otherwise, you’ll just backslide as interest mounts on your existing debt. If you’re able to save more than 20%, adjust the ratios accordingly. If you can’t save 20% just yet, start with less (even 1% each month adds up!) and make a goal to increase your savings by 1% each month or quarter. The Anti-Budget Strategy If Warren’s budgeting strategy feels too complicated, try financial expert and “Afford Anything” podcast host Paula Pant’s anti-budget. Each time you get paid, skim 20% (or whatever your current savings goal is) off the top, put it in a savings or retirement account, and spend the rest however you’d like. Pant’s logic here is that if you tell yourself you’ll save “whatever’s left over at the end of the month,” you’re unlikely to save anything. Free yourself from the worry by saving first, then spend the rest guilt-free. If 20% feels like too lofty a goal, start with whatever feels doable and work to increase that by 1% each month or quarter.
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