Hello,

When we see our children making decisions that could harm themselves, it causes us unease. When the kids are little like mine, it may be running too fast or sitting on the back of the couch.
 
Last week one evening we had finished up dinner at our house, and I looked out the front window and saw the brown snout of an animal on the other side of the road.

We commonly see deer crossing the road at that spot, so I thought it was a deer at first. Then as its neck emerged from the embankment, I could see it wasn’t a deer. I called Mallory, my wife, over and we quickly deduced that it was a large coyote.

Ansley is pictured below with her new bubble wand. This may be the greatest invention of all time... Further proof below.
Ansley with the bubble wand
We’ve lived in our house for nearly seven years and we’ve never seen a coyote. Wile E. Coyote slowly made his way across the road. It was almost as if he was making sure cars were not coming. When was the last time you saw a roadkill coyote? Those devils are slick! We watched as he finally crossed the road and proceeded to walk through our woods.
 
I thought it was the coolest thing ever. I love seeing wildlife and a rare sighting was pretty enjoyable to see. Since I made such a big deal about it, Amelia, our five-year-old, has a had a LOT of coyote questions. I’m pretty sure we discussed coyotes for the next two days on the way to school. One morning she asked where coyotes sleep. I told her I’d Google it and I told her to remind me about it that night. Like clockwork she wanted know where the creature beds down.
Ansley with bubbles
A lot of Amelia’s distress revolved around the potential danger coyotes pose. We don’t want to over fixate on things that could go wrong, but like the coyote’s possible danger we should understand possible dangers in the economy.
 
Did you know that, according to the Wall Street Journal, “For the average American, paying off a new car at current prices demands 42 weeks of income”? Prior to the pandemic it was around 33 weeks. Also, “Today’s average new car loan has a monthly payment north of $750, with an interest rate of 9.5%. For used cars, the average rate is about 13.7%.”
Amelia and Ansley
According to David Sacks, a co-creator of PayPal, “Real estate developers are literally hanging on by their fingernails.” He explained in the video here that often developers buy properties with two-thirds debt that need fixing up. Banks won’t allow long-term debt to be used on real estate that is not in a stable position. Banks often give a two- or three-year construction loan for the developer to rehab the property then secure long-term financing. There are a lot of developers who bought at the top of the market, and now it’s time to refinance. In years past they could expect to secure a loan at 3 to 4%, but now the goalpost has changed and rates are much higher. So, a dilemma presents itself for these developers: Come up with the cash to buy the property or find financing using other collateral. Sacks states that any developer, whether it’s multi-family or commercial, who needs financing in the next year or two is in distress.
 
It's not just those lower on the socio-economic level. From the Wall Street Journal, “Wealthy people are hardly struggling. But their wages are growing more slowly than lower-income households’. They are drawing on unemployment benefits at three times the pace of lower-income households, according to the Bank of America Institute.”
Ansley with the bubble wand
Obviously, it’s easy to see issues like these happening in the economy and begin waiting for the sky to fall. And that’s no way to live! The good news is despite these looming issues the S&P 500 is still up 14 percent this year. The takeaway is when it comes to retirement planning, we need a plan that is weatherproof and able to withstand economic turmoil. I think it’s the only way to have peace of mind.
 
One of the ways we try to bring certainty to our clients is with their blue bucket of money. I’ve written about the different colors of money here. With our blue money we are looking for as much stability as possible so that when problems do arise in the economy we can be as insulated as possible.
 
Our blue money is part of our 3 Roles of Money planning process we go through with each of our clients. If you’d like to learn more about our process, please reply here or call 864.641.7955.
 
Until next week,

David C. Treece,
Financial Planner
864.641.7955
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