What are the benefits and risks of investing in exchange-traded notes (ETNs) compared with ETFs.Topics covered include:How big is the market for ETNs compared with ETFs.How ETNs can do a better job tracking their target index than ETFs.Why ETNs can be more tax-efficient than ETFs..How ETNs have counterparty risk, pricing risk, and liquidity risk.Under what circumstances would an ETN be preferred over an ETF.Thanks to WIX and Policygenius for sponsoring the episode.
Why some analysts believe the Consumer Price Index formula understates inflation while others believe the CPI formula overstates inflation. What really matters to us individually when it comes to inflation.Topics covered in this episode include:What is inflation and what causes it.How is the Consumer Price Index calculated and how has the CPI formula changed over time.What are examples of different CPI measures.Why do some analysts believe U.S. inflation is higher than what CPI states while others believe inflation is lower than what the Consumer Price Index shows.How inflation calculations impact the measurement of other economic data such as the rate of poverty and the growth in real wages.What are consumer attitudes toward inflation and why do central banks worry about changes in household and business inflation expectations.How individuals can monitor and improve their cost of living.Thanks to Sleep Number and Money For the Rest of Us Plus for sponsoring the episode.For show notes and more information on this episode click here.[0:18] Traditional methods of measuring inflation.[4:00] The CPI has changed from a fixed-basket approach to a consumer-representative approach.[6:39] The controversy concerning the accuracy of CPI measurement.[9:11] Is inflation overstated because of how the CPI-U is calculated?[11:23] Rwanda case study: the connection between inflation and poverty.[15:17] Why governments care so greatly about the public’s view of inflation.[17:31] How inflation expectations are measured.[18:52] How do we calculate the desired standard of living?[20:41] The CPI isn’t an accurate depiction of the standard of living.[24:20] Are you satisfied with how you spend your money?
Why true financial independence means eliminating financial vulnerability including not being overly reliant on stock market appreciation.Topics covered in this episode include:What does it mean to be financially vulnerable.What are the two paths to financial independence.Why we shouldn’t stake our financial independence and early retirement on the historical performance of stocks and bonds.What are the rules of thumb we can use to develop reasonable assumptions for stocks and bonds and how those assumptions will lead to lower portfolio balances compared to using historical returns.What has historical earnings growth been for U.S. stocks.Why stock buybacks will be less in the future due to high debt balances unless companies grow their revenues and overall earnings.How are actions lead to financial independence even when it is difficult.Thanks to Vistaprint and WIX for sponsoring the episode.For show notes and more information on this episode click here.[0:17] Being financially independent begins with a decision. [2:33] Protecting yourself against financial vulnerability. [4:14] Should you solely rely on investment returns for financial stability? [7:52] Estimating the returns of asset classes. [13:40] Earnings per share drives the returns of the stock market. [17:31] Build an active and flexible strategy for financial stability. [22:49] Uncertainty doesn’t negate the positive effect of small actions.
How a liquidity crunch in the short-term lending markets sent interest rates soaring. Why this is a huge blunder on the part of the Federal Reserve, and what it means for us as individual investors.Topics covered in this episode include:What are repurchase agreements and how are they used to finance U.S Treasuries.How outflows from money market funds and hoarding by banks led to a liquidity crunch that caused repo rates to spike to 10%.Why banks are hoarding reserves held at the central bank even though there are over $1.4 trillion of them, up from $20 billion in 2007.How quantitive easing increases reserves and quantitative tightening reduces reserves.How the Federal Reserve was able to stop the disruption in the repo market, even though the central bank was caught off guard and could have prevented it.How individual investors can protect themselves from unintended consequences arising from the unconventional policies and experiments being conducted by the Federal Reserve and other central banks.Thanks to The Great Courses Plus and LinkedIn for sponsoring the episode.For show notes and more information on this episode click here.[0:20] The Fed loses control over policy rates, and repo interest rates soar.[2:19] What is a repurchase agreement (repo)?[5:02] Why the big players in repos pulled back on Sept. 16th.[8:38] Banks need more liquidity because of regulations.[12:53] Why reserves have fallen so low.[17:43] How does the reserve balance get reduced?[19:23] The Fed may have shrunk it’s balance too far.[21:36] What can be done about the reserve shortage?[24:17] What can we learn from the repo rate raise?
Why most state and municipal pension plans are underfunded and why that could lead to higher taxes and reduced government services. Why participants in state government retirement systems have greater protection against benefit cuts than participants in municipal retirement systems.Topics covered include:How defined benefit plans work.Why there is more subjectivity regarding valuing a pension plan's liabilities compared with its assets.What does it mean for a pension plan to be underfunded, and why are so many public sector pension plans in that situation.Under what circumstances can a pension plan cut benefits to beneficiaries.Why underfunded pension plans will most likely lead to higher taxes and reduced government services.Thanks to WIX and Peloton for sponsoring the episode.For show notes and more information on this episode click here.[0:18] The crisis of underfunded defined-benefit state and city pension plans.[2:32] Calculating the financial value of a public pension plan.[4:46] What rate of return should public pension plans use?[8:44] Why public pension plans are highly underfunded.[11:34] Kentucky’s 13%-funded pension plan raises red flags.[13:37] Failing to meet the needs upfront causes a funding crisis down the road.[15:33] Why states cannot go bankrupt but cities can.[17:52] How do public sector pension plans affect tax-payers?[20:18] How states and cities are trying to solve the crisis.[21:45] Considering underfunding when deciding what to invest in or where to live.[24:09] How private-sector pension plans could possibly affect tax-payers.