Weekly Market Update by Retirement Lifestyle Advocates

Social Security COLA for 2025 Announced

         The cost-of-living adjustment to Social Security benefits has been announced for next year.  Social Security recipients will see their monthly benefits increase by 2.5%.  (Source:  https://apnews.com/article/social-security-cost-of-living-inflation-increase-e25d292b6c0af80fc9cce9d309e48f02)

         The cost-of-living adjustment is based on the government’s estimate of the inflation rate.  Over the years, there have been many changes to the way the official inflation rate is calculated.

         Subjective adjustments to the consumer price index include hedonic adjustments, adjustments to the weightings of the items considered in the consumer price index, and substitution.

         Independent inflation trackers, which may track the reality experienced by consumers, have an annual inflation rate much higher than the 2.5%.   

Have Americans Hit Their Credit Card Limits?

         Americans, collectively, are buried in debt.  That’s bad news for a consumer spending dependent US economy. 

         In August, consumer debt increased by 2.1% as Americans added almost $9 billion in debt in just one month.  (Source:  https://www.moneymetals.com/news/2024/10/08/credit-card-spending-tanked-in-august-the-the-american-consumer-tapped-out-003526)

         Consumer debt includes credit card debt, student loans and auto loans but do not factor in mortgage debt.  If mortgage debt is added to consumer debt, total household debt stands at nearly $18 trillion!

         Interesting that as consumer debt kept rising, credit card debt fell.  Credit card debt fell by 1.2% in August as total consumer debt rose.

         Suggests that Americans may have reached their limit as far as credit card debt is concerned.

“Gradually, then Suddenly”

         In “The Sun Also Rises”, Ernest Hemmingway’s 1926 novel, one of the characters asks, “How did you go bankrupt?”

         The other character responded, “Two ways.  Gradually, then suddenly,”

         While that may accurately describe the path to many bankruptcies, it is also the path that fiat currency failures follow. 

         Past RLA Radio Guest Jim Rickards notes this in a piece that he recently published.  (Source:  https://dailyreckoning.com/gradually-then-suddenly/). From 1914 to 1944, the British Pound Sterling was displaced by the US Dollar, first gradually, then suddenly.  The Bretton Woods Agreement of 1944 was simply a formal recognition of the accelerating process of the Pound Sterling being replaced by the US Dollar.

         While the US Dollar will not likely be replaced in the immediate future, the displacement process has begun.  The BRICS countries are actively seeking an alternative to the US Dollar, have expanded their membership, and have already put trade agreements in place that bypass the US Dollar.

         The gradual part has begun.  As I have been advising for several years, the time is now to diversify from US Dollars.

Housing Continues to Slow

         If you’ve been a long-time reader, you know that I have forecast a decline in real estate that will rival the financial crisis, perhaps even exceed the declines that we witnessed then.

         It seems that we are now seeing the beginning of that decline.  Wolf Richter reported (Source:  https://wolfstreet.com/2024/10/08/florida-housing-market-buckles-listing-prices-sag-to-30-month-low-but-are-still-way-too-high-inventory-piles-up-institutional-investors-turn-into-net-sellers/) that over the last two years, the median listing price for Florida residential real estate has declined by 11%.

         Prices on closed real estate sales in Florida have declined for three consecutive months and price reductions on existing listings are more prevalent than at any time in the last seven years.

         And the big institutional investors that were scarfing up residential real estate several years ago are now sellers and can afford to sell at lower prices and still make good profits.

         And one other stat that should make you sit up and take notice – the number of active residential listings for Florida real estate has nearly quadrupled in the last two years.

         Debt-fueled deflation of asset prices seems to have begun.  I believe its only a matter of time until stocks follow suit.  Given current stock valuation levels, it could potentially be soon.

Cost of Living in America’s 50 Largest Cities Revealed

         The most expensive city on the list is San Jose, California.  If you live in San Jose, you need an eye-popping annual income of $265,926 to cover a cost-of-living of $132,963 per year.  (Source:  https://www.dailymail.co.uk/yourmoney/consumer/article-13921089/salary-needed-live-comfortably-50-biggest-cities-america.html)

         In San Francisco, you’d need to earn a minimum of $252,878 per year to cover your cost of living and have money to spare for savings and spending.  Annual income of $207,332 is required in San Diego, and you’ll need $194,500 per year in Los Angeles.

         New York City, Washington DC, Boston, and Miami require an annual salary of $140,000 to live comfortably.

         According to the Bureau of Labor Statistics, the average salary in the US is $59,228.

Mortgage Rates Explode

         Interest rates on a 30-year mortgage have spiked much higher since the Fed reduced the Fed Funds rate about one month ago.  The average 30-year fixed mortgage rate has jumped about one-half of one percent in the last month.  (Source:  https://wolfstreet.com/2024/10/05/mortgage-rates-explode-2-year-10-year-treasury-yields-spike-monster-rate-cut-hopes-doused-inflation-fears-resurface-yield-curve-before-after-the-rate-cut/).

         The average interest rate on a 30-year, fixed-interest mortgage now stands at 6.53%.

         This week’s RLA radio program features an interview I conducted with fundamental and technical analyst Jim Welsh.  The radio program is posted an available now by clicking on the "Podcast" tab at the top of this page.

“Be careful about reading health books.  You may die of a misprint.”

                                                      -Mark Twain