Broker Check

It is Always a Problem: Heads It’s Bad and Tails It’s Even Worse

Ever get the feeling that you just can’t win, that nothing ever goes right? As a daily reader of the financial press, I felt this way for years. It always seems to me that regardless of the state of the world, the apparent solution soon becomes the new problem.

There’s no end to it.

When the solution to a problem arrives, it isn’t hailed as “problem solved.” Rather, it’s viewed as the new problem.

Take employment—that is, the number of people working or the proportion of people working to those who want a job--as an example. These numbers usually come from surveys, which are themselves a problem.

When unemployment is high, as it was after the financial collapse in 2008 and briefly during the pandemic, economists, policy wonks, and other paid commentators declare disaster. I am prone to agree with them. If people want to work and can’t, that’s a problem. People suffer.

Why then when employment is high—and unemployment low—do these same publications scream about the lack of people to work, that is, a plethora of jobs?

It’s The Money

When there are plenty of jobs, the demand for labor pushes up wages. Again, this would seem to be a good thing. There’s been plenty of ink spilled on how the bottom half of the labor market has not shared in the great boom of the last two decades. Yet, once the wages increase, this becomes the problem. Now the scribes will write of $100,000-a-year Wal-Mart truckers and academic podcast guests will emote shock that plumbers often earn more than professors. This, it is claimed, causes inflation with the dreaded wage-price spiral.

Black Gold

The price of oil is a perennial problem. When it’s high, as it was in 2008 and 2022, there’s no end to the complaining. This makes sense, as we pay more to go the same distance, leaving us with less money for other necessities or even fun stuff. But you can bet a month’s payoff of your Shell Card that when the price of oil drops, you’ll be faced with article after article on the pain in the oil patch, companies struggling, wells capped, idle rigs, and jobs lost.

My general advice on this one—which is certainly not specific investment advice for anyone reading-- is to set yourself up to always be happy. Get a basket of energy securities. Then, when the price is high, you can focus on the expected value increase of your holdings. When the inevitable price decline arrives, you can focus on your savings at the pump.

Documenting the Doomsayers

I’ve felt this way for years about the press’s passion for problems. Last year, I did something about it. I went for a solution. I created a digital clip file, labeled it “Everything is a Problem,” and started saving articles that fit the bill. (This merely created a problem of having too many articles to write about.)

Here’s a smattering of examples taken from the articles I clipped and the problems they expose.

Rising interest rates have been a dominant financial story for two years now.  In 2022, the Fed started increasing rates and even after it paused, investors decided to increase the Ten-Year Treasury rate in the summer of 2023. These rate hikes, once thought good for banks, were now seen as bad. Banks after all had to pay interest on deposits or lose them.

“Everyone wants interest on their deposits, that’s bad for mainstream banks,” the Wall Street Journal headlined in July of 2023. Yet a few months earlier in March, it had noted that “falling rates could also be a headache for banks.”

No One’s Safe

We all know that a problem for savers for over a decade was, well, saving literally didn’t pay. Like--it paid nothing. Zero! We financial people who like equity and bonds talked of TINA—there is no alternative to investing.

Well, this problem has certainly been solved with bank CDs back to 5 percent and on-demand savings accounts and money markets paying nearly as much. Yep, people are now earning on their cash. The world is right. Or is it?

“Investors are finally making money on bonds and CDs,” screamed the WSJ headline that tipped its hat to good times in August of 2023, before warning, “be prepared to pay taxes.”

This is good for our government, and therefore us, no?

The same theme played out in investing. The dismal 2022 financial performance was followed by a strong rebound in 2023. This refilled accounts, which most people would consider a good thing. But not the intrepid writers at the WSJ who can always find someone willing to complain about something.

Come January and we were treated to a piece on the mixed blessings of a strong market, in an article headed “Americans’ required retirement income has never been higher.”

At first, I thought this was a statement on the great inflation of recent years, as in the McDonald’s dollar meals are now $3.99. But I was wrong. The article focused on the increased distributions that our most senior of citizens are forced to remove from their pre-tax IRAs and employer plans.

This is of course just another way of saying our senior citizens have never had so much money. That’s good, isn’t it? I guess it’s not if they don’t want to use it.

It’s a Wrap

I could go on and on examining this topic. It’s an endless spiral, Turtles All the Way Down. But I won’t. I choose to see the relentless negativity not as a problem, but as a solution to a boring paper and the need for future article fodder. If you have some solutions that became problems, feel free to send them along.

Michael Lynch CFP is a financial planner with the Barnum Financial Group in Ft Myers, FL, where he focuses on his clients’ finances so they can focus on their lives. He teaches consumer-oriented financial planning courses for leading organizations, including Madison Square Garden and Yale New Haven Health Systems. He is a member of Ed Slott’s Elite IRA Advisor Group and the author of Keep It Simple, Make It Big: Money Management for a Meaningful Life, October 2020, and It’s All About the Income: A Simple System For a Big Retirement, May 2022. You can find more articles and videos at www.simpleandbig.com. He can be reached at mlynch@barnumfg.com or 203-513-6032. CRN202701-5767684