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Ponderings For the Week of November 30 to December 6, 2020

Politics and Vaccine News Advance Stocks

Another Monday, another vaccine, or so it was last week. The third announcement of positive preliminary vaccine results, this one by AstraZeneca helped position the stock markets for a strong, holiday-shortened week. While later in the week questions arose about the thoroughness of the AstraZeneca testing cohort, investors still remained optimistic that there would be a variety of successful vaccines leading to a successful reopening of the worldwide economies.

The second ingredient to the week was optimism over a successful, albeit rocky transition in the Executive branch of the federal government. The transition team was proceeding apace and Wall Street was encouraged by the appointments so far, particularly reports that President-elect Biden was preparing to nominate former Federal Reserve Board Chair Janet Yellen as Treasury Secretary.  

But roses have prickles and several economic reports weighed on the generally rosy picture for the week. Jobless claims rose unexpectedly, personal incomes declined, and consumer confidence fell. But when the dust settled, stocks closed out the last full trading week of the month with strong gains overall. The average stock advanced over 3%.

 

Reflections on Our Love Affair with Cars

Many of my readers are well aware of my problems with cars. People spend far too much on their iron and plastic masters, so much that they have to borrow or lease to acquire them. Even worse, when the car is eventually paid off (the average new car loan is almost six years), our hapless owner is eager to trade it in on yet another new and amply financed model.

I’ll never forget one remark by a young woman who took umbrage with my speech remarks exhorting the audience to strive to eventually be able to pay cash for their cars. She said that she had carefully budgeted for her car payments and if she kept the car after it was paid off her budget would be off kilter. In her words, and I’m not making this up: “What would I do with the extra money.” Not wishing to offend the sponsors of my talk, I resisted the strong temptation to say: “Why don’t you save it, you dodo?”

While I’m quite confident that you, dear reader, are not encumbering yourself with a lifetime of car loan or lease payments, you may have a family member, particularly a younger one, who is not so prudent. If so, here is an interesting bit of history. The standard rule of thumb in post-World War II America was to spend no more than two months’ income on a car and finance it over no more than 18 months. At the risk of eliciting some ire, I see little reason why we should vary from those parameters today although recent statistics say that 74% of the cars on the road today are not owned by the driver and 85% of new car purchases involve either loans or leases.    

 

Smart Money Tips

A pair of Pond’s immutable laws:

  • Pond’s Law of Convenience Store Lines. Standing in line behind someone who is purchasing scratch tickets or lottery tickets will cause you to be late for your next appointment. That person will spend more time selecting his or her tickets than the average person spends buying a major home appliance.
  • Pond’s Law of Winning Scratch Ticket Holders. Anyone who holds a winning scratch ticket will cash it in on additional scratch tickets until such time as his or her original “winnings” are lost.

 

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