Robo-Advisors, Inflation, Strategic Petroleum Reserve, Debt, Gold, SBUX, Tesla, Housing Prices, & Annuities

History shows robo-advisors failed to live up to the hype! When robo-advisors first came out years ago, people asked if I was worried about my career. I said no because I do believe that investing can be very complicated and a good advisor is worth it. I’m happy to report that has been the case. Robo advisors have only accumulated one trillion dollars in assets, that is only 2% of the entire $50 trillion advisory market. JPMorgan Chase and Goldman Sachs both dropped their robo-advisor programs because their clients didn’t feel the low cost provided what they needed. Low costs were the initial selling point for robo-advisors but today most have added some human interaction. With that costs have increased and these hybrid services can now cost around 0.65%. In my opinion, that is still not a great option because you won’t get a personal advisor and instead you will be left with a team of people who really don’t know your situation. The biggest problem I have seen with the robo-advisors has been when things get difficult, investors have no one to talk to and they end up selling at the wrong time. When it comes to performance, I think most investors have found that the lower fees did not produce the results they had hoped for. Over the last five years, the best performing robo-advisor based on a 60/40 portfolio was Sofi Automated Investing with a 7.8% annualized return. Schwab pulled up the rear with their Schwab Intelligent Portfolios showing a five-year annualized return of only 5.8%. It’s important to point out these numbers are only if the investor stayed in the program for five years straight. Sometimes automation can be great, but there are just certain areas of life such as your health and financial well-being that you need a good professional on your side to talk to when you need.    A look into the history of inflation data  Whether we’re talking about the CPI or the PCE, it seems no one is happy with how inflation is reported. I tell people your personal inflation is the most important inflation to understand as it is based on what you’re spending habits are rather than looking at someone else’s. A good example is a college student has far different expenditures than a retired senior. The Bureau of Labor Statistics released its first CPI number in February 1921 and that report included data going back to 1913. Time has changed consumer inflation as spending and prices have changed overtime. From 1935 through 1939, food represented 33.9% of a household’s expenses, today it is only 13%. During the depression, apparel was hard to come by and it was 11% of a paycheck. Today it only represents 2.6%. Many items are not comparable as time and style has changed. For example, cars and radios weren’t common enough to be included in the earliest years and now radios have become a dying product. There are some items though that we can look back over history and come. In 1913 round steak was 22.3 cents a pound which is equal to about $7 today. This would be below the price of $8.25 in the month of May. Butter was hard to come by and cost 38.3 cents a pound. That would be around $12 a pound in today’s dollars versus the May average of around $4.60. I will agree the CPI and even the PCE are not the best or should I say an exact measurement that people may want, but keep in mind the Bureau of Labor Statistics surveys metro area businesses and households collecting 94,000 prices and 8,000 rental housing unit quotes per month. So while it is a difficult task to take on, it is not just one person throwing out numbers but an accumulation of a lot of data that has been compiled for over 100 years. There will never be a perfect system for measuring inflation, but as of now they have not been able to find a better way to calculate it.   The Strategic Petroleum Reserve has remained at low levels Oil currently trades around $75-$78 a barrel but the uneasiness in the Middle East should cause concern about the level of our Strategic Petroleum Reserve (SPR). The government used part of that reserve back when oil was $100 a barrel to try and keep the price of oil low, but they have never tried to replace it. We are currently sitting at a 41 year low on the SPR and I have to ask excuse the language, What the hell are we doing? Yes, the United States is currently pumping a lot of oil, but if there were a worldwide supply disruption that would then increase the price of oil around the world. The current administration should’ve been taken advantage of the low prices. We have had oil low for quite a while now and should have been buying a little bit at a time. For some reason the administration has chosen not to do that. I think this is a mistake and I do believe that if we don’t do something soon, we have the potential for some major problems with our energy security here in the US.    The US government is issuing too much short term debt over long-term debt We have said many times that we’re not that concerned with the overall debt