Weekend reading: Staggering towards stagflation?
Ever get the feeling the economy is like a car that’s technically still running but making strange noises every time you hit the accelerator? According to “The Investor” who writes for Monevator the UK’s current financial climate has that vibe with sluggish growth and stubborn inflation. And unfortunately, it seems like the political conversation focuses on arguing about short-term fixes or blaming whomever is in power rather that focusing on the root causes of these issues. While the current economy in the US might be slightly better, it can be helpful to examine what’s going on in the UK to see if we may be in for the same fate, or if the UK’s issues are uniquely British.
Counterfactuals and shades of grey seem hard for some people to understand. So to give just one example, yes, the City of London has expanded after Brexit. But it would expanded more quickly without it.
~The Investor, Monevator
In this article, the author argues that the UK’s economic woes can’t be separated from the lingering aftershocks of Brexit. He points to flatlining GDP, a £41 billion budget shortfall, and evidence that high-value jobs and tax revenues have migrated to the EU. While Covid, global trade tensions, and geopolitical crises have all played a role, the baseline for UK growth dropped in 2016, and the gap has been widening ever since. The article challenges the narrative that the current government is solely to blame, noting that many of the problems were baked in years ago. For UK investors, this backdrop suggests higher interest rates for longer, a potentially stronger pound (with inflation caveats), and opportunities in undervalued UK equities despite ongoing structural weaknesses. While US investors don’t have to worry about the effects of Brexit on their economy, there may be some warning signs if the current tarrifs create too much economic isolation.
Is That “Lifetime Warranty” Actually Costing You More?
Ever see the words “lifetime warranty” and feel like you’ve stumbled upon the ultimate bargain? It’s easy to picture a product lasting forever… or at least never having to buy that product again without another dime coming out of your pocket. But in reality, that shiny promise can sometimes hide a dull truth. Extra costs, time-sucking claims, and loophole-ridden fine print can turn what seems like a safety net into something that costs more than it saves. Before you grab that “guaranteed for life” gadget or gear, it’s worth asking: is the warranty protecting your wallet, or quietly draining it?
For example, a company might charge $15 to ship a replacement for a $20 item. And you might have to pay to send the broken item back, too.
~Travis Campbell, The Free Financial Advisor
In this article Travis Campbell lays out nine ways these guarantees can backfire. First, the upfront price is often inflated, meaning you could be paying more for a promise you’ll never use. Even if you do, shipping and handling fees can rival the cost of a brand-new item. Not to mention you’re likely to face a tedious claims process even if you are willing to pay for shipping and handling. The fine print often narrows coverage, companies can tweak or end policies altogether, and replacements may be downgraded versions of the original. It’s not just legal wrangling, but there’s psychological effects as well. Campbell points out that lifetime warranties can even push you to buy things you don’t really need, all while creating the illusion of unbeatable value. The takeaway? Don’t let a feel-good label distract you from assessing the real quality, price, and usefulness of a product. Sometimes, the smartest move isn’t chasing “forever,” but simply buying something that’s built to last in the first place.
Are Reverse Mortgages Just Delayed Foreclosures?
Many seniors find themselves with a little less retirement savings than they would have hoped to have. In fact, almost 40% of seniors’ only source of income is Social Security. When times are tight, many may start looking for any source of income they can find… including their home equity. Reverse mortgages are a special type of home equity loan available only to U.S. homeowners over age 62. Instead of sending a payment to the bank each month, the bank sends a payment to you which reduces your ownership stake in your home over time. On the surface, it can seem like a win-win: stay in your home, get a monthly boost to your income, and worry less about day-to-day expenses. But the reality can be more complicated, and sometimes riskier, than the commercials let on.
Reverse mortgages are marketed as a lifeline for retirees, especially those who are house-rich but cash-poor. They promise monthly income, no required loan payments, and the ability to stay in your home for life.
~Riley Jones, SavingAdvice.com
In this article Riley Jones breaks down how these loans actually work and the hidden pitfalls they can bring. While reverse mortgages eliminate the need for traditional mortgage payments, homeowners are still responsible for property taxes, insurance, and maintenance. Unfortunately, falling behind on these can still lead to foreclosure. Interest and fees steadily chip away at your equity, meaning there may be little value left for heirs when the loan comes due. Critics warn that for some retirees, reverse mortgages simply delay an inevitable loss of the home, either during their lifetime or after they pass away. Jones offers practical advice on when a reverse mortgage might make sense, red flags to watch for, and alternatives like downsizing or exploring tax relief programs.While reverse mortgages can be a useful tool in the right situation, it is important to go in with full awareness of the costs, obligations, and long-term impact on your home and your legacy.