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- 🛢️ Oil Prices Are Soaring
🛢️ Oil Prices Are Soaring
& Americans are behind on their bills.
Austin & Robert from Rich Habits
October 03, 2024
Together with Public
Good morning,
A quick breakdown — in case you don’t have the time.
⭐ Hurricane Helene victims desperately need help.
⭐ Escaping the paycheck to paycheck cycle requires a few key steps.
⭐ Countless Americans are behind on their bills.
⭐ 2024 has the highest P/E ratio to start a Fed cutting cycle in 60+ years.
⭐ Iran launched well over 100 missiles at Israel, as tensions remain sky-high.
Market Overview
As of market open 10/3/2024
Take note of Oil above! An unbelievable week due to the Iran / Israel tensions. Often times when oil surges, it’s sadly due to war. Additionally, Gold has officially outperformed the S&P 500 over the last 12-months.
Chart of the Week
Source: Fox Weather
In lieu of a chart about the stock market, crypto, economy, or housing — we want to talk about something much more important. The devastation and death toll as a result of Hurricane Helene is unbelievable. Our prayers go out to the MILLIONS of people that have been negatively impacted by this storm.
Roads are destroyed, people are stranded, medical facilities are overwhelmed, and helicopters are the only source of hope for so many areas.
To all of our readers / listeners (and their loved ones) that are in impacted areas of Florida, Georgia, North Carolina, South Carolina, Tennessee, Virginia, and anywhere else that was affected — you have our thoughts & prayers. We will be donating to efforts that help each area.
Here’s numerous links for donating if you’re inclined to do so.
Public launches new 6.6% yielding Bond Account!
All-in-one investing platform Public recently launched its new Bond Account, offering a new way to invest in corporate bonds and take advantage of some of the highest bond yields in years.
When you invest your cash in a Bond Account, you can lock in a 6.6%* yield with a diversified portfolio of investment-grade and high-yield bonds that generate 20 interest payments annually.
Unlike other investing platforms, many of which charge $10,000+ to invest in just one bond, Public allows you to get started with as little as $1,000. Plus, you can continue earning a 6.6%* yield, even if the Fed continues to cut rates.
Discover a new way to invest in bonds and lock in a 6.6% yield with a Bond Account at Public.com/richhabits.
In Case You Missed It…
In this week’s episode of the Rich Habits podcast (linked here) — Robert and Austin explained how to breaking the vicious cycle of living paycheck to paycheck:
Determine Where Your Money is Going — To escape living paycheck to paycheck, you need to know exactly where your money is going. Create an “honest budget” by auditing monthly spending — then use this to forecast your spending before the month begins. Set financial goals, like saving 15% of your take-home pay. To help, start by calculating your debt-to-income ratio, and if it's above 40% — consider reducing expenses, paying off debt, or finding additional income sources.
Stop Investing — If you're living paycheck to paycheck and carrying high-interest debt, stop investing and instead focus on paying off that debt first. Investing while carrying debt with rates as high as 30% doesn’t make sense when the stock market’s average return is only 10%. You should temporarily pause your 401(k) contributions to free up more money to pay down debt faster.
Have an Emergency Fund — Living paycheck to paycheck is often due to overspending rather than income issues, and unexpected expenses like car repairs or rising tuition can quickly become financial emergencies if you're not prepared. By setting aside $5,000 to $15,000 in an emergency fund, you can turn these emergencies into “inconveniences.” The goal is to keep your budget flexible and up-to-date, ensuring you're ready for both unexpected costs and predictable changes.
We’re encouraged by the positive feedback we’ve received thus far. If you know someone living paycheck to paycheck, consider sharing this episode with them.
Here’s a link to the Q&A episode that was posted this morning.
We answered questions from the following people: Max P, Priyanka K, Zachary T, Thuy V, Katie I, Jordan M, & Treyton C.
The Rich Habits Podcast is available on Spotify, Apple, iHeart, YouTube, and wherever else you get your content.
Robert’s Callout
Countless Americans are behind on their bills.
According to the latest annual Federal Reserve Survey, 17% of U.S. consumers had unpaid bills at some point in 2023. The situation is even worse for lower-income households — with 36% of families earning less than $25,000 annually are unable to pay their bills.
Renters are also facing challenges, as nearly 27% of them reported being unable to meet their financial obligations in full. Among all categories, utility bills — such as water, gas, and electricity — were the most difficult to pay, with 11% of renters falling behind on these essential services.
These figures suggest that many Americans are still struggling to make ends meet, casting doubt on Jerome Powell’s recent speech where he consistently said the U.S. economy is strong.
Of course — this is just one set of data points.
As the Fed continues to cut interest rates in Q4 — we’re going to continue to see less headlines about inflation, and many more about consumer payments, jobless claims, the unemployment rate, and business conditions.
I continue to believe we’ll avoid a recession, but we MUST continue to monitor the status of the U.S. economy as we ride the wave!
Austin’s Callout
2024 has the highest P/E ratio at the start of a Fed cutting cycle in 60+ years.
In case you’re unaware, “P/E ratio” stands for “price-to-earnings ratio.” Here’s a helpful link to an Investopedia article (and video) that further explains how it’s calculated and its importance. Long story short, the higher the P/E ratio the more “expensive” a company is from a valuation perspective.
Considering the S&P 500 is an index of 500 companies — it’s possible to calculate the index’s P/E ratio. During most bull markets, the P/E ratio of the S&P 500 ranges between 18-20X. During most bear markets, the P/E ratio sometimes falls as low as 13-15X.
At the moment, the forward (next 12 months) P/E ratio of the S&P 500 is hovering around 22X. On the surface, this is just a simple data point — but when you look back through history and begin to compare “high” vs. “low” P/E ratios during times of Fed rate cuts you begin to see a pattern.
The higher the P/E ratio, the higher the likelihood of a recession.
Now this trend isn’t perfectly accurate as you can see in 1998 the P/E ratio was 18X and we avoided a recession — and in 2007 the P/E ratio was 15X and we still experienced one.
To Robert’s point above, I’m hyper-focused on digesting new economic data releases and deciphering how those specific data points might impact our economy over the coming 12-months.
If we avoid a recession, history tells us the S&P 500 could continue to climb another +35% over the next two years. If we experience a recession, history tells us the S&P 500 could fall -20% during the same period of time.
The Rich Habits Radar
👉 Iran launched well over 100 missiles at Israel, as tensions remain sky-high.
👉 Stellantis (Chrysler, Jeep, Ram, etc.) sold -20% fewer cars in the U.S. YoY.
👉 Ray Dalio provided his thoughts on the recent Chinese market moves.
👉 OpenAI nearly doubled its valuation to $157B in new funding round.
👉 Tesla slightly missed on quarterly deliveries expectations.
👉 Pepsi is buying Siete Family Foods for $1.2B.
Check ‘Em Out
Below is a list of our featured partners that we’ve vetted — with whom we have a personal relationship. Browse these exclusive offers curated just for you:
Budgeting — Download our FREE Budgeting Template
High-Yield Cash Account — Earn 5.1% on your savings
Public — Trade stocks, options, and crypto
Frec — Use direct indexing to invest & save on taxes
Grifin — Automatically buy stock where you shop
Acorns — Get $35 free when you subscribe
Suriance — Protect your family with term life insurance
Video Course — Use code “Newsletter” for 15% off
Seeking Alpha — Optimize your portfolio
Credit Card Matrix — Find your next favorite card to swipe
Roi — Use code “Habits” and start tracking your net worth
Dynasty — Protect your home in a trust
Disclaimer: This is not financial advice or a recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Public Disclosures: Paid endorsement for Public Investing, Inc. Not investment advice. All investing involves the risk of loss, including loss of principal. Brokerage services for US Listed and registered securities, options and Bonds in a self-directed brokerage account are offered by Public Investing. ETFs, options and Bonds are available to US members only.
*This yield is the average, annualized yield to worst (YTW) across all ten bonds in the Bond Account, before fees, as of 10/02/2024. Because the YTW of each bond is a function of that bond’s market price, which can fluctuate, your yield at time of purchase may be different from the yield shown here and your YTW is not “locked in” until the time of purchase. A bond’s YTW is not guaranteed; you can earn less than that YTW if you do not hold the bonds to maturity or the issuer defaults.
A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. The 6.6% yield is the average, annualized yield to worst (YTW) across all ten bonds in the Bond Account, before fees, as of 10/02/2024. A bond’s yield is a function of its market price, which can fluctuate; therefore a bond’s YTW is not “locked in” until the bond is purchased, and your yield at time of purchase may be different from the yield shown here. The “locked in” YTW is not guaranteed; you may receive less than the YTW of the bonds in the Bond Account if you sell any of the bonds before maturity or if the issuer defaults on the bond. Public Investing charges a markup on each bond trade. See our Fee Schedule.
Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. You should evaluate each bond before investing in a Bond Account. The bonds in your Bond Account will not be rebalanced and allocations will not be updated, except for Corporate Actions.
Fractional Bonds also carry additional risks including that they are only available on Public and cannot be transferred to other brokerages. Read more about the risks associated with fixed income and fractional bonds. See Bond Account Disclosures to learn more
While corporate bond yields should fall in reaction to a Federal Reserve rate cut, we cannot know whether that will be true of the bonds in the Bond Account, how quickly bond yields will respond, or how much they will decline.