Dear valued client,
Markets closed the week with slight losses as the U.S. July inflation report (3.2%) came in slightly higher than in June (3%). Elevated gasoline prices are the main culprit for the uptick as OPEC continues to limit its oil output. Another factor making inflation sticky is the growth in average hourly wages, which increased 4.4% year over year. This is why the Fed would like to see a cooling of the labor market before their next meeting towards the end of September.
A worrisome report from the Federal Reserve Bank of New York this week showed that Americans are, for the first time, over $1 trillion dollars in credit card debt. I would urge you all to take this news as a cautionary tale – to stick to a budget and live on less than you make. You certainly don’t want to be paying 15-30% interest to credit card companies.
While most of the world is concerned about inflation, China has the opposite problem: deflation. Consumer prices fell 0.3% last month compared to a year prior. You may think lowering prices is a good thing, but from a macroeconomic perspective, it’s indicative of much weaker demand. Economists attribute China’s situation to an aging population and record youth unemployment (ever hear of the one-child policy?), a tumultuous real estate market, and fewer exports (we can blame India for that). This, in effect, could help ease inflation in the U.S. and Europe, but a prolonged slowdown in the world’s second-largest economy could be trouble for global economic health.
I’d like to leave you with a passage from the Daily Stoic titled “What is the Function of Worry?”
One of the timeless lines in all of the Stoic writings comes from Epictetus, “What upsets people is not things themselves, but their judgments about these things.” It’s a powerful idea. And it’s made all the more transcendent by the remarkable fact that nearly every other philosopher has come to the exact same conclusion.
What is the function of worry? Either you can do something about the problem right now or you can’t. If you can do something about the problem right now, do whatever that is. And if you can’t, worry doesn’t add anything to your capacity to do anything – it just makes you miserable twice over.
As Marcus Aurelius writes in Meditations, “Today I escaped from anxiety. Or no, I discarded it, because it was within me, in my own perceptions – not outside.” Remember this the next time you get anxious, the next time you’re stressed or overwhelmed with worry – these are thought-based delusions. I can discard them. I can let it go.
Don’t let these things make you miserable twice over. Change your judgment about them.
Have a terrific weekend,
PW
