Happy Chinese New Year
(Chinese all over the world celebrated the Year of the Horse on January 31st.)
Happy Valentine's Day
We updated this page on February 13, 2014 from Artesia, CA.
We are Paul and Vicki Terhorst. We retired young and are now perpetual travelers.
Published January 28th:
To read more published articles by us in Live and Invest Overseas scroll down to
TIMELESS and click on their titles.
And this month you can read, on this page, Paul's economic predictions for 2014 under Past/Future.
Find the current Contemplation Photo at the bottom of this page.
Heartfelt visits with family and friends.
Short stays and cute babies here, there, and everywhere. (We had snow in Austin!)
Laughter-filled Palm Springs reunion for Vicki with best friends from Occidental College days.
...the desert won the beauty contest.
A few favorite Thailand photos from last month:
Paul's 2014 economic predictions, published in January of this year in Overseas Retirement Letter, a subscription publication by Live and Invest Overseas:
I predict we'll roll along in 2014 pretty much as we did last year, perhaps a bit better. I'm reluctant to say this, especially for Europe. I think Europe and the euro will come under more pressure to break up in 2014. But I also figure Europe's leaders will again fail to act.
Let's take a look at how I did predicting last year. What I wrote then gives much of the basis for this year's predictions.
Overall I think I did pretty well.
I predicted stocks would rise over two years, that is, before the end of 2014. In 2013 stocks skyrocketed, the S&P 500 up some 25%. Sure, we may have a correction in 2014, maybe even a bear market. But I highly doubt 2014 will be lousy enough to wipe out the gains so far. I'll stick with my two-year forecast on stocks.
Looking further out, the bull market seems set to continue for at least a year or two more. I think there's a good chance we're in the early stages of a very long bull market, similar to the eighteen-year run that started in 1982.
Staying with the U.S., last year year I predicted slow economic growth and a small improvement in living standards, albeit slightly better than the consensus forecast of about two percent growth. I was right on this one, too, as U.S. growth came in at 2.4% and appeared to be accelerating at year end.
I said U.S. unemployment would fall, but would remain above pre-recession levels, and that's what happened. Unemployment started the year at 7.7% and ended at 7.0%.
I said real estate in the U.S. would go up, that 2013 was a good time to buy a house, and it sure was. House prices shot up at their fastest pace in years. The Case-Shiller index of housing prices around the country was up 12 to 20 percent.
Foreign policy types predicted an Iran invasion in 2013, and I disagreed. Not only was I right on this one, but we've now reached an on-again, off-again deal with Iran on its nuclear program.
Finally, I made two mistakes. I predicted "we’ll finally see the outlines of a solution to the euro crisis." Unfortunately the euro crisis keeps getting worse. And I predicted lackluster movement in gold and exchange rates. I was right on exchange rates, as
rates moved very little. The dollar index against a basket of currencies started and ended the year at about 80. But gold tanked big time, from $1,600 to $1,200 an oz. I've said many times I dislike investing in gold, so those who followed my advice stayed whole. Still, I failed to predict the collapse in gold last year.
For 2014 I see the trends continuing. In the U.S. I expect slow growth--call it three percent-- and lower unemployment, but nowhere near the prosperity we should be enjoying at this stage in the recovery. Along with the market and everyone else, I expect the Fed to begin to back off its easy money policy, but very gradually, with small increases in interest rates.
Unfortunately I predict we'll continue to have a jobless recovery. Since the recession ended four or five years ago, economists have insisted jobs will come back with a bit more growth. Wrong. Companies took advantage of the recession to fire huge numbers. But rather than start hiring again, employers opted to keep work forces small. Employers today will do anything to
refrain from hiring, that is, to avoid punishing discrimination, tax, health insurance, liability, union, and other anti-business laws. Let the Chinese do the hiring, in America we'll rely on computers and the Internet to do the work.
As an aside, some believe U.S. jobs numbers would rebound if we removed onerous labor laws. I disagree, I think the system is too far gone, employers too set in their ways. America's best chance might be to encourage people to work on their own. With everyone working solo, discrimination and liability laws would cease to have an impact.
I expect a bit more inflation in the U.S. I'll go further: I hope for a bit more inflation. Inflation is good, or can be good, especially moderate inflation that results from strong growth. Deflation is always bad. With deflation if you guess prices will be lower in a month, or a year, you'll postpone purchases. Others do the same, and the economy spirals into a hole.
Japan has tried for thirty years to get out of deflation and still suffers.Get it right: prefer inflation to deflation. Unfortunately I fear Europe will struggle with deflation this year, which will prevent more robust growth. Along with deflation I expect pressure to break up the euro zone. Commentators from George Soros to Paul Krugman now fear that the euro, the monetary union to hold the EU together, now threatens to tear it apart.
You'll recall that when the euro was conceived, back in the last century, economists opposed the idea. But politicians were all for it. Put all of Europe into one euro fort, politicians theorized, and the fort can withstand nearly any attack. But the politicians erred. Economists correctly pointed out that countries need different monetary policies depending on how their economies are doing. In particular Greece and Spain,
Portugal and Italy, need to devalue to compete. European-style beach vacations in Greece and Spain compare to similar vacations in Turkey. But Turkey remains much cheaper, and Greece and Spain cannot devalue on their own. So the euro stumbles along at $1.35 or so, weak in Germany and way too strong in Greece. Greeks and Spaniards have put up with terrible suffering--a 50% youth unemployment rate, for example--simply because of their inability to devalue.
I'd like to be able to predict that Europe in 2014 will come up with an orderly plan to let the weaker countries out of the euro. But I've concluded, sadly, that European leaders will do nothing about the problem--the same nothing they've done in the past. Rather than making decisions, rather than dealing with the so-obvious problem, they'll continue to try to deflate their way to prosperity.
In 2014 I like real estate, and still believe now is a good time to buy in the U.S. House prices in the U.S. cooled off at the end of the year, but I view the U.S. cooling as temporary. I'd hesitate to buy anything in Spain or Greece or any other euro country that might leave the euro and devalue. I figure you'll be better off buying after a devaluation, not before. Unfortunately, after a major devaluation sellers tend to withdraw properties from the market. In my experience the good deals you read about, and try to take advantage of with cheaper money, often evaporate. After a euro withdrawal in your chosen country, should it ever happen, you may have to wait some time before you get a property you want. Be patient.
Finally, I expect continued weak oil prices in 2014. Fracking should help increase production enough to offset increases in demand resulting from higher growth.
Conclusion: Expect more slow growth, more high unemployment in the U.S., but slightly better than 2013. Stick with stocks, symbol SPY, we may be in for a long, strong bull market. Look for Spain, Greece, Italy, and Portugal to continue to suffer with the euro.
As of this writing Europe has entered yet another recession. Since the end of the Great Recession in 2008 the U.S. has grown some 5.9%, but Europe has shrunk. Some years ago an economist friend and I studied France's postwar economy and concluded that, one way or another, France will lag U.S. growth by about two percent per year. Since the bottom of the 2008 recession the rule has continued to hold. Over those years the U.S. grew slightly more than one percent a year, while France lagged.
The E.U. projects 2014 growth of 1.1% and unemployment falling to 12.2%. I view those numbers as overly optimistic.
We fly to Portland, Oregon in late February to see friends and have an extended visit with Vicki's family.
In mid march Paul flies to Paris and Vicki will meet him there April 1st.
Our plans for the spring and summer of 2014 include France, Poland, and Ukraine along with a short stay in England.
Published for Christmas 2013: The Night Before Christmas In Paris
2013 articles published in Live and Invest Overseas:
Appreciating Property Markets And A Solution To The Euro Crisis--What We See Coming In The Year Ahead
Kathleen Peddicord, publisher of Live and Invest Overseas, asked Paul for a bit of research and editing support for her blog on the Huffington Post's Post50 blogs. Later the articles are also published in the Live and Invest Overseas eletter.
Click on articles by Paul and Vicki to read more published articles about their travels and reflections.
We wrote Cashing In on the American Dream, published by what is now Bantam Doubleday Dell, in 1988. Even though the book is out of date and out of print, it is still considered a classic read for anyone considering early retirement.
Click on 'Revelations from Your Innermost Self' to visit the contemplation page:
REVELACIONES DE TU SER MAS PROFUNDO
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