As I wrote in an earlier post, the FDIC is worried about people pulling money out of bank because they seem to have the need to remind us how safe our money is with banks. The key problem with the FDIC’s message is that they seem to forget or willfully ignore the effect of inflation on the currency and subsequent “value” of coverage. To that end, I have created the table below to show the FDIC how they need to adjust their coverage for inflation since no one there seems to do anything unless a crisis pops up.

I assume a 3% rate of inflation and use 10 year cadence adjustment. The column on the rate is the actual calculation and the column on the left is a suggested rounded number. Keep in mind that as of the date on this post the coverage is $250,000 and it may stay there without people prodding their representatives and government officials to raise this amount.

YearFDIC Insurance CoverageActual TVM (3% inflation rate)
1933$2,500
1934$5,000
1950$10,000
1966$15,000
1969$20,000
1974$40,000
1980$100,000
2008$250,000
2020$350,000$335,979.09
2030$475,000$470,370.73
2040$650,000$638,360.28
2050$875,000$873,545.65
2060$1,200,000$1,175,926.83

Now that I have put my financial survival plans in place for 2020 and beyond, I figured I’d share some of my strategies. A large portion of this post is simply a repeat from the 2007 crisis with some added changes.

  1. Keep your payroll check in MULTIPLE bank accounts
  2. Keep some amount of emergency funds (cash) in your home somewhere safe and sound, don’t assume ATM machines will have cash.
  3. Keep your savings in a SEPARATE account.
  4. Keep well under the 250k limit of FDIC and don’t assume FDIC will bail you out; you’ll learn why later
  5. Forget about money market funds
  6. You should already have a large cash position if investing in the market, if not you’re going to have to ride it out – it took 10 years to recover from 2007 crash.
  7. Keep plenty of food available in your home
  8. Keep you gas tank full at all times when possible
  9. Be vigilant at all times; worry about burglary, robbery and assault at any time from now on until this crisis is over
  10. Have a worst case scenario plan for yourself and your family
  11. If you have large amounts of money buy US Treasuries.
  12. Worry about the “safety” of your safe deposit boxes at the bank and rethink if that’s the best place for your property.
  13. Immediately start thinking about how you can earn some extra cash.
  14. Don’t plan on anyone else saving you. You are on your own.

If you are old enough you might remember the crash of 2001, 2008, and 2020. Keep this in mind when planning your retirement and emergency fund needs.

Did you know there was 4 trillion dollars of money made available to banks as part of the “relief” package? Did you know interest rates for banks are at 0% right now? So if banks have trillions and the federal reserve loan rate is zero percent why the frog are banks still charging 20% to 30% on credit cards?

Worse than that is why are people not DEMANDING from their congressional representative that they put some stipulations in to help provide interest rate relief on credit cards and other high interest loans?

I believe student loans had a three month forbearance and some credit cards may get a forbearance but what is really needed is interest rate relief.

It’s a sad state of affairs when I have to be mad about this for you. I pay off my credit cards each month and rarely pay interest so it doesn’t impact me much but you should be mad and sad.

I received a photo from a long line of cars at a bank ATM from someone today and it got me thinking. Why are people rushing to the bank to get cash?

Is it because 10 million people have filed for unemployment the past two weeks? Is it because those 10 million people won’t be making any more bank deposits? Is it because those 10 million people likely will have their credit card lines cut for non payment soon and they need to stock up on cash?

I wonder what happens when 10 million, 12 million, 15 million and on and on stop making bank deposits and stop making payments on loans, credit cards, mortgages, etc.

Hmm…I wonder what will happen………

As I write this post, I am watching President Trump give an update on March 29, 2020 at 5:30 p.m. Trump’s just announced the extension of the quasi-lock down we are in until April 30th and that has me thinking what if?

What if it’s August and the virus is still out of control?

What if it’s August and no one has gone back to work?

What if the meat packers that process our meats can’t/won’t show up to work?

What if the migrant workers that pick up the crops on farms all over the U.S. don’t show up to work the fields anymore?

What if the drivers that drive the food from the slaughterhouse to the supermarket can’t drive because they are sick?

What if the food arrives at the the grocery store but no one is there to unload the truck and stock the shelves?

What if the shelves are stocked but cashiers are sick?

What if it’s August and you don’t get any more money from the government to help you get by?

What if you decide it’s time to get money out of your bank branch but it’s closed or inaccessible? Ditto for your safety deposit box?

What if desperation sets in for the multitudes that don’t have enough to eat?

Unfortunately, I don’t have any answers for you and most of the answers I can think of aren’t very pleasant. In the worst case scenario, getting meat and fresh fruit and veggies may become very difficult to come by unless you are growing your own.

I’ve gone out and stocked up on canned goods, beans, and rice. It’s not ideal eating but I have enough food now to last me a few months. I have also prepared in other ways that I won’t get into here but if you think through the questions, you should be able to come to the same conclusions.

I wrote the following comment over 10 years ago and I never thought I would need to resurrect it but here we are again.

When people realize that the money they thought they had in the stock market is gone, when they realize that their credit lines have been cut and when they have no cash on hand left to pay for fuel, groceries or medicine there will be a stampede at your local bank.   The first ones to get there and pull out some or all of their cash will get their money; the lazy, the ignorant, the socialized, the optimists, and the clueless will be left cashless.

Be prudent, Be safe, Be Solvent.

Well just a few days ago I wrote how FDIC should have raised their insurance coverage limit from $250,000 to $350,000 to adjust for inflation since the last time it was adjusted was in 2008 with the last financial crash. Here we go again.

I hope they raise the limit because I’ve already pulled cash out of the bank for that very reason. Now that I see this video has been posted on the internet, I can only surmise that there is a slow bank “crawl” rather than a bank run but who knows.

In any event, here is the video.

I tried searching for reports on reserves for some of the big health insurance companies and I had trouble finding them. If I understand how most insurance companies operate, they take in premiums, invest those premiums in bonds and equities to generate returns and use those funds to pay claims that are filed by their customers.

With the stock market crashing and the bond market in turmoil and the potential for insurance claims to soar as people get sick, is this the perfect trifecta to crash the health insurance market?

According to this news report, a woman who got coronavirus and was treated, ended up with a $35,000 bill. The report doesn’t offer too many details but if that is the average bill and health insurance companies end up getting inundated with 100,000 claims then that’s a staggering $3.5 billion per 100k claims. If we end up with 1 million sick that’s $35 billion and 10 million sick, it’s a whopping $350 billion.

So are health insurance companies even solvent at this point? I don’t know the answer to that question but it is frightening to think that the health coverage I think I have may not even be there if I need it.

Plan accordingly. Stay home and stay healthy.

Well here we are again 11 years after the last financial crash and there is talk of bailouts for airlines, cruise lines, banks, hotels, restaurants and on and on and I have yet to hear a single person demand FDIC insurance be funded to prevent insolvency,

I wish that were the only problem but the second one is that FDIC coverage hasn’t increased from $250,000 since 2008. It seems I am one of the few people that can do a net present value calculation so let me give you the numbers. The $250,000 amount from 2008, adjusted for inflation at 3% interest for 10 years should be around $335,000 but let’s just round it up to $350,000 or better yet $400,000. See you in 2030.

If congress fails to act, I’m gonna pull all my money out and then the banking system will really be hurting.

Happy Father’s Day! This year for Father’s Day, I received an Oculus Rift S as a gift. I was excited and expected to set this thing up on my Dell Alienware Aurora R7 in a snap however 2.5 hours into updating drivers, software, and all sorts of other useless exercises I couldn’t get it to work.

I essentially could never get the headset to connect and was perpetually stuck at “Connect Your Headset.” Of course, I googled the problem and many others seem to be encountering the same issue.

I packed up the piece of garbage and took it back to the store (Best Buy).

As a Public Service Announcement, if you are considering getting a Oculus Rift S, please read the reviews and click on this google link before you do.

https://www.google.com/search?client=safari&source=hp&ei=DaAGXbq1EaWAk-4P4tS4yAc&q=oculus+rift+s+%22connect+your+headset%22&oq=oculus+rift+s+%22connect+your+headset%

And yes, I did download the compatibility tool before I purchased the unit in case you’re wondering. I have a high end machine with high end graphics more than capable of running a rift. I will now look at other options.

Our family purchased two new Toyota vehicles over 10 years ago.  A few months ago, one of those vehicles became (in my view) to expensive to continue to maintain.   One of the mechanics did a major screw up causing several thousand dollars worth of damage to the car.   We ended up selling the vehicle and were thinking about buying a new one so we sat down and decided to do some math….

It turns out that for us, in our current situation, it is far cheaper to Uber to/from work than to buy a car.    We still have one vehicle that we share between us but we alternate having the car when we will need it for more than just a single trip from home/work or vice versa.

It turns out that Ubering will cost us about $400/month for daily service to/from work for my wife.  It is a bit more expensive for me since I work further away from home but even that additional amount is STILL cheaper than owning a car.

Most people don’t factor in all the expenses of owning a car: insurance, fuel, maintenance, and the cash outlay for the car itself and interest on top of that if taking out a loan.

So here’s the math.  Each trip is about $10 for my wife so that’s $20/day.   There are about 20 workdays in a month so that’s $400.  This averages about $100 week however it doesn’t factor the fact that I will occasionally drop off my wife when I’m heading to work or pick her up when our schedules sync.    Moreover, I travel frequently and work from home some days so she uses my vehicle when I’m out of town for a week or so every month.  That’s how we ended up with $200/month.

Even at $400/month there is no way to beat that “owning” a vehicle when factoring fuel, insurance and maintenance.   What really kills me is that buying a car is a huge capital expense and most of the time the car sits in the garage or parking lot.

By doing the math, it also turns out I discovered that Uber drivers really get screwed but their loss is my gain.   This article also points out Uber drivers end up making less than minimum wage.

Lastly, there are other intrinsic factors at play here.   The Uber driver is also assuming the liability of driving the car.  This not only includes getting into a car accident but also getting ticketed for traffic violations, parking, etc.   Personally, I really like being chauffeured around so I can do some work or take a call.

My suggestion to you is to do the math and figure out if you really need to own one or more cars in your household.   For people living where there is no Uber or too far away from work (i.e. living in the suburbs) you probably don’t have a choice but for us, it’s a no-brainer so far.

 

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