Apr 24 2015

Two-thirds of Americans don’t understand how credit cards work: The debt addiction in your pocket.

There is something alluring about swiping a card and making a purchase.  It almost seems euphoric and fun.  Credit cards come in a variety of sleek designs to help you part with your current and future income.  Americans are deeply in debt.  Mortgages, student loans, auto debt, and credit cards consume a large portion of future income.  You would think that most people would reflect on the mechanics of how debt works but this is not the case.  Most people are oblivious to how credit cards work but continue to use them and go into deep debt.  Throw in online shopping and you can store your credit information virtually and shop with one-click.  This wouldn’t be such a problem if incomes were moving ahead.  Unfortunately that is not the case and many are struggling to find their economic balance in the new low wage economy.  Credit card debt is once again on the rise and two-thirds of Americans do not understand how credit cards work.

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Apr 20 2015

Student debt now makes up nearly half of federally owned financial assets. The student debt bubble edges on with many more unable to pay their debt.

The student debt epidemic is spiraling out of control and the public is becoming more aware of the situation.  $1.3 trillion in student debt is now outstanding.  This is already a problem with nearly one out of three loans in repayment already in some form of delinquency.  Clearly if you are not paying back an obligation there is some sort of underlying problem.  But like most of the epic debt bubbles, people are slowly coming to the realization that most of this debt will never be paid back.  Consider it a forever loan.  The problem with this mentality is that student loans are now becoming a giant part of federal assets.  In fact student debt now makes up nearly half of federally owned financial assets.  Again, I remind you that nearly one out of three loans in repayment is in some form of delinquency.

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Apr 16 2015

1 out of 4 college adjunct faculty collecting government assistance: Students in debt and professors barely getting by all the while tuition soars.

The student debt crisis continues to move across the nation’s landscape like an unrelenting storm.  The stories of economic pain are growing involving students but what about adjunct professors?  For those of you that are unfamiliar, adjunct professors are like contract teachers at many colleges.  Many carry a heavy teaching load but receive very little job security.  At many for-profits, more money is spent on marketing than actual instruction which begs the question as to where the money is flowing.  It certainly isn’t on career services to help students given the abysmal results.  Adjunct faculty as it turns out, are now part of the new low wage America.  A recent study found that a whopping 25% of college adjunct faculty are receiving some form of government assistance.  This isn’t someone working a part-time job making pizza.  No, these are people teaching your young college kids economics and science.

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Apr 12 2015

The new American retirement plan equates to working forever: Nonexistent nest eggs and most Americans are bad at planning as to how long they will live.

The idea of retirement is a modern one especially when it comes to saving and having a nest egg.  In the past, retirement was only a luxury afforded to a small number of wealthy families.  The rest of the population was destined to work until they died.  That may seem harsh but that is historical fact.  After World War II the idea of mass retirement started to take hold.  Even Social Security was merely a safety net to keep you from starving or being homeless.  Social Security was never designed as the main source of income for retirees but that is what it has become.  Many older Americans simply did not prepare adequately.  The taking away of pension plans was supposed to usher in the era of the self-directed 401k.  One generation later the results are in and Americans are looking into the new retirement plan.  The new retirement plan is working forever (in other words, until people can no longer physically hold down a job).  This certainly doesn’t coincide with the brochures we see of older Americans galloping across the beach with cocktails in their hands.

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Apr 9 2015

The mega Chinese stock market bubble:  Over half of new investors only have a junior high education or less and the Shanghai Composite is up 100 percent in one year.

I still have vivid memories of Japan’s massive bull-run in stocks and real estate.  For many years the consensus was that Japan had found a secret method of perma-growth and prices would only go up.  Down was not in the vocabulary.  We are seeing similar perceptions and narratives when it comes to China’s roaring economy.  Let us make this clear, China is clearly growing and at a very fast pace.  I don’t think that is subject to debate.  But what is up to debate is that valuations in real estate and now stocks are fully out of hand.  In other words, a bubble is fermenting.  There are a few key metrics that really reveal to me that we are heading into deep bubble territory for China.  The first is that the government has stepped in dramatically to curb real estate speculation and this has done very little to curb the rush for real assets.  Next, we see the stock market through the Shanghai Composite being up 100 percent in only one year.  But finally, a large portion of new entry level investors only have up to a junior high education and many new investors do not even qualify as literate.  You still think valuations are fine?  Let us take a look.

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Apr 5 2015

Record 93.2 million Americans now not in the labor force: The not in the labor force rebound added 277,000 Americans in March alone.

In the last year alone we have added 2.1 million Americans to the “not in the labor force” category.  This mysterious category continues to grow and is having a field day with the employment data.  It is hard to ignore this number because it represents a large portion of our population that is simply not counted in the labor force data.  You have older Americans in this category but you also have a large number of people wanting work and simply not being able to find it.  You also have many relenting and taking up work in the low wage segment of our economy.  The unemployment rate would have you believe that this is a fantastic recovery but in March alone we added 277,000 to the not in the labor force category while only 126,000 jobs were created.  It is becoming more apparent there will be a strain on the one-third of Americans supporting the other two-thirds.

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Apr 1 2015

The economically lost generation of Millennials: taking a look at net worth data, living arrangements, and student debt.

Young Americans probably missed the memo regarding the economic recovery that has been taking place since 2009.  Apparently massive student debt, living at home, and a market full of low-wage jobs isn’t exactly the picture perfect ideal of a booming economy.  Millennials are facing an uphill battle.  The market has virtually eliminated the pension system and has reduced benefits to the barebones for most workers.  All of a sudden a large army of Americans are part of the “Uber” economy of freelance workers.  You have two systems clashing with one another when many baby boomers are trying to unload their assets to another generation that is simply not as wealthy or economically secure.  The recovery has been anything but even and the brunt of the financial damage has been taken on by the young.  If we look at the figures it paints a picture of a lost generation financially for young adults.

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