Feb 28 2013

New model of retirement, aka working forever. Americans woefully underprepared to face retirement and half of households have zero retirement plan.

Most Americans are incredibly unprepared when it comes to retirement.  The goal posts keep shifting.  Now for full retirement under Social Security people will need to retire at 67 versus 65.  What is rarely discussed is that rising Medicare premiums are being taken out of monthly payments so the amount being received is already shrinking while the cost of living is going up.  One startling piece of information that came out this year was that half of Americans are one tiny emergency away from being flat out broke.  No wonder why we have a record 47.6 million Americans now on food stamps.  When pensions were phased out starting in the 1980s many thought that the 401k or IRA would be the new way to save.  Hey, Americans will stuff their money into the stock market casino and after 30 years, they would have a million dollar nest egg thanks to compounding.  How did that work out?  Let us take a look at where things stand today.

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Feb 25 2013

What European Recovery? Unemployment at record high and debt only keeps reaching more unsustainable levels. Italy’s Debt to GDP crosses 125 percent.

I never understood why so many people bought into the notion that the European Union was recovering.  If recovery means that a handful of well-connected bankers are bailed out with financial smoke and mirrors instead of facing reality while placing crushing austerity on the public, then yes, maybe a recovery is what was experienced.  As of the writing of this article the EU is facing its highest unemployment rate on record.  How is this even remotely positive or perceived as a recovery?  In Greece, the politicians and some in the public are trying to go after people that accurately stated that yes, there is in fact too much debt.  In Italy, a party led by a former comic did surprisingly well and it appears that there is no clear path ahead for the country.  The amount of debt in the EU is comical so it is apropos that a comedian should do so well.  There is nothing remotely resembling a recovery in the EU if we look outside of the banking sector which does a very poor job at reflecting the true state of the economy.

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Feb 22 2013

Part-time America: How we increased our part-time for economic reasons workforce by 4 million people since the recession began. Healthcare costs encourage low wage employers to hire more part-time employees.

The rise of part-time employment in the United States is part of the low wage system that is spreading throughout the country.  Part-time workers are cheaper to hire and easier to fire.  You also avoid paying benefits from a healthcare system that is seeing skyrocketing costs.  Prior to the economic crisis, the number of Americans working “part-time for economic reasons” was roughly at 4 million.  Today, in this supposed recovery it is up to 8 million.  While the stock market is taking off many companies have figured out that it is cheaper to have a large number of at-will workers instead of bringing on full-time employees and providing additional costs.  As we have discussed, the recession has been used as a cover to slash middle class wages and inflate profits that have filtered to a very small portion of our population.  Part of this problem is structural and we are seeing the impact of higher healthcare costs hitting the employment market.

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Feb 20 2013

Crossing the debt Rubicon. Does debt even matter? Over $5 trillion in Federal debt now held by international and foreign investors.

In most economic literature there seems to be a tipping point at which a nation enters a precarious state in which too much debt has been taken on.  A typical point occurs when a country hits a point where annual GDP is surpassed by total outstanding debt.  We recently crossed that threshold.  Another long-term trend we are living with is depending on the lending and willingness of international investors to put their money into the US.  Today over $5 trillion of Federal debt is now held by international investors.  In essence, we need their money to keep going at our current rate.  While the economic contraction has put the albatross of austerity on the necks of most households, banks and the government continue to spend as they once did.  Speculation is rampant again.  If you listen to some you would think that debt simply does not matter anymore.  If that were the case, we wouldn’t be jumping from one crisis to another dealing with our level of obligations.  At a certain point there is no more can kicking.

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Feb 17 2013

The difference between investing in the dollar store economy and living in it: 20 percent of Americans now receiving food stamps. Dollar stores become a growth industry and top one percent gobble up all income gains after recession.

Lost in the tireless cheerleading for the stock market which in reality, is largely a sophisticated sham for most Americans, we had a report from the Department of Agriculture that should put things into perspective.  In the latest release of data for November 2012 (released in February 2013), the report noted that 141,067 Americans were added to the food stamp program known as SNAP.  This is a massive increase at a time when the stock market is soaring to near record highs.  For the record, the S&P 500 went up 0.28% for the month of November while we added a stunning 141,067 Americans in the same month to the food stamp program.  This brings our current total to 47.69 million Americans that now rely on food stamps.  To highlight our growing structural issues we now have a mind jarring 20 percent of our civilian non-institutional population on food stamps.  What does this truly say about our economy?

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Feb 15 2013

The higher education racket gets long in the tooth: For-profits account for 47 percent of defaults but make up only 13 percent of total enrollments.

Bubbles do not burst in a nice orderly fashion.  In fact, incredible graft enters the system where it becomes obvious to any bystander that the bubble is going to burst.  This is the case for higher education.  The US has over 4,000 colleges and universities, with many of them operating like glorified paper mills.  Similar to the apex of the housing bubble where we heard about no income buyers qualifying for hundreds of thousands of dollars in mortgage loans, we now have many Americans diving into for-profit institutions that operate at the level of paper mills for tens of thousands of dollars of non-dischargeable student debt.  Not only is the for-profit sector a sign of the worm turning for higher education, but many other institutions have jacked up prices to levels that are simply unjustified.  This bubble is getting ripe for the picking.

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Feb 12 2013

Are stock investors coming back in at another debt induced peak? How regular stock investors are horrible at market timing.

The media is falling over itself with articles on how fantastic the stock market is.  The fact that the S&P 500 is now up from the March 2009 lows by over 100 percent seems to put the financial crisis in the annals of history.  Yet for most investors, the stock market is largely a casino.  For example, if we take a look at the fundamentals we realize that much of the meteoric rise has come courtesy of big institutional funds trading on low volume.  The retail investor has been largely absent because first, nearly one third of this nation has no actual savings.  It is hard to save with no money.  Next, you have the median household income at $50,000.  With the rise in tuition, healthcare, and now housing values once again the cost of living is getting more expensive.  But of course, just like at the peak of the tech boom, the average investor is now inching slowly back into the waters only to realize that much of what has occurred has been on the backs of giant piles of digital dollars printed by the Fed.  Are investors making another investing mistake?

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