Dec 31 2016

Guns and Chipotle: Millennials are the most employed generation in two occupational areas: food services and military.

Young Americans have many financial obstacles placed in their way.  Many older Americans like to chime in and blast younger Americans as being weak and complaining too much but the facts tell a different story.  Millennials do have it economically tougher.  Quality of life is up (for all) but the standard of living is getting harder to keep up with.  To achieve that middle class lifestyle that baby boomers achieved with very little education and in many cases a blue collar job now requires a two income households and mountains of student debt just to get there.  It is also the case that young Americans are now living at home in record numbers because of economic necessity.  Millennials are the most employed generation in food services and the military.  What does that tell you?

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Dec 26 2016

The near extinct pension – US pensions aggressively invest in equities relative to other countries to make up for shortfalls.

The pension is nearly extinct.  Overly optimistic returns left many pension plans practically insolvent and not ready to adapt to a low yield environment.  The benefit of pensions however is that it forced people to save over time for retirement.  What we have learned via the 401k is that when left to their own devices, people simply are not good at planning for the future especially when it comes to retirement.  So now, a full generation into this experiment we are left with many older Americans fully relying on Social Security as their main source of income.  That was never the intended use of that program.  When we look at US pension plans we realize that they are aggressively betting on equities to make up for the larger returns needed to payout retirees.  It might seem that the stock market only goes up over the last few years but as we all know, tides do shift.

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Dec 17 2016

The 401k has been a disaster for most Americans: Only 44 percent of private sector workers participate in a defined contribution plan.

Failing to plan is planning to fail.  If this is true, most Americans are planning to live in retirement with very little money and are going to rely heavily on Social Security to get by.  That is the case today where most retirees get the bulk of their income from Social Security.  Back when the 401k plan was introduced, the thought was many people would squirrel away money each month and after 30 or 40 years of working, there would be a large nest egg thanks to a raging stock market.  Stock market growth has tempered and most people just didn’t participate.  So now as many Americans enter retirement age most are realizing they are going to work until they die.  The 401k plan was introduced in 1978 and the end result for most Americans is that it has failed.

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Dec 11 2016

Welcome back debt! Total household debt rose by $63 billion last quarter pushing total household debt to $12.35 trillion. More than half of the debt increase came through auto loans.

The appetite for debt is now back in a furious way.  Total household debt was up $63 billion last quarter driven largely by auto loans.  Auto loans increased by $32 billion and the amount of auto debt outstanding is stunning.  There is now a total of $1.14 trillion in auto loans floating in our economy.  We’ve discussed that a large part of the growth has come in the form of subprime auto debt and that trend seems to be continuing.  While Americans in many cases are too broke to afford a home, they are now able to purchase depreciating assets that lose value the minute they roll off the lot.  This is unfortunately a bad omen since many families are trying to keep up the pretense of being middle class by buying cars that they cannot afford on credit.  Debt is back and it must feel like a comfortable old shirt.

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Dec 4 2016

California is land to the $100k minimum wage state worker: 220,000 highly-compensated state employees cost the public $35 billion.

There is one thing to discuss the minimum wage for servers and many others that work in the low paid service industry but it is another thing to discuss “underpaid” state workers.  That statement cannot be said for California’s state employees.  In a country where the median household income is $52,000 California seems to be the land of largesse.  There is this narrative that state workers take on jobs that pay much less than the private sector but the data in California shows something very different.  In fact, there are armies of highly paid state workers.  There was a study that looked at state workers and the number of people earning six-figures is somewhat mind boggling.  Let us look at the figures.

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