Retirement Blues

There was an interesting quiz called "Have You Learned Your Lessons?" which appeared in last weekend's Wall Street Journal. It was based on a recent report that included surveys of those planning for or already in retirement.

The answers to the surveys emphasized the point that unless US policy makers can get another asset bubble going in stocks and housing, many people, ages 55 and older are in deep trouble.

That "bubble" strategy is exactly what the government has been trying to do - the problem with that strategy is that asset bubbles always burst and when they do - they leave a terrible mess.

According to the National Retirement Risk Index, published by the Center for Retirement Research at Boston College, 44% of US households could find themselves unable to maintain their current standard of living.

I strongly believe that these people will NOT be able to maintain their standard of living because of poor retirement planning.

Let's look at 401k plans, which makes up a large portion of many people's retirement plans. A report from the University of Michigan took a look at a group of 1.2 million workers in more than 1,500 401k plans over a two-year period. The report showed that an incredible 80% of workers made NO changes at all during the two-year period.

This is, to put it mildly, incredibly stupid.....

Individual circumstances probably changed during this time period - age, risk tolerance, overall finances, etc. I cannot emphasize enough - a 401k should be adjusted as your financial circumstances change.

And on top of that, the financial markets certainly changed. Most of these people were probably still locked in to the 'conventional investing wisdom' and had far too many of their assets invested in US stocks.....

And this in a period when US stocks are no higher than they were a decade ago...what a waste of time and hard-earned money!

What is really scary is the statistic showing that the end of 2007, on the eve of the 2008 market meltdown, nearly half of the workers surveyed (ages 56-65) had 70% or more of their 401k in equities...22% had more than 90% of their 401k in equities!

What were they thinking?? Or maybe they weren't thinking?

What ever happened to raising your allocation to fixed income investments as you get older? I guess people just got too greedy.....

Now many of them will have to go back into the workforce in what should have been their golden years.

Tell Me Lies...Tell Me Sweet Little Lies

In a news item that was (unsurprisingly) largely ignored by US media outlets, it was revealed this week that the statistics on global oil reserves put together by the International Energy Agency(IEA) have been "fudged" for years. The IEA is considered to be a very highly-respected agency and they were thought to be THE source for information on the oil markets.

The UK's Guardian newspaper spoke to two whistleblowers at the IEA and what a story they told - According to the whistleblowers, the world is much closer to running out of relatively cheap and accessible oil than what the agency's numbers show.

The agency publicly maintains that oil supplies are plentiful and that production can "easily" be ramped up from the current 83 million barrels of oil per day to 105 million barrels.

Skeptics outside the agency doubt whether even 90 million barrels of oil per day can be acheived due to many major oil fields, such as in Mexico, being in a state of rapid decline. The skeptics expect global oil production to actually begin declining with the next 5-10 years.

And the skeptics may have a point...for example, the IEA is taking Saudi Arabia at its word about its oil reserves. The Saudi reserve numbers have remained constant for many years even though obviously the Saudis have been pumping lots of oil out of the ground for all those many years. Perhaps more telling is the fact that the Saudis have not permitted an independent verification of the Saudis' oil reserves literally for decades.

But why would the IEA risk ruining its reputation and "fudge" their numbers?

According to the whistleblowers, "the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves."

And the whistleblowers go on to say the imperative at the agency "was not to anger the Americans". After all, the US doesn't want Wall Street to lose money in a stock market decline.....

The whistleblowers said, "Many inside the organization believe that maintaining oil supplies at even 90-95 million barrels a day would be IMPOSSIBLE." This is not good news in the light of the rapidly increasing demand for oil coming from the emerging markets. No wonder China has snapped up every oil field they could in recent years...

The whistleblowers went on, "There are fears that panic could spread on the financial markets if the figures were brought down further." And no one wants a financial panic...but won't there be one if we wake up one day and oil is trading at $500 a barrel?

It's just another case of past and current American governments "kicking the can down the road"...hoping a miracle will happen before the country has to face harsh reality.

Obama Administration Continues to Back Wall Street Banksters 100%

There was a move afoot at the recently concluded G20 finance ministers meeting to slap a version of the so-called Tobin Tax on major financial institutions around the globe. This tax would be imposed on each and every financial transaction.

I normally do not support new taxes, but this tax was so small it would not be noticeable to individuals traders, but it would be noticeable to the big financial players who trade madly like Goldman Sachs.

British Prime Minister Gordon Brown advocated the tax on financial transactions to support inevitable future bank rescues. I agree with Mr. Brown's statement:

"It cannot be acceptable that the benefits of success in this sector are reaped by the few, but the costs of its failures are borne by all of us. There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards."

Many European nations, such as Germany and France, are in favor of such a tax. The emerging nations such as China and Brazil have no real objection to it.

But - you guessed it - the tax proposal was shot down by the United States. Treasury secretary Tim-the tax cheat-Geithner nearly had a hissy-fit as he voiced his strong opposition to the tax.

And once again, we see that US economic policies are run by Wall Street. Gawd forbid Tim, that a tax be imposed on Goldman and the boyz -- instead of executives getting a $50 million bonus, they may have to settle for a $49.9 million bonus. Poor babies!

This attitude of the United States toward any sort of meaningful financial reform continues to lower the status of the country daily in the eyes of the rest of the world.....

Just follow the dollar on its downward path into the abyss.....