My oldest is a senior in high school and I have spent countless hours thinking through the issues he will face in making the transition from student to earner sometime in the next 5 to 10 years and given all of the currency, debt, peak oil, etc... issues.
There is this sense that saving money is pointless. Nothing could be further from the truth for young people. The US$ has already collapsed. Could it head down 50% more versus the other major currencies? Sure it could... More likely is that it does not... Either way... does not change the need for savings.
The silly idea that maxing out your 401k is all of the savings you will need is BULL SH#!! Money in an IRA, 401k, etc... is pretax savings... meaning that you will pay taxes on it when you take it out. $1 million sounds like a lot of money - but in a 401k that $1MM is worth 30 to 50% less than its face value after you factor in state, local, and federal income taxes. This is not to say that you should not max out your 401k - you should - you should also payoff your home as quickly as possible (to make that chore easier, buy a smaller and less expensive home... and watch those property taxes... they are in insidious drain on your life), and save at least another 10% to 20% of your income in addition to the 401k and 15 year mortgage (30 year mortgage? BULLSH#! If you can't afford the 15 year payment, you can't afford the house).
OK, so the US$ has some risks... I never said you had to leave all of savings in cash... as you accumulate cash it can be invested in farm land, livestock, precious metals (not a recommendation to buy them here; you are on your own on that call), productive capacity in your own business, commodities and their producers.... but you have to spend much less than you take in. SIMPLE. LIKE. THAT.
In a LIFETIME many professionals will not earn more than $5 million (start at $80k per year at 30 and work your way up to $250k per year at 44 to 55, washed up at 60 if you are lucky - and that's if you are fortunate enough to escape any "hiccups" along the way). That means $2.5 to $3 million after taxes (with federal, state and city taxes are aggregated). Guess how much money you would have if you took $200K and compounded interest of 4% for 40 years? $960,000! Nearly 40% of the life time take home pay for most professionals!! Well, it costs $200k for an undergrad degree at most "prestigious" private universities and colleges... and you can buy 30 year, zero-coupon, TAX FREE state issued bonds (states cannot go bankrupt) at 4% right now. Still want to go to that private school? For the equivalent of 40% of your lifetime earnings? Really? That state school is looking better all the time, eh? Especially since grad school still needs to be funded...
Look at the Silicon Valley millionaires - they were RICH by the time you got out of grad school. You don't have an unlimited work life. The earlier you can get to it and make money the better. Its no wonder that so few corporate women have families at the age of 40, and are relying on doctors and peeing into petri dishes in order to procreate... did I mention that that is not covered by insurance? That career had better have put some savings in the mattress, because it ain't cheap to brew those test tube babies...
Nobody tells you all this stuff when you are picking out your major. Life is about making smart decisions and luck. You can't do much about the luck part, but you don't have to dig yourself any more holes than necessary... and when you find yourself in a hole - stop digging.
Times might be tough for a while... but that is all relative, and they don't have to be tough for everyone.
The Markets
My opinion on the markets, is only my opinion... not advice. Since I dropped my registration in the Securities Industry I can speak more clearly... that does not make me correct. In the short term, markets make everybody look dumb.
That said....
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The distortions in the markets caused by the various central banks has created an opportunity for the little guy (IMHO). The Little Guy has been given a second chance to sell most of his U.S. equities. I have been a long term holder and bull for precious metals BUT... I have never seen a market go vertical/parabolic and not end up badly. That does not mean things can't get MORE parabolic... but buying here seems unwise (but I could be wrong).... See, the US$ has already collapsed (IMHO) vs the ROW currencies... and the U.S. is NOT Zimbabwe. The U.S. will default on Social Security and Medicare (by raising the retirement age and decreasing benefits) LONG BEFORE it will default on its debt.... and that is enormously deflationary, not inflationary.
The Fed has been reasonably successful in their re-inflationary efforts, at least as far as asset prices go... but please note that the desired effect - reinflation of house prices - has NOT occurred. There can be no inflation - hyper or otherwise - without inflation in housing prices. Even the U.S. Treasury and the Federal Reserve cannot prevent the necessity of the U.S. housing market to be "cleared", and in order for that market to "clear" prices must fall farther and for some time.
Not that this makes it easy to profit from. The various central banks are stepping all over themselves and all over the markets.
That said....
---------------------------------------------
The distortions in the markets caused by the various central banks has created an opportunity for the little guy (IMHO). The Little Guy has been given a second chance to sell most of his U.S. equities. I have been a long term holder and bull for precious metals BUT... I have never seen a market go vertical/parabolic and not end up badly. That does not mean things can't get MORE parabolic... but buying here seems unwise (but I could be wrong).... See, the US$ has already collapsed (IMHO) vs the ROW currencies... and the U.S. is NOT Zimbabwe. The U.S. will default on Social Security and Medicare (by raising the retirement age and decreasing benefits) LONG BEFORE it will default on its debt.... and that is enormously deflationary, not inflationary.
The Fed has been reasonably successful in their re-inflationary efforts, at least as far as asset prices go... but please note that the desired effect - reinflation of house prices - has NOT occurred. There can be no inflation - hyper or otherwise - without inflation in housing prices. Even the U.S. Treasury and the Federal Reserve cannot prevent the necessity of the U.S. housing market to be "cleared", and in order for that market to "clear" prices must fall farther and for some time.
Not that this makes it easy to profit from. The various central banks are stepping all over themselves and all over the markets.
Regulation and Prohibition Don't work
Regulation, prohibition, and the use of institutionalized violence as a means of enforcing morality, ethics, and social/political agendas simply does not work. Ever. I have written fairly extensively about this in the past, but that study that I mentioned in 2 of my recent posts - "75% of Americans will be FAT by 2020" - is a perfect example of government identifying the wrong problem. It has also been bouncing around under my hat since I first read it...
Our prisons and court systems are full and our law enforcement budgets are breaking our local and state budgets because government identified drug use/abuse as a threat to our society... As it turns out, America's biggest problem (pun absolutely intended) turned out to be fries and burgers, cheese doodles and soda, candy and corn dogs... from the likes of McDonald's, Coca-Cola, Pizza Hut, Sarah Lee, Dole, Nestle, Tyson, YUM (KFC and Pizza Hut and others), et al...
The brutal reality is this: If a nation is its people and 75% of Americans are obese... what is so great about America? (In America people are executed by the government for Marijuana - as it turns out, bacon is a far greater threat to our society. Who'd a thunk it?) The answer: Our Corporations. The U.S. Federal Government does not care or concern itself with its citizens in the slightest - they are there to be manipulated into voting blocks to keep up appearances by the 2H1P. What the government does care about are the perfect enslavement mechanisms and tax collection points called CORPORATIONS. It was the advent of the share holder corporation and the enactment of the 16th Amendment of the Constitution (income tax), Social Security, and Medicare that conspired to create the perfect storm to collapse our freedoms into indentured debtors, fill our prisons, expand our waist lines, and addict Americans to government services.
America was a nation of strapping farmers and merchants and wiry shop keepers and artisans... and we have been reduced to a nation of pot-bellied Wal-Mart greeters, fallen arched Home Depot clerks, and thunder-thighed McDonald's drive thru serfs... but they all have bachelor's degrees! So they got that (and student loans) going for them... with a tiny fraction of the population benefitting (stealing) from the only industry the U.S. really has left - the export of the American Dollar and American Sovereign Debt (financial services) to the rest of the world. How did this come about? It came about as a result of the corporation and its unique ability to collect payroll and income taxes. (I swear I will get email or a commentary from some brain dead nit-wit that it all started with Ronald Reagan...) Why is it so many believe that the last 50 years represented progress? Because we can watch reruns of "Giligan's Island" on a 10 foot flat screen? Or go deaf by I-Pod? (Oh, I forgot... medical progress, right? Nothing comes without unintended consequences... what if these advances lead to overpopulation and an environmental catastrophe that dooms humanity? What if governments start to regulate reproduction and population? Wait a second... isn't a really, really big and powerful government already doing that?)
Most of us can feel this somewhere in the back of our throats... the way wild animals feel when a hurricane or earthquake is in the offing... all except the True Believers supporting the 2H1P. (As my good friend and Rabbi put it so succinctly when he described people that claim they have "no regrets": "Schmuck! You mean you lived an entire life time and never learned anything?" You folks would love Rabbi Moe. When I described myself as a "self-educated man" he sniffed at me and said: "As if there where any other kind"). The 2H1P folks never learn ANYTHING - because they know it all.
One of the benefits of living a long life, other than the obvious, is the perspective one gains on how much one does NOT know. But, from my experience living on a family homestead, I do I know this: the 39 MILLION Americans receiving food assistance AND the 20 MILLION+ collecting unemployment "benefits" would be far better off working as migrant farm workers. They'd have a paycheck. They would be thinner. The exercise, sunshine, and vitamin D would improve their health and their love lives. They'd be less stressed and angry, especially if they were too tired after work to watch T.V. (speaking of which, I never, ever had a problem falling asleep while living on the farm... "Lunesta", valium, lorazapam. et al are not something in demand by homesteaders).
We have gone soft. Soft in our mid-sections and backsides, and soft in the head. The Left argues against "Belief" (and I am not even remotely religious), yet we have come to believe that something can be had for nothing; that hard work, modesty, and frugality are passe; that T.V. is informative and educational, and that food, jobs, education... comes from Big Brother.
Today I saw a Bill Board asking "Who Is John Galt" on I-95.
Who, indeed?
Our prisons and court systems are full and our law enforcement budgets are breaking our local and state budgets because government identified drug use/abuse as a threat to our society... As it turns out, America's biggest problem (pun absolutely intended) turned out to be fries and burgers, cheese doodles and soda, candy and corn dogs... from the likes of McDonald's, Coca-Cola, Pizza Hut, Sarah Lee, Dole, Nestle, Tyson, YUM (KFC and Pizza Hut and others), et al...
The brutal reality is this: If a nation is its people and 75% of Americans are obese... what is so great about America? (In America people are executed by the government for Marijuana - as it turns out, bacon is a far greater threat to our society. Who'd a thunk it?) The answer: Our Corporations. The U.S. Federal Government does not care or concern itself with its citizens in the slightest - they are there to be manipulated into voting blocks to keep up appearances by the 2H1P. What the government does care about are the perfect enslavement mechanisms and tax collection points called CORPORATIONS. It was the advent of the share holder corporation and the enactment of the 16th Amendment of the Constitution (income tax), Social Security, and Medicare that conspired to create the perfect storm to collapse our freedoms into indentured debtors, fill our prisons, expand our waist lines, and addict Americans to government services.
America was a nation of strapping farmers and merchants and wiry shop keepers and artisans... and we have been reduced to a nation of pot-bellied Wal-Mart greeters, fallen arched Home Depot clerks, and thunder-thighed McDonald's drive thru serfs... but they all have bachelor's degrees! So they got that (and student loans) going for them... with a tiny fraction of the population benefitting (stealing) from the only industry the U.S. really has left - the export of the American Dollar and American Sovereign Debt (financial services) to the rest of the world. How did this come about? It came about as a result of the corporation and its unique ability to collect payroll and income taxes. (I swear I will get email or a commentary from some brain dead nit-wit that it all started with Ronald Reagan...) Why is it so many believe that the last 50 years represented progress? Because we can watch reruns of "Giligan's Island" on a 10 foot flat screen? Or go deaf by I-Pod? (Oh, I forgot... medical progress, right? Nothing comes without unintended consequences... what if these advances lead to overpopulation and an environmental catastrophe that dooms humanity? What if governments start to regulate reproduction and population? Wait a second... isn't a really, really big and powerful government already doing that?)
Most of us can feel this somewhere in the back of our throats... the way wild animals feel when a hurricane or earthquake is in the offing... all except the True Believers supporting the 2H1P. (As my good friend and Rabbi put it so succinctly when he described people that claim they have "no regrets": "Schmuck! You mean you lived an entire life time and never learned anything?" You folks would love Rabbi Moe. When I described myself as a "self-educated man" he sniffed at me and said: "As if there where any other kind"). The 2H1P folks never learn ANYTHING - because they know it all.
One of the benefits of living a long life, other than the obvious, is the perspective one gains on how much one does NOT know. But, from my experience living on a family homestead, I do I know this: the 39 MILLION Americans receiving food assistance AND the 20 MILLION+ collecting unemployment "benefits" would be far better off working as migrant farm workers. They'd have a paycheck. They would be thinner. The exercise, sunshine, and vitamin D would improve their health and their love lives. They'd be less stressed and angry, especially if they were too tired after work to watch T.V. (speaking of which, I never, ever had a problem falling asleep while living on the farm... "Lunesta", valium, lorazapam. et al are not something in demand by homesteaders).
We have gone soft. Soft in our mid-sections and backsides, and soft in the head. The Left argues against "Belief" (and I am not even remotely religious), yet we have come to believe that something can be had for nothing; that hard work, modesty, and frugality are passe; that T.V. is informative and educational, and that food, jobs, education... comes from Big Brother.
Today I saw a Bill Board asking "Who Is John Galt" on I-95.
Who, indeed?
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