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Thinking About Retiring? Better Think It Through!

Thinking About Retiring? Better Think It Through!

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Thinking About Retiring? Better Think It Through!

A friend recently asked me, “How is anyone going to be able to retire?” Since 2008, the retirement landscape has changed radically.

This Atlantic article, How Retirement Was Invented provides some history:

“In the United States, starting in the mid-1800s, certain municipal employees…started receiving public pensions…. By the 1920s, a variety of American industries…were promising their workers some sort of support for their later years.

…. The federal government started creating what would become social security…. When the Social Security Act was passed in 1935, the official retirement age was 65. Life expectancy for American men was around 58 at the time.

Almost immediately…Americans started to live longer. By 1960, life expectancy in America was almost 70 years. All of a sudden more people were living past the age where they had permission to stop working and the money to do it. Finally, they began to retire in large numbers-to stop working, to embrace leisure….

For a few decades, older Americans lived without working, enough that we’ve come to expect that we should be able to retire, even if that may no longer be financially possible for many.” (Emphasis mine)

Major changes

Most people expected to retire at 65, with an employer funded pension, guaranteeing them benefits for the rest of their life.

In 1978 congress passed legislation (Section 401k) allowing employees to avoid being taxed on deferred compensation. Most of corporate America got out of the pension business, grandfathering in older employees, and switching younger people to a 401k. Some offer matching provisions, encouraging employees to save for their retirement.

The old rules don’t work

For the 401k program to work, financial planners preached “the magic of compounding”. The mantra was, “Save now, let your money grow and you can retire comfortably.”

Live off the interest; NEVER touch the principle. This was the holy grail for my parents. Interest from their Certificates of Deposit (CDs) coupled with their social security provided them all they needed.

You can always count on 6% safely. You worked hard to save; don’t lose your money. From late 1969 until mid-2000, treasuries paid 6% or more, with FDIC insured CD’s and top-quality bonds a bit higher.

100 minus your age. If you were 65, 65% of your portfolio should be in safe fixed income investments, and 35% in the market to hedge against inflation. If you bought solid dividend payers, they would also provide income.

Earn 6%, withdraw 4%, and leave the remainder for growth. This was the rule for withdrawals from your IRA or 401k each year, believing you would NEVER run out of money.

The magic rule of 72! If you earned 6% (considered a sure thing) it took twelve years to double your money (12 x 6 = 72). If you earned 7.2% you would double your money in 10 years.

The rule remains, but the numbers have changed!

When the Fed jumped in during a recession, interest rates came down.

  • On 7/31/2000, ten-year treasuries paid 6.04%. Investors could expect their money to double in 12 years.
  • On 7/31/2008, treasuries paid 3.99%. It would take 18 years to double your money.
  • On 7/31/2020 they paid .55%. It now takes 131 years to double your money safely.

The world changed with the 2008 bank bailouts. Check the red line below, it’s scary!

At current rates it is impossible to safely double your money in your lifetime.

Is retirement even possible for the middle class?

Central banks, with government support, cut interest rates to historical lows. They not only don’t keep up with inflation, they also make it impossible to compound your savings – without taking some previously unnecessary risk.

It gets worse. Wall Street On Parade reports, “As Retirees Anguish Over a Sub One-Percent Treasury Note, U.S. Companies Are Suspending their Dividends at a Rate Not Seen Since the 2008 Crash.”

The unintended consequences

Most pension funds are woefully underfunded; they can’t earn enough to fulfill their promises without taking risks that could get the managers sued.

Expect the Social Security retirement age to be moved back, all benefits taxed, means testing for benefits and it will NOT keep up with inflation (despite the indexing provision).

Expect the government to inflate their way out of debt, just like every country with fiat currency – a politician’s paper promise.

Chuck Butler warns, “The Fed is hell bent and whiskey bound to see inflation rise. The Fed heads, believe that they know when to pull away the punch bowl that’s feeding the inflation…. Well, I’m from Missouri, and the Fed Heads are going to have to show me that they have chutzpah to pull away the punch bowl, once they’ve given everyone a heaping cup full of inflation….”

Today’s retirement challenge is significant.

  • Your first social security payment will be the most valuable. With each passing month, the buying power will be reduced by inflation.
  • You MUST factor inflation into your formula.
  • Your accumulated wealth will not grow without putting a lot more at risk than previous generations.

How to get the job done

If you don’t have the benefit of a guaranteed government pension, there are some things you can do. It’s challenging, but not impossible.

Don’t give up! Previous generations lived through famine, depression, pandemics and survived. They changed with the times, went about their business….and thrived. You will prevail!

Expect an economic downturn. Chuck Butler adds, “The Bank for International Settlements (BIS) told us many years ago that “When government debt exceeds 85% of GDP, economic growth slows.” When the debt level grows too large, the economy has to slow down… We’ve moved into the 130% of GDP (not using the Covid-19 GDP numbers).”

Despite the political rhetoric, it’s just a matter of when the downturn arrives. Be prepared, not surprised, which leads to the next point.

“If you live like no one else, later you can live like no one else.” – Dave Ramsey

Get out of debt as quickly as you can. I recently wrote about “Debt Slaves” and how to escape the trap. Get started now!

Downsize and be done with it. Your retirement savings probably won’t meet the safe 6% projections you counted on. Set your retirement lifestyle for what you can afford.

The 2017 net worth calculator indicates a net worth (excluding your home) of around $2.5 million puts you in the top 5% category. If you saved that much, you did good!

6% would have provided $150,000 in safe income. Today’s rates generate $17,250. The government poverty level for a family of 2 = $17,240. While that is maddening, it is more the reason to live below your means and save as much as you can.

Prepare a retirement budget and make it work.

Keep working as long as you can. Find something you enjoy, that is not stressful. We have retired friends who love to garden. They grow herbs and spices, selling them at local farmers markets. Their income, coupled with social security, means they don’t have to dip into their savings to live. The longer you work, the better; just make it fun!

Build a conservative investment strategy for today’s world. Safe, fixed income products will not beat inflation. If you want 4% interest or more, the probability of default rises significantly. Expect bond defaults to start rising. Don’t get caught chasing yield and then losing out.

Use short term CD’s for cash holdings. Risk as little as possible, while providing enough income to pay the bills. Avoid dipping into savings as long as possible.

Find solid dividend paying stocks. Some companies do well in bad times and continue paying their dividends. Seek them out, invest in them and monitor your investments closely. Get good help in finding those opportunities.

Avoid catastrophic losses. While you must take risks to grow your wealth; preservation of capital is critical. Set stop losses where appropriate, and keep them up to date.

Allocate a portion to metals and metal stocks. Inflation is a major concern. I recommend owning metal and metal related dividend paying stocks. The mining stocks not only keep up with inflation, they also provide yield.

Jeff Clark reminds us, Silver is the best performing asset class of 2020, gold is 2nd and Nasdaq 3rd.” Gold will never go to zero….

Friend John Williams shows us gold has outperformed the Dow since January 2000.

Look for bargains. One of the best investment books is Benjamin Graham’s book, “The Intelligent Investor”. Investopedia tells us:

“The investor should look for opportunities to buy low and sell high due to price-value discrepancies that arise from economic depressions, market crashes, one-time events, temporary negative publicity, and human errors. If no such opportunity is present, the investor should ignore the market noise.”

Here is one example. Silver dropped to $12.04/oz. in March and has more than doubled since then. WPM has risen ahead of the silver price as investors are anticipating a further rise in price.

WPM – WHEATON PRECIOUS METALS

If you see a bargain, don’t go overboard, but act on it.

Is it possible for the middle class to retire?

Sure, those that educate themselves, realize they MUST manage their money conservatively and live within their means will do just fine. IT CAN BE DONE!

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Thinking About Retiring? Better Think It Through!
Dennis Miller

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International

Copper Soars, Iron Ore Tumbles As Goldman Says “Copper’s Time Is Now”

Copper Soars, Iron Ore Tumbles As Goldman Says "Copper’s Time Is Now"

After languishing for the past two years in a tight range despite recurring…

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Copper Soars, Iron Ore Tumbles As Goldman Says "Copper's Time Is Now"

After languishing for the past two years in a tight range despite recurring speculation about declining global supply, copper has finally broken out, surging to the highest price in the past year, just shy of $9,000 a ton as supply cuts hit the market; At the same time the price of the world's "other" most important mined commodity has diverged, as iron ore has tumbled amid growing demand headwinds out of China's comatose housing sector where not even ghost cities are being built any more.

Copper surged almost 5% this week, ending a months-long spell of inertia, as investors focused on risks to supply at various global mines and smelters. As Bloomberg adds, traders also warmed to the idea that the worst of a global downturn is in the past, particularly for metals like copper that are increasingly used in electric vehicles and renewables.

Yet the commodity crash of recent years is hardly over, as signs of the headwinds in traditional industrial sectors are still all too obvious in the iron ore market, where futures fell below $100 a ton for the first time in seven months on Friday as investors bet that China’s years-long property crisis will run through 2024, keeping a lid on demand.

Indeed, while the mood surrounding copper has turned almost euphoric, sentiment on iron ore has soured since the conclusion of the latest National People’s Congress in Beijing, where the CCP set a 5% goal for economic growth, but offered few new measures that would boost infrastructure or other construction-intensive sectors.

As a result, the main steelmaking ingredient has shed more than 30% since early January as hopes of a meaningful revival in construction activity faded. Loss-making steel mills are buying less ore, and stockpiles are piling up at Chinese ports. The latest drop will embolden those who believe that the effects of President Xi Jinping’s property crackdown still have significant room to run, and that last year’s rally in iron ore may have been a false dawn.

Meanwhile, as Bloomberg notes, on Friday there were fresh signs that weakness in China’s industrial economy is hitting the copper market too, with stockpiles tracked by the Shanghai Futures Exchange surging to the highest level since the early days of the pandemic. The hope is that headwinds in traditional industrial areas will be offset by an ongoing surge in usage in electric vehicles and renewables.

And while industrial conditions in Europe and the US also look soft, there’s growing optimism about copper usage in India, where rising investment has helped fuel blowout growth rates of more than 8% — making it the fastest-growing major economy.

In any case, with the demand side of the equation still questionable, the main catalyst behind copper’s powerful rally is an unexpected tightening in global mine supplies, driven mainly by last year’s closure of a giant mine in Panama (discussed here), but there are also growing worries about output in Zambia, which is facing an El Niño-induced power crisis.

On Wednesday, copper prices jumped on huge volumes after smelters in China held a crisis meeting on how to cope with a sharp drop in processing fees following disruptions to supplies of mined ore. The group stopped short of coordinated production cuts, but pledged to re-arrange maintenance work, reduce runs and delay the startup of new projects. In the coming weeks investors will be watching Shanghai exchange inventories closely to gauge both the strength of demand and the extent of any capacity curtailments.

“The increase in SHFE stockpiles has been bigger than we’d anticipated, but we expect to see them coming down over the next few weeks,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said by phone. “If the pace of the inventory builds doesn’t start to slow, investors will start to question whether smelters are actually cutting and whether the impact of weak construction activity is starting to weigh more heavily on the market.”

* * *

Few have been as happy with the recent surge in copper prices as Goldman's commodity team, where copper has long been a preferred trade (even if it may have cost the former team head Jeff Currie his job due to his unbridled enthusiasm for copper in the past two years which saw many hedge fund clients suffer major losses).

As Goldman's Nicholas Snowdon writes in a note titled "Copper's time is now" (available to pro subscribers in the usual place)...

... there has been a "turn in the industrial cycle." Specifically according to the Goldman analyst, after a prolonged downturn, "incremental evidence now points to a bottoming out in the industrial cycle, with the global manufacturing PMI in expansion for the first time since September 2022." As a result, Goldman now expects copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25.’

Here are the details:

Previous inflexions in global manufacturing cycles have been associated with subsequent sustained industrial metals upside, with copper and aluminium rising on average 25% and 9% over the next 12 months. Whilst seasonal surpluses have so far limited a tightening alignment at a micro level, we expect deficit inflexions to play out from quarter end, particularly for metals with severe supply binds. Supplemented by the influence of anticipated Fed easing ahead in a non-recessionary growth setting, another historically positive performance factor for metals, this should support further upside ahead with copper the headline act in this regard.

Goldman then turns to what it calls China's "green policy put":

Much of the recent focus on the “Two Sessions” event centred on the lack of significant broad stimulus, and in particular the limited property support. In our view it would be wrong – just as in 2022 and 2023 – to assume that this will result in weak onshore metals demand. Beijing’s emphasis on rapid growth in the metals intensive green economy, as an offset to property declines, continues to act as a policy put for green metals demand. After last year’s strong trends, evidence year-to-date is again supportive with aluminium and copper apparent demand rising 17% and 12% y/y respectively. Moreover, the potential for a ‘cash for clunkers’ initiative could provide meaningful right tail risk to that healthy demand base case. Yet there are also clear metal losers in this divergent policy setting, with ongoing pressure on property related steel demand generating recent sharp iron ore downside.

Meanwhile, Snowdon believes that the driver behind Goldman's long-running bullish view on copper - a global supply shock - continues:

Copper’s supply shock progresses. The metal with most significant upside potential is copper, in our view. The supply shock which began with aggressive concentrate destocking and then sharp mine supply downgrades last year, has now advanced to an increasing bind on metal production, as reflected in this week's China smelter supply rationing signal. With continued positive momentum in China's copper demand, a healthy refined import trend should generate a substantial ex-China refined deficit this year. With LME stocks having halved from Q4 peak, China’s imminent seasonal demand inflection should accelerate a path into extreme tightness by H2. Structural supply underinvestment, best reflected in peak mine supply we expect next year, implies that demand destruction will need to be the persistent solver on scarcity, an effect requiring substantially higher pricing than current, in our view. In this context, we maintain our view that the copper price will surge into next year (GSe 2025 $15,000/t average), expecting copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25’

Another reason why Goldman is doubling down on its bullish copper outlook: gold.

The sharp rally in gold price since the beginning of March has ended the period of consolidation that had been present since late December. Whilst the initial catalyst for the break higher came from a (gold) supportive turn in US data and real rates, the move has been significantly amplified by short term systematic buying, which suggests less sticky upside. In this context, we expect gold to consolidate for now, with our economists near term view on rates and the dollar suggesting limited near-term catalysts for further upside momentum. Yet, a substantive retracement lower will also likely be limited by resilience in physical buying channels. Nonetheless, in the midterm we continue to hold a constructive view on gold underpinned by persistent strength in EM demand as well as eventual Fed easing, which should crucially reactivate the largely for now dormant ETF buying channel. In this context, we increase our average gold price forecast for 2024 from $2,090/toz to $2,180/toz, targeting a move to $2,300/toz by year-end.

Much more in the full Goldman note available to pro subs.

Tyler Durden Fri, 03/15/2024 - 14:25

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Government

Moderna turns the spotlight on long Covid with new initiatives

Moderna’s latest Covid effort addresses the often-overlooked chronic condition of long Covid — and encourages vaccination to reduce risks. A digital…

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Moderna’s latest Covid effort addresses the often-overlooked chronic condition of long Covid — and encourages vaccination to reduce risks. A digital campaign debuted Friday along with a co-sponsored event in Detroit offering free CT scans, which will also be used in ongoing long Covid research.

In a new video, a young woman describes her three-year battle with long Covid, which includes losing her job, coping with multiple debilitating symptoms and dealing with the negative effects on her family. She ends by saying, “The only way to prevent long Covid is to not get Covid” along with an on-screen message about where to find Covid-19 vaccines through the vaccines.gov website.

Kate Cronin

“Last season we saw people would get a flu shot, but they didn’t always get a Covid shot,” said Moderna’s Chief Brand Officer Kate Cronin. “People should get their flu shot, but they should also get their Covid shot. There’s no risk of long flu, but there is the risk of long-term effects of Covid.”

It’s Moderna’s “first effort to really sound the alarm,” she said, and the debut coincides with the second annual Long Covid Awareness Day.

An estimated 17.6 million Americans are living with long Covid, according to the latest CDC data. About four million of them are out of work because of the condition, resulting in an estimated $170 billion in lost wages.

While HHS anted up $45 million in grants last year to expand long Covid support initiatives along with public health campaigns, the condition is still often ignored and underfunded.

“It’s not just about the initial infection of Covid, but also if you get it multiple times, your risks goes up significantly,” Cronin said. “It’s important that people understand that.”

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Government

Consequences Minus Truth

Consequences Minus Truth

Authored by James Howard Kunstler via Kunstler.com,

“People crave trust in others, because God is found there.”

-…

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Consequences Minus Truth

Authored by James Howard Kunstler via Kunstler.com,

“People crave trust in others, because God is found there.”

- Dom de Bailleul

The rewards of civilization have come to seem rather trashy in these bleak days of late empire; so, why even bother pretending to be civilized? This appears to be the ethos driving our politics and culture now. But driving us where? Why, to a spectacular sort of crack-up, and at warp speed, compared to the more leisurely breakdown of past societies that arrived at a similar inflection point where Murphy’s Law replaced the rule of law.

The US Military Academy at West point decided to “upgrade” its mission statement this week by deleting the phrase Duty, Honor, Country that summarized its essential moral orientation. They replaced it with an oblique reference to “Army Values,” without spelling out what these values are, exactly, which could range from “embrace the suck” to “charlie foxtrot” to “FUBAR” — all neatly applicable to our country’s current state of perplexity and dread.

Are you feeling more confident that the US military can competently defend our country? Probably more like the opposite, because the manipulation of language is being used deliberately to turn our country inside-out and upside-down. At this point we probably could not successfully pacify a Caribbean island if we had to, and you’ve got to wonder what might happen if we have to contend with countless hostile subversive cadres who have slipped across the border with the estimated nine-million others ushered in by the government’s welcome wagon.

Momentous events await. This Monday, the Supreme Court will entertain oral arguments on the case Missouri, et al. v. Joseph R. Biden, Jr., et al. The integrity of the First Amendment hinges on the decision. Do we have freedom of speech as set forth in the Constitution? Or is it conditional on how government officials feel about some set of circumstances? At issue specifically is the government’s conduct in coercing social media companies to censor opinion in order to suppress so-called “vaccine hesitancy” and to manipulate public debate in the 2020 election. Government lawyers have argued that they were merely “communicating” with Twitter, Facebook, Google, and others about “public health disinformation and election conspiracies.”

You can reasonably suppose that this was our government’s effort to disable the truth, especially as it conflicted with its own policy and activities — from supporting BLM riots to enabling election fraud to mandating dubious vaccines. Former employees of the FBI and the CIA were directly implanted in social media companies to oversee the carrying-out of censorship orders from their old headquarters. The former general counsel (top lawyer) for the FBI, James Baker, slid unnoticed into the general counsel seat at Twitter until Elon Musk bought the company late in 2022 and flushed him out. The so-called Twitter Files uncovered by indy reporters Matt Taibbi, Michael Shellenberger, and others, produced reams of emails from FBI officials nagging Twitter execs to de-platform people and bury their dissent. You can be sure these were threats, not mere suggestions.

One of the plaintiffs joined to Missouri v. Biden is Dr. Martin Kulldorff, a biostatistician and professor at the Harvard Medical School, who opposed Covid-19 lockdowns and vaccine mandates. He was one of the authors of the open letter called The Great Barrington Declaration (October, 2020) that articulated informed medical dissent for a bamboozled public. He was fired from his job at Harvard just this past week for continuing his refusal to take the vaccine. Harvard remains among a handful of institutions that still require it, despite massive evidence that it is ineffective and hazardous. Like West Point, maybe Harvard should ditch its motto, Veritas, Latin for “truth.”

A society hostile to truth can’t possibly remain civilized, because it will also be hostile to reality. That appears to be the disposition of the people running things in the USA these days. The problem, of course, is that this is not a reality-optional world, despite the wishes of many Americans (and other peoples of Western Civ) who wish it would be.

Next up for us will be “Joe Biden’s” attempt to complete the bankruptcy of our country with $7.3-trillion proposed budget, 20 percent over the previous years spending, based on a $5-billion tax increase. Good luck making that work. New York City alone is faced with paying $387 a day for food and shelter for each of an estimated 64,800 illegal immigrants, which amounts to $9.15-billion a year. The money doesn’t exist, of course. New York can thank “Joe Biden’s” executive agencies for sticking them with this unbearable burden. It will be the end of New York City. There will be no money left for public services or cultural institutions. That’s the reality and that’s the truth.

A financial crack-up is probably the only thing short of all-out war that will get the public’s attention at this point. I wouldn’t be at all surprised if it happened next week. Historians of the future, stir-frying crickets and fiddleheads over their campfires will marvel at America’s terminal act of gluttony: managing to eat itself alive.

*  *  *

Support his blog by visiting Jim’s Patreon Page or Substack

Tyler Durden Fri, 03/15/2024 - 14:05

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