‘Walking-Around Money’ (The ‘Baby-Boomer’ Bubble)

(Disclaimer:  As a recently retired financial services representative, I feel obligated to stress that the opinions; observations and factoids contained herein are the opinions of a private individual….not appointed with any vendor of financial services, and not offering said opinions and/or observations out of any motivation other than the sharing of personal experience with financial risk management)

Is your desired retirement date within the next ten years?

Do you measure “recovery” by the number of foreclosures on your street?

Wondering what will be in the next senate bill and what your senator will think of it when he or she does finally read it?

You are not alone.

As a “baby-boomer”, you have the privilege, (deserved or not) …of observing housing and banking ‘bubbles’  as a member of the largest population “bubble” in centuries.  Your sheer number poses an impending economic tsunami in the increasingly turbulent waters of the world economy.

What to do?   Unless you are ready to put in the hours necessary to “day-trade”, you need to speak with some sort of  “financial services representative”.

As unpleasant as this sounds, it is necessary.  Like your doctor; dentist, or attorney, you need someone to protect your ‘portfolio’ (such as it is) with preventative maintenance.

Let’s cover some groundwork:

1)  You must make the decision to act.  No one is going to take you by the hand and review your portfolio until you decide that it just might be prudent to review your risk tolerance; your time horizon for retirement; your desired lifestyle in retirement; and your legacy goals.  Social Security and Medicare are but supplements to your sustenance in your ‘golden’ years.  The ‘safety net’ afforded by these increasingly stretched government resources definitely cannot be regarded as the “hammock” of your long dreamed-of retirement.

2)  You must acquaint yourself with your ‘portfolio’.  In my practice; it was sobering indeed to note that, most people in fact are unfamiliar with their protection portfolio…..and therefore unclear as to what exactly they might have to work with toward retirement planning.  You need to speak with your human resources people at your job to cover a myriad of topics:

Life Insurance:  Is it convertible to your own coverage if you are terminated or leave the company?  Is your privately owned insurance enough to cover your mortgage; debts; education; and survivor needs of your family?

Disability Insurance:  If you are unable to work for other than a work-related injury or illness,  a)  what is the ‘waiting period’ before short-term disability coverage ‘kicks in”?…b)  What percentage of your average pay is paid? 60%?  (It is definitely not 100%)…c)  What duration of time does your fractional disability income last?…d)  What is the ‘waiting period’ ; amount and duration of  long-term disability coverage (if any).

Medical Coverage:  Know what is covered and what is not, and what the maximum payout is.

401K:  Know what amount the employer matches.  What funds are you in?  How is the performance compared to the overall market?  Does it match your risk tolerance?  Do you know what your risk tolerance is?

Budget/Savings:   Streamline your budget by comparing your income and your cash outflow.  As to outflow……categorize expenditures of income as ‘necessary’ versus ‘discretionary’… (many people are surprised to note that lots more cash than they realized was going to lottery tickets; premium cable channels; tobacco; unlimited cellphone allowances; etc.)

***Save enough cash to pay for at least 6 to 9 months of your monthly living expenses…  This ‘buffer’ is not only common sense and prudence, but it will convince your financial adviser you are committed to reviewing his/her advice.

Now, you can call an adviser for an appointment, or finally accede to allowing one to come over from among the half-dozen or so ‘cold’ calls you probably receive monthly, (which is due simply to demography… your membership in “the bubble”.)

Just as your doctor or lawyer was ‘new’ to you the first time you met, your financial adviser is ‘new’ .  From this writer’s experience, it may be helpful for you to realize that:

1)  The ‘good‘:   Licensing; continuing education; ethical standards; training; etc., are covered at both the state and federal governmental levels to an extent which can equal or exceed standards required of  physicians or attorneys.  You can quickly review the age; experience; license status and disciplinary record of any such representative before you even meet…..State departments of insurance; FINRA/SIPC , etc.,  all have websites which monitor these people down to a regular review of their traffic records; credit histories;  and the proper verbiage on their business cards.

2)  The ‘bad‘:  Since the Madoff debacle;  our learned representatives and senators have reacted with the ‘Frank-Todd’ Act; a plethora of new agencies and regulatory bodies; heightened continuing education requirements; and more rigorous oversight of everything a representative does, down to each and every e-mail sent or received.  The unfortunate result is that your financial representative or adviser has taken the ‘brunt’ of legislative reaction to the crimes of  ‘Bernie’ and the acquiescence of those who had regular and ample opportunity to expose his time-worn ‘Ponzi’ antics.  That this field has become more demanding is borne out by the depressing statistics…most new reps do not last more than 2 years.  And, those who are able to stay in the field due to their marketing prowess or their alacrity at appointment setting, simply cannot afford to deal with clients who are not business owners or professionals.  The regulatory environment, in its’ ‘knee-jerk’ reaction to the Madoff episode, has simply increased  both the cost of doing business for these ‘frontline ‘soldiers in the field, and increased the risk perceived by these ‘soldiers’ of regulatory discipline; fines; and penalties for  things so minute as the lack of  a proper disclaimer at the bottom of an e-mail.  (In my experience, these were updated as often as every two months.)

So, it is a committed individual you will be meeting with.  Just don’t be alarmed if he arrives looking like this:

So….If you can make the decision to act, and can actually talk with some general knowledge of what is actually in your portfolio, you will have done a service to yourself and your family simply by doing your job…..so the adviser can do his job.


Walking Toward the Crossroads: The Next Presidential Election in America (Amerika?)

In eleven short months, the electorate will cast its collective judgment on the current state of our union.  

Between today and that day in November, 2012, we will be inundated, bombarded and deluged with hyperbole; alarmism; smear campaigns; and outright lies by both sides.  Millions (indeed, on the part of the incumbent, billions) of dollars will be expended in the struggle for the hearts and minds of those of us who will vote.  The media will abound with ‘talking heads’ who, under the guise of  ‘commentary’ will proliferate the bile; volume; and just plain viciousness we have already begun to see.  Apologies will accelerate, barely able to keep pace with the snowballing diatribe foisted on us as ‘journalism’.  (The most recent example….Chris Matthews apologizing for a story the day before on the identification of  a Republican candidate’s mention of  keeping “America American” in his campaign literature as identical with the ideology of the KKK).  Indeed, the volume and pace and pure noise of these rants will be such that those just listening to (enduring) it will be stricken hoarse.

What is unique about the coming election, however, is not the record-setting levels of animosity and recrimination, but the polarization of the electorate itself.  To the extent that the last thirty-seven months have upended people’s lives by sapping their savings; their equity; their confidence; and their trust of government itself; the time in their view, is nigh for a reckoning.  Reckoning?  Of what?

Of whether America can continue to be a viable republic, when:

-There are more bureaucrats and compliance officers at many leading state universities than there are professors.

-In an ‘upside-down’ enforcement of securities and banking regulations, financial service representatives cannot afford to spend time with those nearing retirement unless they have $100,000, because of the costs of  licensing and compliance requirements….(the shrinking workforce in the financial services industry has been disproportionately penalized in this regard while the Madoffs; hedge fund managers and ex-governors and inside- trading legislators continue their practices largely unregulated).  As a result those who need their knowledge and advice the most are increasingly shunned by representatives, who are aimed by their employers at the physician, the attorney, the dentist or other business owner.

-Employers are disqualifying job applicants because they have been …..unemployed!

-The most effective income multiplier is the intentional breeding of out-of-wedlock children.

-Incumbent doctrine asserts as axiomatic the notion that unemployment compensation extension creates jobs.

-Public school hours are being cut ( in this writer’s district, to no later than 1:30 p.m).; teachers are being laid off; with no commensurate reduction in bureaucratic advisers; diversity managers; sensitivity coaches or government-provided breakfasts and lunches.

That the electorate has become polarized more that at any time in history, since maybe Lincoln’s first campaign, is manifest in a recent post in WordPress by a bright college student which candidly remarked on the alarming rate of  welfare and food-stamp fraud any cashier at any grocery witnesses daily.  See her post:   http://thecollegeconservative.com/2011/12/13/my-time-at-walmart-why-we-need-serious-welfare-reform/.

While not going into the textual content of the post itself, and while not even expressing herein an opinion of its validity; what is striking here is not so much the post itself, but the commentary it provoked.  Just going through the first 125 or so of these, which took a few hours, what become abundantly, and shockingly clear, was the level of pent-up frustration with a bureaucratic governmental system which is spending increasingly more to fund questionable lifestyles with the taxes derived from the barely over fifty percent of us who actually earn an income.

The litany of first-hand observation and anecdotal narrative in the commentary is eye-opening to say the least.  Without getting into the vagaries of whether steak or lobster are legitimate purchases with food-stamps; whether the majority of recipients of these funds have legitimate need for them and practice prudence in spending them; or whether they actually comply with the original intent of such programs to provide temporary help for those in need, what is clear is the sheer volume of this rapidly increasing component of current government spending and the blatant absence of  prudence in administering the program.  That is…conceding the point that it may be true that the majority of recipients are not “gaming” the system by fudging data in verbal applications (very much like the “stated income” fiasco in the mortgage crisis, though the ‘statements’ have to do with the presence or absence of a wage earner in the household), the fact remains that a 30% increase in food stamp spending under the incumbent administration necessitates at least a 30% increase in “gaming”, all on the backs of a static labor force contending with higher prices for gasoline; food; health insurance; and medicine.

Increasing polarization is evident in the commentary of some 20 to 30% of those who “chimed in”….calling the author either a racist; an apologist for the “one-percenters”; or a spoiled brat, ignorant of the war-mongering corporations and bailed-out banks whose evil plots are the ‘real’ causes of our suffering.

One cannot help but feel for those who related enduring the stigma of applying, only to be told they earned too much, even though they were behind in their mortgage, to qualify……or those who were told, quite bluntly, that they should ‘rethink’ their marital status if they wanted to qualify.  These same good people could also often relate first-hand accounts of beverages being bought by the case with food-stamps, only to be emptied down a drain in the parking lot so the bottles could be returned/redeemed for cash to use on tobacco and alcohol.  The chasm separating those raised on precepts of responsibility, who state rightly that such misuse robs those who are actually in need, and those who have come to regard this largesse as an entitlement, is wide and deep.

What perfect fodder for the media mills.  How dry a tinder for the strife and animosity the stoking of “class warfare” can incite.

And thus, the crossroads.  It would seem that a prudent observer of history or practical economics could not rationally expect our republic to survive on its present course.  At the crossroads, one of only two things can happen.  To the left, an incumbent victory will be taken as vindicating further government spending, which will foster more dependence; reinforce perceptions of  “entitlement”; and breed more uncertainty among large employers, upon whose backs the spending will be supported, forcing even more employment cuts to satisfy stockholders yearning for dividends.  (After all , at some point the money will have to be assessed rather than printed).  To the right, a Republican victory will be seized as a mandate to take heed of the Euro-Crisis and the riots in London; Athens and Rome, and to reaffirm the importance of faith, family and responsibility (hard work) to the health of the republic.  We cannot have it both ways and still be considered a coherent republic which can maintain its status in the world.

A famous Churchill quote puts it quite succinctly…..”“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”  …Currently, the Democratic support of Occupy Wall Street organizations waxes eloquently about the unequal sharing of blessings by the rhetorical ‘one per-cent’.  They are mute, though, regarding how we can more equally distribute the ‘misery’.

We won’t know what’s in that bill until we read it.