- There’s a very good article about the six possible solutions to the pension crisis and the problems with each at wwweconomicswatchdig.com It’s a bit in depth but well worth the read.
MKI - regarding your comment: “the Fed is simply in a tight spot, if they raise interest rates and stir inflation”
Why would raising interest rates necessarily raise inflation? If anything it would lower the money supply which would lower inflation. Inflation of food and other everyday living prices is an effect that happens when demand overwhelms supply. This is usually because money supply gets ahead of production but it can also be when productivity falls or does not keep pace with money supply. There seems to be an obsession with the idea of looming inflation at the moment. It has probably come about as yet another justification for investing in the most dangerous and over-valued stock market in history. There is some truth in this - stock markets tend to keep up with inflation except during periods of stagflation where inflation is rising but economic growth is sluggish.
I think the most likely outcome will be a period of intense deflation. It is what is needed to cleanse a rotten system and because it is needed, it is what will happen.
Mike Preston made the point that the Fed and other central banks have, by their money printing actions, created a euphoria and complacency that has resulted in stock market historical extremes. The Elliott Wave way of looking at that is to reverse the cause and effect. In other words, a rise in complacency drove central bankers to actions that would have been unheard of 3 decades ago. They are “infected” by the same mood as the rest of us to throw caution to the wind, to abandon the lessons of history and to embrace the foolish idea that “This time it’s different.” Of course, most people have difficulty with this idea because it seems to contradict the idea of our self-direction. There are plenty of people who avoid troubled because they are contrarian but not enough at any given time to change the prevailing aggregate mood. The mood is changing. The polarization between people and political parties is evidence of that. At some point (which I am sure is not far away) the complacency will be replaced by fear then panic. As Mike points out. the stock market has been trying to top since 2018. The fact that this process is taking so long is indicative of the level we are at in the Elliott Wave stock market wave count. According to Robert Prechter (who revived the almost forgotten Elliott Wave Theory in the 1970s), we are at the tail end of a Grand Supercycle third wave dating from its beginning in 1784. We are now facing a Grand Supercycle fourth wave correction of almost unimaginable severity. A deflation of the size anticipated in EWT will hurt everyone and will financially wipe out those holding debt.
That means mortgage holders. The historically low interest rates are a wicked temptation to young Australians already obsessed with the idea of owning real estate. The overnight rate was recently lowered to 0.1% from 0.25%. That cannot possibly be to stimulate our economy because the difference is so miniscule. It is clearly to aid the Australian government and the state governments who have taken on almost unimaginable debt levels. The idea that the Reserve bank of Australia is independent is clearly a misapprehension. I am sure the same applies to the Fed and all other major central banks. It would have been better to have let the markets take their course but ever since Greenspan organised the bailout of LTCM in 1998, we have been kicking the can down the road with no appreciable economic return for letting the money supply pour endlessly. At one time a dollar of new money produced more than one dollar of economic return. Now it takes about $8 of new money to add $1 of economic growth. The people responsible for this are not morons yet they have overseen 2 decades of crazy stimulus for no real economic gain. Don’t look at broad GDP figures to prove this, look at GDP growth per person. We have gone backwards. Overall growth figures are only up because of immigration which is a Ponzi scheme that disguises the real state of so many economies.
If the central bank boards are not filled with morons, then what is going on? Elliott Wave Theory and its off-sider Socionomics suggest that our actions are tempered by another unconscious force which is a cyclical mood that influences all of us and drives progress or growth in a two steps forward, one step back succession.
Bill Gross said said a reasonable rate of return for a pension should be 4%. This number includes the long cycle of outperformance (like now) and the long cycle of near no returns coming our way (ala Hussman and Grantham). Passes the sniff test.
The view from 30,000 feet is different. Historically retirements were non existent. In 1900 about 40% of the population worked in agriculture. Today it is about 1%. What has changed? Fossil fuels. They have allowed wonderful lifestyles, little effort, and retirements.
Some time ago Chris said retirement by the masses has been made possible by fossil fuels. Retirement is an artifact of fossil fuels. Period. Forget about money going in or out, rates of return, or fees. It’s all about hydrocarbons.
Prepare accordingly.
Thank you Nate
That 4% return on investment, which you refer to was a valid result of exponential growth in energy, which supported creation of debt in a win win system based on increasing resources to match the investment. But this is over, at least for the indefinite future. CM stated “energy is everything.”
I hope to see a crypto currency or other economic tool tied to generation of energy (not just kw hours or biodiesel etc) , which is everything. I think that successful individuals and communities will reach peak prosperity by focusing on the production and use of energy to replace the hydrocarbons. Maybe financial acts and measurement rubrics could serve greater return by linking them to energy. I heard that the proportion of the stock market devoted to energy used to be something like 30% (Exxon Mobil etc) but has dropped to something like 1%.
A valuable interview because it focuses on the effects that have been caused by unprecedented central bank actions. Mike Preston is absolutely right when he suggests that a financial crisis “can’t come soon enough.” There is an old expression that says “Don’t throw good money after bad” which means that it is better to be realistic and pull the plug early on a bad investment. Human nature, driven as it is most of the time on hope and optimism, resists this. People herd and do what everyone else is doing - until they don’t. It’s a bit like a flock of starlings swirling around the south coast of England in the autumn. They swirl and there are breakouts before reforming back into the swirl again. At some unexplainable point a breakout continues and the more or less stationary swirl becomes a directional movement off to Africa for the winter.
That is what is going on at the moment but the breakout to the downside will happen because it will be instinctual. Starlings are driven in an annual cycle. Human cycles are much longer but I have no doubt that they exist. Nothing that central bankers or governments do will alter this because nothing, except fake money and complacency, is supporting an edifice that is ripe for correction. There are plenty of more obvious reasons to guarantee a downturn. The long term effects of Covid, the pull back in immigration, automation, artificial intelligence and demographic ageing. We have no equivalent job creators like we had in the late 19th C / early 20th C when the internal combustion engine drove the car industry which drove highway building which drove hotel construction and the travel industry. We just have a very clever use of silicon which encourages people to spend way too much of their finite time looking at a screen. Yes, the computer has been partly responsible for vast businesses such as computer games and the airlines could not have expanded the international travel industry without computer booking systems. However, as a generator of jobs the modern economy has been a failure. There are a ton of bullshit jobs, mostly in the public sector, and I wonder how long they will last given the debt loads that governments are carrying.
There is no fixing this situation. We can only take steps to try to limit our personal exposure as much as possible.
could you link the Preston interview you referenced in comment #24? I’d like to take a look at it.
hmmm. If you invested money with John Hussman in any of the last 20 years, you are down on your investment. Maybe one day he will be right, but so far his musings, while erudite, have been a terrible basis on which to direct your dollars.
I dont feel bad for them. They should have saved there money instead of trusting someone else to save for there retirement. They expected younger people to pay for there retirement when the economy is getting worse and wages are getting slashed. The math does not add up the system is bound to fail.
For those looking at 401(k)s and wondering what to do with them, don’t forget about Solo-k’s. You need a business (doesn’t need to be large or even profitable) to roll your old 401k’s in. Go pet sit or mow your neighbor’s lawn and do the taxes to make it a business. Nearly anyone can do it.
Once formed (it takes some time and setup fees), you can get out of the financialized world - invest in cryptocurrency, rental houses, farmland, and even physical gold or silver held in your own home safe or vaulted overseas. Your 401k is “checkbook controlled” - it is basically its own legal entity, and you are the trustee charged with managing its investments. You can invest in most of the things we talk about here at Peak Prosperity.
If you own “paper gold” stocks and ETFs in a standard retirement account at Fidelity or whatever, you owe it to yourself to investigate this option. You could have physical PM’s in your own safe or a vault instead of financialized contracts that may or may not work out as things fall apart.
Chris did a podcast on it a few years ago:
https://peakprosperity.com/damion-lupo-the-qualified-retirement-plan-qrp/
Happy to answer questions about this; pm me.
Please excuse me, I haven’t read your thread. But when you see the gold market taken down for no reason - not even a new virus vaccine for the third Monday in a row would help it. And why? The Title of the Thread says it all. They are obliged to beggar Paul to pay Peter to keep people’s retirement - and other payments coming in. The system is bankrupt - they are reduced to these games to keep it going from day to day. They call it Tools in their Toolbox - someday the justice system will call it something closer to the Truth.
The message seems to be that if your pension is in trouble in large part because of expected future investment returns above what is reasonable, you need to see an advisor who will craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate.
What investments and strategies are available to this advisor, but not to the pension investment committee?
If forward returns in major asset classes and approaches to holding them are looking low and at risk of drawdown, what is an advisor going to do that is better? Pensions can own precious metals, real estate and other commodities. They can employ “alternative “ strategies.
I guess the advisor could suggest you take a chunk of your investment savings and buy an annuity to fill in the gap you expect to have in regular payments in retirement.
What is low return and / or risky for your pension fund is low returns or risky for your own portfolio.
You need to think about tactical approaches which have a greater chance of delivering returns and avoiding drawdown. Sequence of returns risk is the devil for retirees.
I realize this is not the topic in the thread but wasn’t sure where to get this information. I wanted to transfer part of my current IRA to one with Hard Assets Alliance—to put my investments into gold/ silver. The transfer would be to The Entrust Group in Oakland, CA. The reviews of this company were extremely negative. Does anyone have any history with this company or recommend another one they have had a positive experience with ? Many thanks !