Yet another bubble …

imageOne of my links on the right is called “Steve Keen’s Debt Watch.” Keen, an Aussie, is one of the few economists that I listen to. He’s watching the pea, and not the shells.

His May 12th article talks about how the overall effect of Quantitative Easement has been to inflate share prices. Wall Street is doing so much better than the rest of the economy because we are in yet another bubble. The last one used the housing market, and hammered a whole generation of folks whose savings were in their homes. This one is in share prices. We can avoid this one by avoiding the market.

When does it burst? Soon, I suppose. No one knows, of course. All of our self-managed IRA’s will take in the shorts. Typically small and unsophisticated investors, myself included, buy high and sell low.

My advice: support politicians who support you. Punish those who do not.

Typically when the stock market is on a roll, Wall Street via its pocket politicians makes a run at Social Security. The program has been incredibly resilient, withstanding attacks by Reagan, Clinton (bullet barely dodged due to Monica scandal) and Bush – this due to its incredible popularity. So Wall Street’s attack is by stealth, making a run at it when the market is up, weakening it, and lying low during the regular busts. Wall Street wolves are always stalking.

Another part of the stealth attack is to insinuate that the program cannot last, so that most young people assume it will not be there when they retire. But it can easily survive – all we have to do is support it by punishing all who attack the program. It is financially sound right now and into the next few decades, and can be put on permanent solid footing with a few minor adjustments.

Learn the expression “defined benefit pension.” Say these three words to your investment advisor, and watch his eyes dart about nervously as he backs out the door. The private market cannot support DBP’s for any but the wealthiest among us. The rest of us are required to invest in “defined contribution pensions,” or IRA’s that are subject to the boom/bust cycle. Pity the fools who retire when the market is in the bust side of the cycle. They must consume their seed corn and live in constant fear that their money will end before their lives do.

This is the problem with DCP’s – perpetual insecurity.

If you seek investment advice from a professional, some time ask him or her to price a retirement plan for you with the following features:

  • First day survivor benefits for minor children;
  • Spousal retirement support through end of life;
  • Partial income replacement disability benefits;
  • And, of course, a defined benefit pension.

Your advisor will laugh, telling you that such a plan would consume all your income. The private market cannot support such a program. Government can. The “defect” of Social Security is that it is funded by intergenerational transfer. It is insurance, and not investment. Yes, it is often a burden for younger people to contribute for the older generation. But it is what sustains us. The market has no similar option, none that we can depend on anyway.

Social Security checks arrive each month for as long as we live. Many don’t live long enough to fully a enjoy the benefits of their lifelong contribution, and that is unfortunate. My brother, who died at 58, never saw a penny. But that is why the program works – DBC’s must have a downside that supports their incredible upside.

In the meantime, follow Keen. He’s not a guru and will not give you any tips. But he is a smart man. Watch the bubble. Know we are in one. There are no bailouts for regular investors in IRA’s and 401K’s. When the market tanks, if you are heavy into shares, so do you. We can only hope to be around long enough for recoveries, as busts are coming now at more frequent intervals, and are hitting us very, very hard. The 2000 and 2008 busts were killers. But we have not fixed the underlying defect, so more await.

25 thoughts on “Yet another bubble …

  1. Seems to me the county employees in Texas that opted out of SS have done extremely well even with the 2000 and 2008 “busts”.

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    1. Now don’t go running off Swede, leaving us hanging. Tell us more. Are these DBP’s If so, are they insured? Please tell us the specifics of continuations contributions, benefits, long-term outlook.

      And please give us a notion of why, given the size of the Social Security System versus county employees in Texas, that this is not one of your anecdotes that has no significance.

      Put up, Swede Put up.

      Swede? Sweeeede? Swede?

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      1. When the stock market crashes, texan beneficiaries will be SOL:

        “Employers review their plans annually and have the option to raise or lower benefits to control costs.”

        Investment returns fuel 77% of benefits. Funny that Swedie would look to a public agency using private investments to bolster his faith in the stock market. TCDRS may be able to weather a few fluctuations like we’ve seen in the stock market over the last couple of decades, but when the bubble bursts, beneficiaries are going to be hitting the food bank big time.

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        1. Been cleaning up storm damage or “catastrophic climate change”.

          First of all one should never put his entire life’s retirement savings into the stock market. Any first year broker will tell you that. In fact a certain percentage should go to some physical holdings. So the fear mongering statement “you’ll lose it all” is a dishonest ruse.

          Secondly, to answer the ins. question as I remember the Texas county workers were required to carry life ins along with their investments so a spouse and or children had additional monies after the retiree passed. SS gives you a 200 dollar death benefit.

          But what interests me the most is the silence. If one of these employees lost his life’s savings the media would beat a path to his door, including you guys. We’d hear over and over about the failings of the private system and the benefits of a “governmental safety net”. The program been around for 50+ years, no losses on the long term a mid level employee makes over twice what SS provides.

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        2. Over at 4&20 you said

          20,000 administrative bureaucratic jobs.

          Let’s take the VA as an example 59% of the budget goes to the administration.

          VA/ Indian Health Service=Single Payer.

          Just a personal request, but please, if you are going to lay down idiotic comments like that, do so here so I can answer. You know, like your comment is complete bullhsit, probalby stolen form some right-wing talk radio host or blog, and anyway, what does any one have to prove when our private health care system was causing 50,000 premature deaths annually due to the fact that people could not get or afford or get health insurance? We were running a little Jonestown X 50 every year here in the land of the free.

          Your Texas example is interesting, but anecdotal at best. Governmental units all over the country opt out of Social Security, but the requirements are stiff, as without strict regulation private accounts are eaten by fees and bad investment decisions, if not outright criminal intent.

          But suppose that we could on a mass sale control the criminal elements that hang around pools of money … can private accounts succeed on a large scale through our boom/bust cycles? Of course all fund managers are trained to avoid equity and concentrated on bonds and savings returns, but there is a law called “diminishing returns” that kicks in any time something like this is applied on a mass scale.

          So what we need then is not a small localized example of a few counties in Texas and some fortunate outcomes (btw, life insurance policies cannot begin to replace survivor benefits and I don’t see where disability is addressed) – what you need to do is globe trot and find a place where private retirement accounts have worked on a mass scale. After you leave Chile, where you must present BOTH sides of that debacle and address the matter of fascism and oppression of civil liberties, I don’t think you’re going to have much luck.

          So do us a favor – think big now. And please provide evidence that you ever do anything more than scrape around right wing places that satisfy your confirmation bias.

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  2. First let’s take the 4 & 20 sentences.

    20K new adm jobs was a number that the author of the post came up with. Like that was going to improve our overall economic posture.

    59% adm vs actual care was a fact. If you think that’s just a good start then why are we debating?

    Thomas Sowell quote, “Government policies to “bring down the cost of medical care” almost never bring down those costs, and often increase the costs. These policies simply refuse to pay the full costs of medical care. Any one of us can do that, but we know there will be consequences. There will also be consequences when the government refuses to pay the costs, but these consequences will be concealed and/or denied.”

    Read Latest Breaking News from Newsmax.com http://www.newsmax.com/ThomasSowell/VA-Scandal-Single-Payer-healthcare/2014/05/27/id/573480#ixzz331fb9nEP
    Urgent: Should Obamacare Be Repealed? Vote Here Now!

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    1. You really think I will be moved by Thomas Sowell?

      The problem with debating you on anything is your narrow frame of reference. The idiocy of your 4&20 post was the last sentence, not that the ones before were enlightening.

      Again, and until you do this I will hold you as utterly ignorant about health care, until you see how the rest of the industrial world functions, and outperforms us in every category from cost to outcome to 100% coverage, you don’t know anything!

      You don’t know anything. I repeat.

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      1. You’re the one being ignorant Mark.

        Does the govt run the VA and the IHS?

        Yes, and they both run inefficiently with no accountability.

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        1. Case in point lets see just how well the Govt. first foray into HC is going.

          1. Complete fail of healthcare.gov and needs $1 billion to correct.
          2. Still no security on healthcare.gov
          3. Still no backend healthcare.gov
          4. Oregon health care site crashed and burned up 130 million dollars
          5. Maryland health care site crashed and burned up 140 million dollars.
          6. Hawaii health care site crashed and burned up 150 million dollars.
            7.2 to 1 people believe that Obama-democrat care will make things worse.
          7. 7-8 million people lose their health insurance because of Obama-democrat Care.
          8. Mandates put off until after 2014 elections.
          9. UNIONS against Obama-democrat Care.

          So your wonderful SP is going to be better? You’re nuts.

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        2. Stop right there: VA is government owned and run – the government owns the hospitals, employes the doctors. VA has pioneered electronic record keeping. Patient satisfaction with VA is extremely high, more so than with any privately-run hospital. The latest incident, in which they were overwhelmed by returning veterans, has been used to besmudge them.

          Your statement that VA = IHS = single payer is just stupid, maybe ignorant is kinder, but one or other or both. You have been coming around here for years, and you have never take the time, shown any diligence, perfect case-in-point here, that you did not even know the nature of the VA system that you are so critical of.

          So do me a favor: Tell me what you know of the health care systems of the following countries, including relative costs, outcomes, and the nature of ‘ownership’ if that is the proper word:

          Great Britain
          Taiwan
          Japan
          Venezuela
          Mexico
          France
          Norway
          Spain
          Denmark
          Switzerland
          Italy
          Russia
          Cuba

          You really don’t have to go any further. I know the answer. You don’t know jack shit about any of these countries, all of which rank ahead of us in the 2006 WHO survey. (There are two clinkers in there, but you won’t spot them, because you don’t know shit.)

          Jack shit. You don’t know jack shit. That is not a problem. Ignorance can always be remedied. But it would be nice it you would stuff your high and mighty opinions in your rat hole until such time as you have done some basic information gathering.

          God the arrogance and ignorance – it’s toxic.

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          1. This is America what works in Denmark has absolutely no bearing on what will happen here.

            As far as SP or any other variation of HC is concerned they’re all toast.

            Obama’s, and I lumping all you progressives in with him, Teapot Dome scandal.

            http://www.thedailybeast.com/articles/2014/05/27/exclusive-texas-va-run-like-a-crime-syndicate-whistleblower-says.html?utm_medium=email&utm_source=newsletter&utm_campaign=cheatsheet_morning&cid=newsletter%3Bemail%3Bcheatsheet_morning&utm_term=Cheat%20Sheet

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          2. Before I leave answer this.

            According to you the govt. lied (or misled) the public about the Kennedy assassination.
            They lied about 9/11. They lied about the Boston bombings. They lie ’bout the CIA and their involvement in nation building. They lie ’bout weapons of mass destruction in Iraq. They lie ’bout clandestine operations in South America. They disclaim any actions in Crimea.

            But they’re trustworthy with our HC? They killed vets over their lies. They killed 400 Mexicans with F and F. They stood by while our embassy was taken and it’s occupants killed in Libya and lied to cover it up.

            So now you want us to trust them with our health?

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    2. Not administrative jobs. Mostly health care service providers, like doctors, nurses, therapists and pharmacists.

      And really, Thomas Sowell? The master of deceptive non-sequiter propaganda? I’ll tell you what won’t bring down the cost of medical care: an unregulated private marketplace. And actually, in any corporate transaction, a bulk purchaser (government, insurance company, big employer) always has the right to bargain for reduced rates. If a medical provider doesn’t want to accept medicare or medicaid, they don’t have to (and many don’t). So what’s the big problem?

      I’m really sick of this theory that medical care should be a merit-based system where those who have more income get better care than those who don’t. But I guess if you don’t believe in a civilized society, then you don’t care when people die from lack of meaningful health care.

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      1. You disrespecting TS? You’re a racist.

        I’m really sick and tired of paying for people that won’t work, people who smoke drink and drug to an excess.

        I’m sick and tired of paying 14 people’s salaries when i get a check up, govt or insurance related.

        I should be able like all of to buy low cost extreme care and pay cash for all other minor ailments. I should be able to buy insurance out of state like my car ins. The doctors when helping the poor should get tax credits for their service. My state should pass laws limiting
        frivolous lawsuits and high awards.

        Other than that we’re all in for VA/IHS type care.

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        1. The more you write, the more rubble you leave to clean up. I have written extensively about health care, health insurance, Iraq, Libya, covert ops like Benghazi and PSYOPS like 9/11, coup d’état as with JFK, your own victim mentality as expressed above (I think of it as a Galt complex) – I have asserted the reasons why for-profit health insurance cannot work, why some aspects` of our lives are better administered by government (health care for one) …

          I don’t claim to be right about anything but will defend what I have written from my current point of understanding. All I am saying is that I have made my arguments.

          Along comes you, fact-free, low-information, never having read anything here, or at least absorbed it, a tool of right wing think tanks and talk show hosts, so I asked you to do one simple thing – go gather some facts about one subject.

          You made a stupid comment about how Denmark runs its health care doesn’t matter here. You refused to do even basic fact gathering.

          I didn’t ask you to read any particular source, you could go to CATO for all I care, if that is a source of hard data. All I want is some baseline agreement on how these systems function, how they are structured, what they cost and what their outcomes are.

          Since you are incapable of doing even basic fact gathering before you spill all over here with your mindless opinions, I ask that you go away. Come aback when you know something. Arguing with you in your current state of mind is pointless.

          Go.

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        2. I’m not disrespecting Sowell because of his race, and you know that. I just happen to think that his conclusions don’t follow from where he begins his arguments. He works backwards: he knows what he wants to conclude, so he figures out how to capture people’s attention with a non-sequiter.

          Take for instance your link above. Sowell starts off with the tabloid headline: “Veterans Administration scandal.” What is scandalous is not the wait times at the VA — those are atrocious. It is not the VA’s fault that Congress allowed an indefinite state of war, and then didn’t appropriate enough funds to cover the care of returning wounded soldiers. It isn’t the fault of the kind of system that this country uses to care for victims of Congressional and executive overreach. The fault lies squarely on the lawmakers, the laws they pass, and the president’s execution (or “mis-execution”) of those laws.

          As to buying health insurance cross state lines, As of January 2016, you’ll be able to do so. Not in a completely unregulated fashion, but according to state compacts. So quit whining. You got what yuo asked for.

          You want to buy a catastrophic care policy and pay cash at a Cost Care sort of facility, you’re able to do so right now. You don’t like an IRS-enforced mandate, then get in line with me to oppose it. I’ve been against an IRS-enforced mandate since it was first proposed.

          And tax credits for doctors providing charity care? Their tax credit is paid for by your and my tax dollars. A tax credit in one part of the economy is a levy on another. Or have you not learned this basic economics 101 process?

          As to all of the rest of your indignation against humanity, you might as well become a tax protester, and sagebrush rebel like Clive Bundy for all the good it will do you.

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          1. Sowell is a bit like their version of Obama, proof of their moral superiority because he is black, and yet respected. Like Obama, he can spout just about any nonsense and get away with it because of his black intellectual mojo. We are limited in our ability to respond because we walk the line of outing ourselves as racist if we are not deferential. Kurtz came around yesterday and pulled the moral superiority schtick on Swede, claiming that because Swede doesn’t like Obama, he is racist.

            Nice scam, brilliant actually.

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  3. Why discuss future “efficiencies” in the abstract, when we have an ongoing example at DOD. Once each state began to inject federal dollars into defense contracts large and small, creating sacred (“private”) jobs, it became nearly impossible to downsize, even when the goods and services become obsolete or useless. The collateral damage is spread around the globe.

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