Monday, August 31, 2009

Retirement Accounts

Lately I've been wary of retirement accounts because:

- they may be taken over by the government by the time I retire
- due to inflation the money could be worth very little by the time I retire

For these reasons I closed out my account (tax penalty and all) when I quit my last job and did other things with that money.

I planned to not start a 403(b) ever again.

However, one of the places I am working is offering a double match. If I contribute 5% of my salary, they contribute an additional 10%. That is a lot of money and it is tempting. However, I resent the fear-mongering ("you need over 2 million dollars to retire") and bad financial advice ("markets always go up") given by the shady sales people that work for these companies.

Right now I am leaning toward opting out, but the 10% is pulling me back in. To be eligible for a double match from the school, I'd have to enroll by the end of September.

With the assurance that I in no way hold you responsible for what I decide, does anyone have any thoughts or advice on this?

Choices offered (I don't fully understand what these mean):

- Multi-asset - mutual fund
- Equities - variable annuity and mutual fund
- Real estate - variable annuity
- Fixed income - variable annuity and mutual fund
- Money market - variable annuity and mutual fund
- Guaranteed - guaranteed annuity

From Fidelity
- "Freedom fund" - mutual fund, seems to have no employee freedom, Fidelity chooses allocations
- "Money market trust"
- Not sure what else; didn't give much information
- NO "SELECT" PORTFOLIOS including gold, energy, etc.

Update: the "select" sector funds ARE being added to Fidelity's options starting in January

Thursday, August 27, 2009

Unemployment Rate.

The Feds are claiming the current unemployment rate is 9.4%. Several articles have popped up in the last few months contesting the claim of 9.4% unemployment. These articles are stating the real percentage is closer to 16% and could be as high as 20% nationally. Finally, Detroit is once again number one for something; and an unemployment rate of 28.9% is NOT something to be proud of.

Below you will find three articles, the first two relate to the national number, while the latter article is just the city limits of Detroit.

John Miller wrote in the Dollar and Sense article that the true adjusted rate is 16.4%.

Anthony Mirhaydari's article on MSN money states the unemployment rate to be closer to 20%.

The Detroit Free Press has a strong and viable number for the City of Detroit's percentage to be at 28.9%

One last note, I was surprised the Detroit unemployment number is not closer to a 1/3 of the population.

Next Meeting

The next meeting is scheduled for:

Tuesday September 8, 2009
5:30ish to 8:00 pm

Panera Bread
28551 Schoolcraft Road
Livonia, Michigan

Discussing chapter 9 of America's Great Depression and Scott Horton's interview of Cindy Sheehan. We may include a brief discussion of chapter 8 due to some confusion regarding assigned chapters at the last meeting.

Chapter 8 - The Depression Begins: President Hoover Takes Command
Chapter 9 - 1930

Today Scott Horton interviewed Cindy Sheehan. I haven't heard anything from Cindy in a couple years and had no idea that Camp Casey had been set up in Martha's Vineyard during Obama's vacation. The description seems to indicate that Sheehan, a leftist, is criticizing other leftists for their complete lack of integrity. Sounded interesting, so I have chosen it for the AWR interview for the next meeting.
Scott Horton Interviews Cindy Sheehan

Scott Horton, August 27, 2009

Peace activist Cindy Sheehan discusses how to keep the antiwar movement alive during a Democratic presidency, the activist groups willing to trade integrity for Washington access, the universal right to life and liberty and Camp Casey’s move to Martha’s Vineyard during Obama’s vacation there.

MP3 here. (17:31)

Cindy Sheehan became a leader of the antiwar movement after her son, Casey, was killed in Iraq. Her efforts to get answers from President Bush, including a vigil in Crawford,Texas, have received national media attention. She has a website, is the author of Peace Mom: A Mother’s Journey through Heartache to Activism and wrote the introduction to 10 Excellent Reasons Not to Join the Military.

Thursday, August 20, 2009

Anitwar Radio Interview for 8/25/09 Discussion

Scott Horton recently interviewed Tom Woods. Being one of the most intelligent & articulate individuals alive, I picked it as the AWR interview for next meeting's discussion.

Scott Horton Interviews Thomas E. Woods
August 18, 2009

Thomas E. Woods, author of Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, discusses the debt some progressive causes owe to states’ rights, vintage 1812 war propaganda that sounds alarmingly like the run-up to the war in Iraq, state nullification of unconstitutional federal laws and the undue respect given to the Supremacy Clause.

MP3 here. (36:05)

Thomas E. Woods, Jr., is the New York Times bestselling author of nine books. A senior fellow at the Ludwig von Mises Institute, Woods holds a bachelor’s degree in history from Harvard and his master’s, M.Phil., and Ph.D. from Columbia University.

Saturday, August 15, 2009

S&P Index vs. the M1 Money Supply

Here is the graph of the S&P index vs. the M1 money supply that I mentioned during our last meeting.

Next Meeting

The next meeting is scheduled for:

Tuesday August 25, 2009
5:30ish to 8:00 pm

Panera Bread
28551 Schoolcraft Road
Livonia, Michigan

Discussing chapters 7 & 8 of America's Great Depression and an AWR interview TBD.
Chapter 7 - Prelude to Depression: Mr. Hoover and Laissez-Faire
Chapter 8 - The Depression Begins: President Hoover Takes Command

Speaking of Predictions

At the beginning of the year, some of us made predictions regarding stocks & commodities for 2009. To easily track those predictions, I'm posting them here. Hopefully the chart format posts correctly.

Gold 750
> 1000
Oil 60
> 60


DJIA 8100

> 9800

S&P 800
> 1060
Nasdaq -

Inflation 4

Unempl 11



Alltime High
Gold 856.40
GLD eft 86.52
SLV eft 11.20
Oil 44.60
DJIA 8776.39
S&P 930.25
Nasdaq 1577.03
Inflation 3.8

Unempl 7.2

New Edit
Gold - year end of $750, after having reached a high of $1100 in the summer
Oil - will fluctuate around $60
DJIA - year end 8100
S&P - year end 800
Nasdaq - don't follow enough to even attempt to guess
Inflation - will be reported at 4%, but this will be based on a new formula for calculating it
Unemployment - 11% (may also be subject to new counting methods)
The economy will continue to get worse but Obama will still be heralded as a great guy. He will say that "we are all in this together" and that part of the Hope And Change involves sacrificing for the good of the country.

My predictions are what the items will hit during the year, not necessarily the year end price. I think I may be too conservative. Gold may go over $1100 or $1200 but I don't think it will get much higher. DJIA may drop below 6000 but I don't think it will drop below 5000 and the S&P may drop below 600 but not 500. The Nasdaq is more volitile, so it could drop the most, but not under 800.

I'm not sure if Obama will get reelected. The republicans will put up a loser to run against him which will give him a good chance. But unlike Mark & Ken, I don't think he'll have high approval ratings. I believe all the "hope" of the Obama supporters will be dashed against the rocks. High unemployment & high inflation will cause a situation like Carter's and people will not be happy with him. If the republicans can somehow come up with a dynamic candidate, Obama will lose.

For 2009 I'll predict $1350 for gold and a 20% decline in the S&P.

I'll make a similar call as in the mid 90's and early 00's, though different asset class. Only the names and the asset class changes :-)
1) Clinton reelected coincident with economic inflationary boom (dot-com)
2) Bush II re-elected during period of inflationary boom (housing boom)

Since this new phase of monetary expansion (see the M1) coincides with a first term administration in DC, all other things being equal, I think the Obama administration will be hailed as economic geniuses towards the end of 2012, and will remain in power. Starting your first term coincident with the beginning of a new Central Bank inflationary/boom is like being dealt a royal flush. See Clinton/Bush calls above.

In 2000 it was the dot-com bubble, in 2006 it was the housing bubble, in 2012'ish I think it will be the alternative energy bubble. The derivatives market that will un-wind will be the "carbon credit" market. No matter what bubble popped, or pops next, all are technically credit induced by the central bank, only the underlying asset class changes with each new bubble (dot-com, housing, alt-energy).

The next bubble starts now, in alternative energy. Dot-com and housing are dead, never to be heard from again. How crazy is that?

Very interesting Ken,
I think you are on to something. My predictions tend to be more on the moneyed elites manipulating the price of gold much to the char grin of the Austrians. The fix is in. The powers that be won't make the Austrian case easy. We will be right in the end, but Rome fell for over 500 years. The new Rome has several rallies left.
gold- 850
S&P - 1300

On the geo-political side
Obama is definitely re-elected. We will get our first major spill over of the Israeli/Palestinian conflict in the US (someone will bring the fight across the ocean). Several years down the road...massive amounts of malinvestment will leave us with sparkling roads but no one can afford a car or gas.

I've been having a tough time predicting what will happen next. It's like playing monopoly and then a random guy (Federal Reserve) comes out of no where and knocks the game board off the table. Even better, it's like Charlie Brown trying to kick the football and Lucy pulls it away at the last minute. Charlie thinks (Federal Reserve encourages him in this direction) he figures out the problem so he buys new cleats. Sadly Charlie still doesn't kick the ball and now he has new shoes with no value....

Alt energy is definitely the bubble. I will attempt to ride it up and down.

S&P 999

At last Tuesday's meeting, Xorp predicted the S&P would close between 999 & 1000 on option expiration Friday 8/21/09. Immortalizing his words here. We shall see.