Saturday, April 20, 2019

U.S. Retirement Market Ponzi Fueled By Record Concentration In Stocks By Young Americans

by Steve St. Angelo, SRSrocco:

For the U.S. Retirement Market Ponzi Scheme to continue, there must be a new group of suckers to pay for the individuals who are receiving benefits.  Without a new flow of funds, the Ponzi Scheme comes crashing down.  Such was the case for the individuals who invested in the $65 billion Bernie Madoff Ponzi Scheme that came crashing down in 2008.

Interestingly, the U.S. Securities & Exchange Commission (SEC) that investigated Madoff Securities in 1999, 2000, 2004, 2005, and 2006, found no evidence of fraud or the need for legal action by the commission.  The failure of the SEC to find any wrong-doing by Bernie Madoff should provide Americans with plenty of reassurance and confidence that their 401k’s are the highest quality sound investments in the market.

Regardless, the concentration in equities by young Americans reached a record high since the 2008 financial crisis.  According to the most recent data put out by the Investment Company Insititute (ICI), Americans in their twenties who participated in 401k plans, 75{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the group invested more than 80{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of their funds into equities in 2015 versus 48{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the group in 2007:

In just eight years, Americans in the 20’s age group invested in 401k’s, increased their equity exposure (80+{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}) from less than a half to three-quarters.  Furthermore, those in the 30’s age group increased their equity concentration from 55{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to 70{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in the same period.

All this means is that younger Americans participating in the 401k Retirement Market have considerably increased their exposure to stocks while net benefits paid out have now gone into the red.  I wrote about this in my article, Something Big, Bad and Ugly Is Taking Place In The U.S. Retirement Market:

As we can see in the chart, the Private Defined Contribution (DC) Plans paid out $28.7 billion more than they took in in 2014…. the last year the Investment Company Institute provided data. Simply, Private DC Plans are mostly 401K’s.

Unfortunately, the ICI only has data on 401k net benefit withdrawals up until 2014.  However, young Americans invested in the 401k Market have no idea that their funds are being used to pay off those who are retired.  Moreover, the record concentration of 20-30’s age group into equities hasn’t been enough to support the 401k Retirement Market as more money is going out than is coming in.  That is extremely bad news.

Regrettably, nowhere in the ICI’s new report on the U.S. 401k Market do they include the data showing the net benefit withdrawals in 2014 were more than benefits paid.  Instead, they included the following information in the “Key Findings” area at the beginning of the report:

This is an alarming trend.  More 4o1k plan participants held equities at the end of 2015 than they did before the financial crisis in 2007.  What is even more troubling is the percentage of young Americans who have “ZERO” exposure to equities in the 401k Market.

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These Maps Show Where a Dollar Goes Furthest in the U.S.


by Jeff Desjardins, Visual Capilalist:

Go to any large, high-density city like New York or San Francisco, and you’ll notice a difference in costs immediately.

The price you pay for groceries, dinner at the restaurant, filling up your tank, or even your daily coffee goes up substantially. With high-paying jobs, booming economies, limited space, and soaring levels of density, cities can be expensive.


While this effect on costs is most evident in cities, it’s actually present throughout the country.

What you can buy for your paycheck varies wildly depending on where you are, greatly impacting purchasing power and the cost of living. Sometimes even a short one-hour drive can make a difference in some cases.

Today’s two maps come from, and they look at regional differences in purchasing power, based on information from the Bureau of Economic Analysis.


The following map shows the buying power of $100 by state.

If the number is below, such as $90, it means money buys less than the federal average. If a state’s number is higher, such as $110, that means each dollar goes further, giving residents more purchasing power.

Generally speaking, dollars go furthest in states in the Southeast and Midwest parts of the country. Go to places like Arkansas or South Dakota, and you’ll see higher purchasing power.

Here are the five states that have the most buying power:

RankState or DistrictRelative Value of $100

#1Mississippi $116.01

#2Alabama $115.21

#3Arkansas $114.42

#4South Dakota $113.38

#5Kentucky $112.87

And here are the five with the least buying power:

RankState or DistrictRelative Value of $100

#47New Jersey $88.18

#47California $88.18

#49New York $86.73

#50District of Columbia $85.47

#51Hawaii $84.18


The state map does not tell the whole story, however.

The reality is that density makes a big difference for buying power, and large metropolitan areas tend to be more expensive. The following chart breaks it down based on county, creating a much more interesting contrast.

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Macro Theory To Macro Reality To Macro/Micro Calamity! It Ain’t Going To Magically Disappear, It’s Coming!


from Rogue Money:

In this installment, it is time to put nature’s business laws in proper perspective, and kick the technical analysis in the crotch a bit, even though I feel technical analysis has it’s proper place.  It has been my observation that when one sees the terms macro or micro in sequence with terms like“finance and/or economics” in tow, the eyes typically glaze over and the mind shuts down. Which is a shame, because the basics just ain’t that complicated, heck even the typical family household operates within the confines of the standards of “macro theories followed by macro realities.”   The parents deal with the larger picture and it’s theories, and keep it to themselves if necessary until the proper times for effective implementation.  In the business world it gets slightly more aggressive yielding confusion and complications, especially with the addition of winners and losers.  The kings of the latter (losers) yields “Macro/Micro-Calamities.”   Unfortunately, the Macro losers tend to eventually shed their pain to the unwitting micro observers.  

As usual, this installment’s messages will be tied primarily to the US, but due to the obvious importance, their competition’s latest moves will be covered in great detail.  The calamity is on going, and is coming into plain sight!   I may change gears a bit in this installment, attempting to merge the recent news items with the titled subject matter.  Why?  The two are becoming inextricably tied to one another thanks to media lies at unprecedented levels and leadership that loves to return serve in real time.  Additionally I want to take advantage of an RM commenter’s wisdom, a person who fired me some interesting tidbits of logic as well as a great video link that provides a different perspective on the misguided US foreign policies.  I am going to once again post my DHAP list in the “Hard Asset” segment, along with the DHAP “priority ratings” system I personally compiled.   Why?   It is just good business, that’s why, and the timing feels right once again.  

In a generic review of the latest news, it appears the big financial item of late is the “proud” achievement of 20 trillion in US government debt.  At least that is the official number.  Finance 101 basics: an official increase in the obligation to service the US government debt has been made, and of note the US was already well in excess of 100{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in the equation of “Debt to GDP.”  A very important 3rd World bragging right!   Oh, and BTW that is only the “official!” number.  Does anyone trust these numbers?  One number that can be trusted to be a continuing western disaster, accurate or not (it is probably worse than reported) is the huge US trade deficit, which is approaching 600 billion annually.  The government debt in combination with the “NEEDS” trade deficits (no clue how much of the near 600 billion annually is “needs vs wants”) makes it easy to see why QE in combination with what is essentially ZIRP (zero interest rate policy) will have to remain in force.   To hell with the Fed’s cartoonish statements.

With an incoming flood of US paper from totally pissed foreign debt holders, can you see a devaluation on the horizon?  A US dollar devaluation that is!   If you can’t see it coming that’s because it’s already happening, and it’s difficult to see the storm when you are riding the storm winds……!   Before making your way to the News/Subject material, check out this other “Macro reality with implementation being boldly announced (boldly announced is quite telling feature as well) …. leading to what ….. the unprepared competition’s ““Macro/Micro Calamity” ……

This next one is one hell of an example of “Macro Theory being put to work in Macro Reality.” For a preliminary, important and quite recent example, Russia just keeps launching economic bombs at the US dollar.  Putin has just asked his government for legislative approval that will make the ruble the primary currency of exchange at, not just a few but all Russian seaports.  Sticking with our title, this is a prime example of macro reality in action and the calamity that will follow is for the holders of dollars, and in particular the US holders of dollars.  Once again it is my common sense opinion that it will be the domestic holders of dollars, domestic being the country of printing origin, that will get ‘slobber-knockered’ in purchasing power failures.  A Macro/Micro calamity that is a 100{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} certainty, only the degree of the severity is in question.  Moving on ……

News With Macro-Macro-Macro/Micro Calamities With No Sense Of Humor Or Mercy

Since the news will be tied to the titled subject matter this go-round, try keeping the following key points in mind as the evidentiary trail of dollar failure mounts ……

1.  The Ego in the US has lost it’s proper upward containment …..
2.  It appears that the rest of the world doesn’t realize how much the “Ego/Greed” factors are in the driver’s seat within the US and it’s decision making apparatus.  
3.  Phony reasons like the Fed’s mistakes, or the left and the right arguments, or denial of market fraud continue to dominate the false Hegelian Dialectic messages.
4.  Note the continuation of the same signals of de-dollarization, just a different time and date with each and every news release.
5.  The in-your-face exodus of former US partners looking for safer financial harbors continues to mount.
6.  The comical level of what is news in the US, typically late to the party…!
7.  The ultimate on the ground indicator of economic failure, “Stagflation” continues to spit in the totally unaware’s faces.
8.  Former safe havens for US investment taking it on the chin.
9.  US leadership that suffers from the biggest Ego failures, the biggest case of “mine is bigger than yours” in modern western history.
10. Most importantly, ask yourself, do you see anything in the following segment that indicates “The Calamity” can be stopped by human economic widgitry?
***  The go to, 100{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the time characteristic, DEBT IS KING IN DOLLAR-LAND..

In the humorous yet telling segment note the time stamps on the following news headlines…..

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Build Your Economic Storm Shelter Now


by John Mauldin, Goldseek:

If you’re idly conversing with someone you don’t know well, the weather is usually a safe topic. It affects everyone in some way, so it’s a shared experience – but there’s something else, too. The weather is no one’s fault. It is what it is, so you need not worry that the other person will blame you for it. None of us can control the weather. And lately, the weather has been interesting, unless you had to live through its more extreme manifestations. Then it’s been hell. Before this week, I would’ve said that Harvey and Irma wrought devastation in Texas and Florida. But then Maria thrashed Puerto Rico and took devastation to a whole new level. I have a lot of friends who live in Puerto Rico, and I’m not sure how things are going to go for them over the next few months.

We can prepare for storms when we know they’re coming, but we can’t stop them in their tracks or change their path. That’s true for both hurricanes and the public pension problem I wrote about last week. Where pensions are concerned, we have the financial equivalents of weather satellites and hurricane hunter aircraft feeding us detailed data. We know the barometer is dropping fast. The eyewall is forming. But we can’t do much about the growing storm, except get out of the way.

Problem is, the coming pension and unfunded government liabilities storm is so big that many of us simply can’t get out of the way, at least not without great difficulty. This holds true not just for the US but for almost all of the developed world.

Financially, we’re all trapped on small, vulnerable islands. Multiple storms are coming, and evacuation is not an option. All we can do is prepare and then ride them out. But as with recent hurricanes, the brewing financial storms will have different effects from country to country and region to region.

I did a lot of thinking after we published last week’s letter – especially as I was reading your comments – and I wished I had made my warning even more alarming. Being a Prophet of Doom doesn’t come easily for me; I’m known far and wide as “the Muddle Through Guy.” I think the world economy can handle most anything and bounce back, and I still believe it will handle what’s coming over the horizon. But some parts of the economy won’t bounce at all. Quite a few people will see their life savings and ability to support themselves utterly disappear, or will be otherwise badly hurt, and through no particular fault of their own.

I mentioned last week that the next few issues of Thoughts from the Frontline would outline my vision for the next two decades. We’ll get back to that next week. But today I want to continue with the hard-hitting analysis of our public pension problems and say more about personal storm preparation. We all have some very important choices to make.

Local Mess

As I’ve said, the state and local pension crisis is one that we can’t just muddle through. It’s a solid wall that we’re going to run smack into.

Police officers, firefighters, teachers, and other public workers who rightly expect to receive the retirement benefits that their elected officials promised them are going to be bitterly disappointed. And the taxpayers of those jurisdictions are going to complain vigorously if their taxes are raised beyond all reason.

Pleasing both those groups is not going to be possible in this universe. Maybe in some alternate quantum alternate universe where fuzzy math works differently and lets you get away with stuff, but not here in our very real world. It just can’t happen.

So what will happen? It’s impossible to say, exactly, just as we don’t know in advance where a hurricane will make landfall: We just know enough to say the storm will be bad for whoever is caught in its path. But here’s the twist: This financial storm won’t just strike those who live on the economic margins; all of us supposedly well-protected “inland” folk are vulnerable, too.

The damage won’t be random, but neither will it be orderly or logical or just. It will be a mess. Some who made terrible decisions will come out fine. Others who did everything right will sustain severe hits. The people we ought to blame will be long out of office. Lacking scapegoats, people will invent some.

Worse, it will be a local mess. Unlike the last financial crisis where one could direct anger at faraway politicians and bankers seen only on TV, this one will play out close to home. We’ll see families forced out of homes while neighbors collect six-figure pensions. Imagine local elections that pit police officers and teachers against once-wealthy homeowners whose property values are plummeting. All will want maximum protection for themselves, at minimum risk and cost.

They can’t all win. Compromises will be the only solution – but reaching those unhappy compromises will be unbelievably ugly.

In the next few paragraphs I will illustrate the enormity of the situation with a few more details, some of which were supplied this week by readers.

The Uneven Distribution of Pension Problems

I keep using the fabulous William Gibson line that “The future is already here. It’s just unevenly distributed.” Well, paraphrasing, “The state and local pension crisis is already here; it’s just unevenly distributed.”

One reader noted that he has no sympathy for Houston when right next door, Katy, Texas, is building a $72 million football stadium for its high school. 

That’s an aberration, and I might just mention that a few years back Allen, Texas, built a high school stadium for $60 million – 18,000 seats, which they fill every weekend they play. And the Eagles play really well, with several state championships in the 5A division (the biggest schools) in the last five years. There are other such examples. Sadly. I am not a fan of extravagant high school football stadiumsprograms. But then again, I am a former high school nerd turned curmudgeon.)

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GM Cuts Entire Shift at Factory for Crossovers, Laments “Moderating” Sales, Layoffs not Temporary


by Wolf Richter, Wolf Street:

Hottest segment cools. Harvey and Irma Won’t End Carmageddon.

For the first eight months of the year, car sales by GM and Ford plunged 19{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. Industry car sales fell 11{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, despite record incentives. Sales of trucks – pickups, SUVs, crossovers, and vans – have been the big hope. Total truck sales are up 3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} for the year, reducing the overall sales decline to 3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. Particularly crossovers have been red-hot. Every manufacturer has jumped into this booming segment. They’ve been the big hope. But now, even that hope is fading.

“Although crossovers now make up a larger share of the automotive industry, overall volumes are moderating,” General Motors told employees in a layoff notice at its Spring Hill, Tenn., assembly plant that makes the GMC Acadia and Cadillac XT5. These crossover models are among the very vehicles GM is counting on to pull it out of its sales funk.

“We believe the best way to react…is to reduce output,” the statement said.

GM will eliminate an entire overnight shift with about 1,000 workers. Some of the workers might be transferred to the engine or component manufacturing side of the plant, according to the GM spokesman.

The notice was sent on Friday. It was meticulously timed. By the time it was reported by the Wall Street Journal, the markets had already closed and no one was supposed to pay attention any longer.

Already in December 2016, GM announced that it would kick-start 2017 by temporarily closing five assembly plants, temporarily laying off 10,000 workers. But most of those employees were involved in making cars.

What GM told its employees on Friday was different: It would cut an entire shift, it would not be temporary, and the purpose would be to cut production of formerly hot crossovers.

Every automaker is pursuing the hot crossover segment with a vengeance. They’re still selling, but not as well as expected, and demand is “moderating,” as GM put it, and now overcapacity is setting in, the bane in auto manufacturing. It has been hounding plants that make cars. But now the problem is spreading the plants that make crossovers.

In June, GM already announced that it would extend its normal summer shutdown at some plants in the US.

Ford, just days ago, announced that it would idle three plants in the US and two in Mexico that employ tens of thousands of people. The shutdowns will range from one to three weeks. But they build mostly cars, whose sales have crashed as consumer went for crossovers and SUVs, presumably.

“We are continuing to match production with consumer demand, as we always do,” Ford said in a statement, which is the same lingo it always uses during these occasions.

Given that the shutdown of the Ford plants impacts car production, they’re still clinging to the script that car sales have crashed, while SUVs and crossovers are barely hanging on.

Earlier this month, Fiat Chrysler Automobiles announced that it would shut down its plant in Windsor, Ontario, for five weeks starting in October, to “balance production” of two minivans. It has already eliminated two car lines and no longer manufactures cars in the US. It has been the hardest-hit among US brands, with car sales down 22{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} this year, truck sales down 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, and total sales down 7.7{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. Only Hyundai (-12.7{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}) and Kia (-8.4{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}) have booked larger drops.

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An Insider’s View Of The Bitcoinization Of Venezuela

from ZeroHedge:

With Venezuela ‘almost’ defaulting on their government debt this week, Daniel Osorio, of Andean Capital Advisors, has had a front-row seat in the collapse of the socialist utopia, spending at least a week every month in the almost-failed state.

In a brief but fascinating interview on CNBC, Osorio discussed the fact that as Washington unleashes ever tougher sanctions on Maduro, China and Russia are all that’s left for the country with the largest proven oil reserves in the world.

Then exposed the realities of living under Maduro’s crazed policies:

“Venezuela was one of the richest per-capita nations in the world… but now, hyperinflation is a very difficult thing to understand until you have to buy lunch…


The country has not yet dollarized…  but there’s not enough dollars in Venezuela for that to have happened…”


“Venezuela is becoming a cashless society… we are starting to see in Venezuela, the first bitcoinization of a sovereign state.”

Watch the full interview below…

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The Demise Of The Dollar As We Know It: “A Break Is Coming… On A Worldwide Basis”

from SHTFplan:

The significance of the shift taking place on a geo-political basis to unseat the U.S. dollar as the world’s reserve currency cannot be understated. It is, by all means, a complete upending of the financial and economic systems as we have come to know them. According to Keith Neumeyer, the Chairman of First Mining Finance and Chief Executive Officer of First Majestic Silver, the world’s purest silver producing mining company, the move is already taking place with countries like China, Russia, Venezuela and Iran already beginning to trade commodities with Yuan, Rubles and gold.

Amid a recent announcement about developments in the gold and silver mining industry discussed in the following interview with SGT Report, Neumeyer, who previously called out, in very public fashion, the manipulation of precious metals by a small concentration of market players, says that the global currency wars currently playing out on the monetary battlefield will lead to significant price increases in the world’s most trusted hard assets of last resort.

We’re seeing Chinese and Russians trading in gold for oil… there’s a real move on a worldwide basis… There is a break coming…

It has to… It’s just time… The United States is a very powerful country… it has a very powerful military and they want to keep the system that’s in place because a lot of people have made a lot of money in the current system…

I think as the world develops and gets off oil, I think that’s going to help facilitate a break from the Petrodollar system…  and everything that’s going on in the world is very supportive of much, much higher gold prices… I do contend that silver is going to far exceed the move in gold.

The manipulation of commodities markets by secretive, yet very powerful forces will soon come to an end, and when it does, Neumeyer notes that the price of key assets like oil, gold and silver will be more efficiently priced to reflect their true fair market value:

It’s not going to happen overnight… but over several years I think we’re going to see better pricing mechanisms come in to the commodity sector and the miners get a better price for what they actually produce…

As for gold and silver, it’s a well known fact that these core monetary assets become the only trusted mechanisms of exchange in the midst of currency crises, and this time will be no different.

You’ve had government officials go visit Fort Knox… You’ve had talk of gold in the media… that it has been the best performing asset over the last twenty years… and even though we’re not seeing it show up in price… not that there’s anything wrong with $1300 gold… I still believe gold is substantially undervalued and it should be in the $3000, $4000 or $5000 range if not even higher than that… and those times will come.

Indeed those times will come and may be much closer than most people realize.

In 1988 The Economist magazine warned, with very vivid imagery, that thirty years on a new global currency would rise from the ashes of the U.S. dollar.


With 2018 quickly approaching and super powers in the East and West positioning themselves to ensure they have a seat at the table, we may soon witness an unprecedented shock to the entire global financial, economic and monetary systems.

Because the fact is, that for a new global currency to rise from the ashes of the U.S. dollar, there will need to be an event, or a set of events, that first has to burn it to the ground.

And, while the dollar burns to the ground and confidence in the system as a whole is shaken to its core, capital will rapidly shift to assets like gold and silver to preserve purchasing power and value.

European Banking Crisis


by Martin Armstrong, Armstrong Economics:

Perhaps this period will be looked back upon ass the Draghi Deflation. After nearly 10 years of this failed policy, the European banking industry is contracting on every possible level. The merger of Commerzbank to Merge with French BNP is one possibility. Commerzbank is a takeover candidate or shotgun wedding candidate, for good reasons. Its shares have fallen and are trading now at half their book value. When interest rates rise to bring back deposits, then the bank could perhaps get out of its deep hole. The German government, which has a 15 percent stake after a bailout in 2009, is ready to sell looking to raise cash itself.

The Draghi era of negative interest rates has proven to be a complete disaster. People have withdrawn money and preferred to buy safes. Major banks with branches in the USA have shipped their cash to the American branch and deposited at the Fed in excessive reserves. Meanwhile, with deflation dominating the European economy and rising taxation, the average person is just not interested in borrowing until they see the economy turn around.

On top of these issues, to survive, European banks have been withdrawing from proprietary trading, firing expensive staff with experience, and replacing them with inexperienced kids. Additionally, the low-interest environment and the decline in deposits has resulted in a major contraction in bank branches. As banks also move to online banking, they have been able to reduce staff. In 2016, the banks let go some 50,000 jobs. They were also able to close some 9100 branches throughout the EU, according to the European Banking Association.Consequently, now the banking work force has been reduced to 2.8 million people contracting back to 1997 levels. We will most likely see a further reduction of at least 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} going into early 2018. We will see further mergers and consolidation reducing jobs and branches into 2020.

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