Generational Theft

In my lifetime, we have witnessed the greatest intergenerational transfer of wealth ever seen. Seniors have benefited. Our youth have taken it on the chin.

Oddly, even so-called conservatives don’t seem to mind this massive redistribution of wealth. It enjoys broad support. The reasons are obvious; 1) older people vote at a higher rate than young people and 2) people (both voters and their elected representatives) tend to vote their self interest.

Hence, at least thus far, the Boomers and their parents’ generation are doing just fine, the recipients of massive transfers; the youth are massively in debt and on the hook for trillions of obligations owed to what I call the dying generations.

I’m not going to get into the numbers here. If you want to catch a glimpse of them, you can watch this video of renowned investor Stanley Druckenmiller (a former Pittsburgher so he must know what he’s talking about!).

But you shouldn’t have to be convinced. Just think for a moment of the massive transfers that take place in the form of Social Security (people take out far more than they pay in), Medicare, special benefits extended to seniors by state and local governments (e.g., real estate tax breaks) and the less visible countless tax breaks and subsidies that inured mainly to the benefit of the Boomer and their parents’ generations, both in earlier times (education in particular) and now as they age and die.

The result? Continue reading

Investing and Financial Planning in an Era of Uncertainty, Risk and Illusion

For anyone who’s managing their own investments, or who’s planning for eventual retirement, Robert Shiller made some important points in an article published last Thursday:

The closest we can come to Trump among former US presidents might be Calvin Coolidge, an extremely pro-business tax cutter. “The chief business of the American people is business,” Coolidge famously declared, while his treasury secretary, Andrew Mellon – one of America’s wealthiest men – advocated tax cuts for the rich, which would “trickle down” in benefits to the less fortunate.

The US economy during the Coolidge administration was very successful, but the boom ended badly in 1929, just after Coolidge stepped down, with the stock-market crash and the beginning of the Great Depression. During the 1930s, the 1920s were looked upon wistfully, but also as a time of fakery and cheating.

Of course, history is never destiny, and Coolidge is only one observation – hardly a solid basis for a forecast. Moreover, unlike Trump, both Coolidge and Mellon were levelheaded and temperate in their manner.

But add to the Trump effect all the attention paid to Dow 20,000, and we have the makings of a powerful illusion.

Not a day goes by that I don’t ponder what’s around the next corner (economically and financially). Or how investments and assets should be deployed and managed.

It seems a few things are indisputable:

  1. There is above-average uncertainty today.
  2. Risk is greater than acknowledged or priced into the market.
  3. Illusions are dangerous underpinnings for decision-making.
  4. Assets can lose value (for a long time or permanently).
  5. Our bias is optimism.

That’s life, Vera. Uncertainty. Risk. Illusions. Unknowns. Biases.

Plan accordingly. And choose wisely.

The Price To Pay For Spending Tomorrow’s Income Today

When you borrow, you’ll pulling spending forward, that is, you’re spending tomorrow’s income today. Sometimes that’s smart; sometimes it isn’t. In fact, debt can be a killer.

It can kill your retirement. Your security and well-being. Your marriage. Your job. Your dreams. Even your life (suicide rates rise during recessions and periods of high unemployment).

Yet America is in love with debt. But perhaps it’s a toxic love affair. Perhaps, Vera, you’d do well not to fall in love with debt as so many of your fellow Americans have done.

Not all debt is bad though. Continue reading

Why I No Longer Contribute to Most Nonprofits

For most of my life, I thought of nonprofits as charitable institutions. I learned I was wrong. Later, I stopped writing checks to most of them.

My eyes were first opened to the nonprofit world when, as CEO of a large corporation in Philadelphia, I served on a United Way committee. United Way is the conduit through which corporations and individuals fund local nonprofits, which are usually billed as charitable organizations (whether or not they truly are). That was my first glimpse behind the nonprofit world’s curtain. Here is what I found: Continue reading

Invest in the Right Assets

Many Americans invest in assets like McMansions, fancy cars and tons of stuff around the house they really don’t need.

At least I assume they don’t need much of it or our countryside wouldn’t be peppered with storage facilities. We just completed a long trip to see you in Indy, Vera. It’s amazing how many storage facilities we saw along the way, even in communities that didn’t look particularly well off.

In any event, here’s my perspective on the subject of investments: buy assets that produce income. Continue reading

Tell Your Story

Tom Shadyac is a pretty unusual guy. I AM, the documentary about Tom, is worth watching. Suffice it to say Tom’s not into stuff anymore. Tom came to realize our culture had become lost in what Thomas Merton called “the murderous din of our materialism.” But the real reason I mention Tom today is this passage in his book Life’s Operating Manual:

You cannot die without ever having told you story; you cannot die without ever having expressed who you truly are.

Continue reading

It’s Not About the Stuff

The world spends a lot of time and effort trying to convince us it’s about the stuff. Entire industries — indeed, entire economies — are based on this premise. In a myriad of subtle and not-so-subtle ways, we’re told we should acquire and accumulate. And in that acquisition and accumulation we will find satisfaction, meaning and happiness. But nothing could be further from the truth. Continue reading