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March 02, 2015

Had we but DOOM enough and time...

DOOOOM

I hope this Monday morning finds you in robust good health, my groovy babies. You'll need your strength to fend off the waves of zombies, mutants, cannibals, and K Street lobbyists who will be infesting the land during the Burning Times.

King v Burwell is at the Supreme Court this week, but I don't pretend to have the faintest clue as to which way Roberts is going to vote. I am not an attorney nor do I play one on TV, so I really cannot rely on anything other than common sense to judge if the federal subsidies for states which haven't set up their own exchanges will stand or fall. I think the subsidies should fall, given the plain language of the statute, but then I thought the individual mandate was plainly unconstitutional as well and Chief Justice John Roberts found a way to be okay with it. Roberts had a chance to stop this whole abomination in its tracks some years back and chose to let it live on for what (to my untrained eye) were craven reasons. It's a little late in the day to be fretting about the damage this law will do if enforced as written. (But don't worry, hepcats: the GOP has a plan to save the day if the court rules against ObamaCare. Because Severely Conservative or something.)

His Majesty the King has taken time out of his busy schedule of golfing, selfie-taking, shit-talking, and trolling the GOP to heap scorn on a close American ally. To say that President Obama is thin-skinned is to understate the matter dramatically; he truly believes in vox Obama vox Dei, and he takes disagreement extremely personally. Obama has the bad professor's habit of lecturing people rather than talking to them, and in Bibi's case, Obama is lecturing a guy who's far more versed in the issues at hand than Obama is. But Obama is the smartest guy in any room (just ask him!) so it follows that any opinion he holds must be the correct one. Prime Minister Netanyahu will give his speech, Obama will disregard it with the same disdain he's shown for the past six years of his Presidency, and the middle east will slide that much deeper into chaos.

But enough of that nonsense. Let's get on to the financial shenanigans which are this column's raison d'etre.


I've been saying it for a long time: all of the incentives in the developed world right now argue against saving your money. However, I am a contrarian and say that individuals must fight against all the powers that are arrayed against them and save anyway. Just save wisely; know what you're saving for. Have a plan, and stick to it. Prudence and thrift always pay off, even in the face of governmental fuckery. The wheel will turn and the madness and pathologies of this age will pass away. The smart, the well-prepared, the careful -- they will prosper, as they have throughout history during times of turmoil.

Why save? Because continuous consumption requires continuous spending, and most budgets cannot withstand a loss of income on retirement if consumption habits don't change. Most people -- not just Boomers, but nearly everybody -- under-estimate how much money they'll need in retirement. Most financial planners tell you to assume that you'll need at least 60% of your pre-retirement income, but they also assume that you're going into retirement with relatively low debt and a decent position in terms of net worth. That simply is not the case for an increasing percentage of the population.

Moody's to Chicago: BAM!

Some interesting thoughts on how interest rates matter, and how they don't.

Yes, Virginia: our adjusted incomes have gone way up since 1972 (or the prices for all kinds of stuff have gone way down; same difference, really). The productivity explosion in the latter half of the 20th century has allowed citizens of developed nations to afford far more stuff for less work than ever before in human history. The situation is actually even better than that: we can buy awesome suff now (flat-panel 50" TV's, smarthones, etc.) that didn't even exist back in 1972. And all that cool new stuff makes life better and more interesting for rich and not-so-rich alike. Now, granted, we've run up many trillions of dollars of debt at the same time, but...always look on the bright side of life, babies.

China's economy is continuing to cool, and that has a lot of implications going forward. Robust growth over the years (whether fudged or not by China's leaders) has hidden a lot of horrible economic decisions, but -- as Americans discovered in 2008 -- a slow economy tends to uncover a lot of garbage that used to be hidden from view.

The only solution for Greece's ongoing economic nightmare is fundamental transformation of their top-heavy economy. Get the government out of the way; make it easier for entrepreneurs to start and run businesses; flatten the tax code and enforce it rigorously. But Greece will probably do none of those things because culture, as always, is upstream of politics and the Greek culture is the antithesis of everything they must do to reform themselves. Greeks won't do the things necessary for reform because Greeks don't want to do those things. They want a cushy sinecure with a stodgy public-sector bureaucracy where they can retire at 40 and live off a generous pension forever afterward. Smart, innovative, driven Greeks will either leave or simply give up because the tides of the overculture will overwhelm them. (There's a lesson in this for America, obviously.)

How to invest like Mr. Spock. (Personal note: the passing of Leonard Nimoy last week hit this particular sci-fi nerd pretty hard. Safe travels wherever you may wander, Mr. Nimoy.)

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posted by Monty at 09:00 AM

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