We all know that a large wave of Baby Boomers in the US are approaching retirement. But what about the rest of the world? And what happens when those retirees need to spend out of savings? There is more than just a credit crisis and a government deficit crisis in our future. A rising level of retirrees to workers is happening even as I write. And the US is not, for once, the center of the problem. As this week's writer of your Outside the Box Niels Jensen explains, we cannot all export our way out of the problem. There is a global adjustment that must happen and when it does, it will have serious consequences for all. This week's letter is guaranteed to make you think. Set aside a few minutes to do so.
Niels Jensen is the Senior Partner of Absolute Return Partners based in London. I have worked closely with Niels for years and have found him to be one of the more savvy observers of the markets I know. You can see more of his work at www.arpllp.com and contact them at firstname.lastname@example.org.
This week I am really delighted to be able to give you a condensed version of Gary Shilling's latest INSIGHT newsletter for your Outside the Box. Each month I really look forward to getting Gary's latest thoughts on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible. Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises. You can learn more about his letter at http://www.agaryshilling.com. If you want to subscribe (for $275), you can call 888-346-7444. Tell them that you read about it in Outside the Box and you will get not only his recent 2009 forecast issue with the year's investment themes, but an extra issue with his 2010 forecast (of course, that one will not come out for a year. Gary is good but not that good!) I trust you are enjoying your week. And enjoy this week's Outside the Box....
And if you have cable and get Fox Business News, I will be on Happy Hour tomorrow Tuesday the 17th at 5 pm Eastern. Have a great week.
I get a lot of newsletters from money managers around the country, which I try and read as they are written by people who are —in the trenches,— actually making decisions on behalf of their clients. It broadens my perspective. Frankly, most are not all that well written and unimaginative, but who ever said writing was easy? But some really strike a chord with me. Today's Outside the Box I have read twice, which is unusual for me. Cliff Draughn is a wealth manager in Savannah, Georgia (Draughn Partners) and a good friend. His letter is a wide ranging tome on a variety of topics, but is full of common sense and one that I think will resonate with readers. I trust you will enjoy this.
The markets have been forced to digest a plethora of events over the past several years, ranging from continuous geopolitical turmoil to a new Fed chairman, from blowups like the Refco scandal to an inflated housing market, each of these occurrences has raised considerable coverage from the financial press yet one cannot lose sight of the longer term trends (and threats) that still loom. The most obvious, and potentially most significant, is the coming generational aging of the boomer generation and the subsequent healthcare conundrum.
This week's "Outside the Box" will feature an article by the widely proclaimed "Bond King," Bill Gross, on the impact of boomer retirement and what that means for healthcare, the workforce and social security. Many of you will find some of his comments controversial. I do not agree with his analysis on tax cuts, as an example. But he is right about the issues which will face us as a generation attempts to retire without having saved enough assets to do so, either as individuals or as a country.
My long term readers are familiar with Bill as he is a Managing Director at PIMCO. During his tenure there, he has become regarded as the most prominent figure in the fixed income sector while at the helm of the largest bond fund in the world, the PIMCO Total Return Fund. PIMCO is one of the largest specialty fixed income managers in the world, with more than $617 billion in assets under management and more than 800 employees in offices in Newport Beach, New York, Singapore, Tokyo, London, Sydney, Munich, Toronto and Hong Kong.
May you find value in Bill's "outside the box" commentary and enjoy a safe and fun-filled Labor Day.
As we begin the year, it is traditional to think about the future. Today my good friend, Dr. Gary North, helps us to think far into the future, about our plans for retirement. This is one you should forward to friends and family who have yet to begun thinking about how they will live out the last part of their lives.
This note from the December issue of Retirement Plan Advisor literally crossed my desk as I was getting this issue of Outside the Box ready.
"Data from a new study of the recently retired prepared for Putnam Investment underscores the need for employees to invest more aggressively before retirement, as Social Security, traditional defined benefit and cash balance plans remain the largest source of income for households. This is true despite the fact Social Security is in jeopardy, DB plans are on the wane, and cash balance plans face uncertainty because of litigation.
"The biggest surprise for recent retirees, the study states, is having insufficient income and high expenses. Fifty-nine percent of the nearly 2,000 respondents wished they had started saving earlier, while 70% regretted not saving more through their employee-sponsored retirement plan or via an independent plan."
Gary sees most people unprepared for retirement, but if they take a look at what the future might hold there is time to adjust. Let's take a look at some of the scary statistics and possible solutions.