Why its Time to Get Rid of the 401k (which for many is now a 41K)

If you have even peeked at your account statements in the past year, it's painfully obvious that something is wrong with the way we save. The tax-deferred 401(k) plan, and others like it, such as the 403(b) and the IRA, have become our nation's go-to retirement piggy bank. Invented nearly 30 years ago as an executive perk — one more way to dodge Uncle Sam — the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation's retirement system. But propelled by a combination of companies looking to cut costs and consumers who wanted control of their retirement destiny, that's exactly what happened.

collectively we pour more than $200 billion into these accounts each year. But retire rich? Don't bet on it. The average 401(k) has a balance of $45,519. That's not retirement. That's two years of college. Even worse, 46% of all 401(k) accounts have less than $10,000. Today, just 21% of all U.S. workers are covered by traditional pensions, and the number shrinks every year. "The time may have come to consider returning 401(k) plans to their original position as a third tier of retirement planning, behind pensions and Social Security," says Alicia Munnell, who heads the Center for Retirement Research at Boston College. "They should not be the thing we rely on for retirement security." And the government seems to agree. This summer, the Government Accountability Office concluded, "If no action is taken, a considerable number of Americans face the prospect of a reduced standard of living in retirement." That's what is known as an understatement.

TIME MAGAZINE

Is the next bubble in China? I vote "Yes"

The writing is on the wall. China's stock market is up an astounding 79% year to date. Unbelievable, but considering that last year their markets got clobbered, it is somewhat too much too soon. On top of that, Chinese banks are lending like crazy and building everything everywhere while they are still holding loads of US dollars.

In one sense, its a smart strategy in some sense, as John Mauldin pointed out...they are playing a game of "old maid", where they don't want to be the last one holding US dollars. In another sense, they've stimulated too much rather than let natural growth occur. More and more IPO's are hitting their market, which means the top is near and a beatdown is coming. Long term, they'll be a good buy, but not today.

Investing Based On Teen Spending Habits

Interesting report by Morgan Stanley about how and what teens spend their money on and how to invest accordingly. Buyer beware: Teen spending habits can change on a dime..make sure its not on yours.

Simply, the most interesting read on markets/politics/business cycles I've read

Doesn't get much more interesting than this...lots of wild and zany predictions, some that I can foresee happening...

Interest rates going up???

The yield on Treasuries should be aroung 10%. It's obvious that government manipulation is keeping them low. Mortgage rates are based on the treasuries, The 10 year in particular. It is possible for them to keep rates articicially low for a few more years but when you stretch a rubberband to far it eventually breaks. Now before I continue just know I don't have any degrees in finance and economics. I'm just a guy with some rental properties and a failing car lot. That being said I am going to throw out a hypothetical possibility.

Everybody is talking about a 2nd stimulus, even Warren Buffet. The government is already 11TRILLION(11,000,000,000,000 damn that's a lot of zeroes) in the hole. In order to stimulate they have to borrow or print money. They will sell treasuries to the world to fund this stupid idea. Now if you are an investor in American government it looks like a high risk investment to lend money to someone already over their head in debt, while revenues and cash flows are on the decline. In order to create investment it will become evident that you would have to give a good return. So this will force the yields up in order for investors to fund our debt. So if the yield were forced to 10% that would mean mortgage rates at 11 to 13%. That would cut the values of homes in half. Add in the fact that it is going to take an increase in lending rates to motivate the banks to start lending again I think the Big Picture forces interest rates to rise in order for money to hit the street again. I'm sure people didn't expect double digit interest rates in the 80's, but it happened. Rates have been too low for too long. The economy won't recover until credit becomes available once again, and banks won't lend until the returns are worth it. Do as you choose but I am going to prepare for a high rate enviorment to hit sometime in the future.

As a contrarian investor this is a good thing if you are a real estate investor. High rates mean low prices. My philosophy of fully leveraged cash flow won't change so I just have to buy cheap. When rates lower someday and I can refi that will just make the cash flows even better. Intersting times are ahead indeed. Invest wisely.

The house of the Future?

I'm really starting to wonder if this is reality or not. If solar technology is close this could be a huge transition. The thought of trading power off the grid is bigger than just your house. What could be the ROI on buying 100 of these solar panels. Energy is the next bubble. Hopefully it is the real deal, and energy independence puts the US back on the map as a world leader. The cost of 10 solar panels, and a windmill is a little salty(45 k for a 2000 sq ft home). It comes out to be around a 10 year payback. I like to get my money back on improvements or aquisitions in 3 ears or less. It isn't cost effective unless the price of the technology comes down, or as I fear prices of energy skyrocket. I wonder if the lobby money of the oil companies, and huge utility monopolies can keep this under wraps for another 20 years or so. I'd love to own this home, although I'm not quite ready for an electric car. There is something about the power of combustion engines running on high octane fuel. Although if I didn't have to worry about fuel costs because I can charge my car for FREE?! I might learn to live with it.

It seems this is the wave of the future. I'm not sure if the technology is real or not. It certainly isn't cost effective. If it becomes the real deal it will create a lot of infastructure changes, which will be a huge stimulus for the economy. I think it will be a good idea to become an energy auditer/ home inspector. It wouldn't hurt to learn how to install solar panels, and windmills.

As a rental property owner this excites me, and scares the you know what out of me as well. I am very frightened of increased energy costs, and the costs of improvements to convert. The thought of not having to pay much to power my buildings. That is around a 15 to 20% reduction in operating costs. It will be interesting to see how the government tries to control this process, or if big brother rolls over to the deep pockets of the utilities, and oil companies.
We will find out a lot about ourselves, both personally, and as a nation the next decade. I do think our economy is headed for the beating of our lifetime the next 10 years. That house looks great. I wonder if anyone can afford it???

Five Bank FDIC Friday!

So what do ya do when your bank gets foreclosed?? At the same time, some brand new banks may be the best thing to park your IRA money in! Amazing how that works sometimes.

At the same time, FDIC chairwoman Sheila Bair can't sell her own home!

DEFLATION???

Real estate? Cash? Gold? Jobs? What to put your money and time into if we get deflation