Spinning Gold into String


Freddie Mac CEO Donald Layton recently told an audience at the Mortgage Bankers Association annual convention in San Diego that loans with down payments as low as 3% are a net positive and that more low down payment products could be on their way.  Layton lauded the programs because they have boosted homeownership, but why is homeownership still at its lowest level since 1967?  Well that’s easy.  Housing is too expensive, and it’s thanks to these very loan products that Layton praises!

If were allowed to have a real market in housing, maybe housing could come down to prices that wouldn’t require these phony products to begin with.  Let me explain.  Suppose we had real prices that weren’t propped up by the government and artificially low interest rates.  Interest rates would increase to 1990 levels, and most of these housing prices would be cut by at least half.  A $200,000 house would drop to $100,000 or less.  The down payment, property taxes, and mortgage insurance would all become more affordable.  Rents for properties would drop, so Americans saving to buy a house could do so faster.  They wouldn’t have to live in a place they don’t own while coughing of up a sizable portion of their net income each month.  But none of this is allowed to happen because government has set out to make housing more “affordable.”

Just like health care, college and everything else the government touches, prices skyrockets leaving the poor and middle class with a lower standard of living.  Government is like a reverse Rumpelstiltskin spinning gold into string, and it’s the the youngest working generation who will pay the price.  Due to all the big government Americans now love, many millennials will be working well into their 70s before retirement is an option.  Don’t get me wrong.  I think work is great as long as you’re doing what you love.  The fact is that most millenials will be working not because they want to, but rather because the have to.  According to Landon Dowdy, “A new report predicts that young workers will need to work until they’re 75 on average to save enough for retirement.  Researchers at Nerdwallet, the financial site that published the report Wednesday, blamed rising rents and student debt levels.”

That’s just half the problem.  Millennials will also be expected to support the social security, health care and housing Ponzi schemes that their parents voted for.  Thanks Mom and Dad.  Of the three frauds mentioned, social security is probably the worst.  Money is stolen from you over the course of a 30 or 40 year career with the promise that good ‘ol Uncle Sam will support you during your golden years.  But even ordinary Americans are beginning to question Sam’s creditworthiness.  Nick Giambruno reports, “Recently, the government announced that there would be no Social Security benefit increase next year. That’s only happened twice before in the past 40 years.  You see, the government links Social Security benefit increases to their own measure of inflation. If the government says “no inflation” then there are no benefit increases. It’s like letting a student grade his own paper.”

We can only hope that this government flunks out of school soon enough to give millennials a real chance at retirement.

Millennials are in Trouble

Today, Jessica Dickler asked the question “Are millennials financially doomed?”   Unfortunately, the answer is yes.  Many millennials are underemployed, paying massive student loans and some are trying to support a parent at the same time.  As a result of the poor job market and burdensome financial obligations, many millennials are postponing major life decisions like marriage, kids and a house.

When it comes to retirement, millennials feel even more unprepared.  According to Dickler, “Nearly two-thirds of millennials surveyed by T. Rowe Price earlier this year said they believe they’re more likely to win the lottery than to receive any money from Social Security.”  Millennials know they can’t depend on the social security Ponzi scheme, but that doesn’t mean they’re actually saving for retirement.  According to a survey conducted by Bankrate in January of this year, Eighteen percent of adults between the ages of 18 and 29 report that they have too much student loan debt to consider saving for retirement.

When it comes to finding a job to pay for anything, millennials are not too optimistic.  A January 2015 Monster.com study found, “…the recession made it difficult for younger workers to find full-time work, and as a result, the majority of them are feeling pessimistic or uncertain about their employment future. Only 45 percent of young workers say they feel optimistic about their future employment. The report also found that young workers have been settling for contract, part-time or temporary work while they search for full-time jobs.”

Before you go to bed tonight, say a prayer for the millennials.  They’re going to have a tough time in the Greater Depression ahead.



Puerto Rico & Retirement


Since the Puerto Rican Governor announced last month that his island cannot pay back the $72B they owe, it has become apparent that he wasn’t bluffing.  Today, the Financial Times reported, “Puerto Rico faces a $28bn financing gap over the next five years, top officials and outside advisers to the government warned on Wednesday.”  Puerto Rico is a glittering jewel of what you find when you reach the end of failed socialist policies.  Liberal politicians made promises that bought alot of votes, but when it came time to pay for those promises, Puerto Ricans discovered they were empty.

Retired government employees and teachers are discovering that they never should have trusted their retirement to a system run by bureaucrats.  Now they are left to wonder if they will be able to survive their golden years with dignity or beg for the highly competitive position of Wal-Mart greeter.  Americans should take heed from lessons being given in this tiny U.S. territory because they will be taught here one day soon.

According to a recent CNBC survey, “Baby boomers and seniors said that their biggest financial challenge was planning for retirement, while younger people were most concerned with paying for college and sticking to a budget.”  The same survey also indicated that the biggest fear for baby boomers, those aged 55-64, is “Never being able to retire.”  If Puerto Rico is a harbinger of things to come, then these baby boomer fears are not misplaced.