Tuesday, August 25, 2015

So, how does stock market volatility affect retirees? Look at yourself as a "company"

How much do stock prices really matter?

To a retiree living off of “rentier” wealth (not able to earn enough by labor or annuities or other benefits), it sounds like an important question when we have a volatile market.

One way to understand this is for me to imagine I am a company.  I issue shares, on the theory that my books, blog posts, and future movies or music should make money. The “par value” for the shares would be based on my net worth (as equity) at a starting point, according to the accounting equation:
E = A – L

I would get cash (liquidity) from the event.  Then shares of me could be traded in market, and would go up and down, increasing or decreasing market capitalization. If the price was low, and I was liquidated, I would have E left over.  But if the price was too high, then I could go bankrupt (but would be protected by incorporation).

A small business site explains how this works for most small businesses in most states, here. When you incorporate, there is a record of how many shares you are allowed to issue (regulated by the state).
Another site that explains some of this is here.  
A retiree typically is concerned about liquidity.  A stock market (or bond market) decline is bad if the retiree suddenly needs cash (for uncovered medical bills, maybe for property taxes, legal problems, etc).  The market value of his or her holdings may be undervalued according to the “accounting equation” for each company in his or her portfolio, but that does not help him get cash in the short run. Over the long run (dollar cost averaging), the market value of a company tends to average out closer to its real value. 

Of course, since companies (or individuals acting like companies) own securities, these become assets to be computed into these holders’ own accounting equations, which are affected by stock prices. 
What sounds strange right now is that stock values seem so dependent on the unreliable behavior of a large competitor and authoritarian, and even by name, Communist, country – China.  Investors need to get over this preoccupation with a country that just fifty years ago, under Maoism, made peasants of almost everybody.  But our dependence on importing their “cheap” dormitory-style labor is part of the moral problem.
As Donald Trump says, China is not your friend.  Certainly not Wall Street’s.


Monday, August 24, 2015

Glenn Beck appears on CNN, repeats Stansberry's theories without naming him; not good for "lazy" retirees

Tonight, CNN aired Glenn Beck commenting on the yo-yo stock market selloff.  (China’s was tanking again tonight.)

Beck said that the Fed was printing money, not charging interest, and that the markets were figuring out that the stock market isn’t based on anything because currency isn’t based on anything.

He said (like Porter Stansberry) that soon the dollar won’t be the (or a) reserve currency for the world, but right now the US was the least bad of all of them (like poop floating in a toilet bowl). 
So the government is using political power to silence currency hawks, like him, Ron Paul and Stansberry.

It is strange that CNN Money makes a case for optimism based on what a Communist Chinese government decides to do to re-charge its own economy,here
Beck has hosted Stansberry before, link. If the stock market is based on nothing because the dollar is based on nothing (or, as the Chinese think, pooh), then so is the bitcoin based on nothing. But intellect. 

What if he’s right? Is the "government" silencing he currency hardliners?

Picture: Rockville, MD, but looks like a nullianac (from Clive Barker's "Imjica").  Not sure what currency the reconciled dominions use. 

Saturday, August 22, 2015

Stock market "crash" makes retirees ponder, again (and, yes, Porter Stansberry gets mentioned)

So, what to make of the latest “correction” in the stock market?
I don’t recall two successive days with big drops since the 2008 crisis.  My own “portfolio” dropped about 1% over the two days.  But the accounts filled mostly with bonds (especially munis) actually gained.

This "correction" is proportionately much less than, say, the October 1987 crash. 
There have been some doomsday predictions about what happens if the Fed raises rates in September.  I think it probably won’t, and will wait until the end of 2015.

But I'm told that a senior like me should care about an authoritarian country like China. I even get unsolicited proposals to go there myself.  
And there is Porter Stansberry’s prediction that ATM’s stop working in October, and that the US becomes like Greece.  I really don’t get this at all. But it is true that oil and commodity prices fell much faster than experts expected (link ).  That ought to be good in many ways, as states can probably hide gas tax increases and fund critical infrastructure repairs, or even fund more use of renewable and non-carbon emitting transportation energy sources.   You can read about Stansberry here or on my “cf: blog September 2014.   Here’s another account, link which raises a troubling question if just publishing “misleading” financial information in a newsletter is a tort, or should be protected by the First Amendment, but that question belongs on my main blog.

Scary is that Ron Paul   (former presidential candidate) joined his message, which has more to do with our own government's printing money than China's devaluation and oil prices.  Paul predicts our own currency crisis (like Stansberry).
Paul has another "cheesy" (lead-you-on video) that he advertises on CNN here.   Of course, if the Chinese yuan is less reliable now, doesn't the dollar seem more secure by comparison?  

Back to the mainstream: For many retirees the best thing is to wait things out,  as Jason Zweig wrote in the weekend WSJ here. It's noteworthy that this time there are no institutional failures being speculated on the horizon. 
But retirees with large IRA’s have to pull out a certain percentage each year (if over 70-1/2) and that can lead to losses.

On the other hand, people still building IRA’s while still working just keep buying stocks and using dollar-cost-averaging to balance out in the long run.

For some retirees, the wisdom of living off of assets and investments (becoming a rentier) becomes controversial.  Yet the job market really hasn’t provided opportunities that aren’t in many ways cheesy. Would I have wanted to become a “financial planner” in 2005, two years before the big crash started?  Would I want to become a tax preparer and help “married” couples get out of taxes by strategic divorce?  (Gay marriage could be providing a book for tax preparation now, admittedly).  Could I survive as an Uber driver?

Tuesday, August 18, 2015

Virginia publishes legal guide for financial caregivers

The Commonwealth of Virginia has become one of the first states to publish a free PDF document laying out in ordinary language the responsibilities of “financial caregivers”, those responsible for the financial affairs of incapacitated adults, usually but not always elderly.  The primary link is here.

The categories are “power of attorney” (most common), “conservator” (or guardian), trustees under revocable living trusts, and government benefits.
I was in the first category when my mother was alive, but we set up a revocable trust in 2009, which became irrevocable on her passing in 2010 (and was amended to becoming a grantor trust in 2012).

Local stations reported an example where a woman had responsibility for a 35-year-old driver after being disabled when struck by a drunk driver. A typical local report is here


Monday, August 17, 2015

Does the top 1% really favor means testing of Social Security now?

Check this column on p. A19 of the New York Times Monday, Aug. 17, 2015, p. A19, by Paul Krugman, “Republicans Against Retirement”, link here

 The top one percent seems to be for cutting Social Security benefits to those who “don’t need it” (Them!).  The average Republican voter still wants to protect Social Security. Trump reportedly has little against Social Security as it is.

For someone in my bracket, my benefit is tied to the amount of FICA tax that I (and my many employers) paid while I was “working”.  I think of it largely as an annuity. 

But legally it is still “welfare” (the Nestor opinion), and a hard-liner could say, I was simply taxed when working to pay for others.  Too bad to be caught in the middle, but that’s the breaks.  Even Harry Browne had wanted to stop Social Security at some point because it’s a pyramid.

So I still like gradual privatization, or the right to move future benefits into a private annuity plan, to protect it from politicians.


Saturday, August 15, 2015

Dreams, and dementia

Just a brief personal note that makes a point.  Last night, I had an intense dream that I had caused a fatal auto accident.  I wanted it to be a dream and woke myself up, although the after effects lingered for a while.  But it struck me that in a dream, however real it seems, I have no idea of how I got there, in a particular situation, whether desirable (even erotic) or terrifying. That point was well made in the 2010 movie “Inception”.

It is often said that someone with dementia (or Alzheimer’s) may have no short term memory of what has just preceded the “now”, but yet she perceives herself as being the same person.  The dream comparison may provide some insight into how this can be.

Conversely, writing down dreams and keeping a log of them (which I do, privately, off line) may be a good way to exercise short term memory.


Tuesday, August 04, 2015

Life-prolonging treatment sometimes just prolongs suffering

The Washington Post has a feature story in “Health and Science” on Tuesday Aug. 4, about the idea that much medical care for the elderly can prolong life for months or years but not even palliate physical suffering. The story by Kristin M. Kostick and Jennifer Blumenthal Barry, link here, is “Deferring death can mean a life of suffering”, link here

The story concerns a husband and wife, Robert, 73, and Beverly, married for 53 years.  Now, she does the nursing care for his left ventricular assist device (LCAD).  Now Robert is considered in end-stage, where only palliative care is possible.  (He did pass away soon, before the story was written.)

My own mother had coronary bypass surgery in 1999 at age 85, and got eight very good years, and then three in which she declined, to pass away at the end of 2010.  The main diagnoses were congestive heart failure and aortic stenosis.  The possibility of a pacemaker, or of an LCAD, was never suggested.
I did have hospice at home and hired caregivers.  But I might have wound up having to do much more of this myself.


Monday, August 03, 2015

Home health agencies using franchising business models more, could affect how much caregivers earn

“Health Affairs” has published some important material about the home health industry, as with this article by Andrea McClain, who examines “a day in the life of a self-employed caregiver”, here
Caregivers who work directly for families can make more than those employed by agencies, and in recent times there has been more development of trademarked franchises for caregiving agencies.  There is a “viewpoint” column by Mariya Strauss on p. 17 of the Aug. 3, 2015 issue of “In These Times” (publication link article not online yet), “Treating old people like hamburgers” discussing the franchising.  The article reports Health Affairs as saying that 62% of the industry is run by franchises. 
I preferred not to employ anyone directly when I looked after mother, but used two agencies.  Since I was functioning as a “journalist”, I felt that being a direct employer at the same time could generate an ethical conflict.
But it’s clear that caregivers employed directly probably can get paid much better.


Sunday, August 02, 2015

Are benefits for today's seniors impoverishing millennials?

Steven Rattner has an op-ed in the New York Times, Sunday, August 2, 2015, p. 3 in Review Section, “Making life too hard for millennials”, link here.

Despite having more college education, the younger generation makes less and has less net worth and more debt.  Arguably, that’s because of policies that spend more money on seniors, for benefits seniors didn’t completely earn on their own before.

We heard a lot of that during two separate spoofs over the debt ceiling, in 2011 and 2014. The question of means testing Social Security would then come up, as would the question as to whether Social Security benefits are an earned annuity (paid for by FICA taxes over the years) or a welfare benefit.  In a practical sense, seniors perceive the former, legally, it’s more the latter.

Two big things stand out in my own situation.  One is how wasteful Medicare can be.  I don’t go to the doctor often for small things.  Why?  I know the doctor will feel obliged to do a cascade of tests, possibly finding things I am just as well off not knowing in practice.  At 72, momentum works to my advantage.  Spending for my mother, who passed at 97, was really excessive and unsustainable.

Another is the complexity (and ambiguity) of tax codes, including states that have an income tax.  Both federal and state (VA) have tripped over my amended return (which I filed after noting I had missed a few securities paying dividends, trying to return about $130 to each jurisdiction); the state wanting forms that don’t even exist.  The time I spend on matters that make very little difference in the total amount owed gets ridiculous.  And I was even pressured to become a tax preparer myself!
One more point, mentioned in Rattner’s piece, is neglect of infrastructure, which affects my ability to be productive my own way in retirement, and certainly affects the job market for top wage earners.

In the meantime, I can go to imdb and note the resumes of both Gregory Smith and Richard Harmon, both young and both whom I know, and say to them, “you’re paying for my Social Security” by working on so many movies and TV shows by such a young age.  They’re both Canadians, supporting ME.