Retiring Boomers

I saw this article today on the large swath of baby boomers who will turn 65 starting next month. The absolute number (10,ooo per day) is huge and the implications for the economy equally so. Everyone by now knows the story- the boomers spent too much, saved too little and made sometimes horrific life mistakes (jobs,divorce,investments,real estate ,etc.). The article ends by saying 40% of these "retirees" plan to work until they drop. I suspect the real percentage is close to double that figure.

44% Per Year

I saw an interview a couple days ago with Virginia Governor Bob McDonnell regarding his plan to require state employees to contribute 5% (they currently contribute nothing) of their salaries towards pension costs. The most interesting part was what the annual investment returns would need to be in order for the Virginia pension system to be fully funded . The answer: 44% per year!! The S&P 500 has never achieved a 44% return in any year (37% a couple times is the closest). Obviously, you can't get there from investment returns alone. We sometimes see individuals make this same mistake, thinking that if only they could obtain a bit more return all would be fine. Usually, the math simply doesn't work.

2011 Issues

I don't like lists of predictions but this one struck me as rational and reasonable. This guy writes mainly on residential real estate issues so that is the primary focus. Down the list some are issues about state budgets and muni defaults which I suspect may be the issue for 2011. Stay tuned.

Stimulus - the Federal/State distinction

Everyone has heard both sides argue about the efficacy of the stimulus . A couple of Stanford economists have an interesting article today in WSJ that traces the interaction between the states and the federal government on this topic. They make the case that the net is about zero.

Making Money in the Markets

This is a nice interview with David Booth, co-founder of Dimensional on market efficiency and related topics. The very last sentence in the article bears a look. This seems very true to me- given all the brokers and funds relying on the "black box theory", everyone isn't going to totally believe in efficient markets. Everyone does believe in making more money in the markets,however, and that is what EMH is all about.

Too Big to Fail

Some of you know of Professor Eugene Fama and his work on the Efficient Market Hypothesis (he actually did the original work on this in the 60's). This is a short video clip on that topic and also on his opinions on the large banks. He states that they are way undercapitalized and this creates huge distortions in the market. Good stuff!

A Growth Agenda

Art Laffer ,who has advised a wide array of folks in political life (from Jerry Brown to Ronald Reagan) wrote a nice article today in WSJ outlining a very specific agenda to regain economic growth. Most of these are familiar but I particularly liked the last one which involves incentive (or performance) pay for members of Congress. That would get some attention !