I have an almost uncontrollable urge to provide an interlinear translation to Mohammad El-Erian’s latest contribution to Bloomberg View. For example:
Since the eruption of the global financial crisis in 2008, the Fed has adopted a highly “data dependent†approach to policy making. The fact that the crisis took Fed officials by surprise, together with a recovery process that has been far from usual and coupled with repeated growth/inflation forecasting errors, have undermined the Fed’s understanding of the economy’s behavior and the effectiveness of its analytical models, especially the historically-calibrated ones.
Translation: the FOMC members don’t know what the heck they’re doing. Or
The Fed became a hostage not just to high-frequency economic data (and the unavoidable “noise†that accompanies them, including some large subsequent revisions), but also to markets.
Translation: the FOMC has abandoned the Fed’s dual statutory mandate in favor of the single-minded objective of making the DJIA go up. At least they can measure that on a day by day basis.
Must resist the temptation. Must resist the temptation.
I presume Mr. El-Erian would rather speak for himself and waive consecutive translation, as they say at the UN.
In an interview, now several years past, one of the Fed chairmen was quite explicit in stating their desire to create a wealth effect, specifically driven by equities. He failed to address the disparities created between owners of risk capital and owners of “low risk” low returning fixed income capital.
Bastards.
How well I know it. I’m an individual ostensibly well past retirement age who continues to work and among the reasons for that is that for my savings to earn anything I must assume more risk than I deem prudent.
And it’s been ten years. The idea that it’s practical for most people to save for their own retirements is a cruel hoax.
Dave,
I always assumed you kept working because you are one of those people who loves work.
BTW, have you seen this?
It’s a mixed bag. I love work but I hate incompetence and when working for someone else as I am now you’ve got to have a high tolerance level for incompetence.
If my present employer had a lick of sense, he’d give me a job I’m well-suited for: operating manager of the whole shebang. He doesn’t want to manage and somebody’s got to. They also like the high level of revenue that I generate which has always been my problem.
Another reason is that it (along with this blog) keeps me mentally agile.
Interesting article. Note how few respondents mention health care. When you look at the graphic for February 2009 it goes a long way to explaining why I was so upset when President Obama turned his attention away from the economy and towards health care.
Also see how the concerns have changed over the years, reflecting both publicity and the effects of policy.
“…for my savings to earn anything I must assume more risk than I deem prudent.”
Understood. You are in portfolio hell. If one were able to assemble a $300,000 portfolio that could return 5% real (own your home, no more kids education expenses, reasonable catastrophic health insurance coverage; so your personal inflation rate is manageable) there would be a fighting chance with SS plus $15,000 plus end of life principal drawdowns. Everyone has seen those “a dollar is worth x in 30 years” graphics. It’s doable. I don’t know how many people want to retire on $45,000/ yr.
Just wait until these people are fully pitted against the public sector unions. You would be amazed at how many people are down here from IL, MI etc. even I was surprised. Yeah, there is the weather, but there is only so much blood in the turnip. And these are people of relatively advantageous means.
Dave,
We’ve never met, but based on your writing here, your mental agility is in the 90th percentile if not higher.
I share your disdain for incompetence. It’s one reason I don’t miss the civil service. There are a lot of good people working for the federal government, but there are also a lot who just do the absolute minimum. This latter group were an enduring source of frustration.
Drew,
I think $45k a year (if adjusted for inflation) is a pretty decent retirement actually. That’s almost the median US income.
Andy
Perhaps you are correct. I chose a high financial risk but high financial reward profession and the norms and expectations vary. But its not without pause. As fate would have it, tomorrow I get paid for the first time in 8 years, as we close on sales of two portfolio companies. Of course I will get paid a lot. But 8 years…….
How timely:
http://www.zerohedge.com/news/2017-02-28/ny-teamsters-pension-becomes-first-run-out-money-expert-warns-pension-tsunami-coming
I find that terribly sad. Those Teamsters may have been misinformed but they acted with the understanding that they had a deal that could actually have been made good.
Obviously, there are different points of view on this but I blame their union leadership.
It’s largely the leadership for championing the structure. But the rank and file – a lot of them – knew they were getting an unsustainable deal. There are a good proportion who play the multi-pension, jack the salary up starting 3 years before retirement game. Especially those receiving political payback. They know.
I don’t know that they did. It’s amazing what people will believe when their livelihoods depend on it.
As they say, your mileage may vary. In an admittedly unscientific poll – guys I played golf with on the SW side, Teamsters who worked for me, police and firemen living in Naples, FL (let that soak in) and various pension collectors (and people who worked for Ed Burke) – all knew. It’s not close. They knew. And they laughed.
This goes back to something I wrote about a few weeks ago having to do with risk. People frequently don’t even realize when they’re assuming risk.
Just as an example, when somebody goes to school to get an MBA, they’re taking a risk. They’re risking that they can recoup the cost of going to school and the opportunity costs involved. Generally, it’s a pretty good gamble but I can imagine circumstances under which it wouldn’t be. The point is it’s a risk.
The Teamster rank-and-file probably didn’t think of it as a risk and the union leaders encouraged them in that view.
Fund failure really wasn’t that clear until about eight years ago when I already had thirty years in it.
What was it, 2008, I think it was, central states lost 40% of it’s value.
The market fell for about 18 months straight, and because of the need to write checks to retired men, shares had to be sold at rock bottom prices.
And, few people know,Department of Labor regulations would not allow plans to be more than 100% funded. Payouts had to be raised and no backstop could be created, for fear a “slush fund” might be abused.
There’s not a lot of sympathy out there for elderly laborers, the world moves on.
That is a very interesting observation. Sounds like a problem to me since it puts the solvency of the funds completely at the mercy of FOMC policy.
Federal Open market Committiee?
We laborers are at the mercy of shit we cannot, have not, will not, ever hear of. And influence? How? To paraphrase Bill Paxton in “Aliens’
“GAME OVER MAN, WE’RE FINISHED.
https://youtu.be/dsx2vdn7gpY