All posts by Mad Hemingway

America’s Retirees Facing Daunting Challenges

by Sally Keys | July 29 2017 

Photo by Neill Kumar on Unsplash

Can You Afford to Retire?

Around 49% of older Americans simply cannot afford to retire. They believe the only answer is to delay retirement and carry on working as long as possible. In fact, Americans have never been more worried about their finances, according to a survey by analytics company Gallup. And it’s their retirement fund they worry about the most. The reality is that not everyone in America is able to save enough for retirement. Around 55 million Americans are without any access to savings through their workplace. Furthermore, the Trump administration’s action against state auto-IRA programs recently, makes it an even harder problem to solve.

So how bad is America’s retirement landscape?

The truth is, it’s not a good time to be a pre-retiree in America. Saving for the future has long been something that Americans struggle with. But as life expectancy increases and savings needing to last longer, it’s beginning to catch up with them us. In fact, the average couple has only put away around $5,000 for retirement. Those nearest to retirement have the least amount of money saved than any other age group. Those over 60 had about $50,000 saved up. Meanwhile, people 55 to 59 had three times as much, a survey by Wells Fargo discovered.

Financial worries of pre-retirees

Continue reading America’s Retirees Facing Daunting Challenges

How 90% of American Households Lost an Average of $17,000 in Wealth to the Plutocrats in 2016

Paul Buchheit | March 06 2017 | Common Dreams

Steve Lambert, an artist living in Jamaica Plain, Massachusetts, created this sign in 2012 to find out from people in the Greater Boston area what they thought of this question. (Photo: Nate Goldman/WBUR)

America has always been great for the richest 1%, and it’s rapidly becoming greater. Confirmation comes from recent work by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman; and from the 2015-2016 Credit Suisse Global Wealth Databooks (GWD). The data relevant to this report is summarized here.

The Richest 1% Extracted Wealth from Every Other Segment of Society 

These multi-millionaires effectively shifted nearly $4 trillion in wealth away from the rest of the nation to themselves in 2016. While there’s no need to offer condolences to the rest of the top 10%, who still have an average net worth of $1.3 million, nearly half of the wealth transfer ($1.94 trillion) came from the nation’s poorest 90% — the middle and lower classes, according to Piketty and Saez and Zucman. That’s over $17,000 in housing and savings per lower-to-middle-class household lost to the super-rich.

Put another way, the average 1% household took an additional $3 million of our national wealth in one year while education and infrastructure went largely unfunded.

It Gets Worse: Each MIDDLE-CLASS Household Lost $35,000 to the 1%

According to Piketty and Saez and Zucman, the true middle class is “the group of adults with income between the median and the 90th percentile.” This group of 50 million households lost $1.76 trillion of their wealth in 2016, or over $35,000 each. That’s a $35,000 decline in housing and financial assets, with possibly increased debt, for every middle-class household.

Housing Wealth for the 90% Has Been Converted into Investment Wealth for the Plutocrats 

In the 1980s, the housing wealth of the bottom 90% made up about 15 percent of total household wealth (Figure 8 here and Page 41 here).

Continue reading How 90% of American Households Lost an Average of $17,000 in Wealth to the Plutocrats in 2016

10 Insane Things People On Wall Street Believe

Downtown Josh Brown | Fevruary 21 2017 | Ritholtz

To outsiders, Wall Street is a manic, dangerous and ridiculous republic unto itself – a sort of bizarro world where nothing adds up and common sense is virtually inapplicable.

Consider the following insane things that we believe on Wall Street, that make no sense whatsoever in the real world:

1. Falling gas and home heating prices are a bad thing

2. Layoffs are great news, the more the better

3. Billionaires from Greenwich, CT can understand the customers of JC Penney, Olive Garden, K-Mart and Sears

4. A company is plagued by the fact that it holds over $100 billion in cash

5. Some companies have to earn a specific profit – to the penny – every quarter but others shouldn’t dare even think about profits

6. Wars, weather, fashion trends and elections can be reliably predicted

7. It’s reasonable for the value of a business to fluctuate by 5 to 10 percent within every eight hour period

8. It’s possible to guess the amount of people who will get or lose a job each month in a nation of 300 million

9. The person who leads a company is worth 400 times more than the average person who works there

10. A company selling 10 million cars a year is worth $50 billion, but another company selling 40,000 cars a year is worth $30 billion because its growing faster
Away from Wall Street, no one believes in any of this stuff. It’s inconceivable. On Wall Street, these are core tenets of our collective philosophy.

No wonder everyone else thinks we’re insane.

***

Morbid Inequality: Now Just SIX Men Have as Much Wealth as Half the World’s Population

Paul Buchheit | February 20 2017 | Common Dreams

“Inequality is extreme and pathological and getting worse every year,” writes Paul Buchheit. (Photo: Austin Kirk/flickr/cc)

Yes, inequality is getting worse every year. In early 2016 Oxfam reported that just 62 individuals had the same wealth as the bottom half of humanity. About a year later Oxfam reported that just 8 men had the same wealth as the world’s bottom half. Based on the same methodology and data sources used by Oxfam, that number is now down to 6.

How to account for the dramatic increase in the most flagrant and perverse of extreme inequalities? Two well-documented reasons: (1) The poorest half (and more) of the world has continued to lose wealth; and (2) The VERY richest individuals — especially the top thousand or so — continue to add billions of dollars to their massive fortunes.

Inequality deniers and apologists say the Oxfam methodology is flawed, but they’re missing the big picture. Whether it’s 6 individuals or 62 or 1,000 doesn’t really matter. The data from the Credit Suisse Global Wealth Databook (GWD) and the Forbes Billionaire List provide the best available tools to make it clear that inequality is extreme and pathological and getting worse every year.

How It’s Gone from 62 to 6 in One Year

As of 02/17/17, the world’s 6 richest individuals (all men) had $412 billion. Tables 2-4 and 3-4 of the 2016 GWD reveal that the poorest five deciles of the world population own just .16% of the $256 trillion in global wealth, or $410 billion. That latter figure is based on mid-2016 data, but since then the status of the bottom 50% has not improved, and has in fact likely worsened, as both global debt and global inequality have increased.

Continue reading Morbid Inequality: Now Just SIX Men Have as Much Wealth as Half the World’s Population

Five Faces Of Dystopia

Paul Buchheit | February 13 2017 | Common Dreams 

We’ve seen Donald Trump many times in history. And yet we’ve never seen anything like Donald Trump.

Based on reliable news sources, his biographer, and his own writings, the most powerful man of his era has been referred to as an “egomaniac” and “narcissist,” possessing a “big mouth” with an “impulsive style,” unable to differentiate between truth and falsehood, preferring emotion over facts, focused on national greatness and law & order, fearful of “foreignization,” prone to coarseness and put-downs in speeches, and fond of “mantralike phrases” filled with “accusations, vows of revenge and promises for the future.”

Depravity

The man described above is Adolf Hitler. All of the descriptions were attributed to the Nazi leader: some of it by news media in the 1930s, some of it by modern historian and biographer Volker Ullrich, some of it by Hitler himself in “Mein Kampf.” Eerily familiar to the present day.

Racism

Donald Trump placed a painting of Andrew Jackson in the Oval Office, apparently feeling pleased that, in his own words, “a lot of people they compare the campaign of Trump with the campaign of [Jackson].”

Continue reading Five Faces Of Dystopia

Welcome to the new dark ages, where only the wealthy can retire

Peter Fleming | February 14 2017 | The Guardian

As never-ending politically motivated austerity takes hold, more and more people will find they cannot afford to stop work. But it doesn’t have to be like this
‘If people want to work past retirement age, that’s great. The trouble is many soon won’t have any choice in the matter.’ Photograph: Radius Images/Alamy

It’s almost too easy to imagine the scenario. After spending most of our adult life in paid employment, the golden day arrives. A well-earned retirement. Suddenly we’re released from the grip of office email and that long commute. Finally we can enjoy our remaining time on Earth pursuing those interests we’d never had time for, perhaps reconnecting with family and finishing those repairs on the house. Above all, time to relax.

Sadly, this probably won’t be your future … unless you’re independently wealthy. What can only be described as the “battle over work” in the neoliberal era in relation to pay and conditions has just opened another front. Retirement. And things are beginning to get nasty.

We’re now told that the real question is no longer when we will retire but if we will retire, with the prospect of working until you drop likely to become the norm. Due to an ageing population, longer life expectancy and a state pension scheme that can’t keep up, retirement might soon be a thing of the past. According to David Blake, director of the Pensions Institute at Cass Business School, “the danger now is we will have a generation who really can’t afford to retire”.

Retirement was once considered the jewel in the crown of any civilised society. Discrediting the idea that it’s acceptable for the elderly to toil late into their twilight years was one of the great achievements of the 20th century. It wasn’t just about morality, of course. There was also an economic rationale. But giving people the chance to rest after 45 years of hard slog was deemed the decent thing to do.

Not any more. Now we have entered the age of austerity, one that we’re told might never end. As a result, there’ll be no government help in your dotage. Nor will your employer’s pension plan provide enough to make ends meet. If this heartless post-crash variant of neoliberal capitalism could be summed up in one message, it would be this: you are on your own.

Continue reading Welcome to the new dark ages, where only the wealthy can retire

The Data That Turned the World Upside Down

HANNES GRASSEGGER AND MIKAEL KROGERUS | January 28 2017 | Motherboard

Psychologist Michal Kosinski developed a method to analyze people in minute detail based on their Facebook activity. Did a similar tool help propel Donald Trump to victory? Two reporters from Zurich-based Das Magazin went data-gathering.?

An earlier version of this story appeared in Das Magazin in December. 

On November 9 at around 8.30 AM., Michal Kosinski woke up in the Hotel Sunnehus in Zurich. The 34-year-old researcher had come to give a lecture at the Swiss Federal Institute of Technology (ETH) about the dangers of Big Data and the digital revolution. Kosinski gives regular lectures on this topic all over the world. He is a leading expert in psychometrics, a data-driven sub-branch of psychology. When he turned on the TV that morning, he saw that the bombshell had exploded: contrary to forecasts by all leading statisticians, Donald J. Trump had been elected president of the United States.

For a long time, Kosinski watched the Trump victory celebrations and the results coming in from each state. He had a hunch that the outcome of the election might have something to do with his research. Finally, he took a deep breath and turned off the TV.

On the same day, a then little-known British company based in London sent out a press release: “We are thrilled that our revolutionary approach to data-driven communication has played such an integral part in President-elect Trump’s extraordinary win,” Alexander James Ashburner Nix was quoted as saying. Nix is British, 41 years old, and CEO of Cambridge Analytica. He is always immaculately turned out in tailor-made suits and designer glasses, with his wavy blonde hair combed back from his forehead. His company wasn’t just integral to Trump’s online campaign, but to the UK’s Brexit campaign as well.

Continue reading The Data That Turned the World Upside Down

How Universities Are Increasingly Choosing Capitalism Over Education

Naked Capitalism | February 07 2017

Yves here. Some further observations. First, the author neglects to mention the role of MBAs in the reorientation of higher education institutions. When I went to school, the administrative layer of universities was lean and not all that well paid. Those roles were typically inhabited by alumni who enjoyed the prestige and being able to hang around the campus. But the growth of MBAs has meant they’ve all had to find jobs, and colonizing not-for-profits like universities has helped keep them off the street.

Second, this post focuses on non-elite universities, but the same general pattern is in play, although the specific outcomes are different. Universities with large endowments are increasingly hedge funds with an educational unit attached.

By Henry Heller, a professor of history at the University of Manitoba, Canada and the author of The Capitalist University. Cross posted from Alternet

The following is an excerpt from the new book The Capitalist University: The Transformations of Higher Education in the United States since 1945 by Henry Heller (Pluto Press, December 2016):

The fact that today there are over 4,000 colleges and universities in the United States represents an unparalleled educational, scientific, and cultural endowment. These institutions occupy a central place in American economic and cultural life. Certification from one of them is critical to the career hopes of most young people in the United States. The research produced in these establishments is likewise crucial to the economic and political future of the American state. Institutions of higher learning are of course of varying quality, with only 600 offering master’s degrees and only 260 classified as research institutions. Of these only 87 account for the majority of the 56,000 doctoral degrees granted annually. Moreover, the number of really top-notch institutions based on the quality of their faculty and the size of their endowments is no more than 20 or 30. But still, the existence of thousands of universities and colleges offering humanistic, scientific, and vocational education, to say nothing of religious training, represents a considerable achievement. Moreover, the breakthroughs in research that have taken place during the last two generations in the humanities and social sciences, not to speak of the natural sciences, have been spectacular.

But the future of these institutions is today imperiled. Except for a relatively few well-endowed universities, most are in serious financial difficulty. A notable reason for this has been the decline in public financial support for higher education since the 1980s, a decline due to a crisis in federal and state finances but also to the triumph of right-wing politics based on continuing austerity toward public institutions. The response of most colleges and universities has been to dramatically increase tuition fees, forcing students to take on heavy debt and putting into question access to higher education for young people from low- and middle-income families. This situation casts a shadow on the implicit post-war contract between families and the state which promised upward mobility for their children based on higher education. This impasse is but part of the general predicament of the majority of the American population, which has seen its income fall and its employment opportunities shrink since the Reagan era. These problems have intensified since the financial collapse of 2008 and the onset of depression or the start of a generalized capitalist crisis.

Mounting student debt and fading job prospects are reflected in stagnating enrollments in higher education, intensifying the financial difficulties of universities and indeed exacerbating the overall economic malaise.[1] The growing cost of universities has led recently to the emergence of Massive Online Open Courses whose upfront costs to students are nil, which further puts into doubt the future of traditional colleges and universities. These so-called MOOCs, delivered via the internet, hold out the possibility, or embody the threat, of doing away with much of the expensive labor and fixed capital costs embodied in existing university campuses. Clearly the future of higher education hangs in the balance with important implications for both American politics and economic life.

The deteriorating situation of the universities has its own internal logic as well. In response to the decline in funding, but also to the prevalence of neoliberal ideology, universities—or rather the presidents, administrators, and boards of trustees who control them—are increasingly moving away from their ostensible mission of serving the public good to that of becoming as far as possible like private enterprises. In doing so, most of the teachers in these universities are being reduced to the status of wage labor, and indeed precarious wage labor. The wages of the non-tenured faculty who now constitute the majority of teachers in higher education are low, they have no job security and receive few benefits. Although salaried and historically enjoying a certain autonomy, tenured faculty are losing the vestiges of their independence as well. Similarly, the influence of students in university affairs—a result of concessions made by administrators during the upheavals of the 1960s and 1970s—has effectively been neutered. These changes reflect a decisive shift of power toward university managers whose numbers and remuneration have expanded prodigiously. The objective of these bureaucrats is to transform universities as much as possible to approximate private and profit-making corporations, regarded as models of efficient organization based on the discipline of the market. Indeed, scores of universities, Phoenix University for example, have been created explicitly as for-profit businesses and currently enroll millions of students.

Continue reading How Universities Are Increasingly Choosing Capitalism Over Education

The Brilliant Way FDR Got America Back to Work—While Beautifying the Country and Protecting Our Environment

Rain Noe | January 26 2017 | Core77

The New Deal’s Civilian Conservation Corps and the Works Progress Administration got us back on track

We’re currently working up an entry on a very cool toolbox of historical significance. But before we can get to it, we have to give you this brief history lesson to provide some context. We hope you’ll find it interesting on its own merits.

In 1933 America was doing poorly; the Great Depression meant millions of people were starving and out of work. When Franklin Delano Roosevelt took office in January of 1933, he brought with him a couple of brilliant ways to improve the lives of citizens while boosting the long-term health of the country. Two of the New Deal programs he used to do this were the Civilian Conservation Corps and the Works Progress Administration.

The Civilian Conservation Corps, as the name suggests, was focused on conservation. The CCC took hundreds of thousands, then millions, of young, unemployed men and sent them to camps. (I know that doesn’t sound promising, stick with me here!)

At the camps these men were provided food, shelter, free medical care and a living wage. They were trained in how to build, fix and grow things, and then they were put to work in teams.

Continue reading The Brilliant Way FDR Got America Back to Work—While Beautifying the Country and Protecting Our Environment

Why the “Maximize Shareholder Value” Theory Is Bogus

Naked Capitalism | February 03 2017

From the early days of this website, we’ve written from time to time about why the “shareholder value” theory of corporate governance was made up by economists and has no legal foundation. It has also proven to be destructive in practice, save for CEO and compensation consultants who have gotten rich from it.

Further confirmation comes from a must-read article in American Prospect by Steven Pearlstein, When Shareholder Capitalism Came to Town. It recounts how until the early 1990s, corporations had a much broader set of concerns, most importantly, taking care of customers, as well as having a sense of responsibility for their employees and the communities in which they operated. Equity is a residual economic claim. As we wrote in 2013:

Directors and officers, broadly speaking, have a duty of care and duty of loyalty to the corporation. From that flow more specific obligations under Federal and state law. But notice: those responsibilities are to the corporation, not to shareholders in particular…..Equity holders are at the bottom of the obligation chain. Directors do not have a legal foundation for given them preference over other parties that legitimately have stronger economic interests in the company than shareholders do.

And even in the early 1980s, common shares were regarded as a speculative instrument. And rightly so, since shares are a weak and ambiguous legal promise: “You have a vote that we the company can dilute whenever we feel like it. And we might pay you dividends if we make enough money and are in the mood.”

However, 1900s raiders who got rich by targeting companies that had gotten fat, defended their storming of the corporate barricades by arguing that their success rested on giving CEOs incentives to operate in a more entrepreneurial manner. In reality, most of the 1980s deals depended on financial engineering rather than operating improvements. Ironically, it was a form of arbitrage that reversed an earlier arb play in the 1960s. Diversified corporations had become popular in the 1960s as a borderline stock market scam. Companies like Teledyne and ITT, that looked like high-fliers and commanded lofty PE multiples, would buy sleepy unrelated businesses with their highly-valued stock. Bizzarely, the stock market would value the earnings of the companies they acquired at the same elevated PE multiples. You can see how easy it would be to build an empire that way.

The 1970s stagflation hit these companies particularly hard, with the result that the whole was worth less than the sum of the parts. This made for an easy formula for takeover artists: buy a conglomerate with as much debt as possible, break it up and sell off the pieces.

But CEOs recognized how the newly-installed leaders of LBO acquisitions got rich through stock awards or option-type compensation. They wanted a piece of the action.

Continue reading Why the “Maximize Shareholder Value” Theory Is Bogus