The Next Great Generation By Charles Payne
Long/Short Equity, Portfolio Strategy
Seeking Alpha Analyst Since 2009
She was the greatest of them all. You wouldn't know; you're too young. In one week she received 17,000 fan letters. Men bribed her hairdresser to get a lock of her hair. There was a maharajah that came all the way from India to beg one of her silk stockings. Later he strangled himself with it! -Max Von Mayerling
In Sunset Boulevard, faded screen star Norma Desmond was considered washed up at the age of 50. Things have changed a lot since 1950.
Yesterday I had the pleasure of interviewing Kathleen Casey-Kirschling, the first baby boomer to collect Social Security benefits. She shared the feelings of her friends on what they see as an attack on something they earned. Moreover, they wonder why the same government that raided the Social Security trust fund is now looking at entitlements as the only solution to curb our swollen debt level. She considers herself to be in the middle of the road, and believes Congress and the President will fix the problem. In fact, "it's easy" once they get the message. Ms. Casey-Frischling is still angry about the "decade of greed" that began with Enron, through two wars, the housing bubble, and those bankers.
On the notion of greed, I asked if her generation is being greedy by knowingly taking from chest of IOUs that makes it highly unlikely their grandchildren will have anything waiting for them. Her answer was diplomatic, and she really thinks the problem can be fixed. She isn't alone as a majority of Americans acknowledge the problem but think solutions are available that involve zero tinkering with their entitlements. But, there is no way to fix the problem without shared sacrifice. Once we get beyond finger-pointing, some group has to understand they are going to have to give up more for the greater good.
During the interview I said she was part of the Greatest Generation, but in fact that would be incorrect. That generation came up through the Great Depression and fought a couple of world wars. What I should have said is her generation could become the greatest generation of the new century. I remember images of old women eating canned dog food back in the 1970s, the shock, horror, and sadness made everyone feel shame. (These days our three Yorkshire Terriers eat better than I do. In fact, they probably look at my meals and recoil from shock, horror, and sadness.) That hot button has remained near the top of a menu of guilt trips, and it's going to be used so much between now and the next election we might actually feel bad enough to call grandma.
"Mr. Salteena was an elderly man of 42 and fond of asking people to stay with him."
In 1890, nine year old Daisy Ashford wrote the immortal line above as the first sentence in "The Young Visitors: Or, Mr. Salteena's Plan."
One year before precious Daisy wowed the publishing world, Otto Von Bismarck made history when Germany became the first nation to establish old-age social benefits. Ironically, Bismarck's motivations were underhanded as he made a move to stem the tide of socialism sweeping Europe. You see, the age these benefits kicked in was 70; it wasn't until 1917 when it was lowered to 65.
Let's face it Social Security is a scam. When it was approved in America the life expectancy for women was 62 and men 58. Moreover, it has gone from social safety net, to birthright. It was advertised as something people could tap if they just were not prepared for retirement. Now, it's the centerpiece of retirement. The first wave of retirees didn't show up at the nearest Social Security office on their 65th birthday back in the day as the average age when people would claim benefits was 68.5 in 1950. That was also the year when the life expectancy for men finally climbed to 65. What's really nuts is that in 1950 20% of work was physically demanding; now it's only 8% yet those folks waited longer to cash in on that safety net.
A research report on obesity from LSU points to the shift from manufacturing to more sedentary work has had a devastating influence of obesity gains. In 1960, 48% of workers endured moderately intense physical activity, but that number is now 20%. The corresponding change in occupation-related daily energy expenditure decreased 140 calories for men and 124 for women from 1960 to 2008. So work is easier on the body, medicines have improved, and we understand nutrition so much better but we are seriously fat and too tired to work to 68.5 years old. In fact, more and more baby boomers are opting for benefits beginning at age 62.
In a piece from American Enterprise Institute it points out that taking benefits at that age (first offered to women in 1956 and men in 1961) results in a loss of 25% in monthly benefits for life. Their work says making 65 mandatory wouldn't extend the life of Social Security by much but would decrease poverty for retirees over 65 by a fifth. That's remarkable. It would be a lot less grannies eating cheap dog food. The focus, however, is on wealthier seniors that really must step up to the plate. This should be voluntary, but it should happen in waves. At some point the retirement age will officially go to 68.5 and then 70, but I could see such moves being too little too late.
These days if you hit 65 then you have a fantastic shot at hitting 83. With that in mind, I would like to see old folks not allow themselves to be manipulated by scare tactics. In addition, it would seem everyone over the age of 40 should step up to the plate. It's time to be great and tell the world "we're ready for our close up."
Bigger Tent, More Pressure for American Taxpayers
There was bigger news from the G8 summit other than Carla Bruni's baby bump. The G8 is pledging a lot of money to Arab democracies because: "Democracy lays the best path to peace, stability, prosperity, shared growth and development."
If transformation into democratic and tolerant societies continues, Egypt and Tunisia will get $20.0 billion and Algeria, Ivory Coast, and Guinea will get $15.0 billion. Plus, there are more individual goodies, like the U.S. forgiving $2.0 billion in debt to Egypt and extending $2.0 billion in loan guarantees. It looks like we are creating an extension of the welfare state that has worked so well in Europe and pockets of America. This takes that age-old question about being feared or loved and twists it into loathed and liked as long as the money flows. But, these democracies must accept free markets and self-reliance. I've always said the end game of the notion we should close the wealth gap goes beyond our borders.
After browbeating the rich, and nowhere-near-rich, into tax submission the narrative will expand to the world where half of inhabitants' live on $2,000 a year or less. It's going to be our moral obligation to lift them economically even if that means lowering ours. In the meantime, crowds are back in Tahrir Square, but mobs are also forming in Spain, while Greeks stew in anger and frustration. If I'm a 23 year old unemployed Spaniard it's obvious the best thing to do now is turn over some buses to get monetary handouts. The private sector continues to flee PIGS nations, with Dexia Bank reporting a $3.6 billion loss on sale of Greek assets.
The G8 says oil importing Arab nations will need $160.0 billion in external financing over the next three years...Oh baby we are on a slippery slope.
Today's Session
The roads were light and many traders are already on a beach somewhere, and maybe that's why the market feels like a quiet Sunday morning. But, equities are edging higher, and semiconductors could lead the way after strong results from Marvell (MRVL) last night. It's not a typical drum major stock, but semis act much better in general, and for me have been one of the standout niches in the market along with shoes and diamonds. There is nothing more fun than a technology rally.
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