We are all trying to figure out exactly what this movement is about, who is taking part in it, and what they want. And some of us are even joining in on the peaceful protests because they know something just ain’t right.

The movement’s greatest strength, and perhaps its biggest weakness is its ambiguity.

The Occupy Wall Street mission statement, found on the official website, lacks clarity,

Occupy Wall Street is leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%. We are using the revolutionary Arab Spring tactic to achieve our ends and encourage the use of nonviolence to maximize the safety of all participants.

The mission appears to be the act of protest itself. But who’s decision is that in the first place? The organization claims to be leaderless… but someone is sitting behind a keyboard somewhere leading the narrative on the ‘official’ Occupy website.

As a strength, this ambiguity has allowed the movement to quickly pick up steam. We are all passionate, angry, vocal, or uncomfortable with a political or economic issue at the moment. Protesting is a unifier.

As a weakness, this ambiguity has made it difficult for many, myself included, to see what the end goal is. Getting out in the streets and protesting a wide variety of economic and political issues may seem thrilling or unifying at first, but what exactly do people want? Every revolution must have an end goal in order for it to succeed. What is the end goal of Occupy?

If I had to sum up what “Occupy” means to me in one word, it would be “change”. But again… that is an ambiguous term.

We are at a period of time in our country where we KNOW we need change – but we don’t know how to achieve it.

Politicians on both sides, who set the course of our country, have failed us. Is there any doubt that special interest and corporate money has compromised what is in the best interests of the country?

The negative attention given to Wall Street seems a little misdirected, in my judgment. It is true that the banks put us in the present economic downturn, but Wall Street greed is more of a symptom of a society gone wrong than a true cause of the discontent in this country.

The REAL problem is that the American Dream is eroding for all but the income elite. The middle class is taking blow after blow, like an underdog fighter on his last legs in the 12th round.

Let’s look at the big picture:

1. Health Care

We’ve seen health care costs increase 6X vs. a 3X cost of living increase.  In 2011, it will have increased 7.6% more. The health of entire families are beholden to one or two family member’s job prospects.

2. Education

We’ve seen educational costs increase 10X in that same period of time. The boomer generation graduated mostly debt free, but for gen x and gen y it’s more common these days to graduate six figures in debt and student debt has surpassed credit card debt.

3. Economy

Globalization has led to the U.S. losing over 5 million manufacturing jobs in the last decade and some of the very same decisions made by our politicians ensured this result. It’s a huge reason why the unemployment rate in the wealthiest country in the world is still over 9%.

We’ve also seen the rich get richer and the poor get poorer. The Occupy group likes to state the top 1% of income earners possess 40% of all assets, but the top 10% possess 80% of all financial assets. The other 90% of the country only holds the remaining 20% of the wealth.

4. Housing

Due to greed and malpractice by banks inflating property values, we’ve seen the housing market in the U.S. (once a sure bet as a wealth builder) completely ruin the financial lives of many families as they’ve had to foreclose and take losses on their homes, resulting in a destroyed credit history. Ironically, those credit histories are now being used as a job applicant screening tool.

5. Work/Life Balance

The average productivity per American worker has increased 400% since 1950. One way to look at that is that it should only take one-quarter the work hours, or 11 hours per week, to afford the same standard of living as a worker in 1950 (or our standard of living should be 4 times higher). Is that the case? Obviously not. The American family could once live comfortably on one income. Now they live very uncomfortably on two. Someone is profiting, it’s just not the average American worker.

According to the ILO, “Americans work 137 more hours per year than Japanese workers, 260 more hours per year than British workers, and 499 more hours per year than French workers.” We have less days off than any other industrialized nation. Our employers are clearly doing more with much less people in order to boost profit.

Check out my post for more on how Americans are overworked. With over 9,000 Facebook likes, it struck a nerve.

6. Environment

We’ve compromised our environment and seen CO2 emissions skyrocket. Despite the obvious fact that should this continue, our existence as a species will cease to persist, the problem has grown exponentially. And our politicians and corporations have watched (even encouraged) it to happen.

7. Money & Political Influence

Money buys ads and resources, which buys elections. If it wasn’t bad enough already (and it was bad), Citizens United Vs. the FEC, a landmark Supreme Court Case, made it legal for corporations and unions to spend from their general treasuries to finance independent expenditures. These ‘Independent Expenditure Only Committees” are unofficially dubbed “Super PAC’s” and they can raise and spend unlimited funds from individuals, corporations, unions, etc.

The Goal to Achieve All Goals

It’s not that Americans want “something for nothing”, as many critics of the Occupy movement have stated. It’s that we want to stop seeing every part of the American dream erode due to decisions that are completely out of our control. Just as our country fought for its own independence from the British empire, we are now fighting to restore and maintain the American dream as it is being ripped away from us. This is what our country was founded on. Can you blame us?

IF the Occupy group wants that to change, their one demand should be to end the influence of money in politics, as it is the one problem that influences all others. Politicians no longer fight for the citizens of this country. They fight for corporations and special interests so that they can get the advertising representation to keep their jobs. It is killing our democracy and our country and it is the most fixable problem. Start there. Three changes will achieve this result, as I called for back in August:

1. Limit political contributions to individuals only, and only $100 to level the playing field for citizens.

2. Eliminate all independent expenditure contributions and immediately overturn Citizens United.

3. Break up the two-party political system (#1 and #2 will help ensure this).

That is it. That is what we need to get change in this country.

Nothing will come from protesting Wall Street bankers. They are the leeches that have been feeding off a system gone wrong. They should be addressed, but they are not the root of the problem. The root is corruption by our elected leaders.

We should be occupying D.C. first. Wall Street’s time will come.

Let the Occupiers know.

Discussion:

What does the Occupy movement mean to you?

Forget Wall St. – Occupy Needs to Head to DC is copyrighted by 20somethingfinance.com without consent to republish.

What was the result of this disturbing and incredibly wasteful trend?

1. An estimated 64 million empty housing apartment units in China that are too expensive for most Chinese families to afford.

2. Occupancy rates in these new cities are at less than 25%.

3. The ‘world’s largest shopping mall’ is almost completely empty.

4. Universities built to accommodate 2.3 million students that have a slightly lower enrollment of a mere 11,000.

Brilliant, guys.

The Get Rich Quick Bug is Universal

If this trend wasn’t disturbing enough on its own, the Chinese are compounding it. It turns out, that just like Americans, the Chinese also love the idea of getting rich quick. They already got the stock buying bug a few years back when the Chinese stock market quintupled in value in one year (yes, I said quintupled, here’s the chart, if you don’t believe it).

Then, the Americans had to have this little thing called “the housing crisis”, driven by a combination of greedy banks looking to bend the rules to maximize profit by lending people more than they could afford and greedy homebuyers looking to profit in a market where home prices were only seen to go up. We all know what happened next. That bubble completely burst. And the American homeowners were slaughtered.

As U.S. and global markets tanked, the Shanghai Stock Exchange did too, and the Chinese stock owner lemmings were slaughtered as well (see chart above).

The Chinese Housing Boom

Having learned absolutely nothing from our greedy blunders, the Chinese are now one-upping us at our own game.

Chinese citizens have apparently been buying second and even third homes as investments in order to resell them at higher prices in the future. As a result, home sales have surged 25% in the first seven months from a year earlier and prices climbed in 67 of 70 cities monitored by the government in the first half of the year.

The lemmings march on…

In an effort to quell the possibility of the housing market completely caving in under its own weight, the Chinese government has raised the down payment for second mortgages, and about 40 Chinese cities have begun to limit apartment purchases to two per family, or one for non-locals. The government has also asked commercial banks to stop offering loans to third-home buyers.

Like any entrepreneurial society, loopholes were bound to be found. Bloomberg reported that couples were now filing for fake (and sometimes real) divorces, in order to buy more homes. And they are being encouraged by banks and home developers (seeking profit) to find these loopholes in order to do this.

All this is happening, in complete denial of the fact that there are an estimated 64 million empty housing units (because most families can’t afford them). If that doesn’t fit the definition of a bubble, I don’t know what does.

All Bubbles…

So what you have going on is speculators buying homes from other speculators – fueled entirely by debt – in one giant ponzi scheme that is bound to come crashing down because nobody can really afford to buy and live in these increasingly overpriced homes.

If the numbers that are being reported are true, there will inevitably be a Chinese housing crisis and it will COMPLETELY dwarf the housing crisis in the U.S.

The Chinese home speculators will be slaughtered. The Chinese banks will be slaughtered. Whatever Chinese stock speculators that are left will be slaughtered. The entire Chinese economy will be slaughtered.

And the rest of the world?

We’ll find out.

The Chinese Housing Crisis that will Send the World into a Great Depression is copyrighted by 20somethingfinance.com without consent to republish.

Having closely watched net neutrality issues and recently, the Canada broadband usage based billing debate, I thought that you and others of your ilk would have learned a lesson about how NOT to do business in the United States. Oh, how wrong I was.

If you hadn’t been paying attention, here’s what you’ve missed.

The Canada Bandwidth Usage Caps Story

The whole Canada usage based billing debate started in May of last year when the Canadian Radio-television and Telecommunications Commission (CRTC), an agency that regulates telecommunication carriers in Canada, issued a decision that allowed Bell Canada to implement bandwidth usage based billing.

Internet use in Canada is through the roof. According to Comscore, the average Canadian spends 43.5 hours a month on the Web, almost twice the worldwide average of 23.1 hours.

So how did Canadians react to usage based billing? Over half a million people signed an online petition demanding that the CRTC overturn their decision.

As a result, the Canadian Government is now asking the CRTC to reconsider their decision and prominent politicians are demanding it.

Comcast and AT&T, the two largest ISP’s in the U.S., should have taken notice. Did they?…

AT&T Usage Caps

…Not in the way you were hoping. Fresh off the heels of the Canada fiasco, AT&T usage caps were announced.

AT&T DSL subscribers will be limited to 150 gigabytes of uploads and downloads per month for regular DSL customers and 250GB of broadband usage per month for U-Verse subscribers.

They claim that this will only impact 2% of users. In reality, it will put the fear in 100% of them.

Both DSL and U-Verse users must pay $10 per every 50GB above the cap they travel. Only users who exceed the new usage cap three times across the life of their account, will be forced to pay these new per byte overages.

Comcast Usage Caps

What I didn’t realize until recently, is that Comcast usage caps have been around since 2009 (I should have known they’d be a frontrunner in this). 250 GB per month, to be precise. Unlike AT&T, who simply charges more if you exceed the cap, they take a more hard line approach. Comcast states,

If you exceed more than 250 GB, you may receive a call from the Customer Security Assurance (“CSA”) team to notify you of excessive use.  At that time, we will tell you exactly how much data you used.  When we call you, we try to help you identify the source of excessive use and ask you to moderate your usage, which the vast majority of our customers do voluntarily.  If you exceed 250 GB again within six months of the first contact, your service will be subject to termination and you will not be eligible for either residential or commercial internet service for twelve (12) months.  We know from experience that most customers curb their usage after our first call.

“We know from experience that most customers curb their usage after our first call.”? Shouldn’t that type of language on an internal confidential memo only? Good one, Comcast.

Don’t Buy the Usage Cap Rhetoric

Both Comcast and AT&T state that these policies benefit consumers by freeing up the network from bandwidth hogs. There may be some truth to that, but if they want to get rid of the true hogs only, then why put their caps at a level that common users can realistically reach if they embrace new streaming audio, gaming, and video technology?

Doesn’t it strike anyone as odd that in a time when bandwidth infrastructure and capabilities should be exploding we are going backwards in time to the early AOL and Compuserve dial-up restrictions? We should be continuing the trend towards more open, not less open.

I think what this is really about is two things:

1. Permitting further delays in upgrades to their networks, further boosting their profits. I don’t know about you, but I’ve been stuck at 6-8 Mbps since the advent of broadband. Meanwhile, 40 cities in Mexico are getting 100 Mbps upgrades from Telmex (from the current 5 Mbps). Mexico will have 20 times faster broadband than most of the U.S.? You see, when there’s no competition, it’s good for your bank account to not do the right thing for your customers. Why not sit and rest on your laurels and hope that you can curb usage habits and get government handouts instead?
2. Halting a drop in cable TV subscribers. More and more users have seen broadband as an opportunity to lower their overall monthly utility costs by getting rid of cable and using online more. Implementing usage caps puts the fear in users, even if most will never reach the cap, to not look at broadband as a viable substitute. Netflix Canada has cited usage caps as the reason behind lower than expected growth.

We’ve seen this story before. The largest mobile carriers have installed very limiting and pricey usage caps and even gone so far as to outlaw mobile VOIP on their networks.

The thing that should concern you is that AT&T and Comcast are, in many parts of the country, broadband internet monopolies. It isn’t as if you, the consumer, have the choice to go elsewhere for serviceable internet speeds when usage caps are forced on you. We have to grin and bare it. We have no choice. Even the biggest proponents of free market capitalism have to turn their heads in shame.

At least there is a little more competition in the mobile space that allows us to look elsewhere…. well, at least until the AT&T and T-Mobile merger is approved.

The bottom line: Internet growth and consumer choice should not be stifled in the name of monopolistic corporate profits. It’s not in your best interest and it’s not in our country’s best interest. It could even be argued it’s not in the company’s best interest.

Don’t be surprised if this is the start of even stricter broadband usage regulations.

Comcast’s hiring of Federal Communications Commission member, Meredith Atwell Baker (who recently approved the Comcast/NBC merger), as a top lobbyist should be evidence that Comcast is mobilizing for more battles. No conflict of interest, I’m sure.

Maybe we should too.

Related Posts:

• Cheapest Mobile Data Plans
• How to Cut your Comcast Bill
• How to Get Rid of Cable
• Google Voice Number Porting

Broadband Bandwidth Usage Caps: It’s Time for Consumers to Band Together is copyrighted by 20somethingfinance.com without consent to republish.

“Traders the Equivalent of Hackers”

It’s titled, “What Business is Wall Street in?“, and I’d recommend giving it a read. It’s a bit of a longer post, so I’ll highlight some of Mr. Cuban’s finer points. First, Cuban likens Wall Street traders to hackers – justifying their existence through questionable benefits to their industry. He then questions the present state of investing versus it’s original purpose:

“Wall Street is no longer what it was designed to be.  Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings.  What percentage of the market is driven by investors these days?“

A Scary Testimony

What’s somewhat rewarding, as an amateur investor – and horrifying at the same time, is Cuban’s admittance that he feels like there is too much stacked against him as an investor these days:

Over just the past 3 years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF.  Combine that with the leverage of derivatives tracking companies,  indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game than I feel increasingly less  comfortable playing. It is a game fraught with ever increasing risk.

What’s scary about this statement is that it’s coming from Mark Cuban. The man is worth $2.8 billion. If a savvy businessman with that kind of capital can’t find his way around the stock market and get proper guidance in how to profit from it – and feels like the little guy getting screwed by Wall Street insiders…. well, you can see where I’m going with this.

Dividends Keeping Him in the Game

Cuban then highlights his investing strategy at the moment – and it’s a good one that I believe in:

The only thing that keeps me in the market is that most of the stocks (not all) pay dividends or some other sort of cash payout.

According to Steven Johnson, director of simcivic.org, “Capital growth in the S&P 500 averaged 2.3% a year from the mid-1920′s to the mid-1990′s. Dividend yields average 4.6% a year, for a combined gain of 7% a year.” That means that 2/3rds of all returns in the S&P 500 over 70 years was from dividends. That is very compelling. And it’s a strategy that I’m starting to believe more and more in over the years.

Cuban’s Solution

My favorite part of Cuban’s post is that he highlights some solutions for this problem that make sense:

My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business.  Whether its through a use of taxes on trades, or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 5 years or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years.  However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy.  It won’t come from traders trying to hack the financial system for a few pennies per trade.

Bravo, sir. Now if we can only get you a job as the head of the SEC.

Mark Cuban Discussion:

• What do you think about Cuban’s points?
• Are you bothered by the fact that a person with Cuban’s wealth can’t find his own way around the market?
• What would you do to fix Wall Street in order for it to be a welcoming place for the little guy again?

Related Posts:

• How to Make a Stock Trade
• Index Funds Vs. ETF’s
• Zecco.com Review

Mark Cuban’s Solutions to Fix the Stock Market is copyrighted by 20somethingfinance.com without consent to republish.

Bizarro Market, Part 1, Stock Indexes Collapse in Minutes as the Computers Take Over

In a matter of minutes, the Dow Jones Average plummeted 1,000 points, nearly 10% of it’s total value. Here’s a look at the Dow chart (the drop happened at about 2:48 PM EST):

We’ll talk about the speculation as to why it happened, but first, watch it happen live on CNBC as the talking heads start to panic:

If I understand what I’ve been reading, this crash was caused not by fear of the debt crisis in Greece or other legit economic indicators, rather, it was caused by algorithmic trades that automatically kicked in when the market index dropped below it’s 100-day and 200-day moving averages.

For anyone who was 100% invested into one of the major stock indexes today, at one point you lost 10% of your net worth, your life savings, because investors had passive, indiscriminate computerized trades ready to go and execute based on an algorithm.

Is that less than absolutely frightening for anyone with money in the stock market? Yes, the market did rebound and ended the day down a mere 347 points, but there were undoubtedly many who bailed on the collapse much lower than that.

Bizarro Market, Part 2, Proctor & Gamble

The other really bizarre thing that happened today was the shares of blue-chipper defensive buy Proctor Gamble (PG), dropping over $22 (or 37%) almost instantly. Nobody really knows what happened, but it has been speculated that someone entered a trade that was an error. Too many zeros, if you will. Instead of 1,600 shares, they accidentally tried to sell 16 million or so. Oops!

Really?

Where do we go from here?

I know that in order to beat inflation I need to invest my money in some form of equity. But days like these really question my faith towards the stock market and what media and technology has turned it into. I don’t want my life savings, years of determined hard work to vanish instantly due to media panic or computer generated algorithmic trades.

Do you?

I’m off to look into that EverBank Diversified Metals CD a little more closely.

What’s your taken on the market? Is it completely broken? Where are you putting your money?

Related Posts:

• 8 Personal Finance Spring Cleaning Moves
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Stock Market Crash of May 6 2010 Highlights a Broken Market is copyrighted by 20somethingfinance.com without consent to republish.

Kiplinger.com recently made the argument that despite all of the market turmoil, there are some things going right. I thought the list was worth repeating, since we need some positives in these tough times. Rather than trying to fool yourself into thinking that things aren’t so bad, you may want to look at these as opportunities to take advantage of. I’ve added some personal commentary and thoughts on how to take advantage of some of these opportunities.

1. Oil Loses It’s Swagger

Sure, gas has fallen to under $2.50 per gallon. On the surface this looks great, but I worry that if this trend continues, then buying habits are going to trend back towards large gas guzzling vehicles. Look at this as an opportunity to perhaps get a fair value for a gas guzzler that you’ve been trying to unload. I don’t see oil staying this low for long.

2. A Tipping Point for the Auto Industry

A dip in auto sales is a positive in that if you are in the market for a new vehicle you can surely find some great deals out there on 2009 models, and even better deals on 2008′s. Automakers are using these incentives to lower their inventory. As they cut production capacity to align with lower sales, incentives will be harder to find. If you were going to buy a vehicle in the next year or so, now would be a good time.

3. Interest Rates are Low and Headed Lower

The fed just lowered rates again, and they don’t have much lower to go. Rates on long-term loans may have a little further to drop (30 year fixed is a 6.5% at the time of this post), but they are still near historical lows of 5.8%. This presents a good opportunity if you plan on buying a home.

4. Homes are More Affordable

I can see home prices dropping a little further in the next year or so, but not too much. The housing market has really taken a hit, and it looks like we’re nearing a bottom. These things are always hard to predict, but if you’re in the market for a house, it is a good time to become a homeowner.

5. Your Bank Savings have Never Been Safer

As part of the financial bailout, the Fed raised FDIC insurance coverage from $100,000 to $250,000. I don’t see this as much of a benefit to readers of this blog unless you had more than $100,000 in a bank account. If you’re under 60 years old, you probably shouldn’t have that much in a bank account, your money should be working for you elsewhere.

6. Stocks are on Sale, and Many Bonds Offer Terrific Yields

This is indeed a great opportunity to buy great stocks at a steep discount to where they should probably be priced. I’m not an expert on bonds, but if someone reading this is, please chime in.

7. The Miracle of Technological Innovation Continues

Kiplinger refers to tv’s, laptops, and home theaters being cheaper than ever. Not sure why they raised this point, considering the fact that they are a personal finance content publisher that advocates frugal spending. One of the biggest drivers of debt is the feeling of need to own the latest technological gadgets. Save your money, keeping up with technology isn’t a battle that can be won without high expenditure.

8. Prosperity Reigns in the Heartland

The fall harvest is shaping up as one of the best ever, despite the destructive weather and floods in the Mississippi River corridor since last spring. Exports of U.S. farm products will increase more than 40% by value this year. And recent years of high profits have allowed farmers to pay down debt so low that it accounts for a measly 9% of their assets — providing all the credit they’ll need for 2009 operations. At home, while food prices jumped sharply earlier this year, the weak economy is now expected to slow further price increases. (Consider Maine Lobster, now selling for only $5.99 a pound).

I have nothing to add to this other than I think it’s great that prices increases will slow, but with the price of oil sliding and the economy slowing, we should truly see food prices decline. Unfortunately, I seriously doubt this will happen.

9. A New Tone and Direction in Washington

Financial markets should see a boost with a new President in office (things can only get better, right?). This is just another reason why stocks might be in buy territory. It also looks like you’re probably going to be seeing less of a tax burden over the next four years despite who wins the election.

10. Shoppers Can Expect Great Gift Buys this Season

This is a good thing if you like to buy people a lot of junk around the holidays. I tend to opt for experience gifts such as tickets to entertainment, dinner and movie, sporting events, etc., so I personally don’t see much of a benefit here, but you may.

What other opportunities do you see right now that could have a positive impact on your finances?

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• 8 Rules you Must Follow when Investing During a Recession

10 Opportunities Created by a Slowing Economy is copyrighted by 20somethingfinance.com without consent to republish.

Warren Buffett made news the other day in a New York Times opinion piece where he stated that he is moving 100% of his assets from U.S. government bonds into U.S. equities (stocks). When the richest guy in the world, a man who made his fortune through wise value investing, says that it’s time to buy, people tend to listen. Let’s take a look at what Buffett says.

Warren Buffet’s Reasons for Moving 100% of his Assets into U.S. Stocks:

1. Buffett invests by the motto “be fearful when others are greedy, and greedy when others are fearful”.

If you believe in Buffett’s motto, then now is a great time to buy. We haven’t seen this much fear and volatility in the market since the Great Depression. Could people get more fearful than this? To succeed in investing, you need to get over the fear of investing.

2. Buffett believes that a rebound will happen prior to economic conditions improving.

He believes this because during the Great Depression, the Dow hit it’s low in July of 1932 even though economic conditions worsened until FDR took office in March of 1933. Despite the economic decline, the Dow advanced 30%. Those who waited for the economic recovery missed out on the gains.

3. We’ve been through so many tumultuous periods of time and equity value has increased.

Buffett calmly states that the 20th Century provided “two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

4. Cash is a terrible long-term asset that is certain to depreciate in value.

On this point, Buffett is correct. If you stay in cash, you’re bound to get dominated by inflation over time. Buffett then goes on to state that “the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.” I couldn’t agree more with this statement.

My Thoughts on Buffett’s Mottos:

I agree with just about everything Buffett stated. He was very careful not to say that he doesn’t know where the market will be tomorrow, in a month, or even in a year, but does think that in 5, 10, or 20 years, stocks will go up.

I do think he could have further clarified what type of stocks to look for in this type of a market versus giving a blanket statement that he’s getting 100% into them. Many companies will not survive this credit crisis because they don’t have enough cash on hand and won’t be able to meet stricter lending standards.

I am also a little surprised that Buffett was 100% into U.S. Government bonds prior to making this statement. This implies that he is a market ‘timer’. Was his decision to do so smart? In hindsight, absolutely. If only I had listened to my senses when the Dow was overvalued at 14,000 a year ago, I wouldn’t mind dumping more money into the market right now either (I probably will anyways).

What if Buffett is Wrong?

There is always a possibility that the economy won’t recover and is headed lower 5, 10, and 20 years from where it is now. If this is the case, my guess is that we’ll have catastrophic conditions worldwide and 401K statements will be the least of our concerns.

One thing seems almost certain – we’re going to encounter higher inflation levels than we’ve enjoyed over the last 15-20 years. Cash is not the way to go. Gold, silver, tangibles, TIPS, and undervalued market leading equities seem like a solid bet.

If you are going to go the stock route, which would not be a bad choice, you must choose the right type of stocks. More to come on this shortly.

Buffett Discussion:

• Do you agree with Buffett?
• Where is your money right now?
• Does Buffett’s piece inspire you to get back into stocks if you had moved to cash?

Related Posts:

• Review of Zecco
• Buying Stocks in a Recession
• Index Funds Vs. Mutual Funds
• Emergency Funds Guide

Warren Buffett is Moving 100% into U.S. Stocks. Should you? is copyrighted by 20somethingfinance.com without consent to republish.

For those of us whose with retirement savings that are 100% based in stock market funds, the last year has been a bumpy ride. Many of us have seen our 401K balances drop 40% or more, corresponding with equivalent losses in the major market indexes. The market’s performance brings up a few serious questions:

“Can my retirement plans rely on past stock market performance continuing into the future?”

“What if the stock market drops like it has when I’m nearing retirement? Will I have to keep working?”

“How do I save for retirement during times like this?”

If this economy has you second guessing your retirement strategy, it’s time for a reality check.

The Absence of a Pension is a Game Changer

I was speaking with a neighbor the other day who is nearing retirement age. He has about $10K left in payments on the house as his only debt. Additionally, he gets a pension payment of $2,400 a month (adjusted for inflation), his health care is covered for life, and he received a hefty cash settlement as a buyout.

My father will receive 75% of his final salary when retiring as part of his pension plan, all health care covered, and he has also built a rather hefty 401K. Both my neighbor and my father were public sector employees. In combination with social security, they are set for life financially and aren’t overly concerned when the stock market takes a turn for the worse. However, this type of financial security is now looked at as a luxury, and not a right as it once was.

An Assault on Financial Peace of Mind

There has been an obvious assault on defined benefit pensions over the last decade or so, and I’m not sure that the current generation of young professionals fully understands the implications of what that means for our futures.

Long gone are the days when you could put in 30 years at a company and be covered for life through pension payments and health care coverage in retirement. Employers and employees both now look at employment as a temporary paid professional relationship with no long-term guarantees or security. This philosophy may be good for those wanting a variety of experiences in their careers, but it is horrible for those wanting financial stability and peace of mind in retirement.

Social Security will Cover my Retirement, Right?

Social Security is insufficient as a solitary means for retirement income. The Social Security Administration has a retirement benefits calculator that will quickly estimate how much you will receive in retirement in today’s dollars. Based on estimates, I would be able to replace less than one-third of my current income through Social Security benefits.

Although many experts may disagree with this statement, when planning for retirement I’d recommend looking at Society Security benefits as bonus income that shouldn’t factor into your retirement planning. Who knows if it will even be around in 40 years?

How Much Should I Save for Retirement?

This is a much debated topic that cannot be easily answered with generalities that fit all people. Many experts say you should save enough to replace about 80% of your pre-retirement income. Others argue for replacing 100% of your salary or more and point to the fact that many retirees want to travel and end up spending more than they previously had while working.

Everyone has a slightly different view of when they want to retire, how much they want to spend in retirement, and how much they want to save now. This is an area that should be fully explored through self education and even through speaking with a financial adviser.

Retirement Calculators

Along the way, there are many retirement calculators available that can be of great assistance in terms of giving you a better idea of how much of your current salary you should be saving. When using them, please be aware that that they will all use a slightly different methodology to arrive at their projections.

• Fidelity MyPlan Retirement Calculator
• Vanguard Retirement Calculator
• Bloomberg Retirement Calculator
• TD Ameritrade Retirement Planner

Additional Retirement Considerations Given the Tough Economy

1. If you currently have an employer that matches your contributions all the way up to the IRS maximum, and you can afford it, max out your contributions. In general, everyone should take advantage of the full amount of their employers matching benefits if they can afford it.
2. If you are married or otherwise have joint finances with another, strategize in a way so that both of you are taking full advantage of employer matches. This may mean that one of you decreases your contributions so that the other can increase theirs.
3. If you live comfortably, have no short-term financial goals,and have additional income available to be save towards retirement, why not save it?
4. Use the recent economic crisis as a means for motivation to save as much as possible towards retirement. Don’t become so discouraged with recent retirement savings losses that you stop saving altogether
5. If the only experience you have with retirement is through witnessing your parent’s behaviors, it’s time for a reality check. Different generations require a different approach towards retirement. Your parent’s financial stability may provide you with a false sense of security when it comes towards saving for retirement.

Retirement Planning Discussion:

• What is your retirement savings strategy?
• How has the economic crisis effected your retirement plan?

Related Posts:

• Roth IRA Guide
• IRS 401K Maximum Contribution Limits
• The First Steps to Stop Dreaming & Start Retiring
• Retirement is Dead. Now What?

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