Crocodile Tears for Wrecked Retirements

  • BlackRock CEO Larry Fink “billionaire-splains”
  • Yay! Who wants to “work longer” and “take investment risk”?
  • The Fed’s illuminating balance sheet
  • Short and sweet: COVID recession (riiiight)
  • Beelzebezos in space
  • How the IRS “gets worse every year”… The trouble with term limits… And more!

Oy. This guy…

CNBC

Larry Fink — head honcho of the world’s biggest asset manager, one of 600-odd billionaires in these United States — is telling you, Mr. and Ms. Middle America, how to get by in the world he and his friends made.

“Unquestionably, as central banks keep rates low,” he told CNBC last week, “the savers are getting slammed… Many of the savers are now more confused, and I think some of them are now, finally, entering into equities and other asset categories as a part of it.”

In other words, by buying stocks they’re stepping out further on the risk curve than they’re really comfortable doing.

Likewise, he also said, “People are going to have to, unfortunately, whether they like it or not, they may have to work longer because they’re not earning the same returns on their savings.”

To our astonishment, Fink tries to come off here like a disinterested observer of the passing scene — or even a benevolent figure, a kindly Daddy Warbucks looking out for the interests of benighted orphans of the financial storm like yourself.

“We are going to have to address what I would call the silent crisis of retirement,” he said at one point.

In reality, Larry Fink is one of the reasons matters have reached this sorry state.

You’d never guess from his remarks that Fink’s firm, BlackRock, is thick as thieves with the Federal Reserve, would you?

Recall that on March 23, 2020, the Federal Reserve threw the kitchen sink at the financial crisis brought about by the pandemic and lockdowns. The Fed would buy not only Treasury debt and home mortgage debt, but also corporate debt and municipal debt.

The day after, the Fed retained BlackRock to manage $750 billion in planned purchases of corporate bonds. The day after that, the Fed retained BlackRock to manage its purchases of bonds backed by mortgages on commercial property.

In addition, Fed records show Fink spoke on the phone with Fed chair Jerome Powell four times between March 19 and May 13, totaling 90 minutes.

Asked by a reporter on July 29 what they talked about, Powell said, “I can’t recall exactly what those conversations were, but they would have been about what he is seeing in the markets and things like that to generally exchanging information.”

Uh, what kind of information?

“The chairman of the Federal Reserve sits on a pile of market-moving information and is expressly forbidden from ‘exchanging information’ with a Wall Street investment manager if it is inside information,” wrote Pam Martens and Russ Martens last year at Wall Street on Parade. “That’s why any phone calls of this nature are problematic and raise serious red flags.”

The Martenses also point out Powell’s own money is invested with BlackRock and its iShares ETFs, perhaps as much as $25 million.

In any event, Fink knows damn well that the Fed’s policies dating back to 2008 are the reason millions of Americans face the prospect of “working longer” and “ramping up their investment risk.”

It’s obvious to anyone now, more than a decade after one of Powell’s predecessors, Ben Bernanke, defended these policies in The Washington Post of Nov. 4, 2010.

He acknowledged that juicing the stock market was his explicit aim, on the preposterous theory it would generate a “wealth effect” — although he didn’t use those exact words.

“Higher stock prices,” Bernanke said, “will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Yeah, how’d that work out? The 2009–2020 economic expansion was the weakest in post-World War II history. Even before the pandemic, tens of millions of Americans were still living on the edge — especially the 45% with no exposure to the stock market whatever.

We were reminded of Bernanke’s fatuous Op-Ed the other night while watching The Power of the Fed — a new PBS Frontline documentary.

Considering the source, this history of monetary policy starting with the Panic of 2008 and continuing through the present is shockingly good.

Of course, the ground it covers is ground that was trod by The 5 in real-time. We said all along the Fed’s machinations wouldn’t achieve their stated aims. But unless you’ve been with us from our beginnings in 2007, it’s worth the 53 minutes to watch…

The Power of the Fed

… although we daresay it will be more illuminating if you follow along with this chart at your side. This is the Fed’s balance sheet, as vivid an illustration of Wall Street’s addiction to the Fed’s easy money as you’ll find.

Supplement to the Frontline Documentary

Yes, there’s a point to this rant/ramble…

Larry Fink is the reason I show up for work each day. Not him specifically, but the culture he comes from and the rot he represents.

Because I think you deserve better than to “work longer” and “ramp up your investment risk” to have a quality retirement.

You’ve already taken a crucial first step to achieving that quality retirement. You’ve bought one of our firm’s paid products.

That means you’ve got the independence of thought to reject the pabulum dished out daily by Wall Street’s media lackeys. It also means you had the curiosity to seek out a better way to manage your nest egg than the 60-40 portfolio or target-date funds or other vehicles that are irrelevant if not downright dangerous in the world made by Larry Fink and his friends.

It’s a world in which the top 0.1% are the only people who are substantially better off now than they were at the dawn of the 21st century… because they’re the ones closest to the Fed’s money spigot and that’s how they’ve rigged the system for themselves.

The 9.9% below them are holding their own because the top 10% combined own 85% of all the stocks. But the 45% who own the other 15% of the stocks continue struggling… and the 45% who own no stocks at all are sinking further into a permanent underclass.

And so we reaffirm our commitment to you today, dear reader: Our objective is to help you move from wherever you are now to the next highest level.

On behalf of all our editors, analysts and gurus… I thank you for your trust, and we know we have to earn it anew every day.

To the markets, which are shooting nearly as high as Jeff Bezos’ spacecraft. Go figure, the Dow has already recovered more than 500 of the 725 points it shed yesterday.

The Dow fell hardest yesterday and is rallying hardest today. For its part, the S&P 500 has vaulted back above 4,300 and the Nasdaq is no worse off as we write than it was at the end of last week.

The media are still sticking to the narrative that yesterday’s drop was a reaction to rising COVID case counts. But if that’s true, the news overnight that Apple is pushing back its return-to-office deadline by a month — to October at the earliest — ought to be a stiff headwind today, right? Instead, AAPL shares are up nearly 2% at last check.

Then again, Jim Bianco of Bianco Research points out on Twitter that in recent days, the “reopening” stocks took their biggest hit since Pfizer’s announcement of a vaccine breakthrough last November. “The market sees what’s coming,” he says, “and it does not like it.”

We can’t dismiss Mr. Bianco out of hand, seeing as he was one of the lonely voices in January 2020 warning the virus would upend the world as we know it. Now he’s looking at the rising case counts and wondering how the politicos will respond. “Empty NFL stadiums Week 1?” he asks.

Hmmm… The Cowboys-Bucs season opener is 52 days away…

Gold is still above $1,800, but silver has sunk below $25.

For the record: The COVID recession was the shortest in U.S. history — if the National Bureau of Economic Research is to be believed.

The economy peaked in February 2020 and bottomed in April. Two months. So proclaimed the NBER yesterday.

A couple points of background: First, the NBER is not a government agency. It’s a nonprofit located about four blocks from the Harvard campus in Cambridge, Massachusetts. In a process no one has ever fully explained, the NBER has acquired cachet over the decades for declaring the start and end dates of recessions.

Second, at the risk of belaboring the obvious, the end of a recession defined by the NBER does not mean happy days are here again. It merely means the worst is over.

Although even on that score there’s an eye-of-the-beholder quality: By the NBER’s reckoning, the “Great Recession” ended in June 2009. But the unemployment rate didn’t peak until October.

Turns out you didn’t have to subsidize Jeff Bezos’ rocket ride this morning after all.

Last month we noted how the Senate gave overwhelming backing to a $10 billion handout to Bezos’ Blue Origin space venture — a sort of consolation prize for a NASA contract that went not to Blue Origin but instead to Elon Musk’s SpaceX, courtesy of Amazon home-state Sen. Maria Cantwell (D-Washington).

Turns out the proposal died a quick death in the House. So much for that.

Meanwhile, elsewhere in Beelzebezos’ empire…

Newspaper Billionaires

Heh…

To the mailbag: “I’ve used the ‘Free’ File Program (Intuit’s TurboTax) for three years in a row and it’s gotten worse every year,” a reader writes.

“This year (for 2020 filing) none of the Help links worked. I used the paid TurboTax for many years while I had a business and it used to be good, but since I’m now retired, I didn’t want to pay so much for it.

“This coming year’s filing (2021) I plan to use Credit Karma free tax filing (Free Tax Filing Online – $0 State/Federal | Credit Karma Tax®) assuming it is still available by then. I used it before I used the IRS’ program and it was good. I should’ve used it this year but I thought I’d try TurboTax again.

“The point is there are several other companies offering free tax filing for simple tax (which most people use). I don’t think the government should get involved. Every time they do, they **** it up. Just look at the mail system, or Amtrak.”

“I don’t think anyone wants a constitutional convention called,” a reader writes.
“I don’t think anyone would trust our poor excuse for representation to change the Constitution.

“Although calling a convention of states would be much safer than having our illustrious Congress back in session on a normal day.

“In a convention of states, all of the changes that would be voted on have been pre-determined and approved by a majority of the states. The states would then send representatives to Washington, D.C., to attend the convention and vote on the approved articles, and only the approved articles. The only thing Congress has to do with the process is to call the gathering to order. Then they’re out of the picture.

“Now you know why they spread so much disinformation and fear by referring to it as a constitutional convention. They are scared to death of a convention of states that would call for term limits and securing our borders and our election process. Who knows? After it’s all over they may even have to stick to a budget from then on.

“I know, wishful thinking…”

The 5: Well, there’s only one instance of a constitutional amendment passed by state ratifying conventions — the repeal of Prohibition in 1933. So the technique has a 100% track record of achieving good things!

Meanwhile, gotta say it again: Term limits don’t solve anything. We’ve had ‘em here in Michigan for nearly 30 years. All they’ve done is create an entrenched caste of lobbyists and legislative aides who build entire careers passing through the revolving door in Lansing.

We’re all for citizen lawmakers… but not if they’re rendered mere figureheads.

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Congratulations to Technology Profits Confidential readers — who just banked 200% gains in 15 months playing the graphics chipmaker Nvidia.

Editor Ray Blanco has had his readers in and out of NVDA for nearly a decade, with well-chosen entry and exit points. The recent sell-off in cryptocurrencies poses a near-term threat to NVDA, but Ray has every expectation of recommending it again in the future.

Until then, here’s the tech idea that’s got him most excited right now.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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