Unfortunately I don’t think you’re going to be able to stop working when you’re 60-years-old and then live off the fat of the land until you die. Please consider the following questions:

Will the dollar be seriously devalued in our lifetimes?

Will Social Security and Medicare survive?

Will the cost of health care continue to go up?

Will wages keep up with inflation?

Will corporations continue to outsource middle-class service jobs to other nations?

Will the stock market provide suitable returns to your 401k?

Will the government increase taxes to make up for their haphazard spending?

And most importantly…

Will you survive to the age of retirement?

What are you going to do when (and not if), the social netting holding our parents hand into retirement falls apart? Hell, even they are going to have a harder time retiring.

That said, here is a reasonable retirement plan:

1. Save $10,000 a year.

2. Put into CD’s, gold, and a basket of foreign currencies, and nothing into the stock market casino. Forget about hefty returns and focus more on retaining what you have earned. People go to great lengths to shop around and get a good deal on a laptop or digital camera but don’t mind “investing” thousands of dollars into companies and funds they know little about

3. Get a reitirement visa at age 60 to a country that has low cost and reasonable health care, like Ecuador, Colombia, or Argentina. Countries in Southeast Asia would also be suitable.

4. Die.

If you save $10,000 a year for 30 years during your prime earning years (30-60 years old), you’ll have $300,000. Assuming it holds its value in today’s dollars (ha!) or you invested wisely, you can live comfortable in a place like Cuenca, Ecuador for 25 years at a cost of $1,000 a month. That money would last you until you’re 85, without having to depend on your incompetent government.

I’ve been working at the same bar for about four months now. One of my shifts is lunch and during that time I get the occasional person who comes in to fill out a job application. My record for most applications I gave out in a day was five.

Well I go in on Monday night and there is a stack of paper by the bar. Turns out the day bartender collected over 15 job applications for server and bartender positions during her shift, and gave out half-a-dozen more. She said she felt like an HR person, answering questions and giving out pens. At one point six people were simultaneously filling out applications at the bar. Quite a few papers were actual resumes, with years of professional experience but no restaurant experience. Many graduated from very expensive private colleges (Duke, UVA).

And this is Washington DC we’re taking about, a city with supposedly the strongest job market in the country. It seemed like a giant factory closed down on Friday.

1 pair jeans
1 pair shorts
6 t-shirts, 6 pairs black socks, 6 pairs boxers
1 belt
1 long sleeves jumper
1 pair running shoes
1 pair casual Adidas shoes

That’s all I had for six months. I had to do laundry each week but I was covered for hiking on mountains, walking on the beach and drinking at bars and clubs. Everything I had matched everything else and I didn’t have to spend more than 10 seconds a day with my dress.

When a friend recently told me that all the pictures he has of me is in the same shirt, one my sister picked out for me in Macy’s that cost $25, all I could do was shrug. I’ve worn it at least a dozen times and will literally wear it out until it disintegrates, just like what happened to my last pair of jeans. It doesn’t bother me that a bartender at my favorite bar probably thinks I have no clothes. There’s no reason it should.

Guys have to be a little careful about what they choose to showcase. If it’s money then they will attract girls who like money. If it’s style then they will attract girls who like style. If it’s personality, then well, you get the idea. I can’t say any girls I’ve gone out with recently have been high-maintenance, and that’s just how I like it.

I think I will replace my old brown t-shirt next month. Let me gear up the budget for the $20 cost.

After a night at the theater, I posed a hypothetical scenario to Roissy…

“So the economy is going down the shitter,” I said. “Let’s say it’s worse than the Great Depression—absolute worst case scenario.”

“Alright,” he said.

“And retail dies, putting a lot of young girls out of work. And since there is no more credit student loans are history and a generation of girls are unable to go to college because they can’t find a job to pay for tuition. It’s just an ocean of poverty and joblessness. Okay, how much is the average first date?”

“$40 maybe.”

“Now because of the poverty you have millions of girls who would do anything for money. Imagine for only $20 very cute girls who are no more whores than the ones we sleep with would let you ravage them any way you see fit. Just a straight-up transaction. That $20 is less than a typical first date, which is no guarantee for sex. Would you?”

“Hmm, I don’t know,” he said. “How about getting that thrill from the chase? The sense of accomplishment?”

“For $20 who cares?! Overnight guys would stop paying $1500 workshops to get laid. $20 sex with a ‘normal’ girl would make game obsolete. My book sales would plummet.”

I predict that in the next two years meeting girls in the cities hardest hit by the economy will be even more difficult for the average guy. With less disposable income girls are going to stay home more instead of going out. Empty bars and clubs mean guys will be more reliant on meeting girls through friends, family, Myspace, and work. There will be less pump and dumps as guys will want to keep what they managed to get, as they themselves are strapped for cash and meeting girls does cost money. The only guys immune will be those in college, who will graduate to a barren landscape—in more ways than one. More than ever it’s important to have a developed niche where your supply of poon remains uninterrupted in the face of economic uncertainty.

Take a look at this currency chart of the Brazilian Real versus the U.S. dollar. The Y-axis is how many reals you can get for $1:

It has lost almost 50% from its peak. If this holds then that means when I go to Brazil everything will be half off. Other Latin currencies are also struggling. As the Chinese would say: in every crisis there is opportunity. For American men everywhere this is incredible news. For the same budget you can double the amount of time you stay in Brazil.

Also, I hope you guys liquidated all stock holdings in your 401k’s. Otherwise you’re getting murdered. I wonder if one day we’ll look back and consider it crazy to put retirement money into company stock.

Postscript: I need to step away from the internet.

Roubini:

At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the US and advanced economies contraction would be short and shallow – a V-shaped six month recession – has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the US and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown the probability that the outcome could become a decade long L-shaped recession – like the one experienced by Japan after the bursting of its real estate and equity bubble – cannot be ruled out.

And in a world where there is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero.

At this point the risk of an imminent stock market crack – like the one-day collapse of 20% plus in US stock prices in 1987 – cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown.

Denniger:

The selloff this afternoon is the “real deal.” It was not caused by the stock market getting “mad”, it was caused by the short-term credit market along with the Treasury market suddenly dislocating at a few minutes before the bond pit closed at 2:00 PM.

Worse is also the fact that institutional lending has essentially disappeared – both between banks and now it is choking off commercial short-term credit across the board.

It doesn’t get any more serious than this. To repeat: short-term commercial credit is threatening to completely disappear from the American scene.

Every action our government has taken thus far, including repealing mark-to-market requirements have made the situation worse by further destroying confidence.

In the overnight market the futures are imploding once again; the Osaka exchange was closed in Japan after hitting its “lock limit” within minutes prior to the Nikkei opening; the Nikkei is now down ANOTHER 10%, for a total loss of nearly 20% in just two days, with Japanese banks trading “offer only” – that is, NO BID. There are rumors of government bond market fails in parts of Europe, and Iceland has essentially been cut off from the rest of the world Interbank marketplace.

Mish:

The global economic dam has now cracked wide open. Water is pouring everywhere. The bursting of the dam is a fitting tribute to Paulson’s and Bush’s $700 billion boondoggle to add liquidity to banks.

The public was overwhelmingly against the plan (and rightly so) as were close to 200 economists. Paulson, Bush, Trichet, and Brown all goaded Congress to waste $700 billion of taxpayer money on grounds there would be a global meltdown if the plan was not passed. Congress had it right the first time. The $700 billion bailout helped bust the dam.

Neither the Bush administration nor the fools in Congress voting for the bailout bothered to figure out you cannot patch a failing dam by adding water.

Liquidity measures cannot and will not work, when the disease is the Fed, reckless Congressional spending, and fractional reserve lending carried to extreme.

Postscript 2: More Denniger

Oil will collapse in price to $20/bbl. Unfortunately nobody will have any money to buy gasoline, or a car, so it won’t matter. As in The Depression millions of automobiles will be scrapped after being abandoned by their owners for lack of insurance and registration fee money. Cheap scooters will become the dominant form of transportation for those with jobs, as they will be all most people can afford.

As credit collapses distribution of food and other essentials will break down. Unable to access credit, trucking companies will be unable to get goods to market. The current distribution system for food requires travel of over 500 miles from production to consumption; this is untenable in a market where stable credit is unavailable. Food distribution will be severely impacted and in some areas may break down below critical levels.

Unemployment will reach 25% within two years. Median income will fall by 30% nationally. Foreclosures will reach 20 million homes. The government will step in with HOLC-style remediation but it won’t matter – the unemployed won’t be able to pay irrespective of the price.

House prices will fall to well under $100,000 nationally on a median basis but with lending all but non-existent you’ll need 50% down. A few people will make out like bandits near the bottom, being able to buy up homes for $10,000 each in blocks of 10 at a time – for cash. 60% of America will be renters; nearly half of all homeowners will ultimately lose their homes to foreclosure.

Civil unrest will break out in major cities when incomes fall but the cost of food and essential services fail to come down materially, leaving millions of Americans hungry, broke and homeless. Unlike in the 1930s America will not quietly stand in soup lines – instead they will riot, loot and burn. The National Guard will be called up but will find it impossible to exert meaningful control without shutting down all commerce in the affected areas. The decision will be made to cordon off the cities and deny entry to anyone who does not live in that specific neighborhood, essentially shutting down commercial activity. GDP will fall by 30%.

The Dark Knight, the worst movie of the year, broke a record for the fastest to reach $500 million in film history. Here’s why it means nothing…

1. Ticket prices go up every year. I don’t believe I let my friend pay $11 for me to see The Dark Knight. In college a ticket at the newest theater with stadium seating cost me $7. That’s an increase of 57% in 7 years. But…

2. Box office grosses are not inflation adjusted. Especially not when reported by the MPAA. That’s why each sequel of Spiderman and sorry Star Wars kept breaking records. And even if they were inflation adjusted…

3. The U.S. Governments CPI which is used to provide inflation adjusted figures is pure fantasy. Since the 90′s the CPI has been grossly under reporting inflation. It barely accounts for the things that are actually going up in price (food and gas) because they are too “unstable.” No shit.

Why aren’t box office numbers measured objectively with number of tickets sold? Because ticket sales are flat. No hype can be created in flat numbers and no records can be broken. The music industry uses objective numbers with album sales and look how far that has gotten them the past decade. (No music record involving physical CD’s will be broken ever again from this point on.)

Box off records are propaganda to get you excited about seeing increasingly bad movies that cater more and more to teenagers, a reliably bored audience that swallows tripe like The Dark Knight.

“The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated.”
-Wall Street

On Saturday night at 2:40am outside a bar I got to talking with a group and it somehow led to the financial mess (this being DC and all). I expressed my staunch opposal to any bailout of the bankers and one of the girls in the group said the following: “So you want the next Great Depression?”

Bailing out big banks will not avert anything. Not a single foreclosure will be avoided. Not a single, honest middle class job will be saved. Not a single home will go up in price. The only job created will be the bureaucrat in the treasury writing checks to Washington Mutual, Wachovia, Goldman Sachs, Merryl Lynch, and so on. This bailout will only prop up bank’s paper mortgage security holdings so they can survive. They will be rewarded for speculation and fraud and you will be stuck with the bill. The dollar will fall and generations to come will be dealing with the mess. Don’t believe what Comrade Bush, Paulson, and Bernanke are telling you.

The U.S. debt obligations ($10-12.7 trillion, depending on who you ask) will never be paid. The faster it goes up the sooner we face end game—default or hyperinflation, maybe in our lifetimes. Congress will soon vote for a bill on this latest bailout. They will approve it and slap those in the face who are prudent with their money, save, and follow the rules.

Earlier in the night I talked to a friend who works for a Congressman. I asked her, “Does it really matter if I write to my Congressman?”

She said, “Well if a lot of people do, yeah.”

Take five minutes right now and write your representative, even if it’s just a two sentence message stating your opposition. Tell them to filibuster the thing if they have to. And then do it again tomorrow. You either believe in free markets and capitalism or you don’t.

For more on what you can do read the following by Mish:

Lies From Paulson Keep Stacking Up: What You Can Do About It

And here’s a no bullshit interview with Ron Paul describing why this bailout is a horrible idea.

“If it doesn’t pass, then heaven help us all.”

Allow me to teach you what a credit default swap is and why it’s so important to what is happening to the economy today.

Virgle Kent borrows $50 from me. I want to get insurance on his debt in case he goes broke. I go to Roissy and say, “Hey, Virgle Kent owes me $50. Can you insure that debt?”

“I’ll insure it if you pay me $4 a year,” Roissy says.

“Done!”

Roissy is betting that VK will pay me back, especially since he did his homework by looking at VK’s credit rating and saw it was superb. Roissy wrote me a credit default swap, an unregulated derivative invented in 1995 by JP Morgan.

Unfortunately Roissy has some problems with his business, and he no longer even has $50 to pay me in case VK goes broke. The premiums I gave him are long gone. Credit agencies notice this and tell Roissy to find some cash or his credit rating goes down. Roissy is fucked because if his credit rating goes down then he won’t be able to raise cash at good rates to keep his business open (today’s large businesses need a constant flow of credit to maintain operations). Sure enough his rating gets killed and Roissy goes bankrupt.

Now I’m in trouble. The debt I had on my books that was insured is now uninsured. The agencies look at my books and see I have this exposed debt and they downgrade my ass. I have no choice but to enter bankruptcy as well. But I happened to be knee deep in the CDS game too. I wrote a ton of them for Arjewtino, insuring the debt owed to him by other parties. When I go down it puts pressure on him. Like dominoes we fall.

In the carnage it turned out that the ratings we used to judge each other’s debt worthiness was bogus from the start. Essentially we all gambled like we would at a blackjack table, but we did it while drunk. And blind.

The insurance company AIG wrote $78 billion worth of swaps.

Ivy League MBA’s turned the CDS into an even more insidious device. In ways that I will not begin to understand, swaps were used not just to insure against debt but to speculate if companies would fail or not. It turned out that while VK only owed me $50, there were swaps written worth $500 between parties that VK didn’t even know about! The swaps became a means to make money instead of a simple insurance policy. This was enabled by a government run by politicians whose treasure chests were stocked full of kind donations from the big bankers. They did not hesitate to look the other way.

A lot of swaps were written by banks and businesses that are now very sick from making bad bets and possibly outright fraud in the housing boom. (Who would have thought that giving no money down / no-doc loans was a bad idea?)

Here’s the bad news:

…there are $45 trillion of credit default swaps out there. A default on a mere 10% would cause an economic disaster. Unfortunately, it’s guaranteed to happen.

Actually that was the good news. Here’s the real bad news:

The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars. How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want.

The quote up top was said by Henry Paulson.