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Behavior Gap Goes to the Coffeehouse

This week’s show tackles head on the news that a government stalwart, Social Security, is in deep trouble. In particular, we address how we can no longer rely on Social Security as a part of our retirement plans.

Investing is no longer child’s play. Taking personal responsibility for our investments will be key in securing a sound financial retirement. We’ve seen seismic changes during the last five years with regards to “traditional” retirement planning. We have to rethink our approach to investing and our expectations when it comes to retirement.

The Risk of Debt (pointer from Marginal Revolution)

Obama’s spending is not the only reason the deficits are so big–not by a long shot.  But he is using the sticker shock to slide in big spending plans without paying for them.  And while the US can certainly afford one $1.4 trillion year, it probably cannot afford 10 $600+ billion years.  As private credit markets recover, government credit markets will start to reflect that reality.

That’s not to say that disaster is at hand.  Obviously, I am not fond of all the new spending plans, so I (and you) should be mindful of a possible tendency towards wishful thinking.  And this is early days–sometimes a bad bond auction is just a bad bond auction.  But I imagine that Larry Summers had at least one sleepless night.

The Zombieconomy and Capitalism 2.0

It’s time to connect the dots. It is no coincidence that so many industries are in trouble simultaneously and so fast. The growth of the Zombieconomy is a Jupiter-sized wake-up call to today’s leaders.

Here’s the real problem.

Capitalism 1.0 is built on an obsolete set of ideals. What the 21st century needs are better ideals, to build a better kind of business on.

From Irrational Exuberance to Unreasonable Fear

Paul Menchaca: Are planning clients really processing how their situation has changed?

Bob Curtis: The short answer is no. Clients are reacting emotionally, and emotional reactions tend to be extreme. So where a few years ago we were worried about clients’ irrational exuberance for the market, now they’re unreasonably afraid. They quickly believe that everything has gone down the tubes and they’re not going to be able to retire. They’re dealing with a core fear of going broke.

The other problem is at the advisor level. I’ve never experienced so much lack of confidence from advisors. Rather than taking a leadership position and redirecting clients in a positive way, we see them also getting caught up in the market and the losses.

So we’re trying to teach the need to reevaluate. You have to do that client by client. Clients want to know, “How does this affect my personal future lifestyle? Am I going to be okay?” This approach is different from what most of the industry has done.

Remember Pulling the Levers and Don’t Think About It?