Will You Be Wealthy Tomorrow?

Our precious gold is at an all-time record high. Oil prices are consistently hitting new and incredible highs. The almighty dollar is consistently hitting new lows against other major currencies.

Have you really taken the time to step back and decipher the true impact of this? Flash! Baby boomers, it’s now impossible for you to retire. Your pensions are woefully underfunded. Your 401(k) is drastically declining in value as you read this blog. The value of your home is in a free-fall. Your real estate and sales taxes are increasing. Your property and casualty insurance rate is soaring through the roof. Your sales tax is continuously increasing.

We continue to read that inflation is low, but deep down we know this to be emphatically not true. Just go to your local grocery store and you will witness the true rate of inflation immediately. The new scenario for the baby boomers is: You work until you die and then die in debt.

This could be the first recession since 1930 that was truly created by Wall Street. These problems have been fueled by speculators and investors in real estate or other forms of property (dot-com bubble, for example). However, this was propelled by established Wall Street firms like Merrill Lynch, who knew the consequences, and equity buy-out firms (KKR and Carlyle) that are now paying the price. The tragedy is that many innocent Americans are suffering unimaginable losses and may find themselves homeless and penniless when the dust settles. A major cause is misalignment of incentives, where a Wall Street CEO can make a fortune betting shareholder money (and the shareholder gets relatively little) if the bet goes right, but pay little price if it goes wrong. There will and should be big changes in the way CEOs are compensated. For equity buy-out firms, the unequal tax treatment really did trigger a round of greed.

On the other hand, homeowners have done very well over the last decade. When home values hit bottom, which will trigger the recovery, home prices will probably still be way above what they were 10 years ago.

What has changed? And is there anything you can do to survive it? The richest man on the planet was asked last week by a citizen of Zimbabwe what to do against an inflation rate of 100,000 percent. The steely-eyed Warren Buffet, without hesitation, replied, “You must move to first improve yourself [to] where you would be in a position to attempt to earn at the rate of inflation to maintain the status quo. If the value of your currency was to become seashells, you would attempt to accumulate as much as you could.”

It appears as if we’re entering a period of not just one economic bubble but several beyond our control. This is a very bleak and dire scenario.

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