ECONOMY & MARKETS

Job Creation Could Fall off a Cliff in the Months Ahead By Harry S. Dent Jr., Senior Editor, Economy & Markets

Let’s do a quick thought experiment…

Imagine you’ve got two people in the workforce. Let’s say one is 40 and the other 65.

When both are gainfully employed, the unemployment rate is 0%. We’re enjoying full employment within the labor pool.

During the recession, the 40-year-old loses his job. With only two people in the labor pool, that means only half of the working age population that wants a job, has a job. Unemployment is at 50%. Ouch.

As the economy recovers, the 40-year-old once again finds work. However, he’s earning less than he was before.

Great news, sort of. The economy is once again at 100% employment and everyone cheers that the unemployment numbers saw such a major jump, even though average income is down.

But…

A few months later, the 65-year old retires. His departure, however, doesn’t create an unemployment level of 50%. Employment remains at 100%.

How’s that possible?

While it’s true that while the retiree is in the potential labor force, he’s choosing not to participate by retiring. So the workforce has shrunk by one person, meaning that the remaining person is now the entire workforce. Seeing as he’s gainfully employed, everything looks rosy!

Only, is it really? In our example, the economy will slow even though unemployment looks great.

Yes, I realize that I’m oversimplifying something much more complicated here. But my point (and warning) couldn’t be any clearer…

As the boomers leave the economy by the millions, even if we replace them, the workforce won’t grow substantially, and our economy will remain stuck in the ditch!

There is no way in hell that Trump will be able to achieve the 3% to 4% growth he’s promising because workforce growth is declining as baby boomers shuffle into their retirement years in staggering numbers, more than offsetting the millennial generation entry for several years.

All these fantastic unemployment numbers we’ve been seeing each month? They’re simply lipstick on a pig.

Workforce growth – from the natural forces of people entering at age 20 and exiting at age 63 on average – is in decline into the early 2020s. After that, it only grows slightly above zero, at best, for decades to follow.

Our productivity, what with the aging of our society, is back to 0.4%. That’s nearly as low as what it was near the top of the Bob Hope generation retirement cycle in 1983 and at the bottom of the spending wave back then.

And that’s the crux of our problem.

That right here is why it’s demographically impossible for Trump to succeed in stimulating 4% growth.

Sure, we’ve now moved to as low as 4.6% unemployment. That’s well into the full employment zone between 3.8% (2000) and 5.0% (1989) range. In the last peak in 2007, the unemployment rate hit a low of 4.4%, just below where we are now.

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However, and this is a big one: We’ve simply hired back most of the workers we lost in the great recession! Those 150,000 to 200,000 monthly jobs numbers we keep seeing cannot last more than several months, at most. And when they suddenly drop to 50,000 (or less), that could be the shock that causes a sharp bubble crash of 30% to 40% into the fall.

Some economists would argue that there are still people that left the workforce that are no longer looking for work and we could draw them back in. I say good luck on that one. Look at this next chart. It shows that labor force participation peaked between 1998 and 2000 at 67% and has been falling ever since (note the inverted scale). This correlates directly with the rising retirement wave for the massive baby boom on a 63-year lag.

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That high of 67% occurred just as the baby boomers were starting to retire and near the lowest unemployment rate of the entire boom at 3.8% no accident.

It doesn’t take a genius to get that rising retirees means lower labor force participation, especially when it predictably exceeds new entry by younger people.

This chart indicates that participation will fall to around 58% from the current level of 62.6%! This would occur into around 2024, which is the peak of the 63-year lag for baby boom retirement.

That’s another potential 4.6% loss of our workforce – or 0.58% per year over the next eight years – without a recession or depression. That’s 920,000 people a year just gone from the workforce! How do you offset that with lower taxes and who are you going to build these new infrastructures for? Not older people who need less of everything except health care… and nursing homes.

If we’re going to build new infrastructures, nursing homes should be it!

There is also another factor...

As two-worker households see their kids leave the nest, one will often choose to retire early or switch to part-time work. That has been a part of the drop-out rate thus far… These people aren’t coming back either.

So, here’s the reality. By sometime this summer or so, we could hit 4.4% or lower unemployment and then suddenly see job growth drop to 50,000, if not lower… with no obvious recessionary signs or economic crises at first.

How are the markets going to feel about Trump’s 4% growth revival then?

I smell the typical, first dramatic 2- to 3-month typical bubble crash of 30% to 40% when this happens, most likely between late July and late October of 2017.

How do you like them apples?

I still say Trump will likely be stumped or dumped by the end of this year.

Harry

A Grumpy Old Man’s Guide to 401(k) Investing

A Grumpy Old Man’s Guide to 401(k) Investing By Charles Sizemore, Editor of the Dent 401K Advisor Perhaps I’ve been spending too much time with my young kids, but I’ve gotten quite good at wagging my finger and speaking in a stern, fatherly voice. I love my kids dearly, but at times the rascals need a little discipline. And chances are, when it comes to making full use of your 401(k) plan, you do too. So, as my glasses slide down my nose, I’m going to put on my slippers, roll up my Financial Times newspaper and shake it in your general direction. You – yes, you there! Sit down and listen up because this is important. And don’t you dare delete this email. What I’m about to tell you is for your own good. If you’re not taking full advantage of your 401(k) plan… well, shame on you. Those things aren’t free, you know. Your employer spends a lot of money administering the thing… for your benefit. If you can’t be bothered to log in or fill in the forms to participate, you’re just a derned fool. Do you know how many starving children in Ethiopia would love to have a 401(k) plan like yours? At my first job, we didn’t have 401(k) plans. I had to settle for the measly $2,000 I was allowed to contribute to an IRA at the time. Well, I maxed out that IRA… and I loved it! But what I wouldn’t have done for a proper 401(k) plan. So, show some gratitude, would ya. I know, I know. Money saved in a 401(k) plan is money you can’t spend on some new-fangled gewgaw. But if you make decent money, a huge chunk of it is just going to end up going to the tax man. Stop and use your head for a minute. If you’re in the 28% tax bracket – and if you’re still single (at your age!), you’re in the 28% bracket at an income of just $91,150 – then you effectively earn a 28% “return” on every dollar you contribute to your 401(k) plan from day one. Would you rather that 28% go to the guv-mint? Yeah, that’s what I thought. You can save $18,000 in a 401(k) plan in 2017. If you get started now, that’s $692 per paycheck. You can do that. Your grandmother used to feed a family of seven growing kids on $692 per year and never complained. So, log in to your plan or call your HR department now and get your contributions on track. Don’t make me come over there and swat you with this newspaper. And matching… don’t even get me started on matching. When I was your age, I was lucky if my cheapskate boss matched me even 2%. These days, I’ve seen companies match as much as 6% or 7%. If you’re too big of a sissy to contribute the full $18,000 in salary deferral to your 401(k) plan, then for crying out loud, at least contribute enough to get the full matching amount from your employer. If you don’t, you’re leaving money on the table. And I don’t know about you, son, but I don’t have a money tree in the backyard. When someone offers me free money, I take it. Ok, I’m going to unroll the newspaper and push my glasses back into place for a moment. In all seriousness, this is the time of year to make changes to your 401(k) plan. If you’re not already maxing out your 401(k) plan for the full $18,000 (or $24,000 if you’re 50 or older), you should really make that a priority. Even if the stock market fails to return a single red cent, the tax savings and employer matching alone make it more than worthwhile. I realize that not everyone can realistically defer $18,000 of their annual pay. If you’re young, recently started a family or have a non-working spouse, that might not be an attainable goal. But here are a few tips to get you closer. If you got a raise to start the year, I strongly encourage you to allocate the difference to your 401(k) plan. You were already surviving at your previous pay rate; continue to live your current lifestyle a little longer, and push the salary increase into your retirement plan. Years from now, you’ll be happy you did. If you generally get large tax refunds every year, consider chatting with your HR department about increasing the number of exemptions you claim. This will cause you to withhold less in taxes, which will boost your paychecks. You can then use higher effective pay to contribute more to your 401(k) plan. And finally, consider living more modestly. If you rent an apartment, consider getting a roommate or downgrading to a cheaper apartment. Money spent on rent is effectively money wasted. It’s better to use that money to build your future. Listen to me, son. It’s for your own good. Charles

"You can do it"!

02, November 2016

"You can do it"!

‘I am self-sufficient in Christ’s sufficiency.’ Philippians 4:13 AMP

One of Satan’s favorite strategies is making you feel incapable of accomplishing anything worthwhile.  He’ll remind you of your past mistakes so that even when you do make an effort, your fear of failure will sabotage you. This is commonly referred to as ‘Failure Syndrome’.  Satan wants you to feel so bad about yourself that you’ll have no confidence at all.

But the fact is you don’t need confidence in yourself—you need confidence in the God who lives within you!  Without that, you’re like a plane without fuel sitting on the runway; you look good but you’ve no power.  Hear this: through Christ you have the power to do what you never could on your own. Once you learn this truth, anytime the devil tells you, ‘You can’t do anything right,’ your response will be, ‘Maybe not, but Jesus in me can; and He will because I’m relying on Him and not myself. His Word says I’ll succeed in everything I put my hand to’ (See Joshua 1:7).  When the enemy says to you: ‘You’re not able to do this, so don’t even try!  You’ll fail again like you did in the past,’ your response should be: ‘It’s true; without Jesus I’m not able to do a single thing.  But with Him, and in Him, I can do all I need to do.’

Read these words, get them down into your heart and stand on them today: ‘I can do all things [which He has called me to do] through Him who strengthens and empowers me [to fulfill His purpose—I am self-sufficient in Christ’s sufficiency.’ (Philippians 4:13 AMP) The word for you today is: YOU CAN DO IT!

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Nobel Prizes

Nobel Prizes
Alfred Nobel

By Jennifer Rosenberg, 20th Century History Expert

A pacifist at heart and an inventor by nature, Swedish chemist Alfred Nobel invented dynamite. However, the invention that he thought would end all wars was seen by many others as an extremely deadly product. In 1888, when Alfred's brother Ludvig died, a French newspaper mistakenly ran an obituary for Alfred which called him the "merchant of death."

Not wanting to go down in history with such a horrible epitaph, Nobel created a will that soon shocked his relatives and established the now famous Nobel Prizes.

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Who was Alfred Nobel? Why did Nobel's will make establishing the prizes so difficult?

Alfred Nobel

Alfred Nobel was born on October 21, 1833 in Stockholm, Sweden. In 1842, when Alfred was nine years old, his mother (Andrietta Ahlsell) and brothers (Robert and Ludvig) moved to St. Petersburg, Russia to join Alfred's father (Immanuel), who had moved there five years earlier. The following year, Alfred's younger brother, Emil, was born.

Immanuel Nobel, an architect, builder, and inventor, opened a machineshop in St.

See Also: The Nobel Prize Winners

Petersburg and was soon very successful with contracts from the Russian government to build defense weapons.

Because of his father's success, Alfred was tutored at home until the age of 16. Yet, many consider Alfred Nobel a mostly self-educated man. Besides being a trained chemist, Alfred was an avid reader of literature and was fluent in English, German, French, Swedish, and Russian.

Alfred also spent two years traveling. He spent much of this time working in a laboratory in Paris, but also traveled to the United States.

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Upon his return, Alfred worked in his father's factory. He worked there until his father went bankrupt in 1859.

Alfred soon began experimenting with nitroglycerine, creating his first explosions in early summer 1862. In only a year (October 1863), Alfred received a Swedish patent for his percussion detonator - the "Nobel lighter."

Having moved back to Sweden to help his father with an invention, Alfred established a small factory at Helenborg near Stockholm to manufacture nitroglycerine. Unfortunately, nitroglycerine is a very difficult and dangerous material to handle. In 1864, Alfred's factory blew up - killing several people, including Alfred's younger brother, Emil.

The explosion did not slow down Alfred, and within only a month, he organized other factories to manufacture nitroglycerine.

In 1867, Alfred invented a new and safer-to-handle explosive - dynamite.

Though Alfred became famous for his invention of dynamite, many people did not intimately know Alfred Nobel. He was a quiet man who did not like a lot of pretense or show. He had very few friends and never married.

And though he recognized the destructive power of dynamite, Alfred believed it was a harbinger of peace. Alfred told Bertha von Suttner, an advocate for world peace,

My factories may make an end of war sooner than your congresses. The day when two army corps can annihilate each other in one second, all civilized nations, it is to be hoped, will recoil from war and discharge their troops.*
Unfortunately, Alfred did not see peace in his time. Alfred Nobel, chemist and inventor, died alone on December 10, 1896 after suffering a cerebral hemorrhage.

After several funeral services were held and Alfred Nobel's body was cremated, the will was opened. Everyone was shocked.

The Will

Alfred Nobel had written several wills during his lifetime, but the last one was dated November 27, 1895 - a little over a year before he died.

Nobel's last will left approximately 94 percent of his worth to the establishment of five prizes (physics, chemistry, physiology or medicine, literature, and peace) to "those who, during the preceding year, shall have conferred the greatest benefit on mankind."

Though Nobel had proposed a very grandiose plan for the prizes in his will, there were a great many problems with the will.

Relatives of Alfred Nobel were so shocked that many wanted the will contested.
The format of the will had formal defects which could have caused the will to be contested in France.
It was unclear which country Alfred had his legal residence. He was a Swedish citizen until age nine, but after that he had lived in Russia, France, and Italy without becoming a citizen. Nobel had been making plans for a final home for himself in Sweden when he died. The location of residency would determine what country's laws would govern the will and the estate. If determined to be France, the will could have been contested and French taxes would have been taken.
Because Nobel had wanted the Norwegian Storting (parliament) to choose the peace prize winner, many charged Nobel with a lack of patriotism.
The "fund" that was to implement the prizes did not yet exist and would have to be created.
The organizations that Nobel named in his will to award the prizes had not been asked to take on these duties prior to Nobel's death. Also, there was no plan to compensate these organizations for their work on the prizes.
The will did not state what should be done if no prize winners for a year were found.
Because of the incompleteness and other obstacles presented by Alfred's will, it took five years of hurdles before the Nobel Foundation could be established and the first prizes awarded.

The First Nobel Prizes

On the fifth anniversary of Alfred Nobel's death, December 10, 1901, the first set of Nobel Prizes were awarded.

Chemistry:
Jacobus H. van't Hoff
Physics:
Wilhelm C. Röntgen
Physiology or Medicine:
Emil A. von Behring
Literature:
Rene F. A. Sully Prudhomme
Peace:
Jean H. Dunant and Frédéric Passy
* As quoted in W. Odelberg (ed.), Nobel: The Man & His Prizes (New York: American Elsevier Publishing Company, Inc., 1972) 12.

Bibliography

Axelrod, Alan and Charles Phillips. What Everyone Should Know About the 20th Century. Holbrook, Massachusetts: Adams Media Corporation, 1998.

Odelberg, W. (ed.). Nobel: The Man & His Prizes. New York: American Elsevier Publishing Company, Inc., 1972.

Official Website of the Nobel Foundation. Retrieved April 20, 2000 from the World Wide Web: http://www.nobel.se