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Retirement and close to retirement planning for 2015 from Jonathan Clements of the WSJ.

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This article in the Economist magazine says Brazil's new president Michel Temer, once impeachment proceedings lead to the resignation of Dilma Rousseff, is only slightly less popular than her. Polls show 58% of Brazilians say Temer should be impeached close to the 61% for Rousseff, and his party is also affected by the Petrobras corruption scandal. Brazil's large trade unions supporting the Worker's Party of Rousseff see it as a "coup" or "golpe" and promise strikes, combined with large street protests, this comes as the country faces a second year of falling GDP at 3.8% according to the IMF. Brazil has a budget deficit of 10.8% and needs changes in public spending, including pension reforms, which are unlikely under Temer or his party the PMDB, or under the PMDB's Mr. Cunha. Some experts see the change in Brazil as part of a broader shift in Latin America, that happened in Argentina recently with the election of Mauricio Macri as president, towards governments that move to the centre in politics and reduce state intervention in the economy to stimulate growth. This is unlikely to happen in the short run, with society deeply divided and the area in front of the Brazilian Congress cordoned off to separate the opposing factions and rallies of political supporters....

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Discusses how the trade policies are affecting workers in Puebla, Mexico as a microcosm of what is happening in many countries, Latin America, China, S. Korea. In Mexico it increased wages initially and with global competition wages have dropped. Another article in the database talks about how wages in the auto industry have declined in Mexico even as the auto industry has grown in Mexico.

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Oxfam reports that about half of the people showing up at soup kitchens in the U.S. are people with one person in the family working at a minimum or low wage job. About 3.3 million American are affected at the $7 federal minimum wage. The White House proposes a $10 minimum wage that it say would affect 28 million Americans. For most of these people working mostly in low wage retail jobs this can mean having more food and often having the money to take a bus instead of having to walk to work.

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How the discount drug programs at the big drug store retail chains like CVS. Walgreens and Walmart are leading to increasing competition and lower prices in generic drugs that are now sold for one month supplies for hundreds of unbranded drugs. Mass mechandisers like Target have their own programs selling drugs in the same manner as the Walmart which started this with its $4 generic prescriptions for one month supplies in 2006. Its changing the landscape for drug pricing gradually and will become part of a larger trend as health care costs are challenged in different ways by customers, merchandisers, and others in a low inflation cost conscious economic environment, with an overstretched indebted consumer looking for ways to cut costs on everything from groceries, shopping needs and prescription drugs.

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David Segal takes a detailed look inside Apple's retail stores in the U.S. and talks with employees at different stores to find out what its like working as an hourly employee at an Apple store. World wide Apple's 327 global stores sold $16 billion in Apple products. Per employee the sales are about $473,000, but at an hourly rate of about $12 the average employee makes about $25,000 per year. After recent wage raises this could be up to about $36,000. The National Retail Federation says electronics stores have about an average of $206,000 in sales per employee. Contrary to what most people may think most of Apple's employees are not engineers and other professionals, about 30,000 of the 43,000 Apple employees in the U.S. work as hourly employees in the retail stores. Most are young people in the early 20's, single, with health insurance provided by Apple not costing as much for that age group. There is no career path and most leave after a couple of years. Because of the Apple mystique and the drive to create new user friendly products there are many young people looking for this kind of temporary work, especially now with high unemployment. ...

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In a sign of the low returns in the past year for pension funds, the 896,000 California teacher retirement pension fund CALSTRS, shows returns for year ending June 30, 2016, at 1.3%. Half of the holdings of CALSTRS are in U.S. and global stocks with returns of negative 2.3%. Real estate provided return of 11% but overall the returns were low. Over 10 years the returns of CALSTRS are now at 5.6%. The California Public Employees Retirement System (CALPERS), says its returns on its investments were 0.6% for the past year. With large retirement obligations pension funds in the U.S. face real challenges in this low return environment. Private equity investments of CALSTRS had returns of 2.9%, also lagging behind.

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A big change and a rare combination of events is causing labor costs to rise. China's new labor law makes it more difficult for employers to reduce wage costs by methods used in amarket environent without an enforeable code of conduct. The costs of certain raw materials like plastics have gone up significantly. Environmental laws are taken more seriously. And just when wage and raw material costs are rising the government in response to international pressure on the trade surplus is phasing out tax rebates on the less sophisticated products like toys, apparel, leather etc with the intention of moving into more sophisticated products like electronics and cars. As a result after years of falling prices in 2006 prices of Chinese goods in the US went up by 2.4%. And China is putting pressure on commodity prices worldwide through its growing use. All this contributed to USA inflation going up 4.1% in 2007 from 2.5% in 2006. How will this change in 2008 and the years ahead just when the USA is entering a recession and period of sluggish growth? About 7.5% of American spending on consumer goods come from China. With the weaker dollar in relation to the yuan, Chinese factories get fewer yuan for their exports to the USA, the depreciation of the dollar being about 7.6% in 2007 with more depreication ahead in 2008 and 2009. Factory wages have gone up by 80 % in the last few years and the lowest factory wage is about $125 according to experts. Chinese factories have already factored all this into their new pricing asking for price increases of 20, 30, 40 or 50 % according to the American Apparel and Footwear Association. What to expect then on the retail shelves of stores in the USA? Expect a price increase of 10% on Chinese goods. This means from now on Chinese goods instead of lowering inflation in the USA will actually add to inflationand the area of cheap goods coming to a close. As it takes time to move production to places elsewhere in Asia like Vietnam and India its going to be some time before another country takes the place of China....

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Governor of New Jersey, Chris Christie, interviewed by Tom Keene, on the underfunded pension system of New Jersey.

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Indian Finance Minister Nirmala Sitharaman is interviewed by Ashok Malik for the Economic Times in this videocast. On what India did right and lessons learned from addressing the pandemic and the supply chain crisis, inflation, Sitharaman says-Getting input and listening to people about what was needed and the pain, was critical in developing the financial plans. On the realization of India's potential in manufacturing, exports, and industrializing its economy, Sitharaman says-India's strength is its rule of law, so that the country is tolerant of criticism including of the prime minister, and there are democratic institutions that protect ordinary citizens, the business and other sectors. Also important is friend shoring as expressed by US Treasury Secretary Yellen alongside Sitharaman, that sees India as a favored destination for the US and the EU. The efforts to develop first rate infrastructure and logistics removes impediments to foreign investment. Training and education of workers is part of this effort to create a supply of trained labor for foreign investment factories in India. The competition between states is also part of this effort to build attractive locations for foreign investments in manufacturing in India. On 20th century financial institutions transforming into 21st century institutions for the IMF, the World Bank and other international financial institutions Sitharaman says- India has full support from all G-20 countries on debt crisis of countries in Asia and Africa, Latin America to change the way in which help is provided. And the skills are put in place to access financial markets on terms that help meet the aspirations of the people in poor countries or middle income countries, including some G20 countries such as Argentina. Sri Lanka she says, is an example where India is the governor and representing the country at the IMF and World Bank for its financial needs. India took up the interests of Sri Lanka with the G20 and the US, so that the loans are not delayed or given in ways that lead to the country exiting the program, unable to meet the aspirations for development of its people. Sitharaman says the G20 found complete agreement on 15 issues facing the world out of 17 issues, these two related to the war in Ukraine and that too from only 2 countries. This suggests that the media focus creating a general perception of lack of unanimity does not reflect what happened at the G20 meetings in India, and is distorted. What really happened is that all countries agreed on the substantial economic issues facing the world- of food insecurity, of development needs, and of climate change impact.  Sitharaman's responses showed optimism based on the hard work put in at the Finance Ministry and connected to all ministries and agencies of the government. And of a resilient attitude, of concentrated effort on the issues facing India and its partners in growth in the US and EU.  ...

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The Congressional Budget Office report in 2011 shows after tax resource flow that a family has to pay for consumption, a better approach to measuring the growth in incomes since 1970 including government help to lower income people and gains in the stock market for upper class Americans. This report shows after tax resource flow for the top 1% in the U.S. tripled from 1970 to 2011. For the middle fifth of the distribution families experienced real net income gains of 36 percent, and the bottom fifth of the distribution real net income gain of 50 percent.This suggests gains of about 10 percent a year if averaged over 30 years for the top 1 percent compared to 1% a year for the middle fifth and 1.5% for the bottom fifth. The report was done in 2011 and this could skew the results. Between 2011 and 2015 the stock market recovered and this would suggest a much higher gain for the top 1% of incomes and the top 10%, while also providing improvement in incomes for the middle fifth and the bottom fifth as unemployment decreased. Working class and minimum wage slowly recovered, and interest income on savings extremely low, with large student and other household debt, so that even at 10-12% gains per year for the top 1%, and 1-2% for the middle fifth of the distribution and 1.5-2% for the bottom fifth the last three decades have not been good for working class and middle income Americans compared to the the period 1950-1970 early postwar period recovery....

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O'Malley, Sanders, and Clinton emphasize the issue of wages, income disparities, rising inequality, and a shrinking middle class in the first Democratic debate of the U.S. 2016 presidential election. Clinton points out that "at the center of my campaign is how we're going to raise wages." Sanders says that "the middle class of this country for the last 40 years has been disappearing." Clinton points out her opposition to the Trans Pacific Partnership trade agreement because it does not help raise American wages. Clinton calls herself a progressive, but "a progressive who gets things done," and a moderate when it comes to getting things done. Sanders points to the "deep injustice, an economic injustice that threatens to tear our country apart, and it will not solve itself." Sanders points to the wealth concentration in the U.S. "with the top one tenth of 1 percent owning about as much as the bottom 90 percent, and 57% of all new income going to the top 1 percent." Clinton comes to Sanders defense on the issue saying "it's our job to rein in the excesses of capitalism so that it doesn't run amok and doesn't cause the kind of inequities we're seeing in our economic system."...

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The U.S. market looks like it is becoming the kind of maturing market that Japan and Germany have become for automobiles. Germany and Japan saw sales peak at high levels and then decline. And they have been declining steadily for several years. The US has a growing population and demographics because of immigration compared to Japan so there wil be continued demand for new cars. However since 2000 carmakers have introduced so many price incentives, interest free loans, and other ways of pushing sales that sales have continued to climb to unsustainable levels. All through the 1990's sales were in the 15 million range, then after 2000 sales climbed, except for the short period of uncertainty after 9/11/2001 Trade Center bombings. Sales climbed up to 17 million and stayed at these higher levels till the recent crises in 2007 saw a drop in sales and a shift to smaller fuel efficient cars. GM was offering 0% financing for 5 years through its Keep America Rolling campaign in the aftermath of 9/11. By 2005 automakers were offering as much as $8000 in discounts on pickup trucks. Employee pricing enabled regular customers to buy at employee prices. The Big Three sold to rental fleets unsold cars, so much so that by 2005 25% of all vehicles made by GM and Ford went to rental fleets, to rental companies in which these companies had large ownership stakes. For GM this became part of strategy. Fixed costs were high and the UAW contracts made it difficult to layoff workers, a jobs bank in which layed off workers could remain till rehired was itself quite costly as money had to be paid to the workers in the job bank. With this kind of inflexibility in the labor market GM could only spread all the fixed costs for its aging workforce which required pension payouts to retirees and health payments to retirees, by selling more automobiles. During this period of inflexibility in labor, and the legacy costs of previous boom years since the 1950's with generous UAW contracts, GM and Ford pushed sales to unsustainable levels; without considering the furture implications of this short term strategy. Another way this could hurt is by pulling sales in future years into current years because of interest free financing or huge discounting which probably happened in 2004-2005 and is seeing a payback today in 2008. At the peak in 2005 carmakers were planning further expansion of SUV capacity or expansion of other carmaking facilities. Gas was still not at the high levels of today. In 1999 gas cost $1.15 cents a gallon, and it was a little higher than that, but nowhere near what we are seeeing today. These new plants are coming up just as the sales are dropping dramatically, the half million SUV's sold in 2008 is about half the sales in 2003, enough to fill 2 plants when many more plants are being built or opening. The new capacity of 4 plants capable of producing 1 million vehicles is looking like a big mistake, like the new Toyota Tundra plant in Texas. Some of the new carmaking capacity is a Toyota plant in Tupelo, Mississippi, a Honda plant in Indiana, and a Kia Motors plant in Georgia. All this means a big drop in factory utilization rates. GM has 2 plants making full size SUV's. Later this year GM will cut production at these plants and at 2 plants making pickup trucks to utilize them only for 1 eight hour shift a day. Toyota has 1 full plant of excess capacity, not including the plant opening in Tupelo, Missisippi, making it likely to be down in utilization very significantly as well. Nissan is only using 65% of capacity at plants in Canton, Mississippi and Smyrna , Tennessee. And these utilization rates reflect the impact at the early stage of the housing crisis, consumption spending is only now beginning to bite, and unemployment is still to take a hit, so th economic recession immpact is still not reflected in auto sales. Even now GM and Chrysler cling to the hope of a sales pickup in late 2008 and in 2009, which is looking less likely by the day. J.D. Powers survey show the North American auto making capacity at 18.7 million cars and production this year at 14.1 million. This means the automakers have disastrously misjudged the auto market, and the role their own actions in pushing sales have affected the market in inflating the sales numbers beyond what is a sustainable sale increase. When credit tightening and lower consumption spending, housing crisis, and higher unemployment all hit the US in full impact by 2009 the situation is likely to worsen significantly and could become a disaster. ...

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Problems with the old 4% rule for withdrawal from savings for retirees in 2013 include- the decreasing income from bonds, the high P/E 10 ratio of 23 for the stock market in the U.S. in 2013, the timing of entry into retirement and the economic conditions, inflation and unforeseen expenses. The 4% rule needs to be modified in today's conditions.