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Life without pension

Yes, that is one of the elements that are now in play, life without pension, work until death. Did you consider this danger when you woke up this morning? It does not matter whether you are 55+ and awaiting your first months on a pension, or perhaps you are a decade younger and you are setting the stage for your house, your family and your future to be decently secure. Perhaps you are young and you do not care yet on how you celebrate your golden years. Yet what happens when you are becoming aware that this will never be the life you can embrace?

For me it is not really a concern, I have always been a workaholic.

Yet the picture I am painting is slowly becoming a reality. I made mention somewhere in 2018 that there would be noise on renewing, or not cancelling the entire stimulus program. I was initially pleasantly surprised that this was exactly what happened. It did not take long, a mere 8 weeks later we see: ‘Dutch central banker calls on ECB to pause plan to ditch stimulus‘ (at https://www.ft.com/content/d42d5c12-2def-11e9-8744-e7016697f225). Here we see: “The European Central Bank should pause plans to ditch its crisis-era stimulus, the governor of the Dutch central bank has said, in a sign that concerns over disappointing economic growth have spread to the eurozone’s most hawkish circles“, In addition we see: “the central bank needed to gauge how badly the economy was faring before pressing ahead with plans to normalise monetary policy“. This is merely one part where we see that the economy is a jester and we are all playing the same card whilst the protected few get the entire deck, an economy that requires $3 trillion and counting to run through invested support is not running, plain and simple and that debt is with us, the tax payers. The idea to runt that bill up higher should outrage us all, no matter what excuses we get to hear. So when we see “he has moved into line with Mr Draghi and the majority on the ECB governing council. It shows the steep deterioration in eurozone sentiment“, I merely see that not only was Brexit the better idea, we need to get out as quick as we can, with exit deal or not.

What do you think will happen when this blows up in their faces? It will; I personally believe that there is close to zero doubt on this. The Wall Street Journal gave us two days ago: “the ECB could raise interest rates this year. If it doesn’t, the bank might turn to new stimulus measures. It has few tools left“, I will go one step further, it has no moves left other than to tap unused resources for short term gains and that is when someone will give the audience assurances with some small ‘extremely unlikely‘ or some ‘failure is too small a factor to see it as any threat‘ mention and soon thereafter that one thing happens and the pensions will be gone. The Dutch Telegraaf reported on that less than 10 hours ago where the reader gets: “De EU-landen willen volgende maand de knoop doorhakken. De PEPP moet het makkelijker maken geld opzij te zetten voor de oude dag door een einde te maken aan de lappendeken van regels in de Unie“, which translates to: “The EU countries want to make a decision next month. The PEPP should make it easier to set aside money for the old age by putting an end to the patchwork of rules in the Union“. Critical viewers see the danger as the mandatory part comes into question. So not only do we see places like Carillion (UK) with their “pension fund deficit of £800 million” a mere week ago. So what happens when this ends up being the impact on a European scale? What happens when the Dutch and Swedish systems (which are among the safest and most secure pensions) collapse? That is not fictive, that is not academic, that is a realistic danger of the PEPP, when those schemes start banking on the wrong bonds and investments there will be no pension left. Good luck getting by with that March Hare menu. The fact that this is getting pushed by more and more marketing, complete with ‘How a US firm pushed for EU €2.1 trn pension fund‘. It makes me extremely cautious. In the age where we see new stimulus replace another, whist there is no economic good to be found, we see more and more debt, the moment the ECB gets there fingers on that PEPP option the fences move and the entire herd of economic protection levels gets squashed, like grapes in a wine barrel, to be diminished to the status of vinegar. So there goes your pension that was initially a decent chardonnay at $15 per 700ml, and is now no more than $2 per gallon, so how does that go over with your planned pension outlook?

The rapid growth of all these international advisors all claiming that the Pan European Personal Pension products (Pepp) are a good idea is making me even less trusting. Having seen the eager needs of hedge funds managers over the decades and their renowned need for greed is making me worried that this will blow up and whilst they walk away with multimillion bonuses, we all end up without a pension. It does not get any better soon. That part is seen through the paper by Paul Cox, Lecturer at the Birmingham Business School (at https://www.birmingham.ac.uk/Documents/college-social-sciences/social-policy/CHASM/briefing-papers/2018/BP1-2018-Pan-European-Personal-Pension-Paul-Cox.pdf), and the first thing that should worry you is: “Currently there is no specific EU legal framework on the design, provision and distribution of PPs“, so not only is this an international product limited by national law, there is every indication that once outside of the borders a lot of national legislation loses its impact and power, giving rise to all kinds of dangers. Even as we are given: “The PEPP takes the form of a Regulation. A Regulation is directly applicable in each Member State and does not need to be passed in Parliament as a Directive does.” This comes with the added danger that these regulations can be altered at any time, giving the rise to ambiguity as well as adaption to fit the need of the ECB, that same entity that callously handed over $3 trillion in stimulus with nothing to show for it. How does that fit your retirement scheme?

Even as we see: “Transfers into a PEPP from any national Member State PP is allowed but a transfer from a PEPP to a national Member State PP is not allowed” and are given the reasoning of “The aim is to prevent possible tax relief arbitrage where the PEPP tax relief is not as generous as national Member State tax relief.“, the indirect danger will be that the PEPP could face additional taxation (on top of the normal national one).

Yet the bigger danger is in the unspoken part of: “An obligation to provide a financial guarantee might lead to investment in low risk and low returning assets, such as government bonds and money markets, which would go against the CMU’s aim of fostering investment in equity and increasing private sector economic growth. A financial guarantee may also create a significant barrier to entry as only some providers would be able to offer such guarantees“, so not only the loss of optional guarantee, yet the bigger part is the danger of much higher risk investments, apart from the partially visible danger of investing in ECB bonds fuelling more non profitable stimulus, the danger of big risk as people experienced in 2004 and 2008, at that point your pension is gone.

That is a direct danger at present and there is almost zero chance that these dangers will not hit you at some point. The problem is that the closer you are to retirement, the larger the impact will be. Some of my friends were hit with their low risk investments in 2008, resulting in an added 10 year shift to their retirement, so retiring at 75, do you think you will be that lucky?

From my personal point of view, it is not the large players that are the danger, there will always be another Carillion, the danger are the dozen small players where we see people diving into a pool they do not comprehend and set aside the essential protections required, all with the view to strike rich fast. In that view, consider the “the fallout of a $235 billion dirty-money scandal that has engulfed the local branch of Copenhagen-based Danske Bank A/S“, then take “the ABLV, Latvia’s third-largest bank, accused of laundering Russian money and starved it of American dollars, forcing it to close“, add “the closure of Malta’s Pilatus Bank and a 775 million euro fine imposed on Dutch lender ING” and the clear message, given via Reuters by committee chairman Petr Jezek: “The Financial Intelligence Units of many EU member states are ‘clearly not up to the task’“, that is the PEPP picture you could face, all getting in and out quick and ransack EU pensions overnight (and all falling over at the same time). There is too much danger and as we might have some faith in the uber wealthy Larry Fink and his need to grow his $6 trillion empire, the danger of small bank barracuda’s pretending to be great white’s or their version of an all devouring Megaladon (thanks Jason Statham) is too great, there is a lack of protection in place and with pensions that is just too great a risk to face. To translate that in other terms. It is not the one player losing $1oo billion that is the danger, it is the setting that 100 players all lose $1 billion at the same time, the systems are often not ready to deal with such a situation.

I fear that the fraud and pocket filling impact by greed driven persons the next time around will be a lot higher, a lot more devastating. I always figured that I will be working should I pass the 77 mark and still be alive, that is the one benefit of a workaholic, is that the view you are having for your retirement at 40+?

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Updates

First of all

So whilst Microsoft is trying to rephrase their weak position through: ‘We are continuing to look at engagement as our key metric for success and are no longer reporting on total console sales‘, yes try to sell that whilst you have been all aggro on boasting boosted numbers for decades. Now that Xbox is about to become the number THREE system, they are running scared. The Nintendo Switch is now at 32 million, which surpasses the previous total number of Xbox One consoles sold, but they are currently allegedly at 41 million consoles sold, which means that there is only a 9 million gap until the most powerful console in the world degrades to the bronze position. Nintendo sold 14 million consoles in the last quarter alone, so that gives light that this is the last quarter with Xbox in the number two position, optionally the last month. Yet, I admit, my expectation of passing Microsoft by January 31st was not met, I was wrong. Yet the total number of consoles sold in the last quarter is still an amazing feat by Nintendo and it also shows that even as I was not correct in the end, my view was a lot better than all the market analysts.

The writing is on the wall.

I personally believe that some analysts have been setting the stage for shorting the stock of Nintendo. The question becomes what the law states. You see, when we look at the definition of shorting stock, the most generic version is: “he or she borrows shares of a company from an existing owner through his brokerage, sells those borrowed shares at the current market price, and pockets the cash“, yet in this case, the premise is not entirely that clear, with ‘he or she borrows‘ we need to consider that shorting the stock was done as a service for a third party, giving rise to the sale at tremendous profits. At present I seem to be wrong, there is no evidence of a setting to allow for a short sell. Yet the predictions that were made last year were so wrong, in so many ways that the overall findings would lead me to this path (there are others too). So is it just me? I would actually agree with this, was it not for the fact that the level of wrongness regarding Nintendo was so profound.

The state last year (Oct 2018) was given with ‘Nintendo Delivers Record Quarter, But Misses Estimates‘, so the stock tumbled a little less than 2%, in all this, whilst within a year the total lifetime sales of the Microsoft Xbox One were completely by 67% at that time, in addition, the software sales were almost globally ruling software top ten lists all over the place. We can argue that the ‘missed estimates’ were so ludicrously unrealistic that the entire matter had to be looked at, now we see the last quarter alone delivered 14 million consoles, which is almost 50% of what Microsoft achieved in sales between 2012 and 2016, four years versus three months, so how were estimations missed?

The puzzlement is supported even further with: “That’s Nintendo’s most profitable Q2 in eight years and a solid increase from the $211 million it booked last year.” It is in that light that I had an issue with the predictions in the last year. From my point of view Nintendo smashed almost every record, yet the stock is not reflecting that, giving rise to a few issues, but as a non-trader and a non-economy educated person, I cannot give the weight to that thought, yet the thought remains.

And now that we are treated to: ‘Nintendo cuts Switch sales forecast despite strong holiday season‘ the matter should be set, yet I am not convinced. Even as we see 14.5 million consoles up to now the last two months are unlikely to give them the 5.5 million consoles they need, they expect to get 2.5 million consoles and that seems achievable. I am not convinced that the 5.5 million consoles cannot be met, merely because Microsoft is on the ropes and there is no marketing, no advertising to reflect that. In this aggressive expansion universe it seems odd that Nintendo is not taking up the gauntlet to that degree.

They drastically improved visibility, especially compared to the WiiU. They have the titles that have a large appeal across the board and the people who do play the Switch love the interactions. In addition the shock news of Marvel Ultimate Alliance 3 and the fact is that it is exclusively to Nintendo Switch is not merely news, it is equally a shocker to Sony as well, as this was the kind of stuff that Sony needed to prevent from happening. The fans (including me) loved the first one on Xbox 360 and as we see the foundation of the original Gauntlet added to the DC and Marvel Universe, we get a game any comic book fan would love to play and nearly everyone that was one did and loved it. So to get this exclusively to Switch is a dealmaker as well as a record breaker. I doubt that this game will be out in time to get the next quarter sales up to the degree it needs to be upped, but it will soar sales of Nintendo yet again (optionally not in time to make the 20 million marker).

So did Nintendo do it wrong? I am not convinced, they made huge mistakes in the WiiU era and seemingly repaired all those flaws in the Nintendo Switch stage, no matter what estimates were not met, we now see that Nintendo Switch has gotten to 45% mark of the PlayStation 4 lifetime sales in under 2 years which is quite the feat as Microsoft got nowhere near that result, ever!

In second place

This is given to us by the Guardian (at https://www.theguardian.com/world/2019/jan/31/italy-slips-into-recession-for-third-time-in-a-decade-economy) it is in the setting of the same wall with more writing. It was to be expected as Italy has a whole range of economic anchors and downfalls. Yet I had hoped that Italy would have been able to stagnate their economy; alas they do not get to be that lucky and recession is the result. The problem is that this could also adversely affect France at present. It is (according to the Business Insider) yet at present the recession there is most likely, yet not a certainty. No matter how it wields, the French President will have to make a few committing jumps on several levels and as the stage between the US and the EU is polarising France will be on the side of the French needs, which by the way is not on par with American needs, so the Europeans have that to look forward to in the next 5 weeks. It is also the Italian part where we see failings, the Guardian gives us: “The deputy prime minister Luigi Di Maio, the head of the Five Star Movement, said the recession was proof that Europe’s budget rules should be relaxed to allow Italy to stimulate its economy back to growth“, which is the larger mistake. That approach did not work for the ECB and now the EU nations have a 3 trillion Euro anchor around their necks, adding debt will not have any true influence on the economy. the entire spending spree is now to be the anchor that drowns the 27 EU nations sooner rather than later and that is the overbearing part why Brexit was essential, the moment the UK is cut form that, the entire mess evolves too fast for anyone to correct for. The entire mess on four economies, where the one (UK) leaves and two (France and Italy) have merely a recession to offer, which means no options at all leaving it all to Germany who has enough for the ace of spades to be handed to them again and again. Germany avoided recession as it grew by 0.1%, which means that they only defeated the recession on the academic principle. It still means that the German economy is stagnating and that is not a good feeling when you are a German. So whilst we now see a whole parade of blaming the UK on making matters worse through a chaotic Brexit, I merely state that these idiots only have themselves to thank. If they had done something about the lack of transparency at the ECB as well as muzzle Mario Draghi from spending 3 trillion euro’s, money they never had, the situation would not be this dire (as I personally see it). The fact that the Business Insider also reported: (at https://www.businessinsider.com.au/europe-economic-gdp-growth-data-heading-to-recession-2019-1) “Junk bonds went through the roof. Total issuance of junk bonds from non-financial companies (rated BBB) went parabolic, according to Bank of America Merrill Lynch, as more highly rated bonds declined“, it is directly linked to the problem, that market went up by €100,000,000,000 in the last year alone, so this time if there is another meltdown (like 2008) and it happens, Europe will not see the fallout as it happened in Wall Street. No, this time around Europe will be the cause of it all to a much larger extent, so the impact on Europe will be beyond disastrous. Whatever quality of life there is, the Europeans can kiss it goodbye for decades. They could quite likely desire the time of harsh austerity, how is that on forecasting quality of life?

In combination

The EU is in a bad place and it has been reflecting all over the place. You see, last November we were treated to: ‘CPPIB is shorting $750 million worth of EU stock, making it one of the most active short-sellers in Europe, data show‘, more important, it gets an added “Unusual in that Canada’s biggest pension plan also tends to hold ‘rather long-term’ positions“. It seems a perfectly valid place to be in, especially when we see that so far that pattern seems valid. We see the additional “the CPPIB has nearly doubled the number of its disclosed short positions since last year, to 23 from 14. That places CPPIB 14th on the list of the most active short sellers in Europe“, as stated before, I can see the presence, and in this case I cannot explain it (merely because I am not knowledgeable enough to do so). Now, as we see the recession hitting Italy, followed by France soon enough, we might see the reflection on how the gains for the CPPIB could be one of the most profitable ones they have ever had. Even as there is still a little doubt, the firm holding ‘$356.3 billion in assets’, might soon be growing to a half a trillion wealth management colossal. With the positions becoming winners as Talend SA, Wirecard and PostNL falling like a brick in free flight, we see that the CPPIB is lunging forwards through growth (for now).

When we see the impact markets where the fun of wealth comes through the investing towards the gloom of failure, there we see profits soar, profits for those selling short that is. This is not the end or the beginning of the end. As France is setting the stage to move directly into a recession we will see more and more short selling profiteers and as France stumbles, the eyes of all will focus on Greece. Even as we are given ‘Greece moves towards ending austerity with rise in minimum wage‘, it is hard to predict the outcome. It makes perfect sense to do this and when you realise it is significantly less than half of what an Australian would get over that same period. It makes us wonder how the Greeks had been able to keep themselves alive. I personally hope that the view of Alexis Tsipras works out the way he thinks it will, the case is viable, and will it work? Only time will tell at present. Yet it is also a dangerous place. That is seen with: “A glimmer of light emerged on Monday as borrowing costs on 10-year bonds dropped to a four–month low and Tsipras announced that the government would imminently be issuing a five-year bond“, we get the logic of essentially needing to borrow, but Greece is in a much too dangerous place and those bonds could backfire in a terrible way, I believe that the bond issuing was done too early, in a time when there is still too much to lose. In that I actually hope that I am wrong, yet my track record towards predicting these events have been too often on the nose and that worries me to no end.

In this Bloomberg view supports mine (at https://www.bloomberg.com/news/articles/2019-01-07/all-the-risks-besieging-europe-bonds-are-spilling-over-into-2019), the headline ‘All the Risks Besieging Europe Bonds Are Spilling Over Into 2019‘ gives that. Even as the view does not include Greece, the overall risk will be hitting all EU nations (as well as the UK). There are two parts to this, the first opposing me is the view “The risk of spillover from Italy is in our view overestimated,” by Arne Lohmann Rasmussen, head of fixed-income research at Danske Bank A/S. Both that as well as the positivity that he thinks that Spain brings is set on realism, the man is a professional, let’s not forget that. Yet on my side we see: “What happens in Italy is still likely to be felt in its Mediterranean peer, albeit not to the extent of the euro-area debt crisis earlier this decade” this is the Goldman view and I believe t is more accurate, more important the doubt and worrying nature of these investors will make them sketchy and shift happy on a few levels, so when Italy is hit, France will get a beating as will Greece and it will affect Spain too, depending on their economy optionally a lot less and there we get back to the academic non recession of Germany, that 0.1% in the plus, when that gets hit negatively it will escalate the Mediterranean issues by a lot more hitting Spain for certain and hitting the others harder. It is merely my view, yet I believe it to be the correct one. For how much is unknown, I have no idea and I am not willing to guess. We will see a lot more by the end of March. It is at that point where we see what the actual impact will be, at the point the people will decide to either enjoy a little sunshine or make sure that they can avoid the winter of their bank accounts, in Europe these options have become mutually exclusive, an impact that will hit tourism in Greece and Spain in more ways than one. At least the Greek prediction that their tourism will level off in 2019 is decently realistic, which opposes the view: ““2019 will be Greece’s year,” according to DER Touristik, the largest travel company in German-speaking countries” one that is wishful thinking at best.

 

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