Carillion reveals the real threat to jobs - debt

By Neil Patrick

The Yas Viceroy Abu Dhabi Hotel built by Carillion. Photo credit:Rob Alter

When I started work on my book with Marcia LaReau, Careermageddon, we did not have an agenda. Our view was that the evidence will take us where it will.

But after three years research, even I was surprised where we ended up as we sought to discover the real destroyers of jobs.

Careermageddon is a politically neutral book. The conventional ‘wisdom’ about jobs from the left is that government must borrow and spend to create jobs. Amongst the right it is that the free market is more efficient, therefore tax cuts and business friendly policies are the best framework.

The trouble with the free market is that if government uses private contractors, it does not absolve itself of risk, because private companies act primarily in the interests of shareholders and investors. And this can lead to some pretty nasty outcomes for employees and customers.

This week we have seen the unravelling of Carillion, one of the biggest construction firms in the UK. It holds numerous government construction contracts including the UK's high speed rail network expansion, HS2. I flagged this three years ago here as an example of government spending folly.

Carillion is massively in debt. The debt burden is so great that the future of the firm and around 20,000 UK jobs and a further 23,000 overseas jobs hang in the balance. It has a £900m debt pile and £600m shortfall on its pension plan.

It is just the latest in a long and sorry catalogue of failed businesses which are massively over borrowed to the point that even the smallest shortfalls in revenues compound over time to become catastrophic.

The biggest threat to jobs which we identified in Careermageddon is not technology. It’s not migrant workers. It’s not globalisation.

It’s debt. Personal debt, corporate debt, and government debt.

Whatever happens to Carillion, the debt spiral will be even more compounded – it won’t be written off, it will just move and spread elsewhere.

Which leads me to three simple conclusions. Government needs to take greater oversight of the debt vulnerability of firms it contracts with. Business needs to borrow less and invest more not in executive bonuses and shareholder dividends, but in long term assets and debt reduction. And people need to reduce their personal debt so they have greater financial resilience when disaster strikes.

It might not be fun, but if you want to make a worthwhile new year’s resolution, reducing debt is a much more worthwhile one than most that I have heard.

Seven ways boomers are rewriting the rules of retirement

By Marc Miller

(Reuters) - The baby boom generation has broken the mold at every stage of life, and it looks like old age won't be any different.

Boomers aren't heading quietly into retirement. They're launching businesses, embracing digital technology and living abroad in greater numbers than ever before. But in other ways they are struggling more than the previous generation.

Here is a look at trends shaping the next wave of retirement.

THEY ARE LEAVING THE U.S.

More older Americans are packing it in for foreign countries, where they can save on living costs and enjoy warmer climates.

The number of retired workers, spouses and survivors getting Social Security benefits in a foreign land is rising almost twice as fast as the number of Social Security beneficiaries generally, according to Social Security Administration data.

And 21 percent of baby boomers say they are "interested or very interested" in retiring abroad, according to a survey by the Center for Medical Tourism Research at the University of the Incarnate Word in San Antonio, Texas.

"If that were extended across all boomers, you'd have about 3 million people retiring abroad in the next couple decades," says David Vequist, the center's director.

THEY ARE STARTING COMPANIES

Almost a quarter - 21 percent - of new U.S. businesses started in 2011 were launched by entrepreneurs age 55 to 64, according to the Kauffman Foundation, up from 14 percent in 2007. Entrepreneurs age 45 to 54 accounted for an additional 28 percent of the 2011 startups. Taken together, that's 49 percent of all startup activity - far larger than the 20- to 34-year-old bracket, which accounted for 29 percent of new ventures.

In part, the surge can be attributed to the 2008 recession, which sent older workers into consulting gigs. However, there are a surprising number of complex, sophisticated and large businesses being created as well, according to Dane Stangler, director of research and policy at the Kauffman Foundation. He also thinks many of these older business owners are "serial entrepreneurs."

"We're seeing a lot of entrepreneurs in fields like technology and engineering who are launching substantial businesses," he said. "They started companies in their thirties or forties, and now they're doing it again."

THEY ARE TECH SAVVY

Young people might be leading the digital revolution, but boomers - the generation born 1946 to 1964 - aren't far behind.

"Baby boomers got quite comfortable with the Internet and other digital technologies in the workplace," says Lee Rainie, director of the Pew Internet Project. "They won't give that up as they age."

For example, 23 percent of older boomers and 27 percent of their younger siblings use tablet devices, compared with 30 percent of Gen Xers (born 1965 to the early 1980s), according to the Pew Internet Project. The gaps also are small when it comes to smartphones and social networking services.

"They're not going to be downloading every new app that catches the crowd," he says. "They're very utilitarian - show me how it will work for me, how it will improve my life." Expect retiring boomers to publish creative works online, connect with friends and children via social media and continue to job-hunt on sites such as LinkedIn.

THEY ARE BORROWING MORE

Older Americans are taking more debt into retirement than previous generations. Mortgage debt is the biggest factor: Forty percent of homeowners over age 65 had mortgage debt in 2010, compared with just 18 percent as recently as 1992, reports the Joint Center for Housing Studies at Harvard University (JCHS).

The culprit: the refinancing boom before the housing crash. In the years leading up to 2008, homeowners took advantage of low rates and deductibility of interest to refinance, says Lori Trawinski, senior strategic policy adviser at the AARP Public Policy Institute.

"(They) took out equity for things like education or a new car," says Trawinski. Boomers on the cusp of retirement are still refinancing, sometimes at the behest of their financial advisers, because of the appeal of today's near-record-low interest rates.

Higher debt levels will have a variety of effects. Some retirees will be stuck in homes with underwater mortgages or monthly mortgage payments that sap their spending power; others will use low-interest mortgage debt to keep more cash on hand or to keep other money invested longer.

THEY ARE OUTLIVING THEIR EXPECTATIONS

Life expectancy for men has jumped an average of almost two years in each of the last five decades, to 75.7 years in 2010, according to the Society of Actuaries. For women, life expectancy has risen by 1.5 years, on average, to 80.8 years.

Yet more than half of older Americans haven't gotten the memo. A Society of Actuaries survey of 1,600 adults age 45 to 80 found 40 percent underestimated their likely average longevity by five years or more; 20 percent were too pessimistic by two to four years.

"That means there's a 50 percent chance you'll live longer," says Cindy Levering, an actuary and co-author of the report. "If you make it to 90 and only planned and saved enough for 85, you may not have enough to live on."

The odds that will happen are pretty good. For a couple with above-average health, there's a 60 percent chance one of them will live to age 90, the Social Security Administration has reported.

THEY ARE PROVIDING FINANCIAL SUPPORT

Some 58 percent of boomers are providing financial assistance to aging parents, such as helping them purchase groceries or pay medical and utility bills, according to an Ameriprise Financial survey of just over 1,000 Americans conducted in late 2011.

When it comes to their kids, boomers are even more ready to help out. Almost all boomers surveyed - 93 percent - say they have given their children a hand. A majority have "boomerang kids" who have moved back home to live rent free (55 percent) or afford a car (53 percent).

But only one-third believed that supporting adult children was making it more difficult for them to reach their retirement goals.

"They're not connecting the dots," says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. "They may not be taking money out of their retirement accounts to help their kids, but the assistance is coming out of funds that otherwise could be additional savings."

THEY AREN'T RUNNING TO FLORIDA

Boomers aren't embracing the Florida-Arizona axis of retirement to the extent their parents did. Counties known as retirement havens slowed their annual population growth to 1.7 percent from 2007 to 2009, compared with 3.1 percent between 2000 and 2007.

Instead, the Urban Land Institute (ULI) found that the metro areas with the fastest-growing population of 65-plus residents include locations in North Carolina, Texas and Nevada, as well as Colorado, Idaho and Georgia.

Boomers are attracted to communities with large universities and affordable housing, says John McIlwain, senior resident fellow for housing at ULI and author of the report.

The biggest draw affecting relocation? The kids.

"If you want to find out where a boomer couple will be moving to, find out where their oldest daughter lives. It's the pull of the grandkids."

http://www.reuters.com/article/2013/02/05/us-moneypack-retire-surprises-idUSBRE9140O720130205

Baby Boomers – the dumbest generation?

Here’s a short video featuring Peter Thiel, President of Clarium Capital Management.  The question about whether or not baby boomers were ‘dumb’ not to see the housing bubble looming so soon after the burst of the tech bubble is moot in my view.

For most folk, their house is their home.  Most are not and were not property speculators. They simply  aspired to own their own home, and rising house prices merely  reassured them that borrowing large sums to pay for them, was  scary, but a fairly low risk. Very few people I think relish taking on a massive loan to buy anything.

So in my view, you cannot blame a whole generation as individuals for a global economic problem.

I’ve posted this clip for a different reason. Peter explains here why what happens in the next six months is less of a concern than what happens in the next twenty years. And I agree with him.

We are already undergoing a global transformation that  will sweep away the world that western baby boomers accepted as normal for their whole lives. That world will never return.

This raises big questions about what we can do about it. We are burdened with debt, our children are finding it as hard as we are to find work, let alone buy a home and the prospects for  economic growth to enable these aspirations seem at best to be shaky. Career security is gone forever and we boomers need to wake up to this new reality.

It’s this generational crisis which has prompted me to set up 40pluscareerguru. And my mission is to provide every insight and opportunity I can to help my generation survive and thrive through their middle age and beyond.

My sincere thanks go out to everyone that is helping me share this message.

Generation Debt Turns Out to be Baby Boomers

by Roman Shteyn

Baby boomers are the first generation in American history to be entering retirement saddled with debt, including unpaid balances on credit cards.

The financial crisis in 2008 that sent the economy into a recession crippled many baby boomers’ retirement accounts, forcing many to stay in the workforce or significantly alter their retirement lifestyle plans. Now, the oldest of the boomer generation are receiving Social Security checks alongside notices from bill collectors.

According to the report The Plastic Safety Net by public policy organization Demos, Millennial’s (those born after 1980) average credit card debt is $2,982. For those 65+, the average credit card debt is $9,283—and that amount could continue to rise as they age since they have fallen into the trap of financing their lives on credit cards.

The brutal financial reality for baby boomers is that they have entered their supposed golden years during a period when it has become increasingly difficult to build, protect, and grow wealth. Traditionally the highest level of compensation comes from working in your 50s and 60s. These decades used to be a time to increase 401(k) balances and settle into a financially-secure retirement. Instead, if baby boomers were fortunate enough to be employed in a recessionary economy, they often found they were earning less than they had in comparable jobs or assignments before the downturn. If they were unable to find work after being laid off, they may have opted to take Social Security early, which reduced their lifetime payment.

Financial Losses and Burdens

The financial crisis that brought down the stock and housing market was a major blow to baby boomer’s retirement savings. To add to their financial strain, nearly 60% of baby boomers provide financial support to adult children, according to a YEAR report from the National Center for Public Policy.

Many boomers have accepted carrying debt into retirement. A 2012 poll by CIBC bank found that 80% of the generation is not anxious about carrying debt or the amount of it. In addition, CIBC found less concern among the respondents of getting their finances in order to be able to pass on an inheritance to the next generation.

Recent reports have focused heavily on the growing amount of student loan and credit card debt students are graduating college with, but will they learn from their elders and work to shed the debt before entering retirement? After all, they certainly can’t count on an inheritance from boomer-aged parents and grandparent to help them pay down the debt.

Roman Shteyn is co-founder of Credit-Land.com. He frequently writes on credit-related topics.


Read more: http://www.foxbusiness.com/personal-finance/2012/11/20/generation-debt-turns-out-to-be-baby-boomers/#ixzz2CrdSyT71

One thing you must do to survive and thrive in the recession

If you read my blog you are probably interested in what the current economic crisis means for your personal future. The trouble is that journalists typically either grab some shocking headline based on a piece of bad news (which is either irrelevant to us personally or just plain depressing) , or go into so much detail that the average person is bored and confused within a few sentences.

Neither of these situations really makes us much the wiser or helps any of us make good personal decisions. I thought I would try fill this gap by taking an expert and detailed news report and converting it into layman speak, so that anyone reading this can actually learn something of value.

At least I will try and let you be the judge of whether or not I’ve succeeded. So here’s a great report last week from CNBC. Its an interview with Kyle Bass, Managing Partner for Hayman Capital in the US.




It’s heavy going for the layman but there are some key points which I’d like to explain as they have huge significance for any working person or person looking to earn money in the recession. If we can make our decisions with the benefit of the best information available on the economic outlook , we will make better life decisions. It’s really as simple as that.

The first point explained here is that the global economy is not de-leveraging, What does that mean? To put it simply, the amount of credit in the global monetary system is increasing 3-4 times faster than GDP growth. This would normally put upward pressure on inflation, but this is being artificially restrained by low central bank lending rates and less consumption.

Here’s the translation; our government and central banks are printing money to try and prop up the economy. Inflation is only being avoided because of stagnation or reductions in government, business and household spending and low investment returns. In short our economies have stalled and there is nothing on the horizon which can drive growth back into them. Without growth, job and income prospects for everyone in or seeking employment are bleak.

Meanwhile in the US, housing market values have bottomed out, but there isn’t a real prospect of major price growth because earnings and incomes aren’t increasing enough to support increased lending to homebuyers. Worse still, lenders are still trapped by the conflicting regulatory requirements of needing increased capital strength and government pressure to lend – a broadly similar situation exists in the UK. Translation; the traditional default investment of most working people in the UK - their homes, are not going to deliver any real appreciation in value any time soon, and in fact on a localised basis could still show significant price falls in future.
 
In the Eurozone, Germany cannot and will not ultimately provide ‘joint and several’ for the sovereign debt of struggling countries in the Euro. Joint and several is just jargon for underwriting or covering the debts of those countries in economic crisis. If Germany won’t ultimately cover those debts, many more people in Europe are going to see a collapse in value of their assets and incomes over the coming months and years. Hence European markets upon which UK businesses are heavily dependant upon will continue to contract over the coming years, destroying UK jobs in the process.

Now I know I’m probably sounding like a doom monger at this point. But there is a key point towards the end of the interview which I must highlight and which I think will revive your hope. At this point the interview discusses where investors can place their investments in such a stagnant world economy. And the answer from Kyle Bass is critical – ‘invest in productive assets’. That’s his message to investors and it’s just as relevant to you. No I’m not talking about investment in the way that he is. But the principle is the same – it’s the correct investor response to the recession and it's also the correct personal one.

I’m talking about the investment of your time and energy (at least however much you can spare) into the creation of your own productive assets. These are assets you can create, own and generate an income from which cost you little or no money , just a little bit of your time to set up.

Just download my free report here www.40pluscareerguru.com to discover more right now about how you can do this much more easily than you would have ever thought possible. It’s obvious really. If you have assets earning you money month in month out, and they are almost free to obtain, why wouldn’t you want to own them? And how much less would you worry about your job security if you did?

So I hope this all makes sense. Don’t just hope that somehow the politicians or an economic miracle will save you. Take things into your own hands and save yourself. You can do it and now is the time to start.