Thirteenth Edition - Harsh Reality Newsletter

Good morning, everyone! We hope you had a happy May the 4th and Cinco De Mayo. Today is the Thirteenth edition of the "Harsh Reality" newsletter! If you're new here, welcome to the fight. If you want to see previous editions of the newsletter they'll be available at the link below. And if you want to join us on our social media platforms click on those links as well. Our intent is to always provide you more value than we receive so thank you for being here and enjoy the show.

Weekly Dose of "Harsh Reality"

The average person in the U.S. only has $97,000.00 saved for retirement. That's in stark contrast when compared to the comfortable retirement expectations number of $1,040,000.00 in 2021. Add into that the statistic that 35% of the younger generation has no idea what they need to have saved for retirement and you've got a serious and long term issue..

Harsh Reality - If you only have $97,000.00 saved for retirement, at retirement age, you're going to be living out your final years in poverty..

To address this issue from a lean retirement perspective, you need to account for enough money to pay your living expenses without ever touching the principle investment. That can be harder than expected, especially given inflation and the horrible recommendations coming from financial planners.

First lets start off with inflation. Inflation is exactly why you cannot save yourself into wealth. Every year, even when inflation is low, you lose 2% of your buying power due to inflation. Your money is literally less valuable than it was the previous year. In years like 2022, you lost 9% of your buying power. That means that in the best case scenario, you'll lose 100% of your buying power every fifty years; or 100% of your buying power every ten years in the worst case scenario. The key take away from that is to invest your money, not just save it.

Now we'll address some of the bad information you've likely heard from financial planners. The prevailing sentiment is for people to transition their investments to the safer category, heavy on bonds, as they age. Some people call this aged-base allocations, or target-date funds, etc. While it makes sense to use these funds solely from a risk standpoint, you're actually cutting your own throat and putting yourself at risk of running out of money when you go that route. The typical bond-heavy target-date funds are only averaging approx. 4% annual return over age 50-55, which means that when adjusted for inflation, you're losing money for several years before you even retire. So in essence you're cutting off a piece of the golden goose every year leading up to retirement and during retirement because the 4% return isn't enough to live on. In a $1,000,000.00 retirement account, the required average, a 4% return only allows you to draw $40k/year.

In our opinion, that's pure insanity and definitely now how we want to live our "golden years.." The other strategy to consider is to keep your money invested in standard mutual funds that have an average return of 10% or better. In that scenario, a $1,000,000.00 retirement fund would allow you to live off of $100k every year.. FOREVER..

Obviously, you're accepting more risk and the market goes up and down constantly. When the market is down you'd simply adjust what you draw that year based on the previous year's performance. The important thing is that you never touch the golden goose that's paying you.

In addition to living off of a higher amount of money; you would still have that $1M to pass along to your spouse or kids when you pass away. If you eat a piece of the golden goose every year then you wouldn't have it to pass along to your next of kin which is a sad way to close out your life's work and your legacy.

One tool that I love to use is a compound interest calculator. Using that tool you can project how much money you'll have at retirement based on your savings rate, your assumed return and how long you have to invest. That tool will solve the problem younger people have planning for retirement.

Next week we'll go a bit into how much you should be saving, and the differences between a 401k, Roth IRA, etc.

Shit That Matters

The Debt Ceiling Posturing Continues - The Republicans and Democrats continue the back and forth over the looming debt ceiling, putting the U.S. economy at risk.

Harsh Reality - The fuckery continues. Joe Biden has refused to consider the bill the Republicans passed in the House to increase the debt ceiling. The republicans haven't been forthcoming regarding what they're willing to concede to get a deal done. Regardless of what side you're on, understand that a default will break the markets for a long time if it's allowed to occur. Most importantly regarding the big picture, the value of bonds will collapse which are tied to all kinds of debt instruments including our national debt. Most economists agree that near hyper inflation would occur if the bond market were to collapse in the U.S., which is simply something we cannot allow.

Core Inflation and The Fed Rate Increase - The inflation report for April came back hotter than expected with core inflation "sticky" at the 5.5% level.

Harsh Reality - The Fed really is in a no win situation here. Although the Fed has increased rates faster and at higher ratios than any other time in history, core inflation is has been minimally affected. This would signal more rate increases and pain ahead.. Unfortunately, the market has priced in a rate hike pause in June. And when I say priced in, I mean it's priced in as a certainty. According to the CME FedWatch Tool, there is an 85% probability of a pause in June.. While that's down from the 96% high, it's still far to high given the situation. So do not be surprised if the Fed decides not to pause rate hikes and the market reacts very badly on 14/15/16 June.

Russo-Ukrainian War - As summer approaches, an increase in operational tempo is likely on both sides..

Harsh Reality - On the Russian side, Wagner mercenaries did not pull out of Bakhmut and were resupplied with ammo according to their demands to the Kremlin.

Several things have occurred on the Ukrainian side over the past week. First, the Ukrainians have announced that they will postpone their large counteroffensive because they are running out of western supplied weapons. Oddly enough, they just announced the receipt of the UK developed Storm Shadow cruise missile. Some OSI contributors question whether or not this is cover for direct strikes from the NATO alliance.. A scary thought.

Finally, there has been a two pronged push by the Ukrainians in an area south of Bakhmut. We're not sure how effective the ongoing battle has been but the direction of attack and current progress is shown above in blue. The force construct looks like three Ukrainian brigades of the 80th Air Assault and the 3rd Assault Azov brigades, and the Russian 72nd Separate Motorized Rifle Brigade. So in true accordance with U.S. doctrine, the Ukrainians appear to have a 3:1 advantage over the Russian defenders in this force on force engagement. Now its up to the shooters to bring it home.

Title 42 Has Ended - Title 42, dubbed the "Remain In Mexico Policy" has officially ended.

Harsh Reality - As we stated in last week's edition, this is nothing more than the democrats' way of changing the voting demographic in the U.S. While the liberal media continues to cover for bad policy, see here, over 10,000 illegals A DAY are crossing into the U.S.

The border patrol is processing people into the country with "Notice To Appear" documents for court dates, usually years into the future. In some cases they're given government funded cell phones so they can "maintain contact" with the illegals. The NTA paperwork mentioned before is then used as a legal document to obtain government issued identification and to apply for welfare, medicaid and food stamps.

Border states have responded by putting large numbers of illegals on busses and sending them to liberal-run sanctuary cities. Honestly, that's the least you can do for them.

Riots Continue After Former Pakistan PM Arrested - Imran Kahn, the former Prime Minister of Pakistan was arrested last week. That sparked country wide protests and violence. *Shock*

Harsh Reality - Hmmm.. That kind of sounds familiar. The current political leadership targeting and imprisoning their challengers to maintain power.. In all sincerity, it's not surprising seeing this type of banana republic BS out of Pakistan. Unfortunately, Pakistan is a nuclear power that happens to be located in a very unstable area of the world; so this type of violence is cause for concern for everyone.

Weekly Market Recap

Shit That Doesn't Matter

Biden Crime Syndicate - This week the House Oversight Committee presented various evidence showing that the Biden family received over $10,000,000.00 from foreign entities.

Harsh Reality - Between Hunter's hooker and crack addiction, to Joe's "10% For The Big Guy," I think we all know that Biden and his whole family is nothing more than a corruption cesspool. If you don't believe that at this point it's safe to say that you're blinded by your political affiliation and there's no helping you. The liberal media talking points remind me of the move "Wolf Of Wallstreet" and his ratholes where he hid ill-gotten gains.

Unfortunately, no one in the liberal congressional leadership, the department of justice, nor the liberal-run media is going to even consider this. Bank records are not conjecture and the situation shows just how broken and politicized the U.S. legal system has become. Add into that, there is a 0.00% chance that Biden will be impeached by a liberal-run senate and this lands firmly in the "Shit That Doesn't Matter" category. We will say that it is scary to think about what happens to the rule of law when the legal apparatus of the U.S. loses legitimacy..

Musk Stepping Down As Twitter CEO - Musk announced via twitter that he has identified his successor as CEO, Linda Yaccarino. She is scheduled to take over in the next six weeks.

Harsh Reality - We inaccurately reported via our FB group this week that Musk was stepping down as the CEO of Tesla. Fortunately, one of our readers called us out and the mistake was corrected quickly. We are definitely not infallible and appreciate the course correction.

Having said that, this is great news for Tesla. Shareholders and detractors from Tesla have long argued that Elon playing CEO in so many companies means that he can't do a good job. Now that the day to day operations at Twitter is off his plate we'll see how it goes.

Tom Brady & The Vegas Raiders - News broke yesterday that Tom Brady is in negotiations with the Vegas Raiders to acquire a minority ownership stake in the team.

Harsh Reality - After his FTX investment crashed and burned, it's good to see the man going after a viable business prospect. It's definitely a long term strategy as the Vegas Raiders are sure to be at the top of the league before you know it.. *Sarcasm*

That's A Wrap!

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