Reuters Money

One man’s retirement crusade to help Detroit and baby boomers

Randal Charlton has had a long, colorful career with plenty of ups and downs. In his 71 years, he’s done everything from tending dairy cows for a Saudi sheik to starting a jazz club in Florida. And as a lifelong entrepreneur, he has bought and sold 14 different companies.

Charlton’s last venture was a Detroit-based biotech company called Asterand, which he co-founded and then merged in 2006 with a U.K.-based competitor. He was 67 years old after the deal closed – a time when many would hang up their spikes and take it easy.

Instead, Charlton took on a daunting new challenge: fighting Motor City’s economic blight by building a successful business incubator for entrepreneurs called TechTown. Charlton raised $24 million from foundations and government, gathered together an impressive array of resources for training and start-up funding and recruited a small army of start-ups that have created a total of more than 1,800 local jobs.

TechTown is located in an old five-floor automotive plant with 130,000 square feet. When Charlton took over, just one floor was built out, and the center was running on loans guaranteed by nearby Wayne State University. Since then, the incubator has been home to 250 companies, and more than 2,200 entrepreneurs have graduated from its training programs. Last year, 14 TechTown companies received capital infusions totaling more than $1.35 million. The incubator has invested $700,000 directly in early-stage businesses and helped clients raise $14 million in follow-on funding.

Charlton’s work has just been recognized with a 2011 Purpose Prize, announced today. The award, given annually by the Encore Careers campaign, recognizes older career trailblazers who have demonstrated creative and effective work tackling social problems. Now in its sixth year, the prize was created to promote and encourage civic engagement among baby boomers. It’s a program of Civic Ventures, a nonprofit that works to engage boomers in encore careers combining personal meaning, income and social impact.

Each prize winner receives $100,000. The other winners this year include a San Francisco-area screenwriter who adopted two daughters from China in her fifties, then found a way to partner with the Chinese government in efforts to transform the care of 800,000 orphans there; an Oregon woman who produces and distributes low-cost, safe, fuel-efficient cookstoves in Latin America; and a Santa Fe, New Mexico architect working to improve energy efficiency and reduce emissions in buildings.

A native of England, Charlton started his career after college as an agriculture journalist, and then worked for an agricultural export company. His work has taken him to 40 countries and many adventures, including living for weeks in a Saudi Arabian desert nursing a sheik’s herd of cows back to health. Later he acted as a consultant for cattle breeding associations and for the European Development Fund, and as an executive for several global biotechnology companies.

Surveys say: Retirees are getting very nervous

Reference librarians are nothing if not precise, and Kevin Davey plotted his exit from the Chicago Public Library system with all the exactitude of a veteran fact-finder. His last day was Sept. 30 — just 48 hours after his 55th birthday and first day of retirement eligibility.

With his wife still working and the couple’s finances under control, Davey figures that he has the ideal plan in place. All that remains is to land a part-time job with another library to put the icing on the cake. But after submitting close to 20 resumes, Davey hasn’t fielded a single interview.

“I’ve looked for work in bad economies before, but this seems to be more difficult now than it’s been in the past,” he says. “What’s baffling me is that my resume hasn’t floated to the top with all the experience I have.”

If Davey is starting to feel anxious, then no wonder other retirees report financial jitters of historic proportions. The latest Well-Being Index from the Principal Financial Group reveals that 36 percent of retirees — up 15 percentage points from last year — are pessimistic regarding the economic outlook for the rest of 2011.

How do you feel about the economic outlook for the rest of 2011?

• Optimistic
• Pessimistic

How cuts to Social Security Administration will hurt you

“Starving the beast” is a favorite conservative strategy for forcing cuts in federal spending. The idea is to deprive the government of revenue in order to force spending cuts – and resistance to new taxes is a central feature of the current Super Committee deliberations in Washington.

Advocates for older Americans are watching closely to see how the committee’s work might lead to retirement benefit cuts via a higher Social Security retirement age, smaller cost-of-living adjustments or higher Medicare eligibility ages. Meanwhile, a separate starve-the-beast exercise goes mostly unnoticed: a big squeeze on the administrative budget of the Social Security Administration (SSA).

The SSA is funded through the same Federal Insurance Contributions Act (FICA) tax that pays benefits, so it doesn’t compete for general revenue to meet its costs. But Congressional appropriators — who oversee its budget — have been squeezing the agency anyway.

In fiscal 2011, Congress provided the SSA with about $1 billion less than requested by President Obama. Those cuts forced the agency to make cuts that beneficiaries have noticed. It suspended mailing of the annual statement of benefits, and it shelved plans to open eight new hearing offices to handle the backlog of disability claims, which has soared during the recession.

SSA had planned to restore the statement mailings in fiscal 2012 to people over age 60 not yet receiving benefits  – but that won’t happen “if Congress doesn’t provide adequate support,” says SSA spokesman Mark Hinkle. (The agency currently is operating under the second continuing budget resolution for FY 2012, which expires Nov. 18.)

This may sound insignificant, but it’s not. The benefit statement provides a valuable annual reminder of what you can expect to receive and how benefits are calculated – and it prompts us all to make Social Security part of our long-range retirement plans. For now, the alternative is to use the SSA’s online Retirement Estimator, which gives you a personalized projection of future benefits.

Hinkle says the SSA also has responded to the tight budget by reducing employee overtime by 80 percent. That has cut into the amount of time available to help people who come into SSA local field offices for face-to-face services. The agency also lost about 1,600 workers last year who can’t be replaced due to a hiring freeze.

Is the U.S. economy heading for a double-dip recession?

Is the U.S. economy heading for another recession?

Two investment strategists who spoke to a group of Thomson Reuters brokerage clients at a conference in Phoenix on Tuesday say the chances are slim. Despite the bear market blues, David Joy, chief market strategist at Ameriprise, says a double dip recession is unlikely. The U.S. is destined to be in two percent growth environment for the foreseeable future — “or 2.5 percent, if we are lucky,” Joy says.

Rick Robinson, regional chief investment officer at Wells Fargo, who is based in Scottsdale, Arizona, told attendees the chance of a recession in the U.S. is about 35 percent. However, the construction and manufacturing industries in the U.S. are operating at “Depression-like” levels, he says.

The downturn in equities presents a long-term buying opportunity in U.S. as well as foreign stocks, Joy says, but he notes that investors need a time horizon of at least three years. “If you have a five-year time horizon, even better,” he says. When asked when the Dow Jones Industrial Average will hit 20,000, Joy says it won’t happen until 2025. “I hope I’m wrong,” he quips.

Robinson says the 20,000 threshold may be reached even sooner, but first the U.S.  economy needs to deal with current credit issues — for example, municipalities are cash-strapped and banks are holding bad mortgages. That deleveraging will take five to seven years to work its way through the financial system, he adds.

The silver lining? While stocks are in the dumps, the financial industry is in decent shape, Robinson says. “We don’t think this is like 2008. The banks and the government have had three years to address their balance sheets. Banks are better capitalized than they were in 2008,” Robinson says.

While the global economy is sluggish, a bigger worry for the markets is more psychological than fundamental, says Joy, who is based in Boston. “The problem is we are just stuck,” Joy says. And he blames gridlock in Washington for much of America’s mental anguish. “The debt ceiling debate was a debilitating event for psyche of the U.S. investor, even more than the Lehman Brothers collapse,” Joy says.

Spending less could make recession a “self-fulfilling prophecy”: Analysts

Mark and Kathy Swezy of Englewood, Colorado embody what many Americans would call a rock-solid work ethic. Mark is a full-time purchasing manager at JoaQuin Manufacturing, while Kathy splits her time between her own graphic design business and a job at Nosh Nest, a high-end cookware and food shop in downtown Denver, Colorado.

Yet to hear Kathy Swezy tell it, the last two months have meant belt tightening on top of more belt tightening. “Over the last 60 days it’s been a little bit better, because I’m starting to get more graphic design work — but I really had to cut my rates, too,” she says. “So I’ve been buying school clothes at thrift stores, I’m using outdated software,and basically we don’t go out to dinner much at all.”

The Swezys reflect in their behavior what analysts are seeing across a large swath of the American economy. According to Bankrate.com’s September Financial Security Index, 40 percent of Americans have reduced their spending in the past 60 days, a condition that Bankrate senior financial analyst Greg McBride believes could pave the way for another recession.

“That sort of cutback of spending, if sustained for any length of time, would make a recession a self-fulfilling prophecy,” McBride says. “August was in many ways a perfect storm: We had a barrage of poor economic data, a downgrade to the U.S. credit rating, the fiasco over the debt ceiling and a stock market correction. And Europe has been an ongoing issue as well.”

All of that has led to deteriorating financial security among American consumers, who only make things worse when they spend less. “Seventy percent of economic output comes from consumer spending, and any sort of cutback can ripple through the economy very quickly,” McBride says.

Just in case you think McBride’s fishing for headlines, his words are more or less echoed by Clifford L. Caplan, founder and president of Neponset Valley Financial Partners in Norwood, Massachusetts. “With the lukewarm domestic economy, high unemployment and continued problems in housing, few — including myself — see a silver lining to the current malaise,” he says. “Obviously if this reduction in consumer spending continues, the U.S. economy will slide back into recession.”

As for holding out on hope, “Consumers are now shopping in the present tense,” says Jean Chatzky, a New York-based financial expert and author of “Money 911.” “What this environment has taught consumers — for better or for worse, and from my perspective it’s for worse — is that there is no good way to plan for the long term. So when the Dow has a good day or week, they open their wallets. And when there’s more bad economic news from Greece or France or Italy, they close them tight.”

Double-dip recession porridge: 3 bears dish it out

Now that fears of a double-dip recession are on everyone’s mind, the bears are on the prowl and really cranky.

What’s the best way to tame our fears and become confident long-term investors? Let’s listen to what some of my favorite bears have to say and then take a look at the big picture.

The most ominous threats are that of a European bank failure or double-dip recession that would slam both the U.S. and Eurozone. One of the most vocal ursines — Nouriel Roubini, professor of economics at New York University — starts out his jeremiad by asking the question “Is Capitalism Doomed?”

“The massive volatility and sharp equity-price correction hitting global financial markets signal that the most advanced economies are on the brink of a double-dip recession,” Roubini writes.

Bemoaning the Euro debt crisis, America’s fiscal crisis and even the Japanese earthquake and tsunami, Roubini is not sanguine the current system can handle these calamities. Consumers are gloomy and the U.S. housing market is still in the dumps.

“To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states.”

Roubini’s route to this radical shift? More infrastructure spending, progressive taxation, reduction of household debt burden and “breaking up too-big-too-fail banks and oligopolistic trusts.” Paging the U.S. Treasury Department, Congress, Federal Reserve and Bank of America.

Where is the real U.S. jobs plan?

Jobs, justice and peace. Have three themes ever been so intimately intertwined since Dr. Martin Luther King, Jr., championed this tri-partite campaign in his 1967 March on Washington?

Unemployment is ravaging the country, especially among urban minorities. Yet Congress has yet to put forward a comprehensive jobs plan to create employment. We’re still fighting two wars and garrisoning troops in Europe and Japan as the jobless rate soars at home. Debt reduction is still a priority over job creation.

The current economic downturn has put the brakes on economic progress for most of the American working class. They shared in widespread growth during the 1990s, but have been falling behind during the latest recession.

The pain has been uneven and most punishing in the inner city and among the young. For white men and women, the jobless rate for those 20 years and older was around 8 percent as of July. For white teenagers (age 16 to 19), the rate was 23 percent.

Unemployment for African-American adults is twice as high as white adults at 16 percent. For African-American teenagers, the rate soars to nearly 40 percent.

Much of the reason that decent-paying jobs have evaporated is that inner cities and suburbs have been de-populated and businesses have left — many of them to wealthy suburbs or overseas. Unionized industrial jobs have also fled.

There’s been great progress made since the end of World War II to create a broad base of high-paying jobs, although the bulk of those positions were in unionized manufacturing companies, nearly all of which have cut back, shut down or outsourced. High-wage jobs left urban manufacturing districts to be replaced by low-wage service jobs or occupational deserts.

Fury brewing at ratings agencies as markets gyrate

So let me get this straight.

Ratings agencies helped spark the financial meltdown of 2008-9, when they deemed that steaming piles of mortgage junk were brimming with triple-A goodness. They were wrong – and epically so.

Now S&P downgrades the debt of the entire country, further threatens to do so another notch, teams with fellow ratings agencies to bring Europe to its knees with each new appraisal and gets an assist for wiping trillions in wealth from investors’ portfolios in just a few days.

Anyone else think the ratings agencies need a time out?

“If you had asked me a couple of years ago if they could do anything more destructive than the mortgage debacle, I would have said never,” says Roger Kirby, Of Counsel for New York City law firm Kirby McInerney, who is involved in a class action against Moody’s on behalf of shareholders. “But it seems they’re managing to do it again, right now. In order to restore their damaged reputations, they’re interjecting themselves unsolicited into sovereign markets.

“It’s not productive, it’s probably inaccurate, and they’re just going out there on their own with no real purpose to what they’re doing. When future historians are writing about this period, they will probably single out ratings agencies as the single most destructive collection of entities.”

It’s not just an academic exercise. The musings of the ratings agencies are having very real effects on people’s portfolio. In the first day following S&P’s downgrade of U.S. debt from triple-A, another trillion was erased. As a result, some individual investors are starting to do a slow burn about how ratings agencies are stoking financial chaos.

Retirement investors suffer as economy catches up to Wall Street

Retirement investors have struggled with a Jekyll and Hyde economy these past two years, where Dr. Jekyll lives very well on Wall Street while Mr. Hyde runs roughshod over a terrified Main Street.

On Main Street, the jobless rate tops 9 percent and 14 million residential mortgages are underwater – a figure Deutsche Bank thinks will hit 25 million, or 48 percent of all home loans, before the housing bust ends.

On Main Street, the economy hasn’t respond to ultra-accommodative monetary policy. Near-zero interest rates don’t matter because because there’s so little demand for credit to hire people or to buy post-bubble real estate.

Meanwhile, free money has been great for Wall Street. The companies that created Main Street’s problems through the reckless behavior that led to the financial crisis barely missed a beat, and they went right back onto the gravy train.

Now, the Jekyll and Hyde economies demand to be reconciled. The markets finally realize what Main Street has known all along: we’re stuck in a grinding, recessionary economy with no end in sight. You can’t even call what’s coming now a double-dip, because the first downturn never ended.

Monetary policy is of limited use. Interest rates already are at rock-bottom; we’ll probably see more easing soon, even though QE2 hasn’t helped much. Meanwhile, fiscal policy has been focused in exactly the wrong area — deficit reduction rather than job creation and direct stimulation of the economy.

Of course, most Americans have a stake in both the Jekyll and Hyde economies – we live on Main Street, but our retirement money is invested on Wall Street. So the obvious question: what now? I’ll be blogging about strategies for retirement investing all week, but here’s my opening comment to those of us living in the Mr. Hyde economy, don’t create a self-inflicted wound by selling out of panic during this plunge.

Gold Mine: Links and tweets from around the Web

One consequence of the stock market decline is that everyone is talking about investing in gold as it hits record highs. But what are they saying?

A quick trip around the Web today came up with a treasure trove of things to think about, from advice on what to do now, to historical perspectives to funny tweets. There’s analysis that says gold will go up, there’s analysis that says gold will go down. And there are worldwide repercussions that you might not have ever considered.

Here’s a sampling:

From the anti-gold crowd, there’s Roland Gribben, writing in the London Telegraph that this gold rush is nothing new and there shouldn’t be such a frenzy, and Alexander Green, Investment U’s chief investment strategist, writing in ETF Daily News that gold and silver investors are losing their minds. And then there are true contrarians, like Gary Noth writing on LewRockwell.com, that all the experts telling you how to invest in gold, or why to invest in gold, are not worth listening to.

Among those bullish on gold are the powers that be at JP Morgan Chase, who issued an advisory predicting that gold will hit $2,500 by the end of the year. There’s also analysis from the Autochartists Team at FXStreet.com that shows gold continuing to go up. And then there are reports like Maike Currie’s in InvestorsChronicle.co.uk that explain why “the sky’s the limit.”

For historical perspective, there’s a link to an Alan Greenspan essay on gold from 1966 that was first published in Ayn Rand’s  ”Objectivist” newsletter titled “Gold and Economic Freedom.” It’s mostly a defense of the gold standard, but it includes gems like: “Deficit spending is simply a scheme for the confiscation of wealth.”

As for unintended consequences of gold and uses of gold that you might not have thought of, there’s an article on the “Consequences of high gold prices on weddings in Pakistan” and one on gold-plated contact lenses that are now, even more, the folly of the rich. And for anyone considering wedding bands, there’s the statistical note that now gold is as valuGolable as platinum.