REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

A new poll that forms the basis for this report in USA Today indicates that Americans’ doubt over the promises of the Social Security system continue to grow.

Battered by high unemployment and record home foreclosures, most Americans seem to have lost faith in another fundamental part of their personal finances: Social Security.

A USA TODAY/Gallup Poll finds that a majority of retirees say they expect their current benefits to be cut, a dramatic increase in the number who hold that view. And a record six of 10 non- retirees predict Social Security won’t be able to pay them benefits when they stop working.

Skepticism is highest among the youngest workers: Three-fourths of those 18 to 34 don’t expect to get a Social Security check when they retire.

The public’s views are more dire than the calculations of Social Security’s trustees. Last year, they projected the system would begin running in the red in 2016, as the Baby Boom generation retired, and the trust fund would be exhausted in 2037.

Practically speaking, this is not all bad – the public increasingly understands that the system is unsustainable. It doesn’t require four years in college to do the math behind the retirement age-life expectancy gap that has been allowed to grow for the better part of a century. Of course, we should all thank former Fed chief Alan Greenspan for making the system appear to be sustainable over the last few decades as his ground-breaking work on the system in 1983 sent him on to even more destructive tasks at the central bank.

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Given what has happened in the world over the last few years – the last few decades, for that matter – it’s hard to imagine that reports like this from the New York Times should come as a surprise to public sector employees, many of whom are working on borrowed time.

A City Outsources Everything. Sky Doesn’t Fall.

Not once, not twice, but three times in the last two weeks, Andrew Quezada says, he was stopped and questioned by the authorities here.

Mr. Quezada, a high school student who does volunteer work for the city, pronounced himself delighted.

“I’m walking along at night carrying an overstuffed bag,” he said, describing two of the incidents. “I look suspicious. This shows the sheriff’s department is doing its job.”

Chalk up another Maywood resident who approves of this city’s unusual experience in municipal governing. City officials last month fired all of Maywood’s employees and outsourced their jobs.

While many communities are fearfully contemplating extensive cuts, Maywood says it is the first city in the nation in the current downturn to take an ax to everyone.

Maywood sounds like a very unusual place. Just south of Los Angeles with as many as 50,000 residents packed into just one square mile and a police force that sounds like it was completely dysfunctional before it was disbanded, bankruptcy was the city’s only alternative to letting all 66 city employees go.

Nonetheless, a growing number of people across the land are realizing that it makes little sense for the city worker mowing the courthouse lawn to be making $50,000 or more in wages and benefits when a contractor could do the same job for a fraction of the cost.

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New Home Construction at Eight-Month Low

The Census Bureau reported(.pdf) that housing starts reached their lowest level since last October, down 5.0 percent, from an annualized rate of 578,000 in May to 549,000 in June. Permits for new construction rose 2.1 percent, from a rate of 574,000 to 586,000, but they remain quite depressed, moving up from one-year lows reported last month.

The end of the homebuyer tax credit in May is surely responsible for what some are now calling the “2010 mid-year housing wasteland”, where checks of between $6,500 and $8,000 from the government have pulled summer demand forward into the spring leaving far fewer buyers during the peak selling season. Existing home sales will be reported on Thursday.

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Tuesday Morning Links

MUST READS
China Tops U.S. in Energy Use – WSJ
After Job Training, Still Scrambling for a Job – NY Times
Hugh Hendry: ‘If There Was A Way To Short Obama, I Would’ – HuffPo
Spain, Ireland, Greece Sell Debt as Funding Pressure Eases – Bloomberg
Battle looms over new job heading financial watchdog – Washington Post
Treasury Auction Bids Hit Record, Investors Surpass Bond Dealers – Bloomberg
SEC needs to add 800 jobs due to reform law – CNN/Money
The LEAST Educated Cities In America – HuffPo
Welfare & Warfare – Burning Platformg

MARKETS/INVESTING
Oil hovers below $77 amid mixed signs on economy – AP
Gold holds above $1,180 but further losses eyed – Reuters
Bad January, Bad First Half: A Gloomy Omen For Stocks – CNBC
Pimco Sells Black Swan Protection as Wall Street Markets Fear – Bloomberg
Fundamentals for gold remain but seasonal doldrums drag on – Mineweb
Leading money manager now believes deflation is coming – MarketWatch
CARPE AURUM – Gold Scents

ECONOMY/WORLD/HOUSING/FED
Double-dip looks doubly certain – MarketWatch
Senate Set to End Stalemate and Extend Jobless Aid – NY Times
China downcast on exports as EU debt woes bite – Reuters
British government June borrowing tops forecasts – MarketWatch
Six Million to Lose Homes in Next Two Years – The Truth About Mortgage
Need a Mortgage? Don’t Get Pregnant – NY Times
Why Housing Data Are Misleading: The Tax Credit Angle – WSJ
Elizabeth Warren Could Head CFPB Without Senate Confirmation – HuffPo
More on the Fed’s Balance Sheet – The Big Picture

 

What’s Going on with PHYS?

After just getting back in and checking on what markets did in late trading, I couldn’t help but notice that the Sprott Physical Gold ETV (NYSE:PHYS) took a shellacking today.

Surely there’s some explanation for that latest nosedive that, hopefully, is just temporary, but even so, since the May mania, it’s been mostly underperforming boring old GLD.

Full Disclosure: Long GLD,  no position in PHYS at time of writing

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Arnold Schwarzenegger = Gray Davis

Well, it looks like those California government worker pay cuts to minimum wage are not going to go through as Governor Arnold Schwarzenegger had hoped.

Last Friday, a judge ruled that the Gubernator could not make Controller John Chiang reduce the paychecks of tens of thousands of state workers to $8.25 an hour to help out with the current $19 billion budget hole – at least not right now. Apparently, the court is still looking into the matter.

The Sacramento Bee reports that workers are angry at all the cuts, quoting the governor as follows, a passage that should be read with your best Schwarzenegger accent (but, please, don’t do it out loud).

When it comes to state employees, let me make one thing clear, that I appreciate very much the hard work that state employees do. But at the same time, we have had a drop because of the economic crisis worldwide … People had to take reductions in their salaries and all of those things and so the public sector also has to take a haircut.

Of course, this does little for the outgoing governor’s approval ratings that, according to this LA Times story, have now reached the depths of his predecessor, Gray Davis.

Schwarzenegger’s poll numbers are now exactly the same as Gray Davis’ numbers in August 2003, two months before he was recalled by California voters.The poll found about one in five voters (22%) currently approves of Schwarzenegger’s performance as governor, while 70% disapprove.

As should be clear after the last 15 years, California is impossible to govern without an asset bubble of some sort that is in some stage of inflating.

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