Hussman's 2012 Outlook And Mainstream Retirement Planning Alternatives

Here's a dressed up version of an email I just sent out to my two brothers and sister. I'm running about 40% of my 80-something mother's retirement money (the part not locked up in trusts):

"Here's a good piece by the best of the mainstream investment columnists: http://www.hussman.net/wmc/wmc120103.htm. Being mainstream, Hussman does not take into account out of the mainstream risks, including.:

• risks to the whole system from the fraudulent fiat-currency system,
• risks to the middle-class from the "banksters" (the banking, corporate, government elite running the system) or
• Peak Oil.

The key fact in this piece is that the best you can expect from passive, 100% invested in the stock-market investing for the next decade is 4.9% returns minus management fees and taxes compounded annually. I believe Hussman is talking about real returns computed by deflating with the bogus government manipulated CPI numbers, but I'm not sure.

There are a few takeaways from this article:

• The best estimate of what to expect from the investing of our dear mother's retirement money is 2.4% (i.e. 4.9% minus say 1.5% for management expenses minus another 1% for taxes) for the next 10 years. If she lives on what she expects to spend (around $50K/year) and actually gets this return then she should be able to make it to around 100 without running out of money, but without leaving much behind when split four ways.
• The best estimate of what to expect from your own retirement savings (401K or IRA) is 3.4% (4.9% minus something like 1.5% for management expenses).
• Bruce, with his US Post Office pension, should compare what the pension fund is expecting to the article's 4.9% to evaluate the likelihood of his retirement payouts taking a hair-cut.
• If this article seems like boring, complete gobbledy-gook then you should ask yourself how best to take responsibility for your retirement planning. There are no low-risk approaches unless you already have saved way more than you'll need. You can either:
  • save retirement money in tax-protected accounts (IRAs and 401Ks) and live frugally enough to get by on:
    • the gains (losses) from the passive, globally diversified approach (ETFs or Mutual Funds), probably around 3.4%. The risk here is that situation is worse than the best mainstream guy's estimate and "THEY" are going to plunder those tax-deferred savings accounts.
    • the gains (losses) from a top-gun who can play to win with your money without risking it all and who has enough integrity or personal connection to you to actually look out for your interests and save enough. Finding such a guy is harder than it sounds. There's a big straight jacket on your guy if what he's running is in a tax-deferred account. The risk here is either that he plunders your money (e.g. Madoff) or that he isn't really a top-gun and he loses a bunch of your money or "THEY" are going to plunder the tax-deferred savings.
  • spend a few thousand hours spinning up to become a top-gun yourself and retire on your "winnings" from your own savings. The risk here is that you don't actually become a top-gun and don't have "winnings" to retire on or that the investing system is so rigged that small-time top-guns can't make real money.
  • save in the form of physical gold enough and live frugally enough to get by on a fixed number of oz of gold per year. The risk here is that the physical gold is stolen, taxed to death or confiscated by the government or that it doesn't hold its value over the long-term.
  • plan on working as long as your are able and depending on family thereafter.
  • some other thing that doesn't occur to me right now.
  Respectfully and with much love..."

MontyHigh, www.worldofwallstreet.us