What Caught My Eye Today - Wealth, Entitlement Programs, Venezuela

Wealth - I don't know why, but there is something about self-important think tanks producing reports that confirm what is already common knowledge that amuses me.The wealthiest 1% control 39% of the world's wealth, and their share is likely to grow in the coming years, according to a new report from the Boston Consulting Group. See what I mean? Yet another report indicating that the rich are getting richer. The world's total private wealth grew 7.8% in 2012 to $135 trillion. The top 1% control $52.8 trillion, and those worth $5 million or more control nearly a quarter of the world's wealth. The number of millionaires in the world surged by 10% last year, reaching 13.8 million. Those worth $5 million or more will see their wealth grow 8%, while those worth more than $100 million will see their wealth grow 9.2%. In the developed world - the U.S. and Europe - it's mainly stocks that is driving wealth. Stocks have been on a tear this year in the U.S., which has mainly benefited the top 5%, who own 60% of all individually held stocks. In my world, the stock market has obliterated any hopes I've entertained for retiring...ever. In developing markets, the main wealth creator is economic growth and savings. Let's take a closer look at the prospects for developing markets. The World Bank has projected global GDP growth of 2.4% in 2013. By comparison, sub-Saharan Africa looks to grow by 5% or more. Asia, driven primarily by China, is expected to do even better, with growth projections of 7.8%. Sounds rather promising, doesn't it. Then again... Africa ranks at the bottom of the Ease of Doing Business Index (meaning it is extraordinarily difficult to make a buck); it has one of the highest rates of HIV/AIDS (which no doubt has a negative impact on the working age population); and it has almost no banking infrastructure to speak of (which might put a bit of a damper on people's ability to save). How about our friends in Asia? While 7.8% growth would be phenomenal in the U.S. or Europe, it is a pretty dramatic slowdown for the likes of China, which had been posting double digit growth for several years. On top of that, the wealth gap issues confronting Asian nations, makes the problems we have in the U.S. pale by comparison.

Entitlement Programs - Lest you were under the impression that think tanks had a monopoly on publishing reports on stuff we already know, fear not. The U.S. government is doing its part to confirm the obvious as well. The underlying financial condition of Social Security and Medicare did not change greatly in 2012 and both are still on borrowed time according to separate annual reports. The trust funds for retirement and survivors benefits and a separate fund for disability payments, when considered together, have a projected depletion date of 2033, unchanged from last year’s annual report. After the reserves are depleted, continuing payroll tax receipts would be sufficient to pay three quarters of promised benefits through 2087. The Medicare Hospital Trust Fund – one of two funds that support the program – will have enough money to cover its obligations fully until 2026 – which is two years longer than predicted in last year’s report. What's this? A two year reprieve? Yippee! After that, the share of hospital costs that could be financed with payroll tax revenues would decline from 87% in 2033 to 70% in 2050 and later. Some 58 million Americans currently receive Social Security benefits.  So bottom line, all this talk of entitlements going bankrupt is a little extreme. The way I read this, is that in the next 15 to 20 years, instead of receiving a dollar's worth of benefit, I will get somewhere between 70 and 80 cents? Don't get me wrong, that sucks, but considering the performance of my retirement accounts, this is par for the course.

Venezuela - These poor slobs cannot catch a break. First, no toilet paper (click here) and now this... When it comes to Venezuela's growing scarcities, not even the Roman Catholic Church has received a dispensation. Church officials say food shortages and foreign exchange restrictions are causing a lack of ingredients needed to celebrate Mass: altar wine as well as wheat to produce communion wafers. They say the wheat flour used for the sacramental wafers is scarce and the supply of altar wine used for Holy Communion is threatened, which could force them to ration it. Venezuela's only producer of church-standard communion wine, recently informed the church that it can no longer guarantee production because it lacks some imported ingredients. Is anyone besides me curious as to what those "imported ingredients" might be. Wine is wine, is it not?  The shortage of wheat flour has compounded the problems for the church, because the host, or wafer, administered during Holy Communion must be made of wheat. The wafers are made by nuns in convents and parish houses.   I don't want to trivialize the spiritual well being of anyone, but come on -- rationing of communion wafers and altar wine? That's a little funny, don't you think?