The prospective retiree hopes to invest several times their annual income in corporate assets.  If an average worker has $20,000 in assets invested in their workplace and makes $40,000 per year, and their intention is to have $400,000 in assets invested by the time they retire, they will have enough capital to keep 20 workers on the job.  Since the US population is roughly 300 million and the worlds population is roughly 6 billion, American investors intend to invest more capital in the market than is needed by the GLOBAL workforce.

Someone getting paid $40,000 for 40 years makes $1.6 million in their lifetime.  A retirement of $400,000 is roughly one-fourth this money.  Most people know there=s no way they can park one fourth of their income for retirement.  So the capitalization problem described above isn=t going to happen anyway.  The US workforce is 130 million, so at $20,000 per worker the non-real estate portion of US capitalization needs to be $2.6 trillion.  There are roughly 40 million retirees in the country at any time, so the per-retiree allocation $65,000.  This presumes that all capital invested in workers is owned by retirees, an assertion some of us don=t believe.

The real estate situation is more complicated but still easy enough to understand: rental property is typically valued at 60 months rent.  A common apartment rent might be $500, x 4 for a 4 unit building is $2000, times 60 is $120,000.  A five year payback means a PE of 5, which any investor realizes is pretty generous right now.

 Since the rest of the market has a PE around 30, rental income of $350 per month for the entire unit would be representative of market returns, or the fully leased building is worth $720,000.  Coastal areas and NYC values property at the latter, property holders in Duluth experience the former.  A grand tour of San Antonio suggests that some buildings have been >for lease= for years, so average rental income in the city is in line with market returns overall.

What is the asset dollar value of the telephone system per subscriber today as compared to, say, 1970?  It probably amounts to about two miles of wire, one IC on a circuit board in the central office, and a battery mass equivalent to four D cells.  Of the $20 a month spent on POTS, the majority is probably consumed purely by the cost of processing the payment.  This is before the little extras that can run the bill up another twenty or thirty dollars.  That latter money is pure gravy, since there is neither additional asset investment required or any further operational cost incurred.

The $10 million Cray supercomputer of the 1970's is today=s $3000 gaming computer.  We like to think of productivity gains in step-wise increments, but the trend in the last twenty years has included a fair amount of leapfrog.  Unfair questions: cost to make a movie today vs. 1975?  Cost of certain medical diagnosis vs. pre-CAT-scan days?  Cost of producing complex shapes in titanium for jet aircraft?

Everyone is blathering about fuel cells: no petroleum with it=s long and complicated supply chain, no fuel injectors, oil changes, radiators, spark plugs, or mufflers.  If the hydrogen is generated from solar panels on the roof, this gets rid of the coalmines, railroad haulage, centralized generators, gas wells, gas pipelines, and natural gas storage.  The emerging renewable energy portfolio is certainly capable of triggering a massive global economic restructuring, leaving a pile of stranded assets.  Is it inevitable?

This creates an interesting question: why isn=t this evident in the business press?  If you are reading Business Week, do you really want to read that investing for retirement is an exercise in utter futility?  Why would you read any such magazine again?

Investment, then, needs to be focused on acquiring new knowledge.  If the average worker is salting away $1500 per year for retirement, and 100 million workers are doing so, this is $150 billion in new capital added to the market every year.  If a typical startup needs initial capitalization of $5 million, this would suggest that 30,000 fully capitalized startups should be forming every year.  The job of these startups is, or should be, the production of >leapfrog= products, which of course will strand even more present day industrial and utility infrastructure.

Since venture startups are probably counted in the hundreds (per year) these days, obviously this path is also a blind alley.  Rational investment, in this case, needs to be made in the precursors, meaning people.  Since the old IPO saw it to invest in the rider, not in the horse, we need to find more >jockeys=.  Or develop them, whichever.

Regarding retirement: I give up.  Pay-as-you-go Social Security is here to stay.  Our kids will pay for it.