The Wrong Way To Look At Social Security

A bunch of quick hits from this weekends Barron's as the articles come out today.

For all the worry about retirement readiness, Barrons found a survey where retirees say they are doing just fine. That's great but not really what the potential crisis is about. If there is a problem, it is with people still working who are collectively very undersaved for their retirement. 

It was an odd framing but not the reason to mention the article. There were a couple of comments, always read the comments, that said in effect, how much trouble people are in if Social Security is their primary source of income once they retire. A similar personal anecdote where someone was conversationally dismissive of the income from our Airbnb rental. We currently average a little over double our mortgage payment for the rental and the cabin will be paid off when I am 66. 

My reaction to both sentiments is the same. How great would it be for Social Security to cover a huge chunk of known expenses? How great would it be for a modest income stream (the rental is unambiguously cash flow positive but the dollars involved are not huge) to cover a meaningful chunk of known expenses? Modest income stream could apply to many different things, in this example it is a rental. 

There is a balance to be struck between living in the moment and doing favors, financial and otherwise, for your future self but being able to easily cover your retirement nut is a reward for many years of living below your means. How much will your Social Security be even if you haircut it by 20%? I repeat, how great would it be if your Social Security covered half or maybe more? How much easier would retirement be if that was the case? How much easier would it be if a $20,000 or $30,000 income stream was enough to have a meaningful impact on covering your expenses? 

The second article to look at was about investing in sports collectibles which is coincidental to yesterday's joke about a Rickey Henderson rookie card. There was one traditional advisor quoted who also advises on collectibles. He said if you have $ 1million to allocate to collectibles look for game worn jerseys of the most elite player you can afford (I am not going to use the term GOAT), if your budget is $100,000 look for second tier all timers like "Ted Williams or Stan Musial," for $10,000 buy a card of a first tier all-timer and if you have $1000, just keep your money. He added, or just collect what you like. 

I sort of collect baseball and basketball cards. It's very few actual cards issued by Topps or other card companies, I have more custom or art cards which are very cheap. There's quite few people who make these up. They are the same quality, they look great and are very cheap (repeated for emphasis), like $1-$10. A while back I mentioned having a 1970/71 Bobby Orr card that I bought for $20 that was worth $300 or so when I wrote about it so maybe it went up a little more. I made some sort of joke that even if I knew it would go up that much, it's not like I could buy a few hundred of them for the gain.

I might be sitting on a more meaningful gain on something else though. I stumbled into Daniel Jacob Horine early on in the pandemic on Twitter where his handle is Pop Fly Shop. He had started making mashups of baseball and comic books as small art pieces. I found him early but just stuck to buying what I liked for $35 back then including the pictured Nolan Ryan. A few months later he was featured on the MLB Network twice and his popularity blew up going from selling tens of prints each week to hundreds each week. The Ryan is one of only 88. A couple of years ago, a couple of the Ryans sold in the $2500-$3000 range. This past week, someone was trying to sell one for $6000. If the market really is there, then I will try to sell mine. If the market is not there, I'm happy to keep it.

The print is still in the wrapper it came in, inside the frame. The cards in there with it are examples of custom cards. The reason to tell this story is to reiterate from previous posts how unlikely it will be to actually make money that is meaningful unless you are at the Christies Auction level of engagement. I had no inkling the Pop Fly art would have any value otherwise I would have bought all the early ones. I suppose if someone made it their fulltime job, they might be able to have a meaningful impact on their finances assuming the more you put into something the more you get out of it holds true in collecting. I don't know if it does but if nothing else they are fun little pieces of art to have.  

The next article took an uncharacteristically (for most mainstream media) skeptical look at annuities. The short version is that quite a few annuity providers have large allocations to private placement loans which increase the risk of problems in the space arising. Odd that the term "private credit" was not used. If you do a little digging you will find a lot of current content about the threat to markets posed by private credit.

I've long been anti-annuity. I believe part of my bias stems from my mother having annuity, through my older brother, that failed. She got something like 30 or 33 cents on the dollar eventually. I don't know the details beyond that but interestingly, the Barron's article talks about a large failure at Executive Life in 1991. I don't know if that is the one that my mom got caught up in but it made for interesting reading. 

To be clear, while I do have a bias against annuities as they are commonly structured, I still believe the way in which assets can be annuitized is an important space to follow. I've mentioned the Stone Ridge mutual funds that transition into a longevity pool and Blackrock is sniffing around the space with something vaguely similar. These have the potential to be helpful in a way that I'd say would be a huge improvement over traditional annuities. 

Bill Ackman is listing a new closed end fund that will apparently "overlap" to some degree with his closed end fund that trades in Europe. The US symbol will be PSUS and the OTC symbol for the one in Europe is PSHZF. Barron's has PSHZF trading at a 25% discount to NAV. The way closed end funds typically get listed in the US is there is a selling concession (a commission of sorts) embedded in the offering price so they are issued at a premium to NAV which quickly corrects but maybe PSUS will be different.

PSUS will have a 2% fee but as Barron's notes, his holding can be replicated up to a point for less. PSHZF has done quite well lately but the fee and structure is a little disappointing.

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.