Americans Have a Bad Case of Retirement Overconfidence

Via Birch Gold

Americans Have a Bad Case of Retirement Overconfidence

One of the reasons it’s a good idea to form a solid retirement plan is the uncertainty in the markets. But not just the stock markets…

We’ve witnessed absurd calculations about the returns pensions must generate to meet their funding objectives. Like when they use an absurdly-ambitious 7% (or higher) return on investment, for example. We say “absurdly ambitious” because the latest research indicates the next 10 years of stock market returns will be about 8% below Treasury bond returns, which themselves are already offering an after-inflation negative yield.

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One thing Congress gets right: funding their own pensions

Guest Post by Simon Black

Turns out Congressmen make a lot of money…

A study found that while the average American’s net worth increased 3.7% per year between 2004-2012, members of Congress averaged 15.4% annual gains.

That high level of pay means half the members of Congress are millionaires today… and continue to collect their $174,000 annual salary.

Of course it’s you, the taxpayer, paying that cushy salary.

But did you know the taxpayer also foots the bill for insane retirement benefits for Congress?

Each retired member can start collecting a pension at age 62 if they’ve spent just five years in Congress.

And they’ll collect 80% of their $174,000 annual salary.

That’s almost $140,000 a year, for the rest of their lives… for five years of service.

Where can I sign up?

Continue reading “One thing Congress gets right: funding their own pensions”

Are You Infuriated Yet?

Authored by Chris Martenson via PeakProsperity.com,

More and more, I’m encountering people who are simply infuriated with how our “leaders” are running (or to put it more accurately, ruining) things right now. And I share that fury.

It’s perfectly normal human response to be infuriated when an outside agent hurts you, especially if the pain seems unnecessary, illogical or random.

Imagine if your neighbor enjoyed setting off loud explosives at all hours of the day and night. Or if he had a habit of tailgating and brake-checking you every time he saw your car on the road. You’d been well within your rights to be infuriated.

Or to use a much more common example from the real world : When your politicians repeatedly pass laws that hurt you in favor of large corporations — that, too, is infuriating. Especially if those actions run directly counter to their campaign promises.

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State and Local Pensions Average 0.6% Return In 2016 (Despite 7.6% Return Assumption and Chronic Underfunding)

Via Snake Hole Lounge

The US Federal government is spending at a fast and furious rate. US Federal Spending is rising at a staggering $428,253,120 per day while US Federal TAX Revenue is only rising at $129,857,760 per day. That is almost a ratio of 2x tax revenue.

causeofdebt

Meanwhile, US public debt is skyrocketing.

pubdebt

Continue reading “State and Local Pensions Average 0.6% Return In 2016 (Despite 7.6% Return Assumption and Chronic Underfunding)”

Illinois On The Brink? The Whole Country Is On The Brink

Via Investment Research Dynamics

The biggest problem facing Illinois is the public pension fund problem.  I don’t care what the “official” number is for the degree to which it is underfunded.  I can guarantee that even without marking-to-real-market the illiquid investments like private equity funds, derivatives, commercial real estate trusts and other assets that do not have truly visible markets, collectively the public pension system in Illinois is at least 60-70% underfunded.   Then apply a realistic assumed actuarial rate of return on assets, which would be lower than the current assumption (likely 7.5% ad infinitum) and the underfunding goes to 80%. The problem is unsolvable without a complete and drastic restructuring.

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Mauldin Warns The Next Recession May Be A Complete Reset Of All Asset Valuations

Authored by John Mauldin via MauldinEconomics.com,

Sometime this year, world public and private plus unfunded pensions will surpass $300 trillion. That is not even counting the $100 trillion in US government unfunded liabilities. Oops.

These obligations cannot be paid. A time is coming when the market and voters will realize this.

Will voters decide to tax “the rich” more? Will they increase their VAT rates and further slow growth? Will they reduce benefits? No matter what they decide, hard choices will bring political turmoil.

And that, of course, will mean market turmoil.

The Great Reset Will Cause a Horrible Global Recession

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California is Highest Taxes State in USA and should join the EU

Guest Post by Martin Armstrong

Governor Jerry Brown never saw a problem that could not be solved by just raising more taxes. This time, the state pension fund is going broke as we have been warning with the building Pension Crisis thanks to mismanagement and low interest rates thanks to Larry Summers. California has already increased its gasoline tax by 50% in the past decade. Now to bailout the state employee Pension fund,  Gov. Brown has proposed a 42% increase in gasoline taxes and, get this, a 141% increase in vehicle registration fees. Nobody talks about cutting government employee pensions. NEVER! Why when you have a population to milk like the cow.


Final Piece of Pension Disaster Puzzle in New Savings Data

From Birch Gold Group

What was initially a slow breakdown in America’s pension system is now a speeding train wreck, one that has become a risk to more than just pension holders. New statistics on Americans’ saving habits are adding a new dimension to an already massive economic threat.

Traditionally, retirees have viewed pension programs as something they can count on 100%, no questions asked. For decades, pensions — both public and private — have always found a way to make good on their promises. But those days are long gone, and the conditions for pension programs in the U.S. are deteriorating quickly.

It looks as if America’s retirees and soon-to-be retirees are far less equipped to weather a future economic storm than we previously thought.

Continue reading “Final Piece of Pension Disaster Puzzle in New Savings Data”

The Market Has Its Head Buried Deep In The Sand

Via Investment Research Dynamics

Several “black swans” are looming which could inflict a financial nuclear accident on the U.S. markets and financial system.   I say “black swans” in quotes because a limited audience is aware of these issues – potentially catastrophic problems that are curiously ignored by the mainstream financial media and financial markets.

The most immediate problem is the Treasury debt ceiling.  The Treasury is now projected to run out of cash by mid-summer.  Of course, in the spurious manner in which the markets evaluate the next trade, July may as well be a decade away.  My best guess is that the “market” assumes that, after drawn out staging of DC’s version of Kabuki Theatre, Congress will raise the debt ceiling, probably up to $22 trillion.  Then the Fed will extend its highly secretive “swap” operations to foreign “ally” Central Banks (hint:  Belgium and Switzerland) in order to fund the onslaught of Treasury issuance that will ensue.  Problem solved…or is it?

(Note:  Plan B would be another one of Trump’s bewildering Executive Orders removing the debt ceiling.  Plan B is another form of “fiat” currency issuance)

Continue reading “The Market Has Its Head Buried Deep In The Sand”

California Dreaming

Guest Post by Martin Armstrong
calpers.530x298
California is a complete black hole. The people do not even realize that government has been so corrupt, that every person in California owe $93,000 at the end of 2016 to cover state employee pensions. Back in 2015, Calpers, the State Pension system, sold out stocks and bought bonds because they thought the stock market would crash. They have been quietly supporting efforts in Congress to seize 401K pension plans and hand them to the States to manage. Their top two corrupt politicians would have had this through if Hillary won.
Pelosi-FeinsteinIt would be a win-win for the rest of the country if California seceded and took its two leading politicians with them. Of course, I doubt these two notorious politicians would vote to leave. It would be like the Clinton Foundation having to close shop because Hillary lost her influence to peddle.

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Will Pensions Derail the Trump Rally in 2017?

From Birch Gold Group

In the weeks following Trump’s unexpected election win, markets have soared. But some market watchers are starting to fear the “Trump rally” could be nearing its end.

They see one big indicator in trading activity that suggests a major shift might be coming soon. Plus, when pension funds move to rebalance their assets over the next few weeks, it could throw a wrench into the market’s current winning streak.

“Nobody is Selling…”

Even during big market rallies spurred by prolonged buying streaks, there’s still typically a healthy amount of selling activity too. It’s just part of the market’s natural balance. The interesting thing about the Trump rally, however, is how it stands as an exception to that rule.

In the last two months, there have been record-setting levels of buying in equity markets. The weird part is that there isn’t any selling going on in the background. Even Trump’s new special advisor on regulation, Carl Icahn, has noted this, saying that “nobody is selling” — and it’s making him a little nervous.

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Ex-Fed Advisor: Looming Pension Catastrophe Makes It “Hard to Sleep at Night”

From Birch Gold Group

Of all the troubling economic issues in the United States today, the current crisis erupting from mismanaged public pension programs stands out as a uniquely menacing threat to Americans’ financial security. Five major cities have filed bankruptcy over pension woes since 2008, and dozens more are teetering on the brink.

Faced with massive budget shortfalls, a rapidly increasing number of beneficiaries, and stagnant rates of return, federal and state pension funds around the country are near their tipping point.

Ex-Federal Reserve advisor Danielle DiMartino Booth warns:

…the idea that we can escape what’s to come, given demographically what we’re staring at is naive at best. And it’s reckless at worst. And when you throw private equity and all of the dry powder that they have — that they’re sitting on — still waiting to deploy on pensions’ behalf, at really egregious valuations, yeah, it’s hard to sleep at night.

But when it all comes crashing down, pension holders won’t be the only ones who suffer.

Continue reading “Ex-Fed Advisor: Looming Pension Catastrophe Makes It “Hard to Sleep at Night””

The Equal Sign Can Be a Real Bitch

On a long enough timeline, consumption equals production.

Guest post by Robert Gore at Straight Line Logic

If one had to choose a single symbol to represent the apex of human thought and achievement, a strong candidate would be the equal sign: =. That sign says that the symbols and mathematical operations to the left of it are equal to the symbols and mathematical operations to the right. Furthermore, to retain equality, anything done to the left side of the equation must be done to the right side. The equation is the heart of elementary arithmetic, the most complex principals of mathematics and science and their real world applications, and everything in between. Only logical challenge can disprove an asserted equality, and no amount of wishing will turn an inequality into an equality. The equal sign represents humanity’s capacity for ruthlessly pristine logic.

Many people shun mathematics, science, and logic, seeking refuge in their antitheses. A good part of human intellectual history has been attempts to either ignore equalities or turn inequalities into equalities. Forgiving, sloppy, delusional illogic is usually collective. Every age has its particular refuges. Our age has rejected the mathematics of debt. What can logically not occur, a perpetual inequality—consumption greater than production— has become the foundation of the global economy. As the tagline for Zero Hedge notes: “On a long enough timeline the survival rate for everyone drops to zero.” In the same vein, on a long enough timeline, consumption equals production. Understand that equality, and the future comes into stark relief.

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llinois to Tax Drivers 1.5 cents per mile they drive

Illinois Road Tax

llinois motorists are living in a bankrupt state that has promised pensions it never funded. Their state constitution bars the politicians from reducing the pensions so the net result, tax payers must pay a lot more to fund pensions of government workers. As oil prices have collapsed, tax revenues have dropped. The net result, the proposal made by Democrat State Sen. John Cullerton imposes a new tax upon residents forcing them to pay 1.5 cents per mile that they drive. Taxes will rise further and further as the States move into major deficits and as interest rates rise, they will be compelled to raise taxes drastically.

Does the dream end in wakefulness?

Two recent columns, one about the “pension crisis” (which should include all promises of future payment streams, e.g., public pensions, Social Security/Medicare and corporate benefit plans) and the other about the National Debt (which could be scaled up to include all credit market debt, even including contingent contractual payment systems like derivatives), highlight two sides of the same (credit) coin.

What do you think of my view that debt issuance (credit growth) on this scale does three things:

  1. It creates the illusion that wealth can be consumed (by paying armies of people to do stuff that a true market would never sustain) while the holders of the IOU’s (bondholders) believe they still have the wealth.
  2. By doing #1, it encourages a society-wide orgy of capital consumption, because instead of a natural split between capital formation/capital maintenance and consumption, the “have my cake and eat it too” places an illusion of capital on one side of the scale, so people in society drastically increase consumption to balance.
  3. It empowers political apparatchiks, political factions and all spendthrift, high-time-preference permanent children because he who pays the piper calls the tune, even if payment is made with the nation’s Mastercard. It rewards profligacy and financial stupidity. And you always get more of whatever is rewarded in life.

My conclusion is that monetary debasement [abetted by removing silver (1964) and gold (1971) from US money] skewed people’s “mental accounting” of conditions, reinforcing a vast, collective rationalization for policies that as a whole look like our society is an 18-year-old sailor on shore leave, turned loose in a whorehouse with a (seemingly) no-limit charge card.

This explains how the USA instituted policies that packed up and shipped entire industries to foreign lands, and how mercantilist foreign nations bulldozed vast tracts of land to build factories catering to over-consumption on a level no sane person could imagine.

Here’s my point: If this all is true, then the intermediate effects are as follows:

Continue reading “Does the dream end in wakefulness?”

Pennsylvania, Illinois Usher In The New Year With Record Budget Impasses

Tyler Durden's picture

We’ve written quite a bit this year about the fiscal crises unfolding among America’s state and local governments. Illinois became something of a poster child for the problem when, in May, the state Supreme Court struck down a pension reform bid, triggering a Moody’s downgrade for Chicago.

After that, the situation in Springfield worsened materially and before you knew it, the state was paying out lottery winnings in IOUs and missing hundreds of millions in pension payments.

The Illinois high court decision effectively set a precedent. “My reaction was, ‘Yeah, that’s going to play here,’ “ John D. McGinnis, a lawmaker in Pennsylvania, told The New York Times back in May. As the Times went on to note, Pennsylvania “has been diverting money from its pension system, setting the stage for a crisis as more and more public workers retire.”

“The judiciary in Pennsylvania has been solidly of the belief that there are ‘implicit contracts,’ and you can’t deviate from them,” McGinnis said. “If lawmakers in Harrisburg were to unilaterally cut pensions now, they could be taken to court and be dealt a stinging rebuke, like their counterparts in Illinois.”

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