Home » Posts tagged 'pensions' (Page 4)

Tag Archives: pensions

Most defined benefit pension plans are nothing but Ponzi schemes. Plans are now unraveling because of demographics. An increasing number of retirees, needing untenable returns, are supported by fewer and fewer people putting money in the system. Democrats sponsored a bailout scheme. Will it pass?

Pension and Investments reports Sen. Sherrod Brown to Unveil Multiemployer Loan Program Legislation.

Sen. Sherrod Brown, D-Ohio, plans to introduce legislation that would allow struggling multiemployer pension funds to borrow from the U.S. Treasury to remain solvent.

The bill, co-sponsored by Rep. Tim Ryan, D-Ohio, could be introduced later this week or shortly after. It would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates. One restriction for borrowers is they could not make risky investments.

The bill would also fund a program at the Pension Benefit Guaranty Corp. to finance any remaining needs of pension plans borrowing from the new program. “Any money needed for the PBGC would be a tiny fraction of what it would otherwise be on the hook for if Congress fails to act,” said an analysis by Mr. Brown’s office.

Mr. Brown told a group of retired Teamsters in Ohio on Monday that the bill will be out shortly.

It Begins: Pension Bailout Bill

A reader asked me to comment on the story after reading ZeroHedge’s take: It Begins: Pension Bailout Bill To Be Introduced This Week.

“It’s bad enough that Wall Street squandered workers’ money — and it’s worse that the government that’s supposed to look out for these folks is trying to break the promise made to these workers. Not on our watch. We won’t allow that to happen,” said Brown.

…click on the above link to read the rest of the article…

It Begins: Pension Bailout Bill To Be Introduced This Week

November 9, 2017

It Begins: Pension Bailout Bill To Be Introduced This Week

Over the past year we have provided extensive coverage of what will likely be the biggest, most politically charged, and most significant financial crisis facing the aging U.S. population: a multi-trillion pension storm, which was recently dubbed “one of the most heated battles of a lifetime” by John Mauldin. The reason, in a nutshell, why the US public pension problem has stumped so many professionals is simple: for lack of a better word, it is an unsustainable Ponzi scheme, in which satisfying accrued pension and retirement obligations requires not only a constant inflow of new money, but also fixed income returns, typically in the 6%+ range, which are virtually unfeasible in a world where global debt/GDP is in the 300%+ range. Which is why we, and many others, have long speculated that it is only a matter of time before the matter receives political attention, and ultimately, a taxpayer bailout.

That moment may be imminent. According to Pensions and Investments magazine, Democratic Senator Sherrod Brown from Ohio plans to introduce legislation that would allow struggling multiemployer pension funds to borrow from the U.S. Treasury to remain solvent.

The bill, which is co-sponsored by another Democrat, Rep. Tim Ryan, also of Ohio, could be introduced as soon as this week or shortly after. It would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates. The one, and painfully amusing, restriction for borrowers is “they could not make risky investments”, which of course will be promptly circumvented in hopes of generating outsized returns and repaying the Treasury’s “bailout” loan, ultimately leading to massive losses on what is effectively a taxpayer-funded pension bailout.

…click on the above link to read the rest of the article…

Are You Infuriated Yet?

October 21, 2017

Are You Infuriated Yet?

You should be. I certainly am…

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.

There’s a lot of be infuriated about in the world today, so go ahead and embrace your rage. By doing so, you’ll be in a better mindset to understand things like Brexit, Catalonia, and Trump, each of which is a reflection of the fury of your fellow citizens, who are finally waking up to the fact that they’ve been victims for too long.

An easy prediction to make is that this simmering anger of the populace is going to start boiling over more violently in the coming years. Welcome to the Age of Fury.

‘Over The Top’ Dumb

Do you ever get the sense that, as a society, we’re being dangerously reckless? Perhaps so dumb that we might not recover from the repercussions of our stupidity for many generations, if ever?

…click on the above link to read the rest of the article…

Creditworthiness of New York and Illinois: One is Bankrupt

October 18, 2017

CREDITWORTHINESS OF NEW YORK AND ILLINOIS: ONE IS BANKRUPT

Summary

Unless used for capital improvements, any new Illinois State borrowing, regardless of security structure, will amount to nothing more than kicking the can further down the road.
Markets remain open to uncreditworthy government borrows longer than they should. In a low interest rate environment, investors will stretch credit standards.
Benchmark bond ratings are at variance with the rating agencies.

Everyone knows Illinois’ financial condition is poor. Conventional thinking seems to be that a bond default, should that happen, would be many years in the future. Pardon me, but wasn’t that the thinking right up to Puerto Rico’s, “We can’t pay” announcement? To answer the question of just how badly off is Illinois, I assembled a list of key creditworthiness indicators and applied them to New York, a highly rated state, and Illinois.

COMMENTARY AND BENCHMARK PRIVATE BOND RATINGS

The State of New York is managing its financial resources and obligations in a better-than-average manner. Particularly, the State’s employee pensions are reported to be 90% funded, but the general fund deficit must be contained and then eliminated. Unfunded OPEB costs are too high and can be renegotiated. Funded and pro forma unfunded long-term contractual obligations equaled 23% of general fund revenue in FY ended June 30, 2017, and exceeds the 15% threshold for a Benchmark AA or AA+ credit rating.

*Both NYS income tax and sales tax bonds are payable from annual general fund appropriation. For additional information, click here.

COMMENTARY AND BENCHMARK PRIVATE BOND RATINGS

The State of Illinois, in my opinion, is past the point of no return. It does not have the ability to raise taxes or cut spending to the degree necessary to reduce the annual cost of bond and retiree benefits from 33% to a sustainable level. The amount of debt issued by Illinois requires a moderate 8% of general fund revenues to pay P&I.

…click on the above link to read the rest of the article…

The Pension Storm Is Coming To Europe—It May Be The End Of Europe As We Know It

October 7, 2017

The Pension Storm Is Coming To Europe—It May Be The End Of Europe As We Know It

I’ve written a lot about US public pension funds lately. Many of them are underfunded and will never be able to pay workers the promised benefits—at least without dumping a huge and unwelcome bill on taxpayers.

And since taxpayers are generally voters, it’s not at all clear they will pay that bill.

Readers outside the US might have felt safe reading those stories. There go those Americans again… However, if you live outside the US, your country may be more like ours than you think.

This week the spotlight will be on Europe.

The UK Is Headed to a Retirement Implosion

The UK now has a $4 trillion retirement savings shortfall, which is projected to rise 4% a year and reach $33 trillion by 2050.

This in a country whose total GDP is $3 trillion. That means the shortfall is already bigger than the entire economy, and even if inflation is modest, the situation is going to get worse.

Plus, these figures are based mostly on calculations made before the UK left the European Union. Brexit is a major economic shift that could certainly change the retirement outlook. Whether it would change it for better or worse, we don’t yet know.

A 2015 OECD study found workers in the developed world could expect governmental programs to replace on average 63% of their working-age incomes. Not so bad. But in the UK that figure is only 38%, the lowest in all OECD countries.

This means UK workers must either build larger personal savings or severely tighten their belts when they retire. Working past retirement age is another choice, but it could put younger workers out of the job market.

UK retirees have had a kind of safety valve: the ability to retire in EU countries with lower living costs. Depending how Brexit negotiations go, that option could disappear.

…click on the above link to read the rest of the article…

Global Retirement Reality

October 1, 2017

Global Retirement Reality

Global Shortfall
UK Time Bomb
Swiss Cheese Retirement
Pay-As-You-Go Woes
Lisbon, Denver, Lugano, and Hong Kong

Today we’ll continue to size up the bull market in governmental promises. As we do so, keep an old trader’s slogan in mind: “That which cannot go on forever, won’t.” Or we could say it differently: An unsustainable trend must eventually stop.

Lately I have focused on the trend in US public pension funds, many of which are woefully underfunded and will never be able to pay workers the promised benefits, at least without dumping a huge and unwelcome bill on taxpayers. And since taxpayers are generally voters, it’s not at all clear they will pay that bill.

Readers outside the US might have felt smug and safe reading those stories. There go those Americans again, spending wildly beyond their means. You are correct that, generally speaking, we are not exactly the thriftiest people on Earth. However, if you live outside the US, your country may be more like ours than you think. Today we’ll look at some data that will show you what I mean. This week the spotlight will be on Europe.

First, let me suggest that you read my last letter, “Build Your Economic Storm Shelter Now,” if you missed it. It has some important background for today’s discussiion, as well as a special invitation to attend my Strategic Investment Conference next March 6–9 in San Diego. With so much change occurring so quickly now, next year’s conference is an event you shouldn’t miss.

Global Shortfall

I wrote a letter last June titled “Can You Afford to Reach 100?” Your answer may well be “Yes;” but, if so, you are one of the few. The World Economic Forum study I cited in that letter looked at six developed countries (the US, UK, Netherlands, Japan, Australia, and Canada) and two emerging markets (China and India) and found that by 2050 these countries will face a total savings shortfall of $400 trillion.

…click on the above link to read the rest of the article…

Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms

September 22, 2017

Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms

There is a £1 trillion debt time bomb hanging over the United Kingdom. We are nearing the end of the timebomb’s long fuse and it looks set to explode in the coming months.

No one knows how to diffuse the £1 trillion bomb and who should be taking responsibility. It is made up of two major components.

£710 billion is the terrifying size of the UK pensions deficit
£200 billion is the amount of dynamite in the consumer credit time bomb

How did the sovereign nation that is the United Kingdom of Great Britain and Northern Ireland get itself so deep in the red?

This is not a problem that is bore only by the Brits. In the rest of the developed world a $70 trillion pensions deficit hangs heavy.

We are all in this boat because we apparently didn’t learn from the massive man made crisis that was the 2008 financial crisis.

The ‘we’ is referring to UK individuals who are on average holding £14,367 of debt. It refers to the pension fund managers who are ignoring the fact they hold more liabilities than assets. It refers to banks and mortgage and loan providers who give loans to people who are already indebted and who will struggle to pay the debt back. It refers to a compliant media who do not have ask hard questions about irresponsible lending practices and cheer lead property bubbles due to getting significant revenues from the banking and property sectors.

And, ultimately the ‘we’ is the government who peddled such terrible monetary policy that it has brought us as close to nuclear financial disaster as we have been since 2008.

…click on the above link to read the rest of the article…

Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years

September 20, 2017

Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years

Total unfunded liabilities in state and local pensions have roughly quintupled in the last decade.

You read that right—not doubled, tripled, or quadrupled—quintupled. That’s nice when it happens on a slot machine, not so nice when it’s money you owe.

You will also notice in the chart that much of that change happened in 2008.

Why was that?

That’s when the Fed took interest rates down to nearly zero, meaning it suddenly took more cash to fund future payments.

According to a 2014 Pew study, only 15 states follow policies that have funded at least 100% of their pension needs. And that estimate is based on the aggressive assumptions of pension funds that they will get their predicted rate of returns (the “discount rate”).

Kentucky, for instance, has unfunded pension liabilities of $40 billion or more. This month the state budget director notified local governments that pension costs could jump 50–60% next year.

That’s due to a proposed reduction in the system’s assumed rate of return from 7.5% to 6.25%—a step in the right direction but not nearly enough.

Think About This as an Investor: How Can You Guarantee 6–7% Returns These Days?

Do you know a way to guarantee yourself even 6.25% average annual returns for the next 10–20 years? Of course you don’t. Yes, some strategies have a good shot at doing it, but there’s no guarantee.

And if you believe Jeremy Grantham’s seven-year forecasts (I do: His 2009 growth forecast was spot on), then those pension funds have very little hope of getting their average 7% predicted rate of return, at least for the next seven years.

…click on the above link to read the rest of the article…

Pension Storm Warning

September 17, 2017

Pension Storm Warning

This time is different are the four most dangerous words any economist or money manager can utter. We learn new things and invent new technologies. Players come and go. But in the big picture, this time is usually not fundamentally different, because fallible humans are still in charge. (Ken Rogoff and Carmen Reinhart wrote an important book called This Time Is Different on the 260-odd times that governments have defaulted on their debts; and on each occasion, up until the moment of collapse, investors kept telling themselves “This time is different.” It never was.)

Nevertheless, I uttered those four words in last week’s letter. I stand by them, too. In the next 20 years, we’re going to see changes that humanity has never seen before, and in some cases never even imagined, and we’re going to have to change. I truly believe this. We have unleashed economic and technological forces we can observe but not entirely control.

I will defend this bold claim at greater length in my forthcoming book, The Age of Transformation.

Today we will zero in on one of those forces, which last week I called “the bubble in government promises,” which I think is arguably the biggest bubble in human history. Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago.

Earlier this year I called the pension mess “The Crisis We Can’t Muddle Through.” Reflecting since then, I think I was too optimistic. Simply waiting for the floodwaters to drop down to muddle-through depth won’t be enough. We face an entire new ocean, deeper and wider than we can ever cross unaided.

…click on the above link to read the rest of the article…

The Cardinal Sin Of Investing: Permanent Impairment Of Capital

September 16, 2017

Victor Moussa/Shutterstock

The Cardinal Sin Of Investing: Permanent Impairment Of Capital

How to avoid making it

The key message was: When smart analysts independently find the same patterns in the data, it’s time to take notice.

Well, many of you did, by participating in this week’s Dangerous Markets webinar, which featured Grant and Lance.

In it, both went much deeper into the structural fragility of today’s financial markets and the many reasons why economic growth will remain constrained for years to come.

The excessive build-up of debt in the system — and the absolute dependence on its continued expansion to keep the economy from imploding — is, of course, seen as the prime risk to future growth.

As Lance demonstrates here with several of his excellent charts, so much leverage has been taken on that its servicing is increasingly stealing capital that would otherwise go to savings, consumption and productive investment. Going forward, the demands of the debt service will simply result in less and less capital available left over to grow the economy:

As financial assets are (supposed to be) valued on future growth prospects, lower forecasted growth demands lower valuations. Grant calculates that, should the US see another decade of 2% average annual GDP growth (and it has averaged less than that over the past decade), stock prices should be roughly half of what they are today to be considered fairly valued:

And Lance builds further on this, explaining how this moribund growth, coupled with America’s aging demographic trend, will simply savage the nation’s (already troublesomely underfunded) pension and entitlement systems:

…click on the above link to read the rest of the article…

Why you might as well paint a giant bulls-eye on your bank account

September 6, 2017

Why you might as well paint a giant bulls-eye on your bank account

Vegetarians be forewarned… you won’t like what follows.

We slaughtered a pig yesterday at the farm. I have two freezers full of pork now, and countless strips of bacon curing in the kitchen.

I’ve written about this before– out here at the farm I’m able to organically produce almost everything that I eat… meat, eggs, rice, nuts, and just about every kind of fruit and vegetable imaginable. A lot of it gets canned and stored.

We even grow wheat which we turn into organic flour, plus oats and all sorts of other grains.

As I’ve described in the past, this is a pretty powerful feeling. I know that, no matter what happens in the world, I’ll always have a source of food.

And even if it’s all rainbows and buttercups from here on out, I get to eat clean, organic food. There’s hardly any downside.

Invariably as I meet people throughout my travels around the world, I’m always asked why I spend so much time in Chile.

I usually tell them about my business ventures here and that I founded a company that’s rapidly becoming one of the largest blueberry producers in the world.

But when I talk about the farm and growing my own food, people often respond with furrowed eyebrows and a hint of derision– “Oh, so you’re, like, preparing for the end of the world…”

It’s as if embracing a little bit of independence and self-reliance requires paranoid delusion and chronic pessimism.

Fortunately I’m no longer in middle school, so my decisions aren’t based on what the cool kids might think.

In truth I’m wildly optimistic about the future.

Yes, there will come a time when bankrupt western governments will have to suffer the consequences of their reckless financial decisions.

…click on the above link to read the rest of the article…

Taken to the Cleaners

September 5, 2017

TAKEN TO THE CLEANERS

Introduction

Should regulators call the market? It has been a matter of vigorous debate in the regulatory community since the crisis. ‘Cleaners’ think you shouldn’t mess around with the market, although be prepared to clean up if markets collapse. ‘Leaners’ take the opposite view, divided between those who want to lean on the asset side of overheated balance sheets, principally by increasing capital requirements, and those who want to lean on overheated liabilities, using an ingenious accounting method called ‘matching adjustment’, which allows firms to reduce the present value of future liabilities by increasing the rate at which they are discounted. If spreads blow out on your assets you are allowed to add some of that spread to the discount rate for your liabilities, which cushions the impact in the short term.[1]

This article focuses on whether economists can identify trends or bubbles in the residential property market. The question is important for insurers, whose balance sheets have been damaged by the protracted fall in long gilt yields, and who are hunting for yield in alternative assets such as commercial and residential property. I asked three economists for their views.

John Cochrane of Stanford’s Hoover Institution, author of the magisterial Asset Pricing, complains about a common misunderstanding: ‘people say the market can’t be efficient, because it didn’t predict the 2008 crash. That’s exactly backward. Efficient markets theory says that the market aggregates all information that people have – and no more. The market is not clairvoyant. Consequently, the central empirical prediction of the efficient markets hypothesis is precisely that nobody can reliably tell where markets are going – neither benevolent government bureaucrats, nor crafty hedge-fund managers, nor ivory-tower academics. This is probably the best-tested proposition in all the social sciences.’

…click on the above link to read the rest of the article…

Central Banks ARE The Crisis

July 25, 2017

Central Banks ARE The Crisis

Walter Langley Never morning wore to evening but some heart did break 1894If there’s one myth -and there are many- that we should invalidate in the cross-over world of politics and economics, it‘s that central banks have saved us from a financial crisis. It’s a carefully construed myth, but it’s as false as can be. Our central banks have caused our financial crises, not saved us from them.

It really should -but doesn’t- make us cringe uncontrollably to see Bank of England governor-for-hire Mark Carney announce -straightfaced- that:

“A decade after the start of the global financial crisis, G20 reforms are building a safer, simpler and fairer financial system. “We have fixed the issues that caused the last crisis. They were fundamental and deep-seated, which is why it was such a major job.”

Or, for that matter, to see Fed chief Janet Yellen declare that there won’t be another financial crisis in her lifetime, while she’s busy-bee busy building that next crisis as we speak. These people are now saying increasingly crazy things, and that should make us pause.

Central banks don’t serve people, or even societies, as that same myth claims. They serve banks. Even if central bankers themselves believe that this is one and the same thing, that doesn’t make it true. And if they don’t understand this, they should never be let anywhere near the positions they hold.

You can pin the moment central banks went awry at any point in time you like. The Bank of England’s foundation in 1694, the Federal Reserve’s in 1913, the ECB much more recently. What’s crucial in the timing is where and when the best interests of the banks split off from those of their societies. Because that is when central banks will stop serving those societies. We are at such a -turning?!- point right now. And it’s been coming for some time, ‘slowly’ working its way towards an inevitable abyss.

…click on the above link to read the rest of the article…

SkyNet is sentient and will destroy your investments and pension

June 18, 2017

SKYNET IS SENTIENT AND WILL DESTROY YOUR INVESTMENTS AND PENSION

SkyNet is Sentient and Will Destroy Your Investments and Pension

Do you really want to know about how SkyNet controls your investments and pension via the various financial markets? I ask with all sincerity because the subject is not pleasant and may even be frightening to those who have followed a strict diet of financial ignorance.

Once you know, it is nearly impossible to un-know. And just as there is never only one weed in the garden, knowing this inevitably leads to a critical juncture where one must then decide if they wish to know more or simply curl up in the fetal position on the bathroom floor.

You see, when “We the Mindless Minions” (desperately) wish to avoid responsibility for knowing, while the specific tactics used may vary greatly, the theme remains pretty consistent. I call it the Sgt. Schultz defense.

“I know nothing, I see nothing and I was never here.”

A variation of the theme, usually employed when among others, thus we cannot claim total ignorance about the uncomfortable subject presently being discussed, is brilliant in its ability to disavow responsibility while passing the buck to someone (anyone) at a higher pay grade.

“They would never let that happen/do that,” or the always reassuring “I’m sure someone’s looking into that as we speak.” Now how about those (fill in this blank with any sport, celebrity, politician, TV show or viral cat video).

Disavowing knowledge or responsibility, passing the buck and then changing the subject is the time tested way to live in blissful ignorance. Or as I have grown fond of saying, unconscious incompetence with a heaping side order of willful ignorance.

…click on the above link to read the rest of the article…

Surplus or Stimulus

April 25, 2017

Surplus or Stimulus

René Magritte Le Cri du Coeur 1960

Austerity is over, proclaimed the IMF this week. And no doubt attributed that to the ‘successful’ period of ‘five years of belt tightening’ a.k.a. ‘gradual fiscal consolidation’ it has, along with its econo-religious ilk, imposed on many of the world’s people. Only, it’s not true of course. Austerity is not over. You can ask many of those same people about that. It’s certainly not true in Greece.

IMF Says Austerity Is Over

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor.

In Greece, the government did not increase spending in 2016. Nor is the country’s era of spending cuts at an end. So did the IMF ‘forget’ about Greece? Or does it not count it as part of the rich world? Greece is a member of the EU, and the EU is absolutely part of the rich world, so that can’t be it. Something Freudian, wishful thinking perhaps?

However this may be, it’s obvious the IMF are not done with Greece yet. And neither are the rest of the Troika. They are still demanding measures that are dead certain to plunge the Greeks much further into their abyss in the future. As my friend Steve Keen put it to me recently: “Dreadful. It will become Europe’s Somalia.”

…click on the above link to read the rest of the article…

Tag Archives: pensions

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

René Magritte Le Cri du Coeur 1960

Post navigation

Latest Posts