The Pension Crisis Worsens

A new U.S. president, hope for a more pro-growth business environment and record highs across the major equity indices have all taken the focus off underfunded pensions.

But this mess hasn’t gone away … not by a long shot.

Take the situation in Dallas, which I began telling you about last year: It remains unresolved and becomes more heated by the day.

In fact, the plan needs a whopping $1.1 billion taxpayer bailout to become only 70% funded!

The bottom line is that the horse has left the barn for the Dallas Police and Firefighters Pension System. And its members will suffer reduced benefits, while taxpayers foot the bill.

How did this happen?

  • Unrealistic annual return assumptions of 8%.
  • Underfunded by 55% in early 2016.
  • Surge in lump-sum withdrawals.

And the situation in Dallas isn’t an isolated case.

In fact, underfunded pension liabilities are spreading across the U.S. like wildfire.

Even worse, state and local officials are becoming even more desperate as they balance aggressive spending initiatives with surging liabilities.

In Connecticut, the latest work-around shenanigans come from Governor Dannel Malloy: He plans to shift pension costs from the state to local governments.

That’s not a typo: Connecticut plans to off-load its problems to local governments.

Ridiculous!

Why? Because the state faces a budget deficit for the upcoming fiscal year of around $1.7 billion – and they need the money … bad.

This maneuver would force local governments to raise property and sales taxes to fund $400 million annual teacher pension costs, while also reducing pension benefits.

But that’s not all …

In cash-strapped cities and counties and states, officials have threatened to raid the pension funds of their workers.

Last month in Ohio, the Cleveland-based Iron Workers Local 17 faced its own pension shortfall. The result: Average benefits cut by 20%.

This had to be done because the plan’s unfunded liabilities were 76% and there were only had 632 active employees to cover benefits of 2,042 participants.

These underfunded liabilities are made worse by politicians addicted to spending – and doing whatever they can to support their habit.

It’s also happening in New York City, where Mayor Bill de Blasio seeks to expand its fiscal budget by a staggering $85 billion.

And the Big Apple is looking everywhere for funding, including Federal funding set aside for Superstorm Sandy. Plus, don’t be surprised if they dip into the $4 billion in reserves of the city’s Retiree Health Benefits Trust Fund.

I could go on, but you get the point: The pension crisis is growing by leaps and bounds. And your money and liberty could be at stake. After all, you can only spend more than you have for so long until you have to pay the piper. And the piper always gets paid.

But don’t forget: In the midst of just about every crisis, there are opportunities of all kinds, including your investments. That’s why now is not the time to go it alone.

In my trading services, Real Wealth Report and Supercycle Trader, my members enjoy investment advice targeting the right assets at the right time.

Best Wishes,

Larry

 

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Comments 52

  1. Gary February 15, 2017

    If the euro goes away. What happens to the ETF “EUO”.
    I know it will go up for a while, but then what?

    Reply

  2. jim crawford February 15, 2017

    Larry are you still looking for a hard landing this quarter? This immigration thing is getting out of hand, And I see no Republican elected people “comming” in mash to help him. This problem with Flynn and others like him will cause Trump trouble for years to come.
    The metals market is the pits, got another dog to bite!

    Reply

  3. Bill C. February 15, 2017

    Hi Larry,
    What happened to the three day conference between you and Mike Burnick where you were going to lay out your forecast for 2017= 2021. We were advised to tune in at 2PM for 3 days starting on Monday and then on Monday it was changed to Tuesday through Thursday. Mike advised us to mark our calendars, which I did. It turns out that all we got was a report promoting your Supercycle Trader service. Did I miss something? I chatted with Jane Nicholes and she didn’t know what happened. So far I have not gotten an explanation From anyone at Weiss research. What gives?

    Reply

  4. Chuck Burton February 15, 2017

    The Fed, keeping rates so low, and so long, hasn’t helped pension funds any. Perhaps Ms. Yellen has begun to realize this, and it plays a part in her efforts to raise rates at least a little. But higher rates will tend to put paid to any climb in the economy. And the markets. They will also boost the dollar against other currencies, which is contrary to Mr. Trump’s desires. Past actions of the Fed are certainly coming home to roost, and it won’t be pretty

    Reply

  5. thomas parker February 15, 2017

    in texas property taxes rise by raising appraisals rather than rates for political reasons. the pension crisis will spread to real estate and bills,notes, and bonds.

    Reply

  6. Paulette E. Essame February 15, 2017

    Hello, as I was reading your article I had the stupid and horrible feeling I understood or rather started understanding why Trump wanted to dramatically limit the immigration : not so because the country could not financially welcome them, but because they would hardly pay for the deficit ; and supposi,g they – if I may say so – to reduce it, it could encourage the government to pursue…
    But that is one point of view. There must exist the option to find a solution, or a series of solutions through immigration if you adopt the opposite point of view or a radically different one, based on contribution, not on the yield of expenses (I mean what they carry)

    Reply

  7. Edd Habegger February 15, 2017

    Why is it the taxpayers of this country need to bailout underfunded overpromised retirement benefits that were part of union contracts? The unions demanded more so the cities promised more and more and I believe new they were promising things could not deliver. It is not the taxpayers problem. They are overtaxed already on pension funding that is ridiculous. Let the unions bail them out….I know they are underfunded as well after promising more than they could deliver. I have not pity for either and tax payers dollars need not be used to bailout these greedy fools.

    Reply

    • Chuck Burton February 17, 2017

      The politicians want votes so they can continue their parasitic existence – that’s why.

      Reply

  8. Norman February 15, 2017

    What will be the situation for current Civil Service Retirees? I’m 80 years old and doubt if I could be hired anywhere. Larry, what are your thoughts on this matter.

    Norman

    Reply

  9. dennis grasmick February 15, 2017

    Lower the pension paid out to no more than 45% of average pay period!

    Reply

  10. Bill W Trammell February 15, 2017

    Well – just what did anyone expect when people running these funds make decisions and they, themselves, have NO responsibility regarding the results?

    Kinda reminds me of turning kids loose in the candy store, kinda like the recent president and his family.

    Bill

    Reply

  11. Mike February 15, 2017

    The situation in Dallas is primarily the result of a privately run investment advisory firm colluding with others to make losing investments in their properties. The investment firm milked the pension for millions. This being said the biggest problem with pensions beside under-funding is the Federal Reserve subsidizing Wall Street with below market interest rates. Pensions have been denied billions in lost interest in what is tantamount to a transfer of pension monies into the pockets of the robber barons.

    Reply

  12. Michael Clancy February 15, 2017

    It’s time to arrest, try and convict all of those involved in this, and that’s a wide spectrum of people.

    Failure to do so will guarantee a repetition of this problem forever.

    Reply

    • Marina H. February 16, 2017

      It is the time to change the rules of the game by insisting on fiduciary standards, where the pension fund managers are personally held liable for the actions. The laws must be changed. People must learn & understand the difference between the Fiduciary Standards and the Suitability Standards.

      Reply

    • G13Man February 17, 2017

      that would be the Federal Reserve Bank

      Reply

  13. Rudy Balderas February 15, 2017

    How do I print the article? Thank you

    Reply

  14. F151 February 15, 2017

    All of these pension problems have a common root: union involvement. Unions should have never been allowed to enter our schools or our government agencies. Their interests are never the interests of the taxpayers.

    Reply

    • Marina H. February 16, 2017

      It’s not just the unions. The over promising by the pension fund managers to deliver 7-8% annual returns ! This is called speculation, not investment. Furthermore, the pension fund managers, for the most part, are not held to the fiduciary standards. If they were, then the receivers would be taking these folks to courts en masse and held them liable. Fiduciary Standards are needed in the land of OZ.

      Reply

    • G13Man February 17, 2017

      that would also be the politicians [ who also want high pension payments for themselves , and the votes of those other pensioners ] and the tax payers who cried for the politicians to grant those high wages and pensions !!!
      next strike , see if it breaks a no strike clause , then invalidate the older contracts !!!

      Reply

  15. Phil February 15, 2017

    at the right time? are we there?

    Reply

  16. ron goddard February 15, 2017

    when are people, the population, going to become aware that they are being taken for a ride by idiot, overspending ‘politicians’ : professional hitmen? corruption is rife everywhere and burgeoning government numbers(employess doing bugger all) are adding to the crises. here in oz we have the same bungling idiots of the same calibre. there is a cry now and then for a lessening of pay and perks, and more accountability by these people, but then the cry goes up : ‘oh but we want the best people for the political sphere’. and we get the same stupid, voracious idiots ‘running the place’..into the ground. then we say, ‘but its better than russia or thailand or china’. really????
    meanwhile we get closer to complete financial breakdown and the ‘government’ will blame the people for demanding this and that. but when in ‘history’ has it been any different?

    Reply

    • G13Man February 17, 2017

      agree , i want the best programmer to do a program that alleviates these problems and solves the poor workers from having to deal with the bureaucratic shuffle s …
      and the program can actually follow the correct procedures and double check the ID , and etc

      Reply

  17. Joe Knapp February 16, 2017

    >my members enjoy investment advice targeting the right assets at the right time.

    Okay but how can Americans living abroad buy and sell these recommendations?

    Reply

  18. Richard Zeigler February 16, 2017

    Larry–Please provide a complete analysis of U.S. stocks. I have followed your advice for 12 years. I was killed in the 2008-09 disaster, as the Dow plummeted to 7K. I stayed in back to 9.5K, but FOLLOWED YOUR ADVICE and MARTIN’s ADVICE to “get out of all U.S. stocks.” Then, as the market climbed and climbed, I FOLLOWED YOUR ADVICE each and every time you said, “Hold on, a big correction is coming.” And I have FOLLOWED YOUR ADVICE, even your recent analysis, indicating a pullback to 18K, or even lower. While it may be the very definition of insanity to keep following your advice, I intend to. I am NOT in U.S. stocks. I have been awaiting the big pullback to buy in and ride the Dow to 40K. WHAT IS GOING ON with U.S. stocks? When will the pullback actually occur, or won’t it? Should I get in NOW and go to 40K. PLEASE, I am getting killed sitting on the sidelines and holding physical gold.

    Reply

    • Marina H. February 16, 2017

      No despair. GOLD will be the king. History repeats itself over and over again. In Kyrgystan, the central bank wants its population of 6 mL. to own 100 grams of gold per person! That’s Central Asia. Imagine.

      Reply

  19. scot February 16, 2017

    Have you ever looked into tha balance sheets of muni’s, which is available in their CAFR’s? They hide hoards of income producing assets on their balance sheet, while showing the masses their budget (income stmt) to justify raising taxes. You know this is the biggest scam hiding in plain site because you never hear CAFR discussed or a mainstream media question a politician about their CAFR. Combined, all the muni CAFR’s are the largest holder of stocks.

    Reply

  20. Marina H. February 16, 2017

    It is the time to change the rules of the game by insisting on fiduciary standards, where the pension fund managers are personally held liable for the actions. The laws must be changed. People must learn & understand the difference between the Fiduciary Standards and the Suitability Standards.

    Reply

  21. Marina H. February 16, 2017

    It is the time to change the rules of the game by insisting on fiduciary standards, where the pension fund managers are personally held liable for the actions. The laws must be changed. People must learn & understand the difference between the Fiduciary Standards and the Suitability Standards.

    Reply

  22. Marina H. February 16, 2017

    In order for things to change, the rules of engagement ought to change. Pension Fund managers should operate under the fiduciary standards and, held personally liable for any mismanagement, poor performance and the promises of a ‘pie in the sky’.

    Reply

    • Mike February 17, 2017

      Marina, the fiduciary standards you seek were set to go into place under the Obama Administration. Trump has issued a directive halting its implementation. The American people and many here on this blog have spoken and they don’t want no stinkin’ regulations.

      Reply

    • H. Craig Bradley February 19, 2017

      CALPERS Board are all political appointees with scant experience in managing any kind of investments. They are no better at their job than any novice retail investor in many respects.

      Reply

  23. Marina H. February 16, 2017

    In order for things to change, the rules of engagement ought to change. Pension Fund managers should operate under the fiduciary standards and, held personally liable for any mismanagement, poor performance and the promises of a ‘pie in the sky’.

    Reply

    • H. Craig Bradley February 19, 2017

      CALPERS Board are all political appointees with scant experience in managing any kind of investments. They are no better at their job than any novice retail investor in many respects.

      Reply

  24. Marina H. February 16, 2017

    In order for things to change, the rules of engagement ought to change. Pension Fund managers should operate under the fiduciary standards and, held personally liable for any mismanagement, poor performance and the promises of a ‘pie in the sky’.

    Reply

    • Mike February 17, 2017

      Marina, the fiduciary standards you seek were set to go into place under the Obama Administration. Trump has issued a directive halting its implementation. The American people and many here on this blog have spoken and they don’t want no stinkin’ regulations.

      Reply

    • H. Craig Bradley February 19, 2017

      CALPERS Board are all political appointees with scant experience in managing any kind of investments. They are no better at their job than any novice retail investor in many respects.

      Reply

  25. James February 17, 2017

    Maybe we need to look at the east Asian miracle of growth and trade? These include Hong Kong, Korea, Singapore and Taiwan the so called four tigers which started rapid growth in the 60s as well as Malaysia, Indonesia, Thailand and especially China which followed them in the high growth path in the 1970s and 1980s. Because of its spectacular growth, China is a class by itself.

    Reply

  26. James February 17, 2017

    Maybe we need to look at the east Asian miracle of growth and trade? These include Hong Kong, Korea, Singapore and Taiwan the so called four tigers which started rapid growth in the 60s as well as Malaysia, Indonesia, Thailand and especially China which followed them in the high growth path in the 1970s and 1980s. Because of its spectacular growth, China is a class by itself.

    Reply

  27. G13Man February 17, 2017

    that would be the Federal Reserve Bank

    Reply

  28. G13Man February 17, 2017

    agree , i want the best programmer to do a program that alleviates these problems and solves the poor workers from having to deal with the bureaucratic shuffle s …
    and the program can actually follow the correct procedures and double check the ID , and etc

    Reply

  29. Chuck Burton February 17, 2017

    The politicians want votes so they can continue their parasitic existence – that’s why.

    Reply

  30. H. Craig Bradley February 19, 2017

    HERE COME THE (BLACK) SWANS

    Any significant change in one financial variable today has potential knock-on effects globally. Tiny changes in the U.S. Dollar Index ( up or down ) potentially spill-over into the bond markets and some stocks, as well. Similarly, any noticeable spike in interest rates would cause trader algorithms to reallocate out of bonds and into stocks or into gold ( or even the reverse).

    In addition, any unexpected move in one market can be expected to spill-over into other markets both at home or abroad. Another words, every thing is interconnected. Only one word for all these possibilities: RISK. So, if you are in the market under today’s circumstances, you are Risk-On. What other choice do you have?

    Reply

  31. H. Craig Bradley February 19, 2017

    HERE COME THE (BLACK) SWANS

    Any significant change in one financial variable today has potential knock-on effects globally. Tiny changes in the U.S. Dollar Index ( up or down ) potentially spill-over into the bond markets and some stocks, as well. Similarly, any noticeable spike in interest rates would cause trader algorithms to reallocate out of bonds and into stocks or into gold ( or even the reverse).

    In addition, any unexpected move in one market can be expected to spill-over into other markets both at home or abroad. Another words, every thing is interconnected. Only one word for all these possibilities: RISK. So, if you are in the market under today’s circumstances, you are Risk-On. What other choice do you have?

    Reply

  32. H. Craig Bradley February 19, 2017

    HERE COME THE (BLACK) SWANS

    Any significant change in one financial variable today has potential knock-on effects globally. Tiny changes in the U.S. Dollar Index ( up or down ) potentially spill-over into the bond markets and some stocks, as well. Similarly, any noticeable spike in interest rates would cause trader algorithms to reallocate out of bonds and into stocks or into gold ( or even the reverse).

    In addition, any unexpected move in one market can be expected to spill-over into other markets both at home or abroad. Another words, every thing is interconnected. Only one word for all these possibilities: RISK. So, if you are in the market under today’s circumstances, you are Risk-On. What other choice do you have?

    Reply

  33. Jas February 20, 2017

    Academics are always talking about moral hazard as their still a lot of PAYE monkeys out there in their 40s what about adverse selection where you live on an island and the woman marries the wrong man, the natural evolution is that every man should eventually become his own boss, run things the way he wants them to be run.

    Reply

  34. Jas February 20, 2017

    Academics are always talking about moral hazard as their still a lot of PAYE monkeys out there in their 40s what about adverse selection where you live on an island and the woman marries the wrong man, the natural evolution is that every man should eventually become his own boss, run things the way he wants them to be run.

    Reply

  35. Jas February 20, 2017

    Academics are always talking about moral hazard as their still a lot of PAYE monkeys out there in their 40s what about adverse selection where you live on an island and the woman marries the wrong man, the natural evolution is that every man should eventually become his own boss, run things the way he wants them to be run.

    Reply

  36. Space Out March 17, 2017

    Where is the beef ?
    Did someone use the pension money in his campaign recently ?
    I am old and I want to retire. I need my retirement money back !
    I am ready to go to another planet to retire and enjoy all the days of my youth.
    I have been young and now I’m old, but I have never seen pension money disappear
    and evaporate in thin air.
    This is definitely a violation of Fiduciary Responsibility Act, Pension Protection
    Act of 2006, Employee Plans Compliance Resolution System (EPCRS) and
    Prohibited Transaction Rules under IRC Section 4975.

    Reply