Global Economy Bursting?

[Terrel L. Shields]

don't recall a great hue and cry when people's "net worth" went from 60K to 100K

I think a lot of people have very little more than what they have put in their IRA...not even interest on that money.... First, most of us were doing "OK" in the 1990s but took a big hit with the dot.com bust... Saw our stocks go up thru 2008 only to take another huge hit. Those "safe" indexed funds and mutuals plummeted with the markets and how many people were smart enough to get out of stocks in July 2008 and not go back until 2009, dodge the flash crash, then sell in May and go way in 2010, 2011 and 2012? nobody. And T bills? How much money would you have if you had put cash in T bills at say, 1990 rates for 30 years? In 1990, I hadn't put in but maybe $20K but at 6-8%????

 

[DTB]

"I think a lot of people have very little more than what they have put in their IRA...not even interest on that money.... First, most of us were doing "OK" in the 1990s but took a big hit with the dot.com bust... Saw our stocks go up thru 2008 only to take another huge hit. Those "safe" indexed funds and mutuals plummeted with the markets and how many people were smart enough to get out of stocks in July 2008 and not go back until 2009, dodge the flash crash, then sell in May and go way in 2010, 2011 and 2012? nobody. And T bills? How much money would you have if you had put cash in T bills at say, 1990 rates for 30 years? In 1990, I hadn't put in but maybe $20K but at 6-8%????"

I think what you're demonstrating is that buy and hold does not work for most people. They chase the top and hold it to the bottom, finally crying Uncle and sell at the bottom.

Your Bonds scenario is just more of the same. Why not be in Bonds when you should be and be in equitites when the time is right.

You really should check out the Mebane Faber white paper, I know you follow the market, based on your success with Casey General Stores and I believe your brother trading WMT. The Ivy timing model would have had one out of US equities in Jan 2007, re-entering long in Aug. 2009.

[url]http://trendfollowing.com/whitepaper/CMT-Simple.pdf[/URL]

Good luck to all.

 

[Randolph Kinney]

100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits

http://globaleconomicanalysis.blogs...lysis+(Mish's+Global+Economic+Trend+Analysis)

 

[Terrel L. Shields]

Good luck to all.

You need luck....time and chance taketh all.

I do watch stocks and often hold for the long haul even when I know I could "get out". I am that way with my energy stocks. I cannot time the market or at least don't have time to devote to second guessing it. I am foremost a fundamentals investor. So I see that nat gas is beaten down, I may put more money in it (I did) but I don't sell even though I knew nat gas would be dirt cheap this summer. If you don't have cold weather in the Midwest by Jan. 1, natural gas supply will go up.

But Mutuals I've held for years are bow-wows though they looked great on paper until late 2008.

Right now I have a lot of cash on the sidelines and likely will put it back into natural gas stocks. Nat gas is set for major increase in use. I see oil as sliding very soon..depending on Europe and who can guess what they will do.... QE 4 (Twist is basically QE III already) if it happens will send commodities higher again. dollar economy oil price....all tied together.

 

[Workbox]

You need luck....time and chance taketh all.

I do watch stocks and often hold for the long haul even when I know I could "get out". I am that way with my energy stocks. I cannot time the market or at least don't have time to devote to second guessing it. I am foremost a fundamentals investor. So I see that nat gas is beaten down, I may put more money in it (I did) but I don't sell even though I knew nat gas would be dirt cheap this summer. If you don't have cold weather in the Midwest by Jan. 1, natural gas supply will go up.

But Mutuals I've held for years are bow-wows though they looked great on paper until late 2008.

Right now I have a lot of cash on the sidelines and likely will put it back into natural gas stocks. Nat gas is set for major increase in use. I see oil as sliding very soon..depending on Europe and who can guess what they will do.... QE 4 (Twist is basically QE III already) if it happens will send commodities higher again. dollar economy oil price....all tied together.

You will be surprised how many folks are buying farming land in Africa and third world countries in order to profit from such high prices on commodities. Campaigners claim World Bank helps facilitate land grabs in Africa.
Almost seems staged.

 

[Terrel L. Shields]

You will be surprised how many folks are buying farming land in Africa and third world countries in order to profit from such high prices on commodities. Campaigners claim World Bank helps facilitate land grabs in Africa.
Almost seems staged.

A friend was trying to lease a ranch for oil and gas in Wyoming a few years ago, and the owner was selling off 40 acre tracts "to the gentiles" while keeping the mineral rights.

He had bought a ranch in Chile. Said that the BLM and others were such a PITA on his ranch (which bordered Forest land) and wouldn't let him shoot lions or wolves which were eating his sheep, so he was packing it to Chile where he bought land for $50 an acre. They let you shoot lions there... but they use a lot of dogs too.... ovejero, dogs that think they are sheep and live with the sheep and will defend the sheep against predators and other dogs.

 

[Randolph Kinney]

California’s Bad Bet Makes JPMorgan’s Look Minor

http://www.bloomberg.com/news/2012-06-17/california-s-bad-bet-makes-jpmorgan-s-look-minor.html

It is unfortunate that Congress has never called hearings on a far bigger bet, one that has had more catastrophic consequences for millions of taxpayers.

The one I’m referring to was made by California legislators on Sept. 10, 1999. They decided that investment gains would cover 100 percent of the cost of retroactive pension increases they granted that day to hundreds of thousands of state workers.

The politicians made the wrong bet -- and the result has been a penalty to California’s budget that has averaged $2 billion a year ever since and that will cost the state billions more for decades to come.

Promising that “no increase over current employer contributions is needed for these benefit improvements,” and that the state pension fund would “remain fully funded,” the proposal, known as SB 400, claimed that enhanced pensions wouldn’t cost taxpayers “a dime” because of healthy investment returns. The proposal went on to assert that it “fully expects” the state’s pension costs to remain below $766 million a year for “at least the next decade.”

Since then, the pension system has earned only 75 percent of what it had hoped. Because the state is unconditionally on the hook, the state budget has had to make up the difference. As a result, the state has spent $27 billion on pensions, $20 billion more than Calpers projected.

Because the boosted promises last for decades -- for employees’ lifetimes -- and because the pension fund amortizes the difference between what it expected to earn and what it really earned during such a long period, just a small portion of the increased costs has so far been recognized. Far larger increases are in store.

To finance the $20 billion of extra cost for pensions, the state has cut spending on services and raised taxes. As one example, spending on the University of California and California State University systems declined 18 percent from 2002 to 2012, while state spending on pensions rose 214 percent.

The pension deal was a stunning example of nondisclosure. The legislators didn’t inform the taxpayers that:

1. The state was on the hook for deficiencies if actual investment returns fall short of assumed investment returns.

2. The assumed investment returns implicitly forecast that the Dow Jones Industrial Average would reach about 25,000 by 2009 (it barely made it over 10,500 that year) and 28,000,000 by 2099.

3. Potential costs to the state were uncapped.

4. Members of the Calpers board had received campaign contributions from beneficiaries of the legislation.

 

[Riick]

4. Members of the Calpers board had received campaign contributions from beneficiaries of the legislation.

Funny how that works. Bet the Calpers Board itself -or members of their families- got those retroactive boosts too.

 

[Terrel L. Shields]

Most pension funds have over-estimated their return on investments and therefore, are badly underfunded. CA certainly has one of the worst, but no state likely will point fingers because someone might bring up the same issue there...

In reviewing the Teacher Retirement Fund of my state, a significant portion of the fund is in derivitives of one kind or another... Weapons of Mass Financial Destruction as Buffet put it.

 

[Randolph Kinney]

California's pension tale told in four cities

Read more here: http://www.sacbee.com/2012/06/17/4567508/dan-walters-californias-pension.html#storylink=cpy

As votes in California's primary were being counted on June 5, Stockton's City Council was giving its city manager permission to file for bankruptcy protection if negotiations with creditors failed to bear fruit.

The vote-counting quickly revealed that voters in San Jose and San Diego had overwhelmingly approved landmark reforms in pensions for city employees. Almost immediately, city worker unions filed suit to block the reforms.

They and other public employee unions are also pressing the Legislature to revise a newly enacted state law to make it more difficult for local governments to seek bankruptcy protection, fearing that a federal bankruptcy judge could set aside union contracts and perhaps even modify pensions.

Meanwhile, Gov. Jerry Brown wants changes in retirement benefits for state workers, warning lawmakers that without them, public backlash, as evinced in San Diego and San Jose, could doom voter approval of new taxes.

However, Democratic legislators are utterly dependent on public employee workers for campaign sustenance and are clearly leery about serious pension changes.

Chances are very high that Stockton will file for bankruptcy protection sometime this month, which would be the largest municipal bankruptcy filing in American history.

Rising pension and health care costs are big components of Stockton's insolvency, but so are many millions of dollars in bonds that the city floated in recent years to finance lavish new recreational and civic facilities, including a sports arena, a baseball park, a marina and a new city hall.

The city's unions have resisted contract modifications, and the city manager is negotiating with bondholders, trying to persuade them to write down their loans. But there appears to be serious reluctance among bankers, because a Europe-like forgiveness could threaten the entire municipal bond market.

If bankruptcy ensues, the creditors and other stakeholders would line up before the bankruptcy judge, pleading their cases. Would the banks insist that retirement benefits be on the table for haircuts as well as bonds?

That's what the unions fear and explains why they are pushing the Legislature for new restrictions on local government bankruptcies, even though a compromise law on the issue, which Stockton is now following, is only a few months old.

The symbiosis of what's happening in Stockton, San Jose, San Diego and Sacramento is inescapable. And there's another element creeping into the picture.

The California Public Employees' Retirement System, which lost tens of billions of dollars in the global recession, has been touting a recovery.

But the most recent data indicate that it is likely to end the fiscal year on June 30 with another loss, undercutting even further its long-term ability to pay for state and local pensions without significant reforms.