The Coming Pension Crisis & Current Market Madness

I wanted to check out some specific stats for my home state... I am usually more focused on macro & national-level stats just based on the type of research I'm doing for my own knowledge & portfolio allocations.

But I came across info on how Vermont’s State Retirement system is underfunded by a $5.7 billion (wow!)

Source - VT Digger Article

I also was curious about the states GDP, debt per citizen (over $9K per citizen), spending, etc. - US Debt Clock has a feature to look up specific states
US Debt Clock State Feature - Vermont

[As a reminder, when looking at the US national debt of 28.2 trillion, debt per taxpayer is $225K - source].

VT legislators plan to spend $450 million in total for fiscal year 2022, going towards this pension problem (not to solve it, but to keep it afloat).

It’s got to be a tough job. One proposal is to introduce a new pension system and “phase out” the existing system and “retire” its debt (restructure/rollover/haircut in some form) Source - Brattleboro Reformer Article

The situation in VT doesn’t even register when compared to unfunded pension liabilities for other large institutions. This press release is almost a year old but helps illustrate this fact: Unfunded Liabilities in State Pension Plans Total Nearly $5 Trillion, Threatening Taxpayers Nationwide

I think it’s important to mention that in the current financial environment, pension funds and investors of all kinds are finding themselves moving further out on the risk curve in an attempt to maintain (try to at least) required returns.

This grand (looming) pension crisis awaits the future, and currently we see madness in the financial markets in which margin debt is reaching an all time high, there are publicly listed zero-revenue companies with insane valuations, record pace of new IPOs and SPACs, and then the recent news about the biggest investment banks being exposed to the tune of billions after some recent hedge fund blowups (Archegos, Greensill).

Trying to stay on top of the macroeconomic landscape to assess risk, threats and opportunities is incredibly challenging for the average investor. It’s even risky and challenging for the largest and most sophisticated market participants.

The financial markets are becoming increasingly complex (we didn’t even discuss passive investing and the inflows/distortions that dynamic can cause), and predicting what policymakers will do and how those decisions will impact the markets and currencies is even more complicated.

If you are a retail investor in this environment, be vigilant and if you are a pensioner (or soon-to-be) it might be worth looking into your own personal financial situation and explore ways to potentially to protect yourself.

a reply to: FamCore

If only a virus would come along to wipe out the elderly and vulnerable, could solve the problem.

a reply to: Grenade

Bingo! If it was intentionally released, that is exactly why. Money

My pension has been hacked apart so many times during my 20 years with the city I have no idea what to expect when I retire. I just hope what I put in is still there.

I’ve heard of a few evil places filing bankruptcy to screw over their people. Looking at you Detroit.

a reply to: FamCore

All the years of kicking the can down the road will finally catch up to them.

originally posted by: Bluntone22
a reply to: FamCore

All the years of kicking the can down the road will finally catch up to them.

It will catch up to those currently acting as fiduciaries & policymakers (who likely have exacerbated the already existing problems), but either way it's the pensioners who will get screwed

a reply to: FamCore

A few months back Charlie Munger mentioned in an interview that realized capital gains within the next ten or so years will be very low, almost not even worth investing into anything innovative. And that finding solid investments that are fail safe were the best bet, rail roads, agriculture, pharma, telecoms, etc.

I found it rather interesting when I came accross this article talking about the Canadian housing market:

Canada’s Property Bubble Is Now So Large, A Soft Landing Would Take 19 Years

Canadian real estate prices are now beyond frothy, and the government says that’s fine. They believe they can prevent home prices from falling, and let incomes catch up. If you’re in government or banking, you may have already seen me explain how impossible this is. If you haven’t, this is known as the “soft landing” scenario, and it has never happened.

betterdwelling.com... wbpw2NJD4J1d-7YRO9Y6RHF2o

If we were to somewhat follow the, grim prediction that Mr Munger gave. 19 years sounds about right for banks to stay ahead of the curve in terms of financial security. And what would be one of the best ways to lock in such wealth? Real estate.
A theory I came up with a while back is that banks will notice a massive shift and transfer of wealth from baby boomers to their children. And they want to lock in that wealth so it will trickle in at a steady pace.
It's going to be a bumpy ride for the next little while.

a reply to: strongfp

Thanks for your contribution to the thread, I saw a post about a very, very small and lackluster-looking home in Vancouver selling for $1.5 million! I’m glad you brought up real estate prices because that is an asset class that is definitely going bonkers right now in many regions of the world (both for commercial real estate and residential).

a reply to: FamCore

Pensions are toast. The loss of tax revenue from the shut downs will be making pensions under funded even more. A big part of the Covid package was trying to covertly bail out blue cities pensions problems.

originally posted by: Edumakated
a reply to: FamCore

Pensions are toast. The loss of tax revenue from the shut downs will be making pensions under funded even more. A big part of the Covid package was trying to covertly bail out blue cities pensions problems.

Ah, yes. Covert bailouts, everyone’s favorite type of bailouts pitchforks & guillotines in the future or just angry posts on social media with some catchy hashtags?

originally posted by: Edumakated
a reply to: FamCore

Pensions are toast. The loss of tax revenue from the shut downs will be making pensions under funded even more. A big part of the Covid package was trying to covertly bail out blue cities pensions problems.

Unfortunately, I agree with this statement.

Pensions, especially state, local, and federal pensions are not sustainable. The government knows this, yet they'll try and prop up the smoke and mirrors by taxing more, and printing more money.

Here's the kicker, inflation and people starting to wake-up to all the BS is going to implode not only the fiat dollar, but our entire financial market. It doesn't take a mathematician, Wall-Street analyst, or high IQ to figure this one out.

A reset is coming the outcome of it will be based on cool-heads, and truly draining the swamp this time. Career politicians will need to go, and fractional reserve currencies will be looked down upon, because anything anyone had in the bank will disappear overnight.

Money is a faith based system, driven by its true worth, people's sweat equity when people start to shift their sweat equity to a new type of currency that has some finite worth, then all fiat/fractional reserves will implode.

We are already seeing this happen via where people are putting their hard earned sweat-equity, and it's not in banks, or stocks anymore. The days of smoke and mirrors are ending.

originally posted by: TexasTruth
a reply to: Grenade

Bingo! If it was intentionally released, that is exactly why. Money

My pension has been hacked apart so many times during my 20 years with the city I have no idea what to expect when I retire. I just hope what I put in is still there.

I’ve heard of a few evil places filing bankruptcy to screw over their people. Looking at you Detroit.

Here's the other issue with pensions, even if the money somehow survives all this mismanagement. Many people never think of hyper-inflation, meaning with all the money being printed hyper-inflation is inevitable, so even people with 6 figure retirements may be able to by a couple loafs of bread with their monthly check.

99% of pension don't have a hyper-inflation contingency, nor would any of them be able to keep up, unless they could print money themselves.

Our apathy, willful ignorance, and being easily divided in the USA is going to cost even people that think they are well-to-do everything financially.

The "Great Reset" is coming. Knowledge, cool-heads, and people helping people will go a long way when it happens, everything else is just noise.

originally posted by: Realtruth

originally posted by: TexasTruth
a reply to: Grenade

Bingo! If it was intentionally released, that is exactly why. Money

My pension has been hacked apart so many times during my 20 years with the city I have no idea what to expect when I retire. I just hope what I put in is still there.

I’ve heard of a few evil places filing bankruptcy to screw over their people. Looking at you Detroit.

Our apathy, willful ignorance, and being easily divided in the USA is going to cost even people that think they are well-to-do everything financially.

Would you say that it's the poorest bracket, who are barely (or not so barely) just managing to stay afloat on their income and who have no money to invest in stock market-type financial markets, that will be hit the hardest? It always seems like it's the little guy who always suffers the most. That would include a whole lot of families here in the United States.

originally posted by: TrulyColorBlind

originally posted by: Realtruth

originally posted by: TexasTruth
a reply to: Grenade

Bingo! If it was intentionally released, that is exactly why. Money

My pension has been hacked apart so many times during my 20 years with the city I have no idea what to expect when I retire. I just hope what I put in is still there.

I’ve heard of a few evil places filing bankruptcy to screw over their people. Looking at you Detroit.

Our apathy, willful ignorance, and being easily divided in the USA is going to cost even people that think they are well-to-do everything financially.

Would you say that it's the poorest bracket, who are barely (or not so barely) just managing to stay afloat on their income and who have no money to invest in stock market-type financial markets, that will be hit the hardest? It always seems like it's the little guy who always suffers the most. That would include a whole lot of families here in the United States.

It will be to a certain extent, all the fat-cat have tons of assets already, and the means to barter with their holdings. I do think that when this reset occurs, the people will trade, and help each other, meaning it will be an equitable system.

People will not be indentured as easily, meaning paying 100k for an operation that should cost 3k, just because financing is available. Most of our inequities comes from a fractional system, prices do not rise, only the middle-men/bankers adjusting their strangle-hold does.

For instance a bar of soap should cost the same as it did 200 years ago, but with the advent of smoke and mirrors via fiat currency all things can be manipulated to be higher or lower even decades later.

Take for instance a gallon of milk, in 1970 was $1.15, in Michigan we're paying around $1.29 to $1.59 a gallon, it's artificially held down by a cartel, and also subsidized.

Supply and demand play roles even when there is no fiat currency, but typically the price fluctuations will not be drastic, or unattainable for the average Joe.

We have an amazing infrastructure in the western world, so people will help people, there will be a bit of bitterness, but overall I think this reset coming will truly drain the swamp.

People will have to plant gardens where there was useless green front-yards, and crop share what they don't have, we'll also see community co-ops popping up. Children and adults will actually have to learn where plants, and veggies come from in order to survive, however this type of empowerment will spark many new areas of sustainability for everyone.

There is some good in our current MO, however most of it is vastly unsustainable and will slowly kill us off, so this overall slowdown is a blessing in disguise.

Interesting times to live in for sure.