[quote=CA renter]
But to think that these debt problems are solely due to public pensions is to ignore all of the other deficit spending done during the monetary free-for-all. Pensions are only one piece of the puzzle, and they’re not even the major piece in many cases.[/quote]
Let’s try and stay focused, and look at only the public pension vs the local economy.
I am ignoring federal programs like social security, medicare, military spending, because the federal government has tools like a printing press, and deficit spending, but local and state governments do not (unless I am mistaken).
The way muni and state governments can raise funds, is by property taxes, sales taxes and selling bonds.
Given new accounting rules which put public pensions on the balance sheet, I think there will be “downgrades” as what just happened with NJ just a few days ago
will reveal the magnitude of unfunded pensions BILLIONS higher than TPTB are saying “publicly” now.
Or put another way, think what would happen to bonds floated by SD if they are poorly rated w.r.t. other muni bonds (I’d think this would start some kind of death spiral “feedback loop,” because bond bought by large pension funds would avoid SD bonds because of a negative rating, etc.). Its kinda like the problem detroit has right now with trying to raise money in the bond market (in other words because detroit has bad press, its bonds are looked upon as being garbage that will only pay cents on the dollar, so the city of detroit gets more bad press, the bonds get harder to sell, etc., etc., etc.)
If I was a poker player, I’d see the actions of the SD pension reported in the WSJ strike me as being one of desperation, basically asking why double down now?
Seems like a bluff when they say their investment strategy is sound, when I have shown the simple odds of success is 1 in 3 (and that “win” covers a range of values from small to big) AND it seems SD is betting big because they are short big time…
Putting 10 billion down into a margin account (so they can bet as if they have 20 billion, in the pot), either means they have have a good hand or they are desperate (I’d bet good money, its the latter).
Consider in investing, an actively managed account is less likely to beat the market average (i.e. index fund)
As I said I don’t pretend to be a market expert, nor do I have a degree in economics or finance. But I think my three case(s) of a portfolio outcome are one good way to explain why actively managed accounts, fail to beat their index benchmark 2/3 of the time…
So the way I see things, the unfunded SD pension and the strategy to try and make the pension whole, is an armed weapon of financial mass destruction.
One other thing that worries me about local RE is
In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the impending second wave of the lastest mortgage crisis, this time due to Helocs (Home equity lines of credit) and HAMP (Home Affordable Modification Program) interest rate resets. In the second half, Max interviews Aaron Krowne on the true state of the housing market across America – from home ownership rates to mortgage arrears.
