Ok, Cards on the table

[Mega]

Re: Ok, Cards on the table

The real question burning in me is what happens to the pension funds?

In the past high rates saved them, but since 2008 the BASTARD central banks have KILLED real rates, Pension funds had to take risky investments to try to get a return.

So, what happens now?

We know its at the very lest a recession is coming & one they NOT be able to stop (although they will wish to be seen trying too).

https://news.sky.com/story/coronavir...-boss-11957065

Mike

[jk]

Re: Ok, Cards on the table

all pension funds, corporate [those few defined benefit plans which still exist] and governmental are in deep trouble. they were already in trouble before the virus, before the market turmoil, because they were all severely underfunded even with completely unrealistic return expectations. they will either be bailed out or [at least partially] default.

[thriftyandboringinohio]

Re: Ok, Cards on the table

all pension funds, corporate [those few defined benefit plans which still exist] and governmental are in deep trouble. they were already in trouble before the virus, before the market turmoil, because they were all severely underfunded even with completely unrealistic return expectations. they will either be bailed out or [at least partially] default.

Yes, the only defined pension benefit plans that exist any more are federal state and local .gov employees, so we may as well call them "public pension plans".
Partial defaults seems more likely. Joe sixpack is not in the mood to bail out generous pensions while he's planning to scrape by with a modest social security check plus a small and poorly performing 401K.

For a married couple at retirement, social security checks for the family top out at about $70,000 a year combined. I expect that to become a key talking point when the pension funds announce big trouble.
A married .gov couple who were, say, a city attorney and a high school teacher for 30 years might be expecting something like this:

Attorney final salary $120,000 / yr
teacher.... " ....." .......$80,000/yr
Total family salary $200,000 /yr

Percent of FAS at 30 yr = 66%
Family retirement income = .66 x $200,000 = $132,000 / yr, guaranteed for life

So the public pension is a guarantee of twice what a married couple of private sector professionals might expect. To make up the difference here in ZIRP world, a couple of $150,000 / yr private sector professionals would need to have saved well over a million bucks AND be investing it as skillfully as a Wall street pro. That's unusual. Now of course, that was the social contract for all involved going into the deal 30 years ago. Public employees make low wages (especially in the early years), with no chance to strike it rich with bonuses or big promotions, but they get a generous pension at the end.

When the day of reckoning arrives and INPRS and CALPERS blow up, the partial default might look like pension payouts capped at the max of social security payouts.
That's cutting pension payouts in half for long time public employees in exchange for a tax bailout.
That might be acceptable to both the retired cop and the retired car salesman.

[jk]

Re: Ok, Cards on the table

Yes, the only defined pension benefit plans that exist any more are federal state and local .gov employees, so we may as well call them "public pension plans".
Partial defaults seems more likely. Joe sixpack is not in the mood to bail out generous pensions while he's planning to scrape by with a modest social security check plus a small and poorly performing 401K.

For a married couple at retirement, social security checks for the family top out at about $70,000 a year combined. I expect that to become a key talking point when the pension funds announce big trouble.
A married .gov couple who were, say, a city attorney and a high school teacher for 30 years might be expecting something like this:

Attorney final salary $120,000 / yr
teacher.... " ....." .......$80,000/yr
Total family salary $200,000 /yr

Percent of FAS at 30 yr = 66%
Family retirement income = .66 x $200,000 = $132,000 / yr, guaranteed for life

So the public pension is a guarantee of twice what a married couple of private sector professionals might expect. To make up the difference here in ZIRP world, a couple of $150,000 / yr private sector professionals would need to have saved well over a million bucks AND be investing it as skillfully as a Wall street pro. That's unusual. Now of course, that was the social contract for all involved going into the deal 30 years ago. Public employees make low wages (especially in the early years), with no chance to strike it rich with bonuses or big promotions, but they get a generous pension at the end.

When the day of reckoning arrives and INPRS and CALPERS blow up, the partial default might look like pension payouts capped at the max of social security payouts.
That's cutting pension payouts in half for long time public employees in exchange for a tax bailout.
That might be acceptable to both the retired cop and the retired car salesman.

that sounds plausible. my only disagreement is with the phrase "a skillfully as a wall st pro." most wall st pros suck.

[GRG55]

Re: Ok, Cards on the table

So does all this market support and emergency intervention end up on the FEDs balance sheet?.

Of course. The correlation between the S&P indexes and the Fed balance sheet is extraordinarily high.
As EJ pointed out years ago, it's a politically driven economy and stock market now.

[Mega]

Re: Ok, Cards on the table

Jim Rickards as said for a very long time that Wall st baled out the S&L crash in the 90's.
Wall st was baled out by the Central banks in 2008.
Central banks baled out by IMF using SDR's............Now?
Mike

[shiny!]

Re: Ok, Cards on the table

Trader Joe's last night:

First weird thing: almost no carts by the doors. They were all out in the parking lot; staff was too busy to bring them back in.

No staples left. Shelves were EMPTY. Got the last 2 loaves of bread that I like. You could still buy soy sauce and mustard, but no soup or pasta.

The freezers were 90% EMPTY. No frozen vegetables at all!

Cheese cooler was pretty well gutted.

3 lonely cartons of eggs sitting on the bottom of the egg cooler. I picked through them to get a full dozen that weren't broken.

I'd gone in for my weekly half-and-half, hoping to get some tuna. Way up on a high shelf were 2 dozen cans of skipjack tuna that had been overlooked. I got their last ones. No other tinned meats available.

They DID have lots of bagged nuts and trail mix.

Still lots of fresh produce, milk and meat, but non-perishable staples? Forget about it!

Staff looked exhausted but happy, because Trader Joe's takes very good care of them. As weird as the experience was, this is still not a panic.

[Mega]

Re: Ok, Cards on the table

[thriftyandboringinohio]

Re: Ok, Cards on the table

Trader Joe's last night:

First weird thing: almost no carts by the doors. They were all out in the parking lot; staff was too busy to bring them back in.

No staples left. Shelves were EMPTY. Got the last 2 loaves of bread that I like. You could still buy soy sauce and mustard, but no soup or pasta.

The freezers were 90% EMPTY. No frozen vegetables at all!

Cheese cooler was pretty well gutted.

3 lonely cartons of eggs sitting on the bottom of the egg cooler. I picked through them to get a full dozen that weren't broken.

I'd gone in for my weekly half-and-half, hoping to get some tuna. Way up on a high shelf were 2 dozen cans of skipjack tuna that had been overlooked. I got their last ones. No other tinned meats available.

They DID have lots of bagged nuts and trail mix.

Still lots of fresh produce, milk and meat, but non-perishable staples? Forget about it!

Staff looked exhausted but happy, because Trader Joe's takes very good care of them. As weird as the experience was, this is still not a panic.

[jk]

Re: Ok, Cards on the table

from my daughter who lives in l.a.

"You guys, it's really an emergency in LA. All the oat milk and kimchi is sold out."

[shiny!]

Re: Ok, Cards on the table

Oh yeah! I've always said if there's going to be a panic, panic first and avoid the rush.

My mother used to tell me stories about growing up in the Great Depression, and her mother surviving the Spanish Flu pandemic. As a reaction to growing up in lean times, her pantry was always STOCKED. A well-stocked pantry has always seemed normal to me. It's the way I've always lived. Right now though I have it a little more stocked than usual.

During the Y2K hysteria I bought a year's supply of toilet paper because I absolutely refuse to face TEOTW without toilet paper (there are some lines that just can't be crossed, you know?) Having a case of TP in the shed has been one of my little quirks ever since, so I'm in good shape there.

End of February brought me my annual Costco credit card rebate, which I used to buy 6-months worth of cat food, cat litter, and general staples that needed topping off. I noticed it seemed more crowded than usual. Asked a guy buying beans if he was paying attention to events in Wuhan. He nodded and picked up another sack. It's starting, I figured.

I always keep a 6-month supply of meds. With 90% of our medicines sourced from China, I figured there might be a shortage of essential medicines so I stocked up on extra medrol (I have adrenal insufficiency) and some basic antibiotics from inhousepharmacy.vu. (Note to everyone reading this: If you want to stock up on medicines and your insurance won't cover it, inhousepharmacy.vu is a reliable source. The Mayo Clinic refers patients there when they need a medicine that the FDA hasn't approved here.)

In April I usually purchase all the meds and supplements I'll be taking over the summer because I don't want them sitting in hot trucks in July. I went ahead and did my April purchases a month early.

So right now I'm pretty broke, but I didn't buy anything I won't eventually use (except possibly the antibiotics). I don't think we're going to be locked down like Wuhan and Italy but if we are, my cats and I will be alright. And if it never gets that bad, I won't have to do much in the way of shopping for a long time.

[jk]

Re: Ok, Cards on the table

you can get most drugs a LOT CHEAPER using coupons from goodrx.com. often cheaper than using insurance if you have it.

alternatively you can check prices out of canada at pharmacychecker.com

[EJ]

Re: Ok, Cards on the table

I'll tell you what I think. I think something isn't kosher here. The media is treating this virus like it's the Zombie Apocalypse, but it's no such thing. And we've been debating the structural crises in the financial system for more than a decade, waiting impatiently for Ka's and Pooms, but it's always a case of not quite yet. And now after an extended hiatus, EJ shows up.

No doubt, Covid-19 is the real deal, a virus spread by droplets that persists over time and is shed by asymptomatic persons. But outside the impact on elderly folks, the mortality rates don't justify the over the top response, not the panic being ginned up by the media, certainly not the global shutdown of commerce afoot, and most certainly not the unprecedented REPO response we've seen from the Fed - which, by the way we never seem to talk about here (at least outside the paywall).

Could it be that this panic is a cover for a much more serious action orchestrated behind the curtain to deal with these longstanding structural crises? The ECB must realize they are trapped by their idiotic negative interest policy. And as the Dollar rallies in a flight to safety, we're starting to see that the Fed isn't as all powerful as they want us to believe. They want a weak dollar, but it just keeps on ticking.

The Repo Crisis has emerged because of a collapse in confidence among banks. And nobody's talking, except for nonsense about this being a stealth QE. But look it, the EU (meaning, Germany) categorically refuses to bailout (Italian, Greek, etc.) banks. So any bank dealing with a European bank that fails will get a 100% loss. In a "normal" environment, rates would rise to account for the risk, but central banks are pulling all the stops out to keep them down. Only it's not working and REPO is the canary in the coal mine. Maybe we'll soon start seeing an official rate set by the central banks and a real-world rate for everyone else, which will reflect the actual risk. Or maybe something more drastic is afoot? Because even though everything they've tried thus far hasn't worked, they will never admit that NIRP was a mistake. And they cannot now allow rates to rise without collapsing themselves.

So what to do? How to "fix" things in a way that preserves their authority? Well, Legarde and Draghi before her persist in the view that the only reason negative interest rates have failed is because we the people have failed our central banker betters by hoarding our cash. Lo and behold, Corona shows up. In the spirit of never letting a crisis go to waste, why not use this once in a lifetime opportunity to good effect? So what's the answer?

Crypto.

Laugh if you want, but we've seen the Chinese burn and try to disinfect contaminated Yuan notes. Legard has come out many times stating that countries should create their own digital currency. Even the Bundesbank authorized German banks to act as custodians for cryptocurrencies (for safety, dontchaknow). The BoE is sending around reports to the press by way of planting the seed that this is the solution (https://www.bankofengland.co.uk/rese...tal-currencies) to our problems and Sweden has published similar papers. The explosion in the popularity of crypto has been a sight to watch, but despite the utopian-talk associated with it, I could never help but wonder what these crypto evangelists think the central banks will do about it? Shrug their shoulders, admit defeat, and get a real job? Yeah, fat chance of that. When it suits them, they'll create their own crypto and confiscate the rest. Anyone who balks winds up with a worthless pile of digital bits. And maybe they get a few years in the lockup, too?

But how to get us rubes to bite? How to get at all those Euros and Dollars stuffed under the mattress? Easy peasy. Create a central bank crypto, give folks notice of their intent to cancel the currency and force people to deposit their Euros. And what prey tell would they use as a justification? Howsabout a global media-driven panic over pandemic flu as a for instance? Feed a hungry the press with disinformation and create a panic about Corona that spooks the markets and corporations so as to deliberately collapse the economy. Use the double-whammy of a zombie apolcalypse flu-driven economic collapse justify their solution. Eliminate paper currency and adopt the central bank's crypto.

And when cancelling the currency fails - which it will as it has always done - all the easier it will be to enact forced loans, bail-ins, extend 90 day paper to 10 years, and run a few keystrokes so as to encourage folks to spend their crypto before the value diminishes. It's a central banker's wet dream! And don't bother with the Bitcoin stuff. It's honey for hackers and we're keeping you safe by confiscating cryptocurrencies from the bad actors and converting them to government digital currencies. You wouldn't want to get laid down by Corona from that dirty, filthy, infected lucre, would you?

Too bad for the wizards of smart that it won't work. First of all, because king Dollar continues to reign and the Golden God-Emperor Trump will never go along with it. And least of all because it really will precipitate the mother of all financial crises.

Bottom line, whenever the media-government-corporate-educational complex line up 100% behind something, you gotta know that something is rotten.

Said it before and it's worth repeating, if an economy is run by and for the finance, insurance, and real estate industries what kind of response to a pandemic could be expected? Besides endless dithering and delays, the "public-private partnership" that Trump presented as the US solution is consistent with FIRE Economy structure. Not that I think it's a terrible idea to have test drive-in centers at CVS, Walgreens, and Target, but I suspect there are many, many "devil's in the details" issues to be worked out before we see any actual test sites: Who will staff these sites? The insurance companies will want a piece of the action. How long will that take to arrange?

On a brighter note, here's how the Italian people are coping with their lockdown.

[Mega]

Re: Ok, Cards on the table

Ah. can't have that......here some 1970's BBC

[Mega]

Re: Ok, Cards on the table

https://news.sky.com/story/virgin-at...ilout-11957708

Everyone wants a BALEOUT