The Market Moves Higher into Overvaluation Territory
S&P 500 significantly above its 15 year moving average inflation corrected price!
DREAM LOVER: STOCK MARKET CONTINUES TO RISE AS EXPECTED GLOBAL GDP GROWTH CONTINUES TO TANK
The S&P 500 stock market index keeps climbing regardless of whether economic information is good or bad. Why? Because Wall Street’s “Dream Lover” is the Chair of the Federal Reserve Board of Governors.
For example, the world GDP forecast keeps falling … and the S&P 500 stock market index keeps rising. Much like a psychotic Energizer Bunny.
Pension-Bond Warnings Go Unheeded by Kansas Leaders
(Bloomberg) -- Kansas and Kentucky may borrow billions to invest in cash-strapped pension funds, undeterred by warnings the practice risks driving up taxpayers’ bills to retirees.
The states’ lawmakers are considering following a strategy used more than a decade ago by Illinois and New Jersey, which sold bonds to bolster retirement systems that have since fallen further behind. In January, with stocks close to record highs, a group of state and local-government officials advised against speculating with borrowed money, saying it may backfire if investments sour.
Selling bonds is a way to inject cash into retirement plans, with public officials speculating that they can earn more from investments than they will pay to borrow. With interest rates in the municipal market hovering above a half-century low, top-rated, 30-year taxable munis yield 3.65 percent, according to data compiled by Bloomberg. Pension funds typically assume they can earn more than twice that amount.
Hamden, the Connecticut town, has no other choice, said Scott Jackson, the city’s mayor. With only 10 percent of the money it needs to cover future benefits, the city has little to invest to meet those bills. Without the new cash, Jackson said the pension might run out of money, which would mean paying retirement checks with the city’s general tax revenue.
“Nobody likes pension bonds,” he said. “It’s an indication something has gone horribly wrong.”
DYI Comments: Here we go again! States and municipalities who have promised too much for future and current retirement checks against way too little of the cost borne by the government employees nor the government itself. So now they are under funded to the tune of billions. So their response is to throw money at the problem. A desperate measure to "kick the can" down the road in a hope that markets will bail them out. It will not work. What has to be done is to reduce the pension promises and have the employees deposit much larger premiums(pay cuts). New employees will go into a 401k type plan which will be the beginning of the end for under funded pensions. This solution politically is a box of dynamite that most governments will not go unless bankruptcy occurs.
The little town of Hamden Connecticut with a population of 61,000 find itself so under funded is beyond comprehension. Where there is smoke there is fire. The top cops of Connecticut need to investigate these political leaders.
DYI
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