Daily Digest

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Daily Digest 10/19 - IL Pension Debt Heavily Underestimated, U.S. Has Its Own ‘Oil Curse’

Wednesday, October 19, 2016, 10:24 AM

Economy

Obamacare rates to jump 16.7% in Michigan despite state scrutiny

The double-digit increases will mean a financial hit for taxpayers in general, as well as some of the 393,322 Michiganders who currently buy individual health insurance on or off the government-run exchange.

Oil industry needs $10 trillion to meet coming demand, says OPEC’s Barkindo

The global oil industry needs an astronomic investment injection over the next two decades or risk jeopardizing it’s ability to meet future oil demand, the Organization of the Petroleum Exporting Countries warned on Tuesday.

How some of the most vulnerable student loan borrowers are set up to fail

Over the next two years, more than 220,000 low-income borrowers who have already defaulted on their student loans will default again, according to projections released by the Consumer Financial Protection Bureau Monday, unless policy makers take immediate action. This group represents about one-third of the 650,000 federal student loan borrowers who made the minimum payments necessary to cure their defaults in the last year.

Budget plan shows Spain may need cuts to meet 2017 deficit target

Spain's next government will have to find 5 billion euros ($5.6 billion) in extra revenues or spending cuts to meet its deficit targets in 2017, according to the country's budget plan, at a time of unprecedented political instability.

The U.S. has its own ‘oil curse’

In Alaska, poster child of oil-dependent states, lawmakers spent two contentious summer legislative sessions debating how to cover a $4 billion budget deficit. They weren’t alone: Plunging oil prices have drilled holes into state budgets — $2 billion in Louisiana, $1.3 billion in Oklahoma, $1.3 billion in North Dakota — that left lawmakers bickering over how to close the gaps.

Poland Seeks to Lock in Low Yields With First 30-Year Eurobond

While the yield on the 30-year German bond doubled since July to 0.68 percent on Tuesday, Poland is hoping the extra yield it’s offering will stir interest even as the east European country’s growth outlook has soured amid rising economic-policy risks.

Report: Illinois’ pension debt heavily underestimated

“Basically, it’s Enron-style accounting for government,” Williams said. “If you’re an executive in the private sector, and you used the kind of accounting used by state and local governments, you’d be in jail today.” Williams said the $362 billion is the second worst pension debt in the country. Only California is worse.

Venezuela's PDVSA Sows Payment Doubts While Extending Swap

Venezuela’s economy and finances have been decimated by the collapse in oil prices, leaving the government struggling to find enough hard currency for imports of basic necessities and debt payments. The company’s president, Oil Minister Eulogio Del Pino, said in an interview last week that that the deal was critical for PDVSA and that officials would be “evaluating all options” if they couldn’t persuade enough investors to accept the terms.

Russia Rushes $13 Billion Debt Relief as Defense Strains Budget

Russia’s government is easing the debt burden of defense companies, jettisoning the 2016 deficit target as the nation’s relations deteriorate with the U.S. and its allies.

Zero-Yield Bonds Shunned as Untouchables by BBVA Private Banker

“But the truth is, central banks will change monetary policy -- and if I’ve bought a German bond earning zero percent, and yields go back to around 4 percent -- which is about where they should be when we have 2 percent inflation again -- the price loss will be more than 25 percent.”

Japan finance institutions face huge losses on government bonds if yields rise

If yields of outstanding bonds climb 1 percent across the board, the value of outstanding government bonds would drop by an estimated ¥67 trillion, or 13.5 percent of nominal gross domestic product in fiscal 2015, according to the ministry.

Central Bankers Rejoice: There Are Signs That Inflation Is Actually Arriving

Deflationary forces have abated amid firming commodity prices and a sustained labor-market improvements, contributing to a recent sell-off in many developed-market sovereign bonds. Calls for expansionary fiscal policy to buoy growth going forward have also helped shift the mood.

China Sept new yuan loans surge to 1.22 trillion yuan, well above forecasts

China's debt has soared to 250 percent of GDP and the Bank for International Settlements (BIS) warned in September that a banking crisis was looming in the next three years.

China Credit Surge Fuels Economic Stabilization, Debt Concerns

"It’s more of the same: more yuan lending, more debt, no real increase in M2 growth and a much larger rise in M1 growth," said Michael Every, head of financial markets research at Rabobank in Hong Kong. "It screams ’Liquidity trap!"

Goldman says U.S. bondholders risk a $1.1-trillion hit if rates spike

A 1-per-cent increase in interest rates could inflict a $1.1-trillion (U.S.) loss to the Bloomberg Barclays U.S. aggregate index, analysts at Goldman calculate, representing a larger loss for bondholders than at any other point in history.

Gold & Silver

Click to read the PM Daily Market Commentary: 9/26/16

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

15 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4145
Report: State public pension unfunded liabilities soar to $5.6 t

 

Report: State public pension unfunded liabilities soar to $5.6 trillion

Watchdog.org-16 hours ago
Your public pension system is the best funded among all the states, according to a new report that tracks pension debt. Just don't get a big head about it. You're ...

Pension plan funding shortfalls threaten retirees in all 50 states

Wayne County Journal Banner - ‎6 hours ago‎
Across the 50 states, unfunded pension obligations now total $5.6 trillion. Now, that number sounds large at a national scale, but what does it mean for the average American? To be exact, this state pension debt equates to an average price tag of $17 ...

China Holdings of U.S. Treasuries Drop to Almost Four-Year Low

Bloomberg - ‎18 hours ago‎
China's holdings of U.S. Treasuries fell to the lowest level since November 2012, as the world's second-largest economy draws down its foreign reserves to prop up the yuan. The biggest foreign holder of U.S. government debt had $1.19 trillion in bonds ...

Japan investors in dilemma over US bonds as hedging costs bite

Reuters-11 hours ago

In their hunt for yield, Japanese investors bought 21.4 trillion yen ($208 ... have climbed to around 1.5-1.6 percent, compared with the 10-year U.S. debt yield that

Student Loan Debt For Recent College Graduates Increases Again, Now At $30K

The Consumerist - ‎Oct 18, 2016‎
The latest annual student debt survey [PDF] from The Institute for College Access & Success (TICAS) found that nearly 7-in-10 graduating seniors (or 68%) of 2015 graduates of four-year public and nonprofit colleges owed an average of $30,100, up 4 ...

Student loan money being spent on clothes, vacations

wwlp.com-21 hours ago
SPRINGFIELD, Mass. (WWLP) – Student loan debt has reached a record high of $1.3 trillion, but that doesn't necessarily mean students have spent that much ...

Kansas has racked up billions in debt over the past 20 years, more ...

Topeka Capital Journal-1 hour ago
Kansas' bond debt has jumped nearly $4 billion over the past 20 years -- more than tripling the level seen in the late 90s. At a time when the state struggles to ...

China Construction Bank Eyes More Than 50 Debt-to-Equity Deals

Bloomberg-8 hours ago
The bank assessed the firms' debt levels, industry indicators, and the ... a Construction Bank unit is raising money from investors to buy 10 billion yuan of loans ...

Nigeria's $64bn debt overhang raises fresh concerns

Nigeria Today-13 hours ago
Ten years after Nigeria exited the London and Paris Club debts through debt buyback that reduced its obligations from $35 billion to $5 billion in 2006, the ...

Saudi Arabia sets record with mammoth $17.5 billion bond issue

Reuters UK-6 minutes ago

Saudi Arabia sets record with mammoth $17.5 billion bond issue ... selling $17.5 billion (14.22 billion pounds) of debt in the government's first international offer .

Singapore's $24 Billion Wipeout Eats Into Its Shipyard Base

Bloomberg-12 hours ago
More than two years of tumbling oil prices have wiped more than $24 billion from the ... Polo Marine Ltd., are seeking leniency from creditors on their debt load.

 

cmartenson's picture
cmartenson
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Posts: 5727
Pension disasters...

Just the pension shortfalls alone could be used internally by the Fed to justify their ""market"" propping activities.

After all, if they did not jam equities higher, the pension shortfalls would be that much worse, and possibly irrecoverably so (spoiler alert: they already are beyond any hope of recovery).

So they jam away, day after day, burning up the bat phones between Japan and the EU, doing whatever is necessary to keep the devil at bay.

However, they are missing, badly, the larger context.

Growth is gone. For a very, very long time.

Without that growth the entire pile of debt instruments upon which the entire Western edifice is based will crumble.

So, no, there's no need to worry about the pensions. Why? Because they won't be paid.

See? Worry requires uncertainty and there's nothing at all uncertain about pensions and other entitlements. They simply cannot (and therefore won't) be paid.

reflector's picture
reflector
Status: Gold Member (Offline)
Joined: Aug 20 2011
Posts: 269
axel merk: The U.S. Dollar May Be Fading, But Not For The Reason

 

an interesting perspective on the future of the dollar as a result of changes to money market accounts:

(4 min interview with kitco)

axel merk: The U.S. Dollar May Be Fading, But Not For The Reason You Think

http://www.kitco.com/news/video/show/Kitco-News/1391/2016-10-18/The-US-D...

DennisC's picture
DennisC
Status: Gold Member (Offline)
Joined: Mar 19 2011
Posts: 309
Re: watchdog.org link

Go Team! 

U-S-A, U-S-A, U-S-A

Glad to see I'm still lucky to reside in one of the more insolvent states.  Although there certainly seems to be enough alarms being raised (i.e. seemingly no shortage of articles) about pension funding issues, it will be interesting to see when the "aha moment" comes for the hoi polloi in general, kind of like for the folks in Dallas.  Monty, I think I'll take the cash instead of what's in the box on the stage.

https://www.alec.org/app/uploads/2016/10/2016-10-13-Unaccountable-and-Un...

davefairtex's picture
davefairtex
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Joined: Sep 3 2008
Posts: 5408
no need to worry?

Chris-

I think the first people through the pension door will be able to flee successfully. So for those right at the cusp of getting their lump sum, worry is entirely appropriate.

For those who have 10 years to wait...I agree. No need to worry.

Between now and 10 years, I believe the federal government will move heaven and earth to raise taxes on the rest of us in all sorts of ways to try to make sure their own pensions aren't defaulted upon, up to and including confiscating our IRAs and 401ks because "the (Federal government) pension promises are sacrosanct."

So in terms of worry - I remain worried. Not because I have a pension, but because I have money that I saved in an IRA and am therefore a potential cow waiting to be milked.

sand_puppy's picture
sand_puppy
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Joined: Apr 13 2011
Posts: 1884
Where does ISIS come from?

This Ben Swann video was posted here some 1-2 years ago.  I am bringing it back as the subject is complex and its complexity is used to keep it vague.

Boogeymen are very useful.  Now that the arch-criminal mastermind-of-terror OBL has left the scene, ISIS and Putin must fill his shoes.

Time2help's picture
Time2help
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Posts: 2830
Re: IRA
davefairtex wrote:

So in terms of worry - I remain worried. Not because I have a pension, but because I have money that I saved in an IRA and am therefore a potential cow waiting to be milked.

"Maybe the smartest thing to do is pull it".

thc0655's picture
thc0655
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Joined: Apr 27 2010
Posts: 1613
Chicago registers 600 homicides

Doctors and medical professionals save many more shooting victims than they did even 20 years ago.  As a result, comparing homicide rates over the last 20, 30 or 40 years will be somewhat misleading.  What should be compared is how many shooting victims a city has had.  In the below article, Chicago's homicide increase (+24%) gets most of the attention, but you should focus on the 50% increase in shootings to get a feel for how bad things are.  AND YOU SHOULD KEEP FIRMLY IN MIND THAT CHICAGO AND ILLINOIS HAVE ABOUT THE STRICTEST GUN CONTROL LAWS IN THE NATION.

http://chicago.cbslocal.com/2016/10/19/miserable-milestone-chicago-surpasses-600-homicides-this-year/

Vernadette Taylor moved to West Englewood’s 6700 block of South Winchester more than 30 years ago with her husband, son and daughter.

In the last year and a half, three shootings on her block have left one man dead and 10 others hurt.

The 28-year-old man killed on her block Monday night helped push Chicago past a miserable milestone as he was one of more than 600 homicides the city has seen so far this year — a 24 percent uptick compared to the same time last year, not to mention about 100 killings more than the homicide totals in New York and Los Angeles combined this year.

Nonfatal shootings also are way up citywide. As of last week, more than 2,100 people had been wounded this year and survived, compared with about 1,400 people shot in the same time period in 2015, the Chicago Sun-Times is reporting.

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
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Posts: 1181
Liquidate

Liquidated my qualified plan money 11yrs ago. I hope property rights are maintained, that all folks! Best have your mare settled!

 

badScooter's picture
badScooter
Status: Silver Member (Offline)
Joined: Jun 20 2011
Posts: 152
IRA etc

Liquidated my IRA, whole life policy, etc, back in '08, early '09.  Spent the proceeds in Vegas, so very sad, it is all gone.  Not worried about any form of 'nationalization' of retirement savings, not worried about civil forfeiture.  I sleep ok at night, at least about the savings thing.  Not so much, the "let's have a war" thing.

Edwardelinski's picture
Edwardelinski
Status: Gold Member (Offline)
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Posts: 319
Matt Taibbi Fans:

Not sure there are any fans here anymore but he will be on Comedy Central tonight.His writings have been great as of late.(or maybe not here).Oh and Mass voters, the newest dope on the horizon looking to unseat Elizabeth Warren-Curt Schilling....

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
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Posts: 830
BadScooter, are you a paramount poems fan?

Ho hum, ho hum
HO HUM Ho HUM!

if it isn't a paramount, it isn't a poem (Morris Bishop)

Bankers Slave's picture
Bankers Slave
Status: Platinum Member (Offline)
Joined: Jul 26 2012
Posts: 523
Nothing new here!

TechGuy's picture
TechGuy
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Posts: 415
Re: "pensions won't be paid"

Chris Wrote:

"So, no, there's no need to worry about the pensions. Why? Because they won't be paid."

Unfortunately a lot of states and local gov't borrowed Billions to increase the funds in their pension funds. The assumed that they could borrow low and that at some point interest rates would normalized and they could collect interest at a higher rate then they borrowed. Of course rates did not go back up, but the pension plans now have a lot of debt. This money will have to be paid back to the bond holders, even if they reneg. on their pensioner obligations. 

"They simply cannot (and therefore won't) be paid."

I firmly believe that the federal govt will simply print money to prop up entitlements and provide bailout for states too. The politicians know that if they were to cancel pensions plans and entitlements that there would be a million man lynch mob showing up on there door the next day. I am sure there would be massive riots too. I expect they will continue to pander and jawbone the public for as long as possible, and when they exhausted all options they will turn to the printing presses. My guess is that we follow in the footsteps of Venezuela, or Argentina at some point the future. 

 

badScooter's picture
badScooter
Status: Silver Member (Offline)
Joined: Jun 20 2011
Posts: 152
Morris Bishop

Hi MR,

I had to look him up, he sounds interesting.

Cheers,

Mike

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