By Zach Scheidt
This post America’s Silent Crisis appeared first on Daily Reckoning.
I ran into some disturbing news recently. News that makes me both angry and perplexed.
And it has to do with America’s pensions.
But here’s why it’s so important — even if you don’t have a pension:
Your tax bill could explode as governments around the country seek to bail out insolvent pension plans. And you know how much politicians like to use your tax money to bail out some constituent. They like to prove their “compassion” with your money!
And frankly, the disturbing news I recently discovered could wreck your retirement plans.
All because some bozos on Wall Street are completely inept at investment management. Actually, I’m not sure it’s it’s incompetence… or sheer laziness. But frankly, it really doesn’t matter.
What matters is that millions of retirees are going to wake up one day and realize that their pension fund payments stopped coming. At the same time, tens of millions of retirees are going to wake up to a market calamity.
And it all ties back to the miserable job U.S. pension fund managers are doing.
Let me explain…
As you know, we’re currently in a long-term bull market for stocks. Ever since the market bottomed following the financial crisis, stocks have been moving steadily higher. The current bull market is one of the longest-standing bull markets in history, now approaching eight straight years of advances.
In fact, I read where this is currently the third-longest bull market in modern history.
You would think that pension funds would be benefiting from this extreme bull market, right? After all, we know that there is a pension crisis in the U.S., with an estimated $414 billion shortfall in what corporations need to be able to pay retirees.
But instead of investing in the stock market, allowing strong returns to make up pension shortfalls, pension fund managers have been underweighting U.S. stocks.
Regardless of whether the market is in a Fed-inflated bubble, no one can deny that it’s been an impressive run. And pension plans are missing the boat.
You see, when the financial crisis hit, pension funds reduced their exposure to stocks to the lowest level since the 1960s. Ironically, this is the exact time that pension funds should have been increasing their exposure to stocks!
Over the next eight years, not much changed. As the market plowed steadily higher, pension fund managers kept their portfolios conservative — allocating capital to things like Treasury bonds and “investment-grade” corporate bonds that paid next to nothing.
Remember, this is an eight-year period with interest rates at or near zero percent! What a horrible time to be invested in bonds!
So during one of the greatest bull markets in history, pension fund managers have put their investors’ capital on the sidelines, missing out on huge potential gains and investing in bonds that pay next to nothing in interest.
Can you see why I’m so angry?
But if you somehow think your Social Security retirement package is any better, think again. The Social Security trust fund has zero exposure to …read more
Source:: Daily Reckoning feed
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