Economic Collapse

[Justified]

The U.S. Economy Is Collapsing And The S&P 500 Is Flat?

http://investmentresearchdynamics.com/the-u-s-economy-is-collapsing-and-the-sp-500-is-flat/

A friend of mine did an exhaustive, in-depth study of public pension funds. He concluded that if there’s a 10% decline in the stock market for any sustained period of time, every pension fund will collapse. The Central States pension fund manages the Teamsters pension in several States. The S&P 500 is near an all-time high and every other primary asset has been inflated by the Fed to historical levels and this pension is still collapsing. That’s just a “sniff” at how bad the problem really is. The State of Illinois public pension fund is one of the largest in the country and it’s on the verge of collapse.

I was chatting with him about the cash inflows and outflows at his particular fund, which theoretically is not “underfunded” (but it really is). I was stunned to learn that outflows exceed inflows every month and they have to sell assets every month to fund beneficiary payments. This is because, in order for the fund to achieve cash flow “neutrality,” it needs to generate an 8% ROR. Even though we’ve had 7 years of Fed-driven stock and bond price appreciation, all of these pension funds are still underfunded. Last year the returns were flat to down. Every year that returns are flat to down, every fund with an assumed 8% (some are set at 7.5%) hurdle-rate for cash flow neutrality goes in the hole by 8%.