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Registered Investment Adviser Caleb Lawrence

The melt up continues with the major averages opening higher on little real news, though they slipped late and enter the final hour about even. That said global financial stress continues to climb as the crypto currencies get wacked again. Britain’s biggest construction company Carillion goes bankrupt. Commercial real estate slides in 2017 for the first time since the last crisis.

The New York Fed regional index fell 1.9 points to 17.7 in January. Most of the report was unremarkable save huge employment related declines of 19.1 points, while the work week fell 8.5 points to a barely positive .8.

Despite significant trade related negative factors going into the end of the 4th quarter Gross Domestic Product estimates are running some 3% putting the 4th quarter on track for a 3rd consecutive solid quarter as 2017 looks to peg Trumps boastful 3% growth estimate. He’s going to need a lot of help to keep that going.

Recent municipal bankruptcies have put a real spotlight on the sanctity of pensions in California and other states of late. Despite funding levels in the 70% range being all to common, CalPers is currently running some 68% and that after the significant market gains of late. That said it remains largely the norm for pension fund managers to assume 7-8% rates of return despite reality being about half that. Many, particularly in California figured that pensions were sacrosanct as the agreements stipulated that should deficits occur taxes would be raised to cover the difference, end of story. But a looming California supreme court case looks to cast these guarantees to the wind, something already decided by lower courts. When promises are made that can’t mathematically be kept, sooner or later push will come to shove, and the courts are increasingly recognizing that the needed tax increases will prove ruinous by necessity. California is far from alone on this as pension funding looks to become quite the scandal nationwide over the next 10-20 years.

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