How Public Pensions Turn Cities into Unlivable Hellholes

“It’s like going to the ATM in Vegas and then going to the roulette wheel and it comes up red and you go back to the ATM.”

The remark was recently made by Steve Mermell.  The man retired last year as city manager of Pasadena, California.  He knows a thing or two about how borrowing to enhance pension fund returns can result in spectacular losses.

The Wall Street Journal article did not clarify whether red was a winning turn of the roulette wheel or not.  Within the article’s context it didn’t really matter.

The main point was that public pension funds are grossly underfunded.  Consequently, more and more pension funds are borrowing money to play the markets.  The goal is to boost returns to cover their massive funding gaps.

If you recall, public-sector retirement plans offer defined benefits, where retiree pension checks are calculated based on salaries and years of service.  Private employers, on the other hand, generally offer defined-contribution plans (like 401Ks), where payouts are based on market returns.

If you live long enough, and are a recipient of a public pension fund you will get out far more than you put in.  If you work in the private sector, there’s a good chance you will outlive your retirement savings. Continue reading

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The Decline and Fall of a High Finance Wizard

By now, anyone with half an inkling of awareness knows the Federal Reserve is in the brutal business of expropriation.  Arbitrarily creating or destroying money has the effect of creating or destroying claims to goods and services.

What we’ve witnessed over the last several decades is that increasing the supply of money first increases asset prices, and later increases consumer prices.  Conversely, decreasing the supply of money decreases asset prices, and, eventually, and often in concert with a recession, slows the rate of consumer price inflation.

Now, after the most radical credit creation binge in modern history, the Fed is in the early stages of a credit destruction purge.  On June 16, the Fed hiked the federal funds rate by 75 basis.  This was the Fed’s most aggressive rate increase in nearly 28 years – since November 15, 1994.

How many fund managers remain who were in the business in 1994?  How many are navigating through uncharted waters?  Are they prepared to answer the margin call from hell? Continue reading

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Burn, Baby, Burn!

Italian immigrant Simon Rodia was a man of resolve.  He labored nearly every day from 1921 to 1955 chicken wiring steel pipes and rods together, pausing only to take swigs of malt liquor.

With singleness of purpose he focused his energy into erecting numerous towering eyesores in his backyard in the Watts district of Los Angeles.  No one really knows why.  Maybe he found it satisfying.

One day, after 34 years of this madness, Rodia abruptly stopped.  On a whim, he deeded the property to his neighbor and hopped a bus to the East Bay.  No one in Watts ever heard from him again.  But his monstrosities, known as the Watts Towers, are now a National Historic Landmark.

Over nearly two decades, we frequently rode the LA Metro Blue Line (now the A Line) from Long Beach to Los Angeles.  We’d peer out the window while traversing through Watts and wonder from what beautiful mind these towers were birthed? Continue reading

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How Inflation Got Away from Washington Screw Ups

Sometimes I think of all the places I don’t want to go
Then I think of all the things I never want to do
Think of all the people I never want to meet
I close my eyes and I go to sleep

Green Corn, NOFX

Prayers for the ‘Big Guy’

Being a government hack has its advantages.  You get eleven paid holidays per year.  You get promoted for poor performance.  The benefits are superb.  Best of all, you can get remarkably rich…even if you’re a screw up.

President Joe Biden, for example, has worked for the federal government for nearly 50 years.  His net worth is about $9 million.

Yet Biden and his wife Jill really made the big bucks between 2017 and 2020, when Biden was out of office.  Together, they hauled in $17.3 million in book deals and speaking fees.  These are some of the fringe benefits of having been a government bigwig.

The Good Book says we should pray for our leaders. First Timothy 2:1-2 (KJV) offers the explicit spiritual instruction. Continue reading

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