Why markets Really are rising this week...

Even though this posting is not about St. Patrick's Day or the Irish, we chose themed art since the holiday is tomorrow and we love the people of Ireland and those of Irish ancestry (well, we love Most Irish people --  there's a handful we know that we think of as utter 'Shite') but we won't let that get in the way of how we view millions of others in a most positive manner

Anyways, onto the topic of the day..

Well its Friday.. end of a bad economic week.  Don't get me wrong- everything was supposedly "good" according to mainstream media, but really for everyday folk, it was bad.

The stock market kept rising and rising, including a day it went over 200pts.  That's good, right?  No its bad..  It didn't rise because of phony employment data or Greece, that corrupt nothing of a nation officially fastening their Master (or Mistress') collar around their scrawny necks..

Its anticipation of QE3..and A Lot of it..

From Goldman Sachs (parenthesis are ours):

"We still expect another asset purchase program that involves purchases of both mortgage-backed securities and Treasuries (That's Quantatative Easing).  This would expand the Fed's balance sheet (once more), but its impact on the monetary base would likely be "sterilized." (or minimal in effect) We expect this program to be announced in the second quarter, either at the April 24-25 FOMC meeting or the June 19-20 meeting...

"We see three reasons why additional Fed easing may well be warranted despite the improving (economic) data: 1) The improvement might not last... "

In other words, unless the economic "improvement" is guaranteed in perpetuity, the Fed will always ease.     Can not run the risk of Real Capitalism (you survive or fail on your own merits and no one bails you out) to get in the way of the US economy.

We all know this tired game by now:

a) Fed wants to give QE to banks, Wall St, etc.. but no political cover
b) Fed uses MSM shills like in WSJ to spread rumors and hype
c) This becomes financial 'talking point'; interest in QE spreads
d) Market rises dramatic and steady on anticipation and assumption
e)  Fed as "no choice" to give QE- market would pull back otherwise
f)  Printing presses in overdrive; US dollar further devalued

So how much QE would be released into the banks and financials?

Its hard to say the specific number the Fed will come up in the late Spring, with but one thing is for certain, whether it takes 3, 5 or 10 more "QE's", the Fed needs to pump another $3.6 Trillion dollars into the financial sector to get equities to pre-2008 crash levels to cover credit shortfalls.

These financiers-- they really aren't the brilliant minds that the media and others trumpet them as.  They're criminals.. no different than a burglar stealing your TV from your home or picking your pocket.  They just create complexity to keep up the ruse. Their actions of deviance are quite simple and straightforward-- acquire as much $$ as humanly possible from every outlet including governments using intimidation, corruption, bribery and/or fear, but do it in such a way that most people will be utterly confused and not bother to follow the trail.

The best way to explain it is to use the plot of the movie "Oceans 12", the sequel of the George Clooney & Brad Pitt film. Its not an exact comparison but the similarities are there.  To be very brief: At one point in the film, a 'master thief' with a giant ego offers a challenge to 'Ocean's 11' to steal an expensive Fabrege egg from a museum before he does.  If successful, they get a lot of $$ to be used to pay a debt to another.  If they fail, they can't pay the debt and all go to jail.

I won't go into every nuance of the plot but ultimately (Movie Spoiler Alert) while the master thief ends up stealing the Fabrege from the museum and thinks he's won, in reality, the 'Oceans 11' crew stole the egg by switching with a fake on a train en route to the destination, thus being in possession of the real one the entire time.   The master thief thus lost the wager.

But there's where the connection between the film and the financial system lies:  It wasn't enough for them to simply steal the egg like a common criminal.  They wanted to feel they were above what amounted to pickpocketing, so they created an elaborate ruse to still appear they were going to break into the museum and steal it.  Lots of deception and trickery and moving parts to keep everyone confused from the police on their trail to the film audience itself.

This is the 'M.O' of the financial apparatus not only here but abroad

Keep the con going using complex terminology, even more complex financial instruments and 'products' created out of thin air, revising and revision of US law by making bills so large, no one has time to read them, and on and on..

Funny how we find that kind of deception entertaining when sitting in a theater with a bucket of popcorn between our legs watching good looking, charismatic actors and not when its wretchedly ugly old white crones with beady eyes.

There's not much we can do to stop the corruption and utter bullshit which is Finance, but that should never be a valid excuse for not seeking to understand it.

Happy St Patrick's Day to those who properly honor the day & its meaning

The $4.4 Trillion Pension Problem

We at A&G have addressed many economic problems over the last 18 months; both domestic and from abroad.  We've written about banks, Wall St. the Fed, the Tea Party movement, the weakening of Unions, unemployment, higher gas prices, food costs, etc...

We've covered a lot of aspects of the ongoing recession/depression.

Now its time to address a new topic for us:

Pensions.

Specifically, unfunded pensions.   And from this lack of funding, will come pension cuts which are going to be occurring at some point in the near future at a rate so rapid in speed and broad in scope that most people dependent on that monthly check are unfortunately going to suffer greatly.  State, cities and county governments simply do not have the funds to cover what is owed to pay out to those who've spent their lives putting into the system.

Right now, they're all just playing for time.

According to Northwestern University Professor John Rauh, the latest estimate of the total amount of unfunded pension and healthcare obligations for state and local governments across the United States is 4.4 trillion dollars.  Where is that $$ going to come from?  Either pension benefits are going to have to be cut deeply all over America or taxes will need to be raised dramatically.

Pick your poison.

~ Now are you focusing on the Tequila or the Vodka?

There simply is not enough money out there to keep all of the pension commitments that have been made.  Something has got to give.  In the end, millions will likely be plunged into poverty as pensions disappear because when governments declare bankruptcy, their obligations to pensioners are among the first things to disappear.

Here's a sampling of the mess that awaits:

* In Pennsylvania, PSERS (Public School Employees' Retirement System) has an accrued unfunded liability of nearly $26.5 billion, the amount of money the fund is short to cover existing retirement benefits. That hole is expected to grow to $43 billion by 2019.  SERS (State Employees' Retirement System) is $12.5 billion in the red, and that shortfall is expected to climb to nearly $18 billion by 2018.

* In California, the Orange County Employees Retirement System is estimated to have a $10 billion dollar unfunded pension liability (that's just one county).  State and local government bodies in CA have $325 billion in combined unfunded pension liabilities. ($22,000 for every single working adult in CA).

* In Illinois, they are facing an unfunded pension liability of more than $77 billion dollars.  The state is flat broke and on the verge of default, so it is inevitable that a lot of those pension obligations will never be paid.

* States financed only 4% of the $627.4 billion they were projected to owe for future retiree benefits in 2010, according to Bloomberg Rankings data. The previous year (2009), states only funded 5% as governors coped with lower general-fund revenue and rising demand for services.

-- For example, in New Jersey,  the state owes at the moment what amounts to almost $7,600 per resident for public workers’ post-employment benefits other than pension payments

~ Gov Christie: "Sorry about your lost pensions.. I ate them"

* Cities including Central Falls, Rhode Island, and Vallejo, California, have used bankruptcy to cut promised benefits to current and retired workers. States can’t seek court protection under the code’s Chapter 9. Presently, Harrisburg, Pa is also very close to declaring bankruptcy.

* In Michigan in order to attempt to reduce its retiree health-care costs, it passed a law in 2011 where employees hired after Jan. 1 of 2012 won’t be promised health benefits when they retire. Instead, the government and workers will contribute to a fund that retirees can use to pay for insurance.

States have been slow in tackling the retiree health-care cost issue to avoid pressure for benefit cuts or funding increases, which may divert money from other priorities.  Currently at least 20 governors and legislatures have failed to prepare ways to meet their projected expenses, according to the Council of State Governments.

Over the next 20 years approximately 10,000 Baby Boomers will be retiring every single day.  States, counties and municipalities have tried to enact legislation that increases retirement age or pushes healthcare recipients onto Medicare (and their balance sheets) but all these actions are nothing more than can-kicking strategies.

So what is a person to do?  The answers are not simple nor easy.  The best course of action (if possible) is to save, save, save.  Do not simply assume your retirement pension will be there or the checks will simply keep coming.   The economy is extremely volatile, no matter what the lying liars in Washington DC and the Fed say.

Put aside money.  If you can not save enough for retirement, then at least work to scrape together what you can for emergencies and other contingencies.  Every dollar not wasted on fancy lattes & expressos, health club memberships or other impracticalities, is another dollar to put away for something vital like making a mortgage or car payment or a doctor visit if/when you find your pension one day cut by 25%, 50% or worse.

If you think it will never happen, well..  it already has...

From New York Times, December 23, 2010:

"Pritcherd, Ala, a struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry. Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full...

"Nettie Banks, 68, a retired Prichard police and fire dispatcher, filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber, leaving him badly wounded and unable to get to his new job as a police officer at the regional airport.

"Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house,” said David Anders, 58, a retired district fire chief. “He was a proud enough man that he wouldn’t accept help...

"“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt."

Do not put your faith or trust in the system.  Place it in yourself, your family, and true friends.  When times are tough, they are the only ones you can count on (well-- assuming you haven't permanently burnt bridges by acting with jealousy, pettiness and/or spite as family can be prone to do)

Remember the basic maxim of the Aesop fable "The Ants & the Grasshopper"--  The Ants prepare for the coming winter...  The Grasshopper simply plays his fiddle... and eats away the day.