Last Friday, we dove into the U.S. Pension Fund Disaster, where we set up the backdrop for how pension funds can trigger a massive sell-off.

Wall Street and pension fund trustees are asking more folks to double down rather than exit their high-risk stock recommendations.

Such traditional advice will get this massive class of baby boomers slaughtered, and given the size of the baby boomer class, it will have devastating consequences for the larger markets and economy in general.

Today, investors and broken pension funds are going “all-in” on these dangerously overvalued markets and hence doubling (even tripling) down on stocks (and therefore stock risk) to try and close the gap between what they need to retire and what they have today.

But at the same time, pension funds and Wall Street are asking suckers to go further and deeper into “miraculous” stocks, and their pension fund trustees are quietly muting their promised “return expectations.”

Many households and pension funds, like our very government, simply don’t have enough money. To stay afloat (and keep you afloat), this means they are taking crazy risks in an even crazier stock market.

Today, we’re going to dig even deeper as to why this is inevitable.

More importantly, we’ll address what you can do now to avoid the carnage ahead…

Not a Safe Bet

It’s crazy because by every metric – be it standard PE multiples, median PE multiples, cyclically adjusted PE multiples, or even market cap to GDP ratios – the U.S. stock market is currently at all-time record highs of overvaluation.

In short – not the safest bet, especially for wannabe retirees.

Meanwhile, and based upon pure math and demographics, we have a record-high number of baby boomers seeking to retire and draw upon their pensions from state pension providers and defined benefit plans that simply do not have the money in their funds to pay them. In fact, they are about to have even less money when these markets hit a recession.

That’s because these funds have been speculating, gambling, and falling short on their promises. According to recent data from Pension & Investments, average pension returns among 36 pensions tracked are down by 26% this fiscal year over last.

Again, pension fund returns are simply not as good as they and Wall Street promised. Big shocker there, eh?

And again, what does Wall Street, the pension advisors, and “retirement advisory complex” tell you to do? Buy more stocks!

Big shocker there, too, eh?

But stocks are already at record high-risk levels based upon every credible measure. This means the “experts” are literally inviting you to walk over a cliff.

Today, this pension fund scam, like any Ponzi scheme, only has enough funds to pay out the early draws, not the later ones, which means baby boomers and markets are facing a demographic time bomb colliding with a recessionary storm front.

As for state pension funds and defined benefit plans, which are collectively trillions of dollars in the red, I will not have the time or room here to break this devastating data down state by state or pension by pension.

What I can say here is that these desperate, broken, and frankly unethical pension strategies are now at a point in history where the only solution they are “promising” for these duped baby boomers is that an ever-rising stock market will save them from now until 2027.

Time for a Reality Check

We now have millions of baby boomers massively overweight in high-risk equities and yet seeking to survive on a stock market that is now at both an acme of record highs (and hence record risk) as the longest business cycle ever recorded nears its approaching end.

That is a perfect storm.

Meanwhile, Wall Street and broke pension managers (as well as fee-seeking advisors and clueless anchormen) duck in the corner pretending not to worry or that that stock markets will never fall.

In fact, and notwithstanding the Fed’s monetary “doping” since 2008, normal business cycles contract once every 4-8 years, which means recessions and market crashes are as inevitable as thunderstorms and hurricanes.

Always Sunny in Wall Street?

Now 11 years into the most hated (and artificial) bull cycle in history, the majority of retirees are still being told market thunderstorms or hurricanes no longer exist.

As of this writing, Hurricane Dorian has wreaked havoc on the Bahamas and Carolinas.

The Bahamas and Carolinas, like the stock markets, are known for their sunny days. But as both Dorian and the above facts confirm, it’s not sunny every day in the Bahamas – or the stock markets.

Yet, Wall Street and its cadre of gambling pension advisors would still have you believe it never rains on Fed-supported markets.

I’m warning you now that a perfect storm is converging as broken, under-funded pension funds are no longer able to pay millions and millions of plan contributors who were recklessly placed in overweight stock holdings and index funds whose values are about to take a massive dive when the most overvalued (and hence most at risk) stock market in history reaches the end of the longest business cycle in history.

The market storm we are tracking is real, and our recommendations to protect you are as serious as they are sincere.

Blowing at 47 knots of windspeed as of September, our Storm Tracker is telling you to be 47% in cash.

And do remember this: Recessions are always date-stamped in arrears, which means it takes two down quarters of GDP (plus a month or so to figure that out) before the National Bureau of Economic Research (NBER) lets us know when the next recession actually began, which is effectively too late.

Below is the Atlanta Fed’s latest GDPNOW reading for Q3 GDP, published September 4, 2019. It’s falling fast lately, and it’s down to 1.5% in barely a week.

The Bureau of Economic Analysis pegged GDP in Q2 2019 at 2.0%. If the Atlanta Fed is right (and they’re actually pretty good at this), GDP could take a 25% hit this quarter.

At this rate of decline, we could see two negative GDP quarters beginning to form as early as Q4 2019 and that’s pretty nearby.

Are we already in a recession? If we are, the NBER won’t be letting on until mid-2020 – and that’s too late for you and pension funds alike to take action, for markets begin to slide way before we know we’re officially in a recession.

If you’re currently overweight in Index ETFs or similar mutual funds tracking S&P proxies, we suggest you cut your exposures now before the rain.

I’ll be back with you soon.

Sincerely,

Matt Piepenburg


Comments

10 responses to “How to Protect Yourself Amidst the Pension Hurricane”

  1. No problem with state-sponsored CALPERS and CALSTRS California state pension plans. Just tax the citizens to death. These pensioners are a “protected class’ under the State Constitution. One of the reasons productive people are leaving California.

  2. Your article, that at first sight appears to be excellent, might also be considered as part of ‘Project Fear’.

  3. Hello Matt: You have referred to high risk equities in this article. How does one identify them? I don’t know if any of my holdings are high risk, and would like to know if they are.
    Thanks
    Rod Belyea

  4. Excellent advice for self directed qualified investors. I feel sorry for the millions of pension members who are trapped and cannot heed your advice or do anything about their circumstances. You’re right, this next collapse is going to be devastating and these unfortunate members are going to be set back for years and years which will be very demoralizing and very bad for future market investing and future performance. It could possibly take years to recover just back to getting even.

  5. C.C. DEBT WENT UP TO 23 BILLION IN JULY AS PEOPLE CAN’T PAY THEIR BILLS.AS OF NOW GOLD & SILVER ON SALE WHEN THE PENSION GO BUST YOU NEED A LIFE BOAT .WHEN THIS IS ALL OVER 4 GENERATIONS WILL LIVE IN THE SAME HOUSE.WHAT I SEE IS THE GRAND PARENTS HAVE OLD SCHOOL PENSIONS THAT MONEY GETS FUNNELED DOWN TO THE KIDS AND GRAND KIDS.BECAUSE THE KIDS CAN’T MAKE AND EVERYONE WANTS NEW SUV, NICE TRIPS, BEST OF EATING OUT.WHEN THE PENSIONS GO SO WILL THE WHOLE GAME AND THAT IS SOON.

  6. What will the effects be of our fed just printing currency backed by no precious metals just our blind faith? Our government just allowed over one trillion dollars of this paper currency.

  7. You need the DNA recurrence of Thomas Jefferson. Time is money-pay your federal, state, county, and local government employees labor script for time on the job, every 2 weeks. Don’t go through the Fed anymore!

  8. Crazy times, crazy heads of States. Fed,Chiefs will do whatever it takes.
    They will keep printing money together with wage increases the market
    might go on for longer. Pension crisis : yes, one just has to work until you
    drop dead or a bit of charity or a lot ?

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