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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (39846)	10/30/2010 8:51:41 PM
From: Madharry	Read Replies (1) \| Respond to of 78819

I expect that we will see a lot of cities file for bankruptcy as a way to discharge or reduce their pension obligations. Its laughable to think that deals under which overtime counts towards retirement benefits in a big way can end anyway other than badly. Buffett was talking a couple of years ago about how his company was going to take over the municipal bond insurance market. He hasnt said much of anything about this in quite awhile. Unfortunately I just see this snowballing as once consumers, retirees , business get wind that a cities finances are in trouble those who can will abandon ship like the ETs in MIB and cities will suffer from a dwindling tax base and declining real estate prices until they file. How many real estate investors are looking to buy property in Harrisburg PA?

To: E_K_S who wrote (39846)	10/31/2010 11:25:30 AM
From: E_K_S	Read Replies (1) \| Respond to of 78819

OT - Unfunded Municipal Pension Liabilities perhaps as high as $3 Trillion . . . Report warns of coming wave of municipal pension shortfalls washingtonpost.com From the article:"...The nation's largest municipal pension plans are carrying a total unfunded liability of $574 billion, which comes on top of as much as $3 trillion in unfunded pension promises made by the states, according to a report released Tuesday...". =================================================================== Here is a site that monitors failing pension systems pensiontsunami.com The fix will be a piece mill approach with the worst systems going bankrupt. Maybe we will see a system wide consolidation of the self administered plans into some Federal backed stopped system that provides a minimum level of coverage (ie equivalent to the social security payout for time worked). It's definitely something to monitor because individual city pension failures could cascade into a system wide Black Swan meltdown. EKS

To: E_K_S who wrote (39846)	10/31/2010 12:10:30 PM
From: geoffrey Wren	Read Replies (1) \| Respond to of 78819

the high benefits are the problem. one step back in the equation is the fact that public service employees have so much pull. Locally there is a story about how the Fremont Police (Bay Area, CA) put out a hit piece on a councilman running for election because there were some suggestions he would back a proposal to make police take a few furlough days a year. In local elections, a hit piece mailer has significant effects. More commonly the unions contribute money to those candidates who support the unions, and get out the vote for them. The candidate who puts out more mailers has a great advantage. If you buck the unions at the local level it is very difficult. Even at the state level, you are taking a big risk. The way the unions got the sweetheart pension deals through was by legislating a higher assumed rate of portfolio return. That created an assumption that more benefits could be promised without additional cost. Absurd. I've got the point that if any candidate or position is backed by the teachers union or police union or firefighters union or prison guards union, etc., I automatically vote the other way. We are more like Greece than most people realize.

To: E_K_S who wrote (39846)	11/1/2010 10:27:27 AM
From: Jurgis Bekepuris	Respond to of 78819

Value opportunities: - yeah, that city job was a value opportunity... years ago. So forget about it. - Shorting munis... for people like Mike Burry who can dig deep enough to find cities that will default and also figure out whether state/federal bailouts will occur. Same for state bonds. - Avoiding munis for the rest of us. Until they are so cheap that you can pick up the ones that won't go BK for 50 cents on a dollar. - I am not an economist, but I think that although inflation may be a solution, it is not caused by these issues. So don't expect inflation just because San Jose and other cities have budgetary issues. In fact, the civil service job wage cuts are wage deflation, so a push in opposite direction. A lot of people for some reason make a logical fallacy "inflation is a fix therefore inflation will occur". OTOH money printing is inflationary (more money chasing fewer goods, so prices rise), so inflation may occur from fed actions in QE++.