My hometown of Worcester, Massachusetts, just like every other municipality in America, is broke.
Some ten years ago they issued bonds for the expressed purpose of gambling the proceeds in the stock market. This was done to close a *pension funding gap*. When one is losing, just hit up a bookie and double up, right?
A decade after issuing nearly $220 million in bonds to close its pension funding gap, the city of Worcester’s bet on the stock market is under water.
The gamble by one of New England’s largest cities that it could make enough in the markets to pay back bondholders and generate returns above the cost of the debt has fallen way short. In fact, Worcester’s pension funding gap widened considerably in the past year as a global economic crisis waylaid investment portfolios everywhere.
Worcester’s bogey, as DelSignore calls it, is a true interest cost of 6.31 percent on the bonds. To produce savings for the city, pension investment returns have to beat that target.
But Worcester’s 10-year return through the end of 2008 was 3.79 percent, leaving the city’s pension liability only about 68 percent funded.
These cities and towns were bankrupt 10 years ago....and they are even worse off now.
They simply have no shot at surviving the next leg down on Wall Street.
Here's the most damning excerpt from that article:
Pension-related costs are now Worcester’s third-largest expenditure. Even with some relief from the state built in, the pension cost for fiscal 2010 will be $39.4 million, including $16.6 million in debt service on the pension obligation bonds. That’s more than what the city will spend on police ($38.9 million) and fire ($32.2 million), according to the Worcester Regional Research Bureau.
As you can see, taxes are, more and more, just levied for *income redistribution*. In other words, taxes do not get spent on SERVICES!
There is a simple and elegant solution to this:
Abrogate pension obligations!
Make those free-loading 'old coots' and 'old bags' go live with their kids.
This is what they get for electing and RE-ELECTING all those Morons over the years.
Thanks to aupanner for sending me this link and reminding me of my *roots* - some two months ago!
Give me a break, I've still got 500 unread emails in this inbox.
4 comments:
So, let's get this straight... the city borrowed money at X in order to return X+Y, whereby Y could be used to close the pension shortfall. So, if that Y was just sitting out there, why didn't the lenders go secure it themselves without the middleman city govt to pay off in the process?
So long as inflation rules the day, these pension-mgmt rackets (that's all they are) are a sure thing... it's just a big skimming/pyramiding process. But now that deflation is rolling around, these schemes are revealing themselves as insolvent and fraudulent, as they always were!
Congratulations, America.
Similar to your (non) strategy as an erstwhile "propriety" trader- double up on a losing position until your broke. Whose the moron?
What,no retort? Having marginalized the 35.04 year old captious MORON with the previous comment-he suddenly becomes blind and dumb? "proprietary' misspelled.
Last year, riding out and doubling up shorts worked - 3-4 separate times. This year it didn't. Next year is anyone's guess.
I'm a big boy. I made my bets and have to deal with the consequences.
I don't know that *stop-losses* are really a strategy either. Guys can get shaken out a bazillion times in some markets. People who have traded long enough all have disasters on their records.
Not only was *proprietary* mispelled....
But *your* should read "you're".
And *Whose* should read "who's".
I hardly ever ignore comments, especially ones *teed up* so high.
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