-Economist: Social Security in Worse Shape than Detroit’s Pension Funds
-Billionaire Warns: Yellen Collapse ‘Will Be Unlike Any Other’
Economist Brusca: Fed’s Easing Will Spark Inflation
30 Jul 2014 By Dan Weil
Inflation hawks warn that the Federal Reserve’s massive stimulus program will accelerate price increases, and independent economist Bob Brusca says they’re right.
The Fed has left its federal funds rate target at a record low of zero to 0.25 percent since December 2008. And its balance sheet has mushroomed to $4.4 trillion through quantitative easing.
“The Fed’s balance sheet is huge,” Brusca told CNBC. “I think they kept interest rates very low for a very long period of time.”
The central bank probably won’t recognize the inflation threat until it’s too late, he said. “They think there’s a lot of slack, and therefore when bad things happen, they don’t believe it. And that’s the problem. When bad things happen you have to believe it.”
Consumer prices rose 2.1 percent in the 12 months through June.
Internal strife over policy also is a problem at the Fed, Brusca said. “A division is also going to make it harder to do the right thing in a timely fashion.”
Meanwhile, Sheila Bair, former chair of the FDIC, warns that reverse repurchase agreements, a money-market operation which the Fed may use when it decides to boost interest rates, could cause trouble.
“The mere existence of this facility [reverse repos] could exacerbate liquidity runs during times of market stress,” she writes in The Wall Street Journal.
“Borrowers in the short-term debt markets will have to compete with it for investment dollars, and all, to varying degrees, will be viewed as higher risk than lending to the Fed.”
http://www.moneynews.com/StreetTalk/Brusca-Federal-Reserve-easing-inflation/2014/07/30/id/585718/?
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Economist: Social Security in Worse Shape than Detroit’s Pension Funds
Boston University economist Laurence Kotlikoff (Wikipedia)
July 29, 2014 By Barbara Hollingsworth
(CNSNews.com) – “Social Security is insolvent,” Boston University economics professor Laurence Kotlikoff told the House Subcommittee on Social Security at a hearing on Capitol Hill Tuesday. “And it’s not bankrupt in 30 years, or 20 years, or 10 years. It’s bankrupt today.”
“This is not my opinion. This is the only conclusion one can draw from Table IVB6 of the 2013 Social Security Trustee’s Report.”
“This table reports that Social Security has a $23 trillion fiscal gap measured over the infinite horizon,” noted Kotlikoff, who also served as a senior economist on President Ronald Reagan’s Council of Economic Advisers.
“Twenty-three trillion dollars is 32 percent of the present value, also measured over the infinite horizon, of Social Security’s future revenues. Hence, Social Security is 32 percent underfinanced, which means it is in significantly worse financial shape than Detroit’s two pension funds taken together.”
Social Security’s debt also “swamps the $13 trillion of official debt in the hands of the public,” Kotlikoff testified.
And “the system’s off-the-books debt is growing at leaps and bounds – by $1.6 trillion between 2012 and 2013 – thanks to the approaching retirement of vast numbers of baby boomers.”
While “the Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Fund fails the long-range test of close actuarial balance, it does satisfy the test for short-range (10-year) financial adequacy,” the 2014 Trustee’s Report states.
The “combined trust fund asset reserves at the beginning of each year will exceed that year’s projected cost through 2027,” it continues. However, “depletion of combined trust funds reserves” will occur in 2033.
According to Table VI.FI “Unfunded OASDI Obligations Through the Infinite Horizon” in the 2014 report, Social Security’s fiscal gap has increased to $24.9 trillion.
Social Security cannot “sustain projected long-run program costs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers,” the trustees state.
Kotlikoff also told House members that Social Security is now in “worse financial shape today than when the Greenspan Commission ‘fixed’ it” 31 years ago.
“Today, we are looking, in the current 75-year projection widow, at 31 years of negative cash flows, which the Greenspan Commission knew were coming and willfully ignored,” he said.
The economist also accused the system’s trustees of a “disinformation” campaign to keep Americans from finding out that “Social Security is in dire financial shape.”
“To their great credit, Social Security’s actuaries have been reporting the system’s infinite horizon fiscal gap every year since 2002. And to their great shame, Social Security’s Trustees have been ignoring this comprehensive measure of the system’s insolvency every year since 2002.”
“Unfortunately, those who proclaim the strongest desire to preserve and protect Social Security, particularly its Trustees, are doing their level best to destroy the system by ignoring or substantially understating its financial problems,” he said.
Although he praised Social Security for being a “lifeline for generations of Americans who would otherwise have spent their retirements in abject poverty,” Kotlikoff testified that “nothing short of a fundamental reform of the system” will save it.
“To pay its scheduled benefits in full through time, the Social Security system needs a 32 percent immediate and permanent increase in the future path of payroll tax revenues,” Kotlikoff noted. “Alternately, to prevent having to raise its FICA payroll tax rate, the system needs to immediately and permanently cut all benefits payments by 22 percent.”
He also pointed out that Social Security, which is 32 percent underfinanced compared to its obligations, “cannot be bailed out by the rest of our fiscal system,” which is 58 percent underfinanced. In April, Kotlikoff told CNSNews.com that “the nation’s true fiscal gap is $205 trillion. The nation is completely broke.”
Kotlikoff urged House members to support The Inform Act (H.R. 2967 and S. 1351), which has been endorsed by 17 Nobel Laureates in economics. The bill would require federal accounting agencies such as the Congressional Budget Office, the Government Accountability Office, and the Office of Management and Budget to do “infinite horizon fiscal gap” accounting for every major fiscal bill introduced in Congress.
That would require them to calculate “the present value lifetime net Federal tax burdens facing each current generation of children 18 years of age and under, as well as each future generation.”
Related links from article
Download kotlikoff_testimony_7-28-2014 at the link below
http://cnsnews.com/sites/default/files/documents/kotlikoff_testimony_7-28-2014.pdf
http://www.treasurydirect.gov/govt/reports/pd/mspd/2014/opds062014.pdf
http://www.ssa.gov/oact/trsum/
http://www.ssa.gov/history/reports/gspan.html
http://cnsnews.com/news/article/barbara-hollingsworth/study-help-us-workers-find-jobs-eliminate-or-slash-corporate
http://www.theinformact.org/content/text-bill
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http://cnsnews.com/news/article/barbara-hollingsworth/economist-social-security-worse-shape-detroit-s-pension-funds
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Billionaire Warns: Yellen Collapse ‘Will Be Unlike Any Other’
29 Jul 2014
Another horrific stock market crash is coming, and the next bust will be “unlike any other” we have seen.
That’s the message from Jeremy Grantham, co-founder and chief investment strategist of GMO, a Boston-based firm with $117 billion in assets under management.
Grantham pulls no punches when assigning responsibility for the coming financial carnage. In a recent interview with The New York Times, he calls Federal Reserve Chair Janet Yellen “ignorant” and says the Federal Reserve all but killed the economic recovery.
Grimly, he adds, “We have never had this before. It’s going to be very painful for investors.”
Grantham isn’t the only one worried about a market collapse.
“We have no right to be surprised by a severe and imminent stock market crash,” explains Mark Spitznagel, a hedge fund manager who is notorious for his hugely profitable billion-dollar bet on the 2008 crisis. “In fact, we must absolutely expect it.”
Billion-dollar investor Warren Buffett is rumored to be preparing for a crash as well. The “Warren Buffett Indicator,” also known as the “Total-Market-Cap to GDP Ratio,” is breaching sell-alert status and a collapse may happen at any moment.
So with an inevitable crash looming, what are Main Street investors to do?
According to Michael Carr, the founder of Peak Profits and acclaimed author of Smarter Investing in Any Economy, you can make tactical investments that will perform well in any market.
Carr explains, “The $21 trillion stock market is an ocean of opportunity with hidden profit patterns everywhere. So, even in a market correction, there is always a bull market somewhere. The key is to effectively mine the data and find stocks that are entering a proven profit pattern.”
As proof, Carr displays a spreadsheet on his computer and quickly points to a section marked “2008.”
Carr notes that in 2008, during the worst part of the Great Recession, the overall stock market was decimated and plunged over 30%, wiping out the 401(k) and retirement accounts of millions of innocent, hard-working Americans.
Yet during the crisis, Carr’s Peak Profits system correctly identified 29 winning stock trades. More impressively, none of the trades were shorting the market or individual stocks. Every single trade was betting the stock price would rise, which is exactly what happened.
Carr states that this is proof that no matter how bad the next stock market collapse is, his system can identify the stocks that will deliver consistent winners time and time again.
His ability to precisely identify these winning trades is due to his unique background.
For nearly two decades, he held a top-secret post as the communications officer for Strategic Air Command, where he was charged with designing and programming the computers that coordinated America’s nuclear missile arsenal.
“In the military, I developed complicated equations to predict the flight patterns of nuclear missiles,” Carr comments. “Today, I use these same complicated equations to predict the price patterns of stocks.”
Just like mapping out nuclear missile trajectories with thousands of variables . . . Carr’s program screens more than 8,000 major stocks and thousands of relevant financial data points to identify what he believes are the best stock trajectories in the market . . . stocks that he believes will rise no matter what the market is doing.
Just last year, the Peak Profits system actually identified 242 winning trades! Most of them were conservative wins of a few percentage points here and there.
“The key is to get small wins, again and again. If you can get 1 percent a week, that works out to about 52 percent in profits every year,” Carr points out.
But clearly, Carr is being modest, because his system isn’t just for small gains.
For example, take the high-flying stock Tesla Motors (TSLA). His system identified two back-to-back, peak profit patterns in the stock, and trading these patterns would have given you an enormous 263 percent gain.
The military precision of Carr’s investment system has also identified big wins like . . .
148 percent on SanDisk
315 percent on Akamai Technologies
180 percent on DaVita HealthCare Partners
182 percent on Gannett
191 percent on Alexion
306 percent on Equinix
Recently, Aaron DeHoog, the financial publisher of Newsmax, teamed up with Carr to make his unique investment system available for anyone to use.
“We wanted to retool Mike’s system so anyone could profit from it, no matter their age, income, or investment knowledge,” he says.
In fact, DeHoog was so impressed with the system that he immediately jumped on Carr’s top “buy” recommendation during his first meeting with Carr — a company called ViroPharma.
He bought in at $31 and sold five weeks later at $39, for a quick 25 percent gain!
“The only problem with the trade was that I sold it against Mike’s instruction. I sold it on my own and did it way too soon,” DeHoog confesses. “The profit pattern Mike’s system had identified wasn’t done forming yet. If I’d held on to that position just a few weeks more, I would have been sitting on gains of 62 percent.”
In a new video called the Peak Profits System, Carr describes his system in detail and how anyone can use it to protect their wealth from the next stock market collapse (Click Here to Watch the Video)
http://www.moneynews.com/MKTNews/Billionaire-yellen-market-collapse/2014/07/21/id/583962/?
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Related
http://www.moneynews.com/StreetTalk/imf-global-growth-risks/2014/07/29/id/585641/?
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