Really Right

After awaking from my New Year’s celebration I decided to do a little catchup reading. One article that caught my eye was about a pension crisis in Dallas, Texas.  The first thing that came to mind was this must be the county workers retirement pension system, I was wrong; this is the police and firefighters retirement pension system.  A very small pension fund by comparison to some such as CALPers.  However the problem in Dallas is strange, in a sense because Dallas has a booming downtown, cranes and skyscraper construction dot the skyline.  People have been moving to Dallas in droves, this is not the case study of a braying Midwestern city struggling with population loss, and the mill or warehouse closing down.  This really caught my eye.

Government and private sector accountants have been tussling in Dallas over how large the deficit in the pension funding crisis is, however they do agree on one thing, it’s between one and five billion dollars! Yeah, Billion, like Million but with a “B”.  Dallas appointed a pension board about thirty years ago to oversee the investments of this fund; most states and municipalities do this.  These board members are supposed to have a fiduciary duty to put the financial needs of the members over any short term profits or accounting gimmicks…they failed.  I will go in to their misdeeds later; in the meantime the city is now facing a monumental crisis of epic proportions.

The pension system in most states and municipalities all work the same, work so many years, and contribute a small portion of your check, roughly 1% and you will get a defined payout amount each month for the remainder of your life once you retire.  This is true with most pension plans; they are set up in a defined benefit manner not a defined contribution manner.  This becomes a problem when the union designs a contract where employees can retire at 50 and collect full benefits until death some 30 years later.  The problem is the pension fund essentially becomes a Ponzi scheme as new money is added from current workers that go to pay out the benefits to retired workers.

The fund receives money each month collected from current workers’ pay, and then hopes to invest the money, earn a decent return, and pay out benefits to those collecting retirement.  The main problem is these funds always use pie in the sky projections for investment return, with some such as CALPers saying they expect around 7.5% a year!  As per usual they didn’t come close to 7.5%, they actually did .41% which is well, awful especially considering the market is at all-time highs.  Enough about California; now back to Dallas.

Dallas got creative about a decade ago, they created an option for retired members called (DROP) deferred retirement option program.  This option allowed retired members to put their pension check in a separate account, which would be a savings account, with a 10% interest annually credited to it.  If you’re scoring at home, once again this is a characteristic of a Ponzi scheme promising pie in the sky returns, risk free mind you.  Many retirees participated and I cannot say I blame them, as a 10% risk free return that is likely guaranteed by the municipality or the state is a great option.  Then as one would expect problems began to arise, since you can’t guarantee 10% returns while the fund was only projecting to earn 7%.

The fund was beginning to see trouble in 2008, and as a result the board of directors decided to make investments in real estate as opposed to stocks or equities.  Investing in real estate is extremely risky, and the bets placed by the Dallas pension fund blew up right in their face.  This was to be expected. (If X was tasked with generating a massive investment return, I admit I would have done something similar.)  The fund began buying up real estate all over the world, a winery and hotel in Napa, and quite a few investments in foreign countries that were supposed to make up the difference and generate a return that could pay off the obligations to retirees.  This solution is not an issue until the value of the real estate holdings drops, and predictably it did.  The fund took over $500 million in write-offs over a two year period from 2014-2015.  Which is not a problem until those expecting to receive pension benefits find out they may not be receiving said benefits, then mayhem ensues.  Mayhem indeed did ensue later in 2016.  Further adding fuel to the fire were an agreement to raise the cost of living adjustment by 4% a year rather than pegging the rate to inflation which would have saved over 15-20%.

Remember those DROP accounts? The pension system had over 500 worth more than 1 million dollars, as a result of the shortfall; retirees began pulling all their money out of the system. Who can blame them?  It was money and benefits they had earned.  As a result, the mayor of Dallas, pension board leaders, and the state have been looking for a solution, including the temporary halting of withdrawals from the plan.  Which as per usual from governments and the CRA these days, answers nothing.  Panic has set in among retirees and as a result lawsuits have started flying in Dallas, as well as an FBI investigation as well as an SEC investigation.  The mayor of Dallas predictably wants a state bailout, which predictably the state government told him politely no thank you.  Now he wants to raise property tax by 130% on Dallas residents.  Remember this is Dallas, not a small decaying city, but one that is lined with skyscrapers.  Stay tuned, and I will report as more details come available.

X

The best entertainment on television during the last few weeks has been the Donald Trump show. Trump is the straight man in this farcical comedy. Unlike politicians that say what is necessary to get elected and then have nothing to show for a lifetime of “public service”, Trump goes to the nation’s capital and does what he promised and all hell breaks loose. Why, because both the political class and the media are shocked that he really meant all those things he said. Furthermore, Trump has the “stones” to actually follow thru on his promises and doesn’t care what they think. To them, this guy is worse than Reagan and that was a very low time for them.

109 people get caught in the crossfire of Trump’s immigration order and the international socialists and those likeminded travelers—with generous funding by George Soros—act like Trump just reinstated internment camps. (For those that forgot, the KKK, Jim Crow laws, and internment camps were all Democrat policies implemented against fellow Americans, not immigrants wanting to come to this country.) The ACLU reported has raised over 24 million dollars off of this non-event.

Trump fired the acting director at the Department of Justice over her refusal to defend his policy. Trust me; she will land on her feet with some cushy job in academia teaching at some liberal law school. She was on her way out so taking a cheap shot at Trump and getting fired was a resume enhancement for her. Ditto for the Pentagon bureaucrat a few days ago that said male and female Marines should sleep next to each other when in the field. Women don’t belong in combat, period.

Today, the next part of the campaign against Trump will be rolled-out, milliseconds after the Supreme Court nominee is announced. It won’t matter who it is, the campaign in a box is already part of the standard playlist of Liberal tactics. I hope Trump picks Alabama Supreme Court Judge Roy Moore just to tweak the whole lot of them but I doubt that will be his play. Frankly, I hope he picks someone like John Eastman and not a sitting judge. That would be fun to watch.

Just remember that the street theater that you are witnessing is primarily to cause the weak kneed Republicans (Ryan, McCain, Graham, et al) to cave and surrender to the will of the Liberal minority. If Republicans stick with Trump, the Liberal agenda is toast. Trump will roll them back to the Stone Age. Again, look for Trump to call on the American people if the Republicans get too wobbly and spineless.

This week, we will experience the end of an error and a new beginning. Yes after eight years of Barack Obama a new chapter in American history will begin. As with all beginnings there is both uncertainty and high hopes for President Trump. Unlike Obama and his imperial declarations of unilateral executive authority, Trump has the possibility of lasting change by having his wishes turned into law by the Legislative branch of government. Not since Ronald Reagan, has anyone holding the office been so willing to bypass both the media and Congress and take his case for action directly to the American people. Trump will have the power to cause permanent changes in both political parties by being successful.

Unlike the Contract with America and Speaker Newt Gingrich, Trump has longer term goals for the country than merely 100 days. The economic picture has been so obfuscated by Obama and to some extent George W Bush before him, that both danger and opportunity will be encountered. Obama has been cooking the books thru “Quantitative Easing” and manipulation of economic data such as unemployment statistics. The plight of the American worker is the worst it has been since the 1930’s but the difference is less honest politicians and a greater willingness to print money and finance the status quo with debt. Medicare is expected to become insolvent during the Trump years and no one has been willing to fix it. Thankfully Trump has the backbone to at least try for more than a Band-Aid solution.  Cutting corporate taxes and repatriation of money that US companies are warehousing overseas will be a great boon to the economy. Trump’s tough stance on trade is needed. Proposals like the Trans Pacific Partnership and its 6,000 pages of nonsense are ridiculously complex and unintelligible even for its advocates to understand.

The legacy of the Supreme Court will be the one that Liberals will hate the most. They can’t get most of their ideas thru the legislatures of the several states or the Federal government so the legislative power of the courts has been their “go-to” play. Trump must not only put folks on the Federal Bench but realign the courts. The dreaded Ninth Circuit Appellate Court must be dismantled so the only the Left Coast states are under their sway. Look for some “out of the box” proposals to be made in this area.

To me, the Courts don’t have to overturn Roe v Wade. If the government would be prohibited from spending any public money on abortion and family planning then groups like Planned Parenthood would be irrelevant. Abortions are at an all-time low. The people that regard abortion as the Sacrament of the religion of Feminism are literally dying-off or at least beyond child bearing years. Yes, Roe needs to be overturned but I think that will be a lagging indicator not the first domino to fall.

Protecting religious liberty will be a mixed bag under Trump but the hostility against Christianity that Obama fostered will mostly be undone. Marriage will be the area to watch. I look for the social engineering of the military including its hostility to Christianity and promotion of LGBT junk to go away…for the most part. I think you will see states like California going to war against Christians while the national government stands with people of faith. The threat of withholding Federal Funds will win the day…for now.

Many of us sense that this is the last chance we will be given before following Europe into the abyss. The America of Norman Rockwell is gone; will it continue on the path into socialism (international or national) or find a way to continue to be Reagan’s “city on the hill” for the rest of the world. If Trump doesn’t undo the damage of the baby boomers and show the next generation a better way than doubling down on the narcissism of their parents then the American Experiment has truly ended as an abysmal failure.

Lastly, I predict that the biggest obstacle that Trump faces will be Republicans undermining him. If they thwart his legislative priorities, look for Trump to run a slate of candidates against these incumbents in two years.