The largest pension fund in the country CalPERs continues to underperform: Weakest return since 2008-09 financial crisis.
The two largest public pensions in the U.S. are Calstrs and Calpers and collectively they oversea $484 billion for public workers in California. Pensions have a hard time surviving in a low return world. For example, these pensions seek out a 7.5% annual return which is simply unrealistic to do in a market that is volatile (by definition, markets are meant to be unpredictable). Not only is the market volatile but we find ourselves in a low return environment. Pensions trying to seek out guaranteed returns are going to have a tough time finding a sure bet when bonds are producing such a low return. Unfortunately these guarantees become contractual and the shortfall needs to be closed by the taxpayer. It is no surprise that pensions have become a rarity in this market. The 401k model of investing was supposed to help workers transition from this guaranteed return to a more market based approach. The only issue with that is most people never save on their own and make bad investment moves. When you are dealing with high frequency traders and other advanced investment techniques, the regular family stands no chance. Recently Calpers posted a dismal return, the worst since the 2008-09 financial crisis.
Gallup Economic Confidence Index plunges while stock market near record: Stock Market decoupled from financial well being of average Americans.
Gallup releases an Economic Confidence Index which should reflect the overall sentiment of Americans as it pertains to the economy. With the stock market near record highs and the housing bubble market soaring, you would expect average Americans to be smiling from ear to ear with glee. But when you click on over to Gallup, the chart looks downright gloomy like finding out you just failed a midterm exam you studied so hard for. While Gallup may be stumped and scratching their head as to why this divergence is there, I feel we have touched upon a few points as to why this is occurring. First, half of Americans don’t even own one stock. Next, you have many U.S. companies making large profits abroad. Good for the company but that doesn’t translate necessarily into a better financial position for most Americans. Housing values being inflated only keeps Americans from buying as reflected in a generationally low homeownership rate.  In other words, crony capitalism is working as it should.
With a recovery like this, who needs a recession: 62 percent of Americans don’t even have $1000 in savings.
The stock market just hit another record high. Yet only half of Americans actually own any stock. Real estate prices are ebbing closer to their previous bubble peak. Yet the homeownership rate is down. The unemployment rate is down dramatically but we have over 94 million Americans not in the labor force. This recovery seems so contradictory in many ways. One glaring example of this is by how little Americans have saved for a rainy day. Another survey was recently released showing that 62 percent of Americans don’t even have $1000 in savings. In other words, most people are one small emergency expense away from being on the streets. What this means is that many will simply rely on credit cards, friends, or family should an emergency arise. With a recovery like this, who needs a recession?
Those not in the labor force grows by 25,000,000 people from 2000 to 2016: During this same period those employed grew by 15 million and those unemployed grew by 6 million.
The unemployment rate looks dramatically better than it really is because of some funny accounting. Our labor force looks dramatically different from what it did in 2000. A large part of the low unemployment rate is coming from those not in the labor force. I’m fascinated with this aspect of the employment situation because it is rarely discussed and is largely an elephant in the room. Most pundits like to assume that most of the growth is simply coming from an older population. Even if that were the case, many older Americans need to work until they die since they have paltry retirement accounts. The figures have grown so disproportionately large that we have a shadow class of the population that is now voting for non-establishment candidates. The mainstream press tends to report on large sealed off metro areas that neglect most of the country. Let us look at the numbers here.