The Public & Private Pension Crisis – September 2018 Newsletter

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By Ross Silver

I was recently speaking with a retired school teacher who is very concerned about her pension evaporating. I thought this was just conversation fodder but she was dead serious and I understand why as a result of looking at how underfunded pensions are in each state. What is puzzling to me is that Connecticut ranks highest in per capita income yet they have the most underfunded pension obligation. How is that possible?

In the U.S. alone, federal, state, and local governments, pensions are about $7 TRILLIONshort of the funding they need to pay out all the benefits they’ve promised. That doesn’t include another $49 TRILLIONin unfunded Social Security obligations, yikes! America’s private pensions are in bad shape as well; around 1,400 corporate pensions are a combined $553 billion in the hole. 25% of those funds are expected to fail or be bankrupt in the next decade. In 2015, the total worldwide gap in pension funding was $70 TRILLIONaccording to the World Economic Forum (“WEC”). That is larger than the twenty largest economies in the world combined. The WEC stated that the worldwide pension shortfall is on track to reach $400 trillion by 2050. So why am I mentioning this?

If public and private pension Ponzi schemes plans see funding deteriorate along with equity prices dropping, that means a considerable drop off in global equity market participants. In addition, pension plans will have to play catch up to make future pension payables due. If the younger workers are not funding their public or private Ponzi schemes pension obligations then pension participants expecting funds have a serious problem and that is a serious problem for all equity market participants that I am sure most people are not thinking about. I half-jokingly used strikethrough font when referencing public and private pensions because they really are Ponzi schemeswhen you think about them. I am sure someone will send me an email backing pensions, I agree with the concept of pensions, just not pooled pensions run by professional money losers.

In times of prosperity it easy to get caught up in…prosperity. I tend to be a doomsday prepper when it comes to equity markets and as such always want to have a plan when things get ugly. “In the land of the blind, the one eyed man is king” – Desiderius Erasmus‘s Adagia (1500). I don’t mean to sound like an alarmist but I think ugly is coming given the contentious domestic political environment, the possibility economic contraction may be on the horizon due to interest rate hikes, global trade is slowingand lastly because the darlings of Wall Street are starting to capitulate (see TSLA, NFLX, FB, etc.). The first sign of a fatigued market in my experience is when the darlings go to the doghouse and that seems to be happening now.

Don’t put lipstick on any pigs!

Football Returns & Cannabis Runs

For those in the business of approximating the margin of victory by one team versus another, the long wait for football is over and let the approximating begin! Sports’ gambling is of course now legal in certain states and more states are likely to follow suit because money talks, just look at what is happening with cannabis where 8 states and D.C. have gone recreationally legal and a total of 31 states allow for some form of cannabis legally. Pretty cool! Speaking of pretty cool how about the run Emerald Health (EMH.V) has had in the past 30 days, a 100%+ gain. We mentioned Emerald Healtha couple of months ago, and visited their grow in Vancouver, and we remain excited about the company’s prospects.

Potential September Catalysts (we hope)

Two companies we have written on and follow are reporting data this month Vital Therapies, ticker: VTL, (Phase 3 data) and Atossa Genetics, ticker: ATOS, (Prelim Phase 1 Endoxifen).  Vital is one of the most heavily shorted stocks around when you measure short interest versus float. I have a lot invested in Vital Therapies and if this data readout is poor I will not be a happy camper but I am VERY optimistic.

As for Atossa, their preliminary results from their Phase 1 study of topical Endoxifen in men due by month end could wake the stock up as investors always love data. We have published videos on Atossa as well as written an article recently and Atossa may provide a solution for eradicating and treating breast cancer.

We eagerly await data from both companies!

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