Boulevard of Broken Retirement Dreams

Posted On Apr 21, 2016 By Dave Gonigam

  • Nothing like this has happened to defined-benefit pensions in 40 years
  • Only nine days to act before Social Security breaks another promise
  • Man behind several prescient oil calls says the bottom is in now
  • Why does Saudi Arabia’s king need to hold his wealth offshore?
  • Preview of coming (virtual reality) attractions… VR for good and evil… the best barter items for the apocalypse… and more!

Wow. If you’re a retired Teamster, we’re glad we’re not you today. And even if you’re not a retired Teamster, you’ll want to pay heed.

“More than a quarter of a million active and retired truckers and their families could soon see their pension benefits severely cut,” says The Washington Post — “even though their pension fund is still years away from running out of money.”

The move would amount to “the first cuts in earned pension benefits to current retirees in over 40 years,” writes David Dayen at The Intercept. Not all Teamster retirees would be affected, only those covered by the Central States Pension Fund. But they face an average cut of 23% come July 1.

The decision isn’t final. And the decision rests with the Treasury Department.

This unfortunate state of affairs traces back to one of those last-minute budget deals in Washington aimed at averting a “partial government shutdown.”

The deal was loaded with all sorts of special-interest goodies. We described one of them as it all went down in December 2014 — banks gaining the privilege of trading high-risk derivatives through their subsidiaries backed by the FDIC, potentially leaving taxpayers on the hook if those bets go bad.

Also included was what’s setting up these Teamsters for a more meager retirement: The trustees of pension plans that cover more than one employer in a single industry can now apply to the Treasury to cut benefits to current retirees, supposedly to improve the plans’ solvency.

“Retirement security advocates fear that the Central States decision will trigger a number of other pension funds to use the new law to shirk obligations made to workers for decades,” Dayen writes.

“Three other pension plans have already applied to make benefit changes.”

Here at The 5, we’re agnostic about the wisdom and/or necessity of this move. Maybe the managers of the pensions promised more than they could deliver in decades gone by and the numbers no longer add up. Or maybe the present-day managers are being overcautious about the shortfall they anticipate.

For our purposes, it doesn’t matter: We bring up the case of these Teamsters to make a bigger point about broken retirement promises — such as the looming end of “file and suspend” for Social Security.

We wrote about it a few times last year. Without going into the weeds here, it’s a technique couples can use to maximize their Social Security benefits during retirement. The Obama White House labeled it an “aggressive” strategy benefiting “upper-income” recipients who “manipulate” the system.

Congressional Republicans apparently agreed, because they went along with killing file-and-suspend during another last-minute budget deal six months ago. It’s not only couples, well-to-do and otherwise, who stand to lose out. So do divorced women.

At the time Congress and the White House cut this deal, we called it a “stealth default” — the government going back on its promises to folks who’ve followed the rules and faithfully paid into Social Security for decades.

The door to this technique remains open for only a few more days. It won’t make sense for everyone, but for many people, it could mean up to another $200,000 during retirement. After April 30, it’s gone forever. Today’s the 21st. Best get cracking if you think you might qualify.

Whether it’s the market action, earnings or economic numbers… it’s shaping up to be a “meh” day.

The major U.S. stock indexes are ruler-flat as we write, the S&P 500 hovering just above 2,100. Gold tried making a big run earlier in the morning, but at last check, the bid is barely above $1,250. Crude is in retreat from its 2016 highs reached yesterday, now $43.32.

The big earnings number of the day is Verizon, which was also “meh” — neither beating nor missing the Street’s consensus guess, but equaling it.

The economic numbers of the day are likewise “meh.” The Philly Fed survey shows the mid-Atlantic manufacturing sector once again shrinking a bit. The Chicago Fed National Activity Index finds the overall U.S. economy growing more slowly than the postwar norm, but nowhere near recession either.

The man who called the top of the oil market in mid-2014 is calling the bottom now.

“Hedge fund manager Pierre Andurand has a track record that suggests his opinion on where oil is headed is worth listening to,” says Outstanding Investments contributor Jody Chudley.

Andurand also shorted crude in 2008 and got long again in 2009. “He’s called all of the major turns in the oil market in recent memory.”

So why is he so certain crude hit bottom in February? “His reasoning,” says Jody, “is that this extended period of low oil prices has had a significant impact on oil supply. In addition, he notes that there is very little spare capacity in the system to make up for any drop in production. The catalyst to drive oil higher is on the horizon. Andurand believes that we are going to see global oil inventory levels start to decline within a few months and that those declines will accelerate quickly.”

As in $70 by year-end.

“If that happens,” says Jody, “there are going to be some explosive share price increases in the more beaten-down exploration-and-production names.”

Maybe President Obama’s not the only one at the summit of Gulf state leaders who senses he’s a lame duck.

There’s absolutely no news from the summit today, other than symbolic BS about how the king of Saudi Arabia sent only a minor flunky to meet Obama at the airport.

Here’s a more interesting and revealing question: Why do some of those leaders have money stashed offshore, as revealed in the so-called “Panama papers”?

King Salman has links to two companies in the British Virgin Islands that obtained more than $34 million in mortgages to buy pricey property in London. Leaders in Qatar and the United Arab Emirates also show up in the documents.

“Why would these Arab sheikhs go to the trouble of hiding their money in offshore accounts?” muses Maajid Nawaz at The Daily Beast. “To all intents and purposes, they already own their countries, and they certainly pay no taxes.”

Nawaz’s answer is something we’ve hinted at all year: “As global connectivity, education levels and social mobility rise, their citizens are demanding greater rights, greater autonomy and greater control. Grotesquely wealthy, precarious, family-run fiefdoms cannot stand forever, and the fact their owners seek to funnel money abroad via secret offshore companies points to that.”

The first 2016 forecast we rolled out in January was Byron King’s call that war and revolution would come to Saudi Arabia this year. You think King Salman knows something we don’t?

“Who knows? I might be outta here on the next plane after yours…”

There’s still over eight months for Byron’s forecast to play out. And before that, there’s the inevitable devaluation of the Saudi riyal, as forecast by Jim Rickards.

Here come virtual reality movies — and not only of the adult variety.

They’re all the buzz this week at the trendy Tribeca Film Festival in New York — which has set up a “Virtual Arcade” where you can don a VR headset and take in as many as 18 film shorts pushing VR’s capabilities to the limit.

Case in point — an animated featurette called Invasion! “When hostile extraterrestrials land on Earth, only an intrepid bunny can save the planet,” writes Times reporter Neil Genzlinger. “Or, actually, two bunnies: Look down toward your feet and you will see that you have acquired a rabbit body. The story doesn’t last long, but the sense that you have fur lingers awhile.

“If you’ve never watched a film in this format, it’s rather mind-blowing,” he says. “But you may need a neck massage afterward from looking up, down and all around.”

Heh… We can only imagine what you’d need with VR for porn — which, as we said yesterday, has been blazing technological trails for decades, to the immense profit of early investors in technologies like streaming video, digital video cameras and even digital payment systems like PayPal.

You missed the story? You can get caught up right here. Fair warning: The video is not explicit, but it’s certainly suggestive. Enough that anyone looking over your shoulder might wonder what you’re up to…

“As if TV and the Internet haven’t done enough to make us weak and useless, now we will have VR,” a reader writes.

“We will be able to ‘go’ anywhere and do anything without leaving our couches. With tactile stimulators attached to appropriate body parts, even sex will be possible without having to ever seek out a partner. I suppose the next step will be something to feed us and carry away our waste products.

“We’ll be placed in an appropriate bed at birth and live short, fat, useless lives, and a machine will bury us at death without our ever actually experiencing reality. I hope the robots and such that replace us do a better job.”

The 5: Well, every new technology can be used for good or evil. We’ll never say a bad thing about the Internet, seeing as it’s how we communicate with the vast majority of our readers. And heck, TV put food on your editor’s table for 20 years before I decided it was time to try something new.

Don’t discount the educational possibilities that come with VR. Ray made a big point of that in his initial presentation on the technology. Of course, the new porn version has stolen all the thunder. Go figure…

“I thought yesterday’s issue was a pretty good issue,” writes one of our regulars — a fellow who’s not afraid to shower us with both praise and criticism when warranted.

“I am not surprised about the VR-porn connection. You correctly described the VCR/Internet/YouTube history as well as the payment-for-content history.

“I am glad my subscriptions Jim Rickards’ Strategic Intelligence and Trend Following With Michael Covel are for three years (at very good prices), as that insures I will keep receiving The 5.”

“I think new-in-the-box .45 ACP or .357 Magnum,” a reader writes in reply to yesterday’s mailbag, “would likely be more tradable than silver bullion coins post-apocalypse.”

The 5: The weapon or the ammo?

“I do not foresee, and I have never said, the end of the world,” Jim Rickards told us a while back. “Apocalypse, end of the world — those worlds get put in my mouth a lot by other people, but I’ve never said them, nor do I see that happening.

“However, could you see a breakdown of critical infrastructure, power grid out for a period of time, exchanges closed, banks closed, people reverting to a slightly more agrarian kind of society? Sure, I think all those things are possible, maybe even likely.”

Under those circumstances, we suspect ammunition would prove an excellent barter item. And in terms of value per square foot, it takes up a lot less room than toilet paper!

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Ray Blanco is hosting a live online event this afternoon exclusively for readers of Technology Profits Confidential. The topic — Virtual Reality: Making Money Through the Goggles. He’ll lay out the case for VR’s 81,000% profit potential over the next five years… and the best ways to play it.

If you’re not currently a subscriber, you can still sign up today — via the salacious new version of Ray’s sales pitch, of course — and have access to a recording of the session, along with all your introductory reports and information.


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