Pot, Pensions and Payment Plans

Posted On Jul 21, 2017 By Dave Gonigam

  • “Breathtaking” growth in the pot pioneer state
  • The looming pension crisis at S&P 500 companies
  • The already-here pension crisis for 1 million retirees
  • Floyd Mayweather on a payment plan with the IRS (what?!)
  • GE drags down rest of the stock market… more insight into steel tariffs… an on-site report from “Venezuellinois”… and more!

“These stats change everything,” says the note from our penny pot stock maven Ray Blanco.

If you somehow got the impression that the best opportunities to make a small fortune from penny pot stocks have already come and gone… Ray is here today to set the record straight. The best is yet to come, as you’re about to see…

Colorado just set another marijuana milestone.

Only a week ago today we mentioned how the Centennial State has logged 12 straight months of sales topping $100 million.

Ray says that’s only part of the story. Total revenue since recreational weed became legal in January 2014 just topped $500 million. “But a whopping 40% of that revenue,” he points out, “was generated just in the past year.”

Now that’s a growth industry. And with other states coming online with legal cannabis, that growth is still in the future in many other states — especially California, home to one in eight Americans.

Meanwhile, Ray tells us “an estimate from Marijuana Business Daily puts the total estimated demand for recreational cannabis in the U.S. at $45–50 billion.

“That’s more than 12 times legal recreational AND medical cannabis sales combined in 2016.”

[Pause for a moment to consider there’s a trade publication called Marijuana Business Daily. It also publishes a reference called the “Marijuana Business Factbook.”]

“And even more significantly,” says Ray, “the number crunchers estimate that for every $1 consumers spend at pot dispensaries, $3 in economic benefits are created. So the pot stories that are captivating folks right now aren’t even scratching the surface of the weed wealth that’s going to be created in the next few years.”

All of which means the trading possibilities in penny pot stocks can only get better. And they’re already phenomenal. This month alone, readers of Penny Pot Profits have had the chance to close out and collect gains of 52% in less than a week… and 164% in less than six weeks.

Ready to grab your share? Start here.

The U.S. stock market is in retreat from this week’s record highs.

All the major indexes are in the red. The Dow is down about a third of a percent, dragged lower by the only stock that’s been included in the average for its entire 125-year existence — General Electric. GE’s latest quarterly numbers reveal a 12% drop in sales year over year. With that, GE shares are now trading at their lowest in 19 months. For frustrated GE investors, CEO Jeff Immelt’s pending departure can’t come soon enough.

Meanwhile, the dollar keeps sinking and gold keeps creeping higher. The dollar index is down to 94 — threatening to break below a level that’s held for more than year. Gold, meanwhile, has crossed back above $1,250 for the first time in a month.

Yikes: “Of the 200 biggest defined-benefit plans in the S&P 500 based on assets, 186 aren’t fully funded,” says Bloomberg. “Simply put, they don’t have enough money to fund current and future retirees.”

For more than half of those funds, the gap grew from fiscal 2015 to fiscal 2016, thanks to those ultralow interest rates the Federal Reserve has imposed on all of us.

Of the 200 companies Bloomberg studied, the biggest gap is at Intel — whose pension assets amount to only 46.6% of liabilities. Ouch. Of the five worst, two are airlines — Delta and American. (United is within the 10 worst.) In terms of raw dollar figures, the biggest gap is at GE — $31 billion.

As we mentioned earlier this month, desk jockeys at UPS are getting their pensions frozen — 70,000 people in all. They won’t be the last.

Corporate America’s pension plans are sliding down the slope where about 50 Midwestern pensions sit now — in “critical and declining status.”

Most of these pensions are jointly administered by trustees for a labor union and multiple employers. Fifteen months ago, we related the sad tale of the Central States Pension Fund. It was on the verge of becoming the first fund to cut benefits for current retirees in more than 40 years.

Central States hasn’t reached that stage yet… but another fund administered for 4,000 retired ironworkers in Ohio has, according to a CBS News report yesterday. Some retirees have seen their monthly payout cut in half.

This type of pension plan covers more than a million American retirees.

The Pension Benefit Guaranty Corp. — think of it as the FDIC of pensions — is supposed to step in and backstop failing plans. But for multiemployer plans like the one for the Ohio ironworkers, payments are limited to just over $1,000 a month.

And as we’ve pointed out in the past, the PBGC is broke. It has assets of $88 billion… but it’s saddled with liabilities from previous pension plan collapses of $164 billion.

Add it all up and we return to a warning our income specialist Zach Scheidt related here last December.

“You can be sure that the federal government isn’t going to sit by and let corporate pension funds fail without stepping in and bailing them out.”

That is, by passing “emergency” legislation to shore up the PBGC, or some such.

“That doesn’t mean that retirees will be made whole. Who knows how the situation could pan out — but retirees could be forced to accept smaller monthly payments or reduced lump-sum payouts. But it does mean that the U.S. government could be saddled with huge expenses.

“And that means higher taxes for you and me, and possibly another round of financial crisis in the U.S.”

In addition there’s the threat to the bottom lines of the aforementioned S&P 500 companies.

“The pension fund shortfall affects big companies that trade on the U.S. stock exchanges,” Zach explained. “If projections for future returns wind up being too optimistic (which I believe they will), and as these corporations are forced to put more cash into their pension funds, stock prices will likely drop.

“A fall in the stock market (due to lower profits as companies fund their pension plans) could hurt your retirement — even if you’re not counting on a pension check.”

[Ed. note: Unsettling stuff, we know. But there is a way to shore up your retirement — pulling down as much as $1,659 per month in investment income — thanks to a little-known provision in the Medicare Act.

It’s not a handout. And you don’t have to be 65 or over to take part. All you have to do is get on the payout list. Here’s how.]

Forget net worth — it’s all about cash flow. Or so we learn in the context of boxer Floyd Mayweather’s travails with the IRS.

Mayweather has earned $700 million during his career. And he stands to pull in at least another $100 million in a Las Vegas bout with Conor McGregor on Aug. 26.

But Mayweather is sitting on a sizeable tax liability after he earned $250 million in his victory over Manny Pacquiao in 2015. According to reporter Oskar Garcia at Law360, Mayweather owes $22.2 million. Tax-prep experts tell MarketWatch a liability that huge usually entails penalties and interest, and it goes back to underreporting self-employment income.

Those damned quarterly estimated taxes — they’ll get you every time.

So… Mayweather has come to terms with the IRS on a payment plan, spread across three months.

Mayweather

Mayweather: Man with a (payment) plan.

In fairness, his tax attorney, Jeffrey Morse, is trying to spin it as a plus. “If he is investing money and getting a rate of return that far exceeds what he has to pay the IRS in interest,” he tells Fight Hype, “then any smart business person is going to take advantage of that deferral.”

Note Mr. Morse framed that as a hypothetical by saying “if.”

We don’t buy it. We’re hard-pressed to imagine any investment with a return higher than accruing IRS interest and penalties — well, aside from investments that might attract the attention of another federal agency, the SEC…

“Some comments on steel tariffs,” a reader writes after yesterday’s episode…

“Trump is looking to make good on the threat of invoking a ‘Section 232’ investigation, which was created under the Trade Expansion Act of 1962 to give the president authority over trade in the name of national security. He wants to protect manufacturers from countries (namely China) that dump steel into our country. The only problem with his argument is that we already have effective trade laws in place protecting us from unfair ‘dumping’ of raw material from other countries, including China.

“Manufacturers in the USA already pay more for their raw material than anyone else in the world. The only real winners are the domestic steel ‘producers’ — i.e., the steel mills of our country, ArcelorMittal, Nucor, U.S. Steel, Steel Dynamics, AK Steel. The losers are steel consumers/manufacturers (anyone that uses steel to make a finished part).

“Commerce Secretary Wilbur Ross helped consolidate the domestic steel producers in the late ’90s and made a lot of money doing it. Additionally, Dan DiMicco, one of Trump’s trade advisers, was CEO of Nucor in the early 2000s.

“Domestic producers account for a very small amount of jobs in comparison with manufacturing and all of the ancillary jobs created through manufacturing. If steel costs go up, and they certainly will with increased trade tariffs or duties, manufacturers will simply move somewhere else (like Canada or Mexico) to make products that can compete globally. The USA is not in a bubble; we’re part of a global economy. Capital is going to move to a country with more relaxed trade regulations.

“Additional duties and taxes will not create or save manufacturing jobs. They will only exacerbate an already difficult task of producing steel products at a competitive global price.

“Love The 5.”

The 5: You can bet your bottom dollar Trump will campaign at a steel mill in some contested congressional district next year, crowing about the jobs he “saved” with tariffs. And reporters ignorant of economics — even with their virulently anti-Trump agenda — will be too clueless to go looking for all the people in other industries who lost their jobs because of rising steel prices. Pathetic.

Next, a lament from one of our regulars in Chicago’s western suburbs — writing in the aftermath of a budget deal in Illinois that permanently raised taxes while solving none of the state’s long-term budget issues (i.e., pensions).

“Here’s a pic I took of my immediate block yesterday during lunch.

Homes on sale in suburb

“In the far distance,” he adds, “there is a THIRD house for sale, and JUST around the corner on the left is a FOURTH house for sale… and immediately behind me, around a curve about six houses back, is a FIFTH house for sale. Two weeks ago there was one.

“Yes, the left really IS this clueless. Venezuellinois may come even sooner than we had feared. FOUR houses just went up for sale after the tax increase. I am hoping and planning for ours to be the No. 6. Not to worry, though! When productive taxpayers leave, the left has the time-untested ‘solution’: Raise taxes yet again. And you are correct, not a one of them majored in math, I’ll bet…”

“My comment does involve a ‘but,’” writes our final correspondent.

“But more specifically one with two T’s. In reference to your ‘amusing aside’ from Gov. Talmadge yesterday, it might be interesting to clarify for the youngsters in your readership that in Georgia, and many other states in 1930, the Sears Roebuck catalog was a ‘friend’ that kept on giving — as a common source of toilet paper that arrived in the mail.”

The 5: Yes indeed. The pages weren’t glossy in those days, so they were well-suited to the purpose. Biodegradable, too. The catalog was a must-have for the well-provisioned outhouse…

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

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