US cities face billions in pension shortfalls

This is what happens when savers and pension plans take their investment advice from the risk-selling investment bankers: too little is contributed and great hopes are pinned on financial speculation rather than reasonable math and return prospects. During secular bear markets in particular, this is a deadly, life-changing (for the worse) combination. In the end the investment banks rake in billions while the fund owners suffer the consequences of harmful financial management and advice.

No city has as serious a pension issue as Chicago, reports CNBC’s Scott Cohn. Nationwide, the municipal pension debt ranges from $800 billion-$4 trillion, he adds. Here is a direct video link.

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The end of the commodities super cycle and over-priced stocks

Short-seller Jim Chanos updates on the end of the commodities super cycle and the risk of presently jubilant stock prices for investors. He spoke with Reuters today. Here is a direct video link.
This long-term chart of the price of copper–gold line (think real economy) versus the price level of the S&P 500 –black line (financial markets) over the past 13 years pretty vividly underlines the unusual disconnect presently between the real economy/demand and QE juiced stock prices. Sustainable? Never has been. This time different?

Chart source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

The fact that the price of copper has been falling along with global growth again since 2011 makes rational sense. High prices from the commodities bubble spurred record global production and stockpiling of copper inventories which have been very slowly drawing down over the past 2 years as rampant production has been slow to shut down even while demand has plunged with Chinese growth as shown in this chart.

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Inverse mentors or mentors?

The always entertaining Mayor Rob Ford sat down with The National’s Peter Mansbridge last night to explain why he is now working with a personal trainer and plans to revamp his image in preparation for the next election in Toronto. You can watch it here if you are interested in the latest installment. Jay Leno summed it well this week, when he pointed out that Mayor Ford has become God’s gift to stand up comedians. Jimmy Kimmel astutely pointed out that if Mayor Ford was a reality show in American, sponsors would be racing to renew his contract for a second season. All of which raises the question: is it true to say that the masses much prefer watching coverage of train wrecks than happy, functioning people and their families?

I found this discussion on Charlie Rose last night to be quite interesting on this topic of what shows are grabbing eyeballs in the new era of multimedia productions. Here is a direct link. (The second 30 minutes on the 500 years of African-Americans: Many rivers to cross is also worth watching.)

As the media experts point out, the era of the anti-hero is in full bloom today. From mob bosses (The Sopranos) to meth cookers (Breaking Bad) to jail inmates (Orange is the New Black), to frivolous self-indulgence (Say Yes to the Dress, Bridezillas) and reality shows get much, much more base–popular culture seems fascinated by what we would traditionally view as dysfunctional elements (kind term) or self-destructive train wrecks (harsher).

In the 50’s we had shows like Leave it to Beaver; in the 60’s My Three sons, The Andy Griffith Show; in the 70’s things like The Brady Bunch and The Partridge Family and All in the Family which certainly expanded coverage to unattractive attributes like prejudice. The Cosby Show in the 80’s focused on traditional family values… Were these shows all idealistic hypocrisy or were they generally reflective of the values of their time? If so what do current shows say about current values?

Personally I deplore watching self-destructive people for entertainment. Maybe I have seen enough of this in real life over the years to get my fill; but human darkness is the last thing I chose to watch for fun. So clearly I don’t get the modern fascination. But the open question I have is why do so many others? What is really going on here? Is it that watching dysfunction makes people feel relatively normal or superior in comparison? (Note the way Mayor Ford justifies his behavior by insisting that many others do the same things.) Or is it that the characters featured seem so foreign to most viewers that they find it interesting to be a voyeur? Is it true as Terrence Winter suggests in the Rose interview, that no one would watch a show any more about good, decent, hardworking people, without addictions in positive relationships trying to raise their kids well and serve their community? Is that really so boring? Or is it that the people like that, who might appreciate those shows are so busy working and maintaining all their goals and values that they have no time to watch much television/media?? So they are not the viewers commanding production budgets.

Certainly it can be very instructive to be open and honest about human weakness and mistakes as others can learn from observing such role models which I have dubbed “inverse mentors”. And especially where such examples inspire others that they can avoid the same mistakes or change, grow and improve themselves. But it has been well documented that there is a connection between the behavior which leaders and public figures model and the prevalence and tolerance for similar actions in the general populace. So it makes a difference whether public figures who exhibit destructive behavior are seen as mentors or inverse mentors. Are they discredited and rejected or revered, admired and financially rewarded for illegal, immoral acts and bad behavior (ie., like bankers and corrupt business leaders and politicians the past few years).

Whatever the motivation for the present focus, it has been wisely observed that we are what we spend our time thinking about. So I can’t help but wonder what all this 24/7 coverage of dysfunction, illegality, dishonesty and destruction portends for our future.

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