Researchers at Boston College’s Center for Retirement Research analyzed the current status of State and Local government defined-benefit (i.e., “traditional”) pension plans across the nation.  What they found was a bit disturbing.  Despite an assumption that the plans would earn an average return of 7.6% per year, the 170 plans reviewed by analysts actually had an average return of just 0.6% in 2016. This has dropped the average plan funding percentage to just 67.9%.  Given the underperformance with regard to investments, there remain only two viable options—increasing contributions (from governments, their workers, and/or taxpayers), or reducing pension benefits, or both.  Most observers believe that, in the end, it is taxpayers who will once again get the bill.

For anyone who has funded college costs, you know that the costs have soared for years. In fact, over the past 30 years, college tuition has risen a whopping 400%, with annual growth rates far exceeding the rate of inflation.It seems as though market forces have caused colleges to become more competitive in their pricing as last year’s increase was more in line with inflation at 1.9%. For many, college has become unaffordable, and many are quickly ruling out choices based on price, and considering a more affordable institution.

You can read more here…


As the stock market continues to grind higher and investors become more complacent, we are reminded by this “stubbornly fail-safe marker” of economic contraction since 1960.  Every time Commercial & Industrial (C&I) loan balances have declined or stagnated—a recession was already in progress or was imminent.  This can be seen in the following graphic, from Zero Hedge using Federal Reserve data.

On a year-over-year basis, after growing at a 7% year over year pace at the beginning of 2017, the latest bank loan update from the Fed showed that the annual rate of increase in C&I loans is down to just 1.6%–its lowest since 2011.  Should the rate of loan growth deceleration persist, in roughly four to six weeks the U.S. would post its first year-over-year loan contraction since the financial crisis.

All gave some, some gave all. As we honor our fallen heroes today, let’s remember their sacrifice that allowed us to live a life in the greatest nation there has ever been.

Opinions & Reality

April 24, 2017

Everyone has heard the term “Put your money where your mouth is”, often times in bar room banter when coaxing someone to back up their statements or opinions by putting some cash on the line.  Schwab Chief Investment Strategist Liz Ann Sonders released a note this week with research showing that consumers are “saying” they have confidence in the economy going forward, but data such as retail sales figures aren’t matching that level of confidence – in other words, they aren’t “putting their money where their mouths are”.  Wall Street analysts and economists collect various measures of data and most can be broken down into either of two groups—“hard” and “soft” data.  Hard data are actual figures, retail sales, number of vehicles sold, etc.  Soft data tends to be consumers or business managers opinions of the economy—e.g. consumer confidence data and purchasing manager surveys.  Ms. Sonders notes that, for example, the Conference Board’s “soft” consumer confidence data hit its highest level in 17 years last month, but on the other hand “hard” data like retail sales fell for a second straight month in March.


America’s Patent Lead

February 22, 2017

We often hear talk about the U.S. falling behind in this or that area.  But one measure of forward progress is innovation, which can be concretely measured by the number of patents filed per country.  On that score, the U.S. is the indisputable leader, and no other country is even close.  This infographic shows that the U.S., at 3.03 million patents filed between 1977 and 2015, is almost 3 times as prolific as the next country, Japan.  In fact, just the state of California outweighs all other countries but Japan!

A subtle change in the internals of the stock market bodes well for active portfolio strategies such as momentum, relative strength, trend-following and even individual stock picking.  The change is a significant drop in correlations among stocks, away from the herd-like “risk on – risk off” moves in which all stocks go the same direction at the same time in the same magnitude.  That herd-like behavior dominated the 2009-2015 period, but during 2016 (and so far in 2017), correlations among stocks have fallen sharply, back to levels that predominated in the 1990-2007 era (a great era for those active strategies).  The lower correlations typically result in a much wider dispersion of returns, with much greater differences between top performers and low performers.  Brian Belski, chief investment strategist at BMO Capital Markets, recently noted that active strategies “will be the key to delivering outperformance in the coming months, as opposed to the more passive strategies that have been mostly dominating the investment landscape the past several years.”

Mind-Blowing Statistic

February 6, 2017

Multi-billionaire Microsoft founder Bill Gates recently wrote on his GatesBlog, “This might be the most mind-blowing fact I learned this year”, followed by a graphic of Chinese cement usage over the last 3 years.  In short, China has used more cement in the last 3 years than the United States has used in the last 100 years!  China’s 6.6 gigatons of cement, consumed in 3 years, dwarfs the U.S.’ 4.5 gigatons, consumed in 100 years.  Here’s the amazing graphic provided by Mr. Gates.

2017 Forecasts

January 17, 2017

The abundance of market forecasts for the new year are before us once again. The following quotes might be useful to inoculate ourselves from those who seem to know how the market will play out this year.

“We’ve long felt that the only value of stock forecasters is to make fortune tellers look good.”
 Warren Buffet

“We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know.”
John Kenneth Galbraith

“Forecasts create the mirage that the future is knowable.”
Peter Bernstein

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
Mark Twain



The Social Security Administration has announced it’s third policy change since 2011 regarding the mailing of annual of individual Social Security reports. They have cut back on who receives the reports by mail, and the reason is to cut costs. I’m glad they’re cutting costs where they can.  Here’s an article that explains the latest policy change.