The July 2019 issue of The Elliott Wave Theorist observed a “relentless climb to the greatest stock market overvaluation in U.S. history.” This trend included “widespread speculative investing by formerly conservative pension funds.”
Public pension funds suffered significant losses in the Dotcom Bust and the Great Recession, according to The Wall Street Journal. In addition, the Global Anticorruption Blog points to a “lack of transparency” in how pension managers choose investments, which contributes to a “substantial risk of corruption.” The funds are now more than $1 trillion short of the asset level they should have.
Spurred by bull-market optimism, fund managers adopted a risky solution: investing with borrowed money. The Journal warns that this practice can make investing losses more severe in a down market and that 2022 has already brought a “steep slump in financial markets.” Funds’ woes could be compounded if this slump develops into something as severe as the Financial Crisis or Dotcom Bust.
The May 2012 issue of The Socionomist warned that during such a time, debt deflation could affect the flow of checks from entitlements, including public pensions. It also warned that the massive benefit programs which politicians have been afraid to touch could become cost-cutting targets. To learn more read “The Government Entitlement Tsunami Will Subside.”
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