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Tuesday was gut-wrenching.
But Wednesday may have been even worse.
The Dow Jones Industrial Average plunged 600 points, and the Nasdaq Composite entered "correction" territory.
Somehow, though, those tumbling numbers weren't the worst thing I saw Wednesday.
Early Wednesday, veteran reporter John Stossel posted a report on the Fox News website that shook me to my core.
Here's the headline: "Politicians' Deceitful Promise That Nobody Has Been Paying Attention To."
In it, Stossel laid out the despicable fact that our states' and municipalities' pension funds are severely underfunded.
And that's led to a $6 trillion pension debt. That ticking time bomb represents a full third of the U.S. economy.
Meanwhile, Stossel explained, our politicians have nothing but platitudes. Everything is "all right," they all say.
Pensions for hardworking Americans could be cut up to 50%. And that's just a start.
What's worse is that Stossel's story is coming out when it may be too late to do anything.
This is an issue that's been building for decades.
Institutions use so-called "alternative investments" to boost performance because they are trying to make up for the $6 trillion in underfunded liabilities we've just told you about.
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Fund managers, desperate to kick the can down the road before the $6 trillion pension time bomb blows up on their watch, claim they can boost returns using exotic hedge funds, partnerships, real estate, music royalties, derivatives… you name it.
More often than not, however, this promised performance never materializes – and the fund managers lose customers.
But guaranteed pension plans can't kick the can down the road because they have to provide a certain amount of retiree income every year. So these same funds constantly take on more and more risk via increasingly speculative investments. It's all an attempt to make up the gap between the amount of money their funds can invest and the amount of money they have to return to retirees every year.
According to the Center for Retirement Research at Boston College, those alternative investment allocations skyrocketed from 9% of total assets in 2005, to 24% in 2015.
That's not slowing down. A 2017 study by Coller Capital found that 23% of pension plan administrators expect to add alternative investment allocations in the next year.
Only they won't find the high returns they crave.
That's because it would only take one pension fund defaulting to set the chain of dominos.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.