Earlier this month the California Policy Center released a study that provided additional evidence that the U.S. stock indexes are overvalued by approximately 50%, along with calculations showing the impact of a major downward correction on the solvency of California’s state and local government pension systems. Stocks are now at unsustainable bubble valuations.
Not covered in this study, but equally overvalued, are bonds, which pension systems misleadingly categorize as “fixed income” investments in their portfolio disclosures. CalPERS even went so far as to trumpet their success in earning a 9.29% return on “fixed income” investments in their most recent press release – a healthy return that offset losses elsewhere and allowed them to earn a marginally positive return of 0.61% last year. But “fixed income” investments usually refers to bonds, and bonds are also at unsustainable bubble valuations.
Here’s why bonds are overvalued today: Whenever new bonds are issued at lower fixed rates of interest than the bonds that were issued before them, then those older bonds that pay higher fixed rates of interest can be sold for more money than their original price. This is because on an open market, buyers will price a resold bond at a value calculated to equalize returns. When rates go down for new bonds, the prices for existing bonds go up. The problem is that back in the 1980’s, bonds were being issued at rates as high as 16%, and today, they’re being issued at rates close to zero. After a […] Read More
Back in 2012 we published an article entitled “The Forgotten 33%,” which included a graphic entitled “American Voter Breakdown 2012.” It depicted the U.S. electorate as comprised of 46% who pay zero net taxes, 20% who work for the government and are net tax consumers, the 1% “super rich,” and the “forgotten 33%,” who work in the private sector and earn enough to be positive net taxpayers.
The point of the article, then and now, was that people with an intrinsic preference for big government comprise a super-majority of voters in America. But something has changed since 2012…
AMERICAN VOTER BREAKDOWN 2016
The emergence of Donald Trump and Bernie Sanders as serious contenders to become president of the U.S. reflects a growing awareness among voters in all of the above categories that things can and should be better. The 33% who constitute America’s beleaguered taxpayers were angry four years ago, and this time around they’re furious. Their ire is the most easily explained: Now more than ever, they work long hours for less wages or lower profits, all while being told by the establishment press, by mainstream academia, and by left-wing politicians that they’re “privileged,” and still aren’t paying their “fair share.” If they’re white, they’re told their success is the undeserved result of their color, when in fact they’ve been the recipients of institutionalized reverse discrimination for nearly two generations. And no matter what their ethnicity, they confront soaring prices for housing, health care, […] Read More