Tony Cherniawski Blog | Municipalities Suffer From The Pension Blues | Talkmarkets
President, CIO at The Practical Investor, LLC
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Anthony M. Cherniawski is a principal of TPI. He has a Bachelor of Communication Arts degree from Michigan State University (1972). His business experience is as follows: 

Tony Cherniawski’s early success in the investment business came from a chance ... more

Municipalities Suffer From The Pension Blues

Date: Saturday, September 21, 2019 1:13 PM EST

Mike Shedlock observes, “Multiple cities in Illinois are forced to cut police, fire departments and other city services to fund pension plans.

Third Domino

Illinois does not allow cities to file for bankruptcy but that is the best word to describe many of them. East St. Louis is the latest.

Wirepoint reports Third domino falls: Illinois Comptroller set to confiscate East St. Louis revenues to pay for city’s firefighter pensions.

On Tuesday, the East St. Louis’ firefighter pension fund demanded that Illinois Comptroller Susana Mendoza intercept more than $2.2 million of East St. Louis city revenues so they could be diverted to the pension fund.

The fund trustees said the city shorted firefighter pensions by $880,000 in 2017 and another $1.3 million in 2018. Under a 2011 pension law, the state comptroller gained the powers to intercept city revenues on behalf of police and fire pension funds shorted by their municipalities.

Harvey was the first municipality to run afoul of the intercept law. North Chicago, a Chicago suburb of 30,000, was the second. Now it’s East St. Louis’ turn.”

If this is the best economy ever, why can’t municipalities fund their pension plans?This may be coming to a city near you.

VIX made an extended Master Cycle low on Thursday, then rallied above weekly mid-Cycle support/resistance at 14.97, creating a new buy signal. Once a Master Cycle low is made, there are usually 2-3 weeks of rally.

(MarketWatch) Bond-market guru Jeff Gundlach says he’s watching a few areas of the market to gauge whether the current bullish dynamic is starting to unravel in earnest. On Wednesday afternoon, during a CNBC interview, he said that he’s sees some early cracks that are worth investors’ attention.

Those include readings of consumer sentiment and a disparity between gauges of volatility in the bond and the stock markets.

SPX reverses.

SPX reversed out of its Thursday morning high without breaking above the July 26 high.$353,000,000,000.00 of POMO activity this week by the Federal Reserve could not keep the SPX from cracking.The Cycles Model suggests two or more weeks of decline lies ahead.

(MarketWatch)U.S. stocks closed lower Friday, for the first weekly decline in a month, as investors looked beyond a litany of central-bank decisions of the past week and focused on the state of China-U.S. trade talks.

U.S. stocks turned lower in afternoon trade, dragged lower by the technology sector XLK, -1.17% and consumer discretionary shares XLY, -1.15% after a report that a Chinese delegation had canceled plans to visit farms in Montana as a part of its negotiations with the U.S. delegation.

Traders were also on the watch for any effects of “quadruple witching day” on Wall Street, the simultaneous quarterly expiration of stock-index futures contracts, single-stock futures, and options on stock-index futures and individual stocks, which often spurs higher volumes.

NDX loses traction.

NDX was unable to gain any traction to overcome its September 12 high this week.NDX was on schedule for its Master Cycle high while SPX delayed a week due to rotation from momentum stocks to value stocks.This appears to be the end of the Cycle which began on December 26.The subsequent decline may be as steep as the rally out of that low.

(Bloomberg)How can U.S. stock indexes be right back up at their record highs when there are strikes on oil installations in the Middle East, the money markets are in revolt, negative bond yields show despair at the prospect of growth anywhere in the world, and any number of decent indicators are signaling on-coming recession? It’s a good question. And the answer, according to one investment strategist I spoke to this week, is clear: “It’s because everyone is in the Larry Summers trade.”

Summers is one of the most prominent economists of this era, of course, but my friend used his name as shorthand for his concept of “secular stagnation.” Markets are positioned for Summers’ negative theory to come true in full force. That leaves central banks with little choice but to work on the Summers assumption.

High Yield Bond Index stalls above its support/resistance cluster.

The High Yield Bond Index made its weekly high on Monday and drifted lower since then. The sell signal is temporarily suspended until it declines beneath support again.. The Cycles Model warns the next step down may be a large one.

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