"Houston, we have a problem."

| April 13, 2018
Share |

On this day in 1970 those words were spoken from Apollo 13.

“New Jersey, we have a problem.”

If our current politicians have any say, those words will never be uttered by them. It will be kicked to someone else to deal with.

Consider the facts:

Standard & Poor’s has estimated that the state’s pension is funded at just 30% of what will be needed.

“New Jersey’s pension system may have already reached an unfixable tipping point,” noted a report issued last month by the right-leaning Manhattan Institute.

“The system is now missing so much money that even when it achieves its investment goals, it falls far short of the money it needs to remain solvent over time.”

New Jersey’s new 7% return assumption is better than the old 7.9%—but still higher than the consensus forecast of well below 5%. The state will probably come up short and will either need to pour in more from tax revenues, take on more debt—or default. The latter is not a palatable option.

None of those outcomes is good for bondholders. If borrowing costs increase, the relative value of existing munis will fall and hurt investors hoping to trade their bonds, and muni-fund shares will most likely take a hit. In the event of a default, as in Detroit, bondholders could find themselves with far less than they were promised.


Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Meyer Capital Group), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Meyer Capital Group. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Meyer Capital Group is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Meyer Capital Group’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Share |