Friday, September 28, 2018

Oil up, housing down, pension stampedes rampant

To $74, bend but not break.  Marginal producers can keep it below $80, for no3w. This is Iran oil being kicked off the dollar.  Ten year jumped 20 basis point, suddenly, in the past few weeks.  That is causing home sales to turn down.  Still bend but not break. 

Unemployment dropping caused by boomers retiring, about ready to break. Pension stampedes cause interest charges to jump, hence the rate rise.  Especially the ten year government where the SS payouts happen. 

The pension stampedes are a result of agglomerations of labor into specific pension plans with ad hoc, optional optimum exit doors.  There is flexibility in retirement among state workers in Cal, for example.  But like a wave function that collapses to ground state on observation, groups of workers tied to a single plan hit the sweet spot an d suddenly exit.  DROP plans and other special payouts, save vacation days loom large, then there are the age bounds.  These stampedes cause short term debt volatility and long term creditors get skitish, the ten year rises, the Congressional budget takes a sudden whack.

No comments: