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It turns out the state of Illinois misled municipal bond investors by not disclosing its unfunded pension liability. Here we are in 2013, and the scolding from the SEC is about bond disclosures going back to 2005 and 2009. What’s the rush?

If you’ve been a regular visitor to Richardcyoung.com, then the unfunded pension liability is not news to you. We’ve been talking about this for years. I’m not sure what’s more distressing, the fact that the SEC is so late to the party or the fact that $2.2 billion of the stuff was snapped up by buyers. As usual, investors seem to be OK with piling on the risk just as long as they don’t lose any money. Stay tuned.

It’s shameful that the state of Illinois treats its pension like an afterthought. It has only 40 cents of assets for every dollar it owes. Who’s voting for these politicians anyway, the teachers? The money isn’t going to magically appear.

What’s concerning is that local politicians like Chicago Mayor Rahm Emanuel want to make their problem your problem by having the federal government pick up the tab. Mr. Emanuel wants Chicago’s retiree health benefits to be federally funded through an Obamacare state exchange. Are you ready to start paying for Illinois state workers’ health care? No? Too bad, it’s coming. At the end of the day, this move by the SEC is pathetic. It’s criminal that pension obligations are not met by proper fiduciaries. But no one is held accountable, as we can see in a case like this—when the SEC, an arm of the federal government, administers Illinois nothing more than a slap on the wrist.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.

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