Subscribe to John Mauldin's
FREE Publication:

Thoughts From the Frontline

Sign up for John’s free weekly letter and join 1 million of his closest friends.

We will never share your email with third parties

Thoughts from the Frontline

Rich City, Poor City

September 21, 2013

"The future is already here," intoned William Gibson, one of my favorite cyberpunk science fiction authors, "it's just not very evenly distributed." Paraphrasing Gibson, the pension crisis is already here; it's just not very evenly distributed. For the past two weeks we've been exploring the problems of state pension funds. This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research. Then again you may be pleasantly surprised and congratulate yourself on choosing a particularly adept hometown. And be on notice that, no matter what your personal conclusion and how well-grounded your analysis is, there will be people who live in your neighborhood who think you are utterly full of, well, let's just say "nonsensical matter" and leave it at that. This is a family letter.

Into the Transformational Future

First, a quick announcement. I am constantly asked where the future jobs will be, and I think hard about the answer to that very personal question (it's crucial to those of us who have young kids). Will we see Gibson’s dystopian world or Ian Banks' world of abundance? The answer is, of course, that secular growth in employment will come from the new, transformational technologies that are already…

Discuss This


We welcome your comments. Please comply with our Community Rules.


Ronald Nimmo

Sep. 22, 2013, 11:09 a.m.

San Diego CA has taken a lot of steps to deal with it’s pension liabilities. It started dealing with the issue about 9 years ago, before it was a nationally recognized problem. It’s pension fund earned 13.4% for the last year, 5.3% for the last 5 years, and 8% for the last 10 years. Although they do have alternative investments, they have achieved it without the extreme imbalance and risk-taking done by Dallas. Also, new employees for the last year and a half have only been eligible for defined contribution plans rather than defined benefit plans. Current employees have had to increase their share of employee contributions to the plan, and also to contribute to the retiree’s health benefit’s fund if they want to receive medical care when they retire. But the city’s ARC payments are high because they underfunded the pension plan in the late 90’s and early 2000’s to pay for an expansion of the Convention Center, improvements to Qualcomm Stadium, and the building of Petco Park. I guess the high ARC payments are what John was referring to when he mentioned San Diego and Houston.

Sep. 21, 2013, 2:49 p.m.

Thank you for all the data.  Most helpful for muni investors. I do think however that all the hype over muni fund return assumptions is over the top, and designed to get municipal pensions cut.  Your article led me to check my own returns.  And, as calculated by Vanguard where I keep my brokerage accounts and bond funds, my past 5 year returns are 9.5 %.  Admittedly this is 9/1/08 to 9/20/13 so it’s not a standard period.  But I think some of these pension funds, professionally managed, can certainly do 8.5% going forward.

John Tepley

Sep. 21, 2013, 12:14 p.m.

Mr. Mauldin, a question and a comment.
1) Where do you find time to do all this?  Do you even sleep at all?
2) To answer your question:  “Where are all the new jobs going to come from?”, the answer is: “They’re not.”.

The history of the industrial revolution was the elimination of hundreds of jobs that are replaced by a few.  The history of the information revolution is going to be the elimination of hundreds of jobs that are replaced by a few.

To give an example from popular fiction, in Charlie and the Chocolate Factory, Charlie’s father is one of hundreds of workers that lose their jobs when the assembly line is automated.  Luckily, since Charlie lucks into some money, Charlie’s father is retrained as a repairman and gets a job back at the same factory repairing the machines that replaced him and hundreds of others.

The question that the movie does not answer is:  “What jobs did the hundreds of other laid off workers get?”