Tag Archives: politics

07.01.25
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U.S. $ Decline and the Impact on Inflation

By: Russ Kamp, CEO, Ryan ALM, Inc.

As I was contemplating my next blog post, I took a look at how many of my previous >1,625+ posts mentioned currencies, and specifically the U.S. $. NEVER had I written about the U.S. $ other than referencing the fact that we enjoy the benefit of a fiat currency. I did mention Bitcoin and other cryptos, but stated that I didn’t believe that they were currencies and still don’t. Why mention them now? Well, the U.S. $ has been falling relative to nearly all currencies for most of 2025. According to the WSJ’s Dollar Index (BUXX), the $ has fallen by 8.5% for the first half of 2025.

Relative to the Euro, the $ has fallen nearly 14% and the trend isn’t much better against the Pound (-9.6%) and the Yen (-8.7%). So, what are the implications for the U.S. given the weakening currency? First, the cost of imports rises. When the $ loses value, it costs more to buy goods and services from abroad. The likely outcome is that the increased costs get passed onto the consumer, who is already dealing with the implications from uncertain tariff policies.

Yes, exports become cheaper, which would hopefully increase demand for our goods, but the heightened demand could also lead to greater demand for U.S. workers in order to meet that demand leading to rising wages (great), but that is also potentially inflationary.

What have we seen so far? Well, first quarter’s GDP (-0.5%) reflected an increase in imports spurred on by fear of price increases due to the potential for tariffs. Q2’25 is currently forecasted to be 2.5% according to the Atlanta Fed’s GDPNow model, as U.S. imports have fallen. According to the BLS, import prices have risen in 4 of 5 months in 2025, with March’s sharp decline the only outlier.

The potential inflationary impact from rising costs could lead to higher U.S. interest rates, which have been swinging back and forth depending on the day of the week and the news cycle. Furthermore, there is fear that the proposed “Big Beautiful Bill” could also drive rates higher due to the potential increase in the federal deficit by nearly $5 trillion due to the stimulative nature of deficits. Obviously, higher U.S rates are great for individual savers, but they don’t help bonds as principal values fall.

We recommend that plan sponsors and their advisors use bonds for the cash flows (interest and principal) and not as a performance driver. Use the fixed income exposure as a liquidity bucket designed to meet monthly benefits and expenses through the use of Cash Flow Matching (CFM), which will orchestrate a careful match of asset cash flows funding the projected liabilities cash flows. The remaining assets (alpha bucket) now benefit from time, as the investment horizon is extended.

Price increases on imports due to a weakening $ can impact U.S. inflation, but there are other factors, too. I’ve already mentioned tariffs and wage growth, but there other factors, including productivity and global supply chains. Some of these drivers may take more time to hash out. There are many uncertainties that could potentially impact markets, why not bring an element of certainty to your pension fund through CFM.

06.23.25
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ARPA Update as of June 20, 2025

By: Russ Kamp, CEO, Ryan ALM, Inc.

Despite the chaotic nature of our markets and geopolitics, it is comforting that I can report weekly on the progress being made by the PBGC implementing the critical ARPA legislation. That is not to say, that the 2nd Circuit’s recent ruling isn’t creating a bit of chaos, too.

Regarding last week’s activity, the PBGC’s efiling portal must have been wide open, as they accepted initial applications from 5 pension plans residing on the waitlist. The PBGC will now have 120-days to act on these submissions.

There were no applications approved, denied, or withdrawn last week, but that isn’t to say that the PBGC rested on its laurels. There were two more plans that repaid a portion of the SFA received, as census errors were corrected. International Association of Machinists Motor City Pension Plan and Western States Office and Professional Employees Pension Fund repaid 1.61% and 1.08% of the SFA, respectively. In total, 57 plans have “settled” with the PBGC, including four funds that had no census errors. To date, $219 million was repaid from grants exceeding $48 billion or 0.45% of the grant.

In other ARPA news, another 16 funds have been added to the waitlist resulting from the 2nd Circuit’s determination that previously terminated plans can seek SFA. We do believe that it will prove beneficial for these plans, but it will stress the resources of the PBGC to meet ARPA imposed deadlines.

Given the highly unpredictable nature of war and tariffs on inflation and U.S interest rates, it isn’t surprising that the U.S. Federal Reserve held the Fed Funds Rate steady last week. We encourage those plans receiving SFA grants to secure the promised benefits through a cash flow matching strategy. Who knows how markets will impact bonds and stocks for the remainder of the year.

06.23.25
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$6 billion – Is That All?

By: Russ Kamp, CEO, Ryan ALM, Inc.

A recent ruling by the 2nd Circuit has opened the door for roughly 100+ multiemployer plans to pursue Special Financial Assistance (SFA) that were originally deemed ineligible because the plans had terminated. The PBGC’s inspector general, in a “risk advisory”, has estimated that the cost to provide the SFA to these newly eligible plans could be as much as $6 billion. Is that all? Let’s not focus on the $s, but the number of American workers and their families that this additional expenditure will support.

As I reported last week in my weekly update related to ARPA’s pension reform, the PBGC had denied the application for the Bakery Drivers Local 550 and Industry Pension Fund, a New York-based terminated pension plan, because it had terminated. The plan covered 1,094 participants in 2022 and was 6.3% funded, according to their Form 5500. Regrettably, the plan terminated in 2016 by mass withdrawal after Hostess Brands, Inc., its largest contributor, went bankrupt. However, the court stated, that despite terminating in 2016, the plan “continued to perform audits, conduct valuations, file annual reports, and make payments to more than 1,100 beneficiaries.”

As of June 13, 2025, the PBGC had already received 223 applications for SFA with $73.0 billion approved supporting the retirements for 1.75 million American workers. What an incredible outcome! However, according to the inspector general’s letter, the potential $6 billion in added cost would include $3.5 billion to repay the PBGC’s earlier loans to approximately 91 terminated plans, which was described as a “potential waste”. He went on to state that the potential repayment to the PBGC would be a waste of taxpayer funds due to the positive current and projected financial condition of the multiemployer program. “PBGC’s multiemployer program is in the best financial condition it has been in for many years. PBGC’s 2023 Projections Report states that PBGC’s multiemployer program is projected to ‘likely remain solvent for at least 40 years.’” GREAT!

Perhaps the repayment of $3.5 billion in loans could enable the PBGC to lower the annual premiums on the cost to insure each participant, which might keep some plans from seeking termination due to excessive costs to administer the program. Something needs to be done with private DB plans, too, as those costs per participant are far greater, but that’s a story for another blog post.

As regular readers of this blog know, we’ve celebrated the success of this program since its inception (July 2021). The fact that 1.75 million American workers to date have had their promised benefits secured, and in some cases, restored, is wonderful. Think of the economic impact that receiving and spending a monthly pension check has on their communities. Furthermore, think about what the cost would have been for each of these folks had the Federal government been needed to provide social services. None of these workers/retirees did anything wrong, yet they bore the brunt.

The estimated $6 billion in additional “investment” in American workers is a drop in the bucket relative to the annual budget deficit, which has been running from $1-$2 trillion annually. Restoring and supporting the earned retirement benefits is the right thing to do.

05.06.25
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ARPA Update as of May 2, 2025

By: Russ Kamp, CEO, Ryan ALM, Inc.

I think someone forgot that the calendar flipped from April to May. The April showers have been followed by the May monsoons in New Jersey. The May flowers may be washed out to see!

Regarding the ARPA implementation by the PBGC, the current efiling portal is describes as limited, which is certainly far better than the frequently mentioned “temporarily closed” status. As a result, there were three new applications submitted during the past week. Local 1102 Retirement Trust, IBEW Eastern States Pension Plan, and Local 1922 Pension Plan are each classified as non-priority group members. In the case of Local 1922, its application was revised. In total, these three funds are seeking $53.7 million in special financial assistance (SFA) for just over 6k participants.

In other ARPA news, Aluminum, Brick & Glass Workers International Union, AFL-CIO, CLC, Eastern District Council No. 12 Pension Plan, a Wyomissing, PA based plan, has received approval of its revised application. They will receive $8.5 million for the 580 members of its pension plan. This was the first application approved in nearly a month.

Happy to mention that there were no applications denied, withdrawn, or asked to repay excess SFA during the last week. However, there were two additional plans added to the waitlist. Sports Arena Employees Local 137 Retirement Fund and Retirement Plan of Local 1102 Retirement Fund have been added to the waitlist. In total, 119 non-priority funds have sought SFA through the waitlist process. Neither of these funds locked-in a date for valuation purposes on the discount rate. Four funds have not currently chosen a lock-in date.

There are still 43 plans that have yet to submit an application for review, with all but one of those a non-priority group member. Despite significant recent volatility, U.S. Treasury interest rates, particularly 10- and 30-year maturities, are enjoying fairly robust yields. The 30-year yield is once again above 4.8%. This level of rates provides pension plans receiving the SFA some additional cost reduction to defease benefit payments.

04.11.25
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What Was The Purpose?

By: Russ Kamp, CEO, Ryan ALM, Inc.

I was introduced to the brilliance of Warren Mosler through my friend and former colleague, Chuck DuBois. It was Chuck who encouraged me to read Mosler’s book, “The 7 Deadly Innocent Frauds of Economic Policy”. I would highly recommend that you take a few hours to dive into what Mosler presents. As I mentioned, I think that his insights are brilliant.

The 7 frauds, innocent or not, cover a variety of subjects including trade, the federal deficit, Social Security, government spending, taxes, etc. Regarding trade and specifically the “deficit”, Mosler would tell you that a trade deficit inures to the benefit of the United States. The general perception is that a trade deficit takes away jobs and reduces output, but Mosler will tell you that imports are “real benefits and exports are real costs”.

Unlike what I was taught as a young Catholic that it is better to give than to receive, Mosler would tell you that in Economics, it is much better to receive than to give. According to Mosler, the “real wealth of a nation is all it produces and keeps for itself, plus all it imports, minus what it exports”. So, with that logic, running a trade deficit enhances the real wealth of the U.S.

Earlier this year, the Atlanta Fed was forecasting GDP annual growth in Q1’25 of 3.9%, today that forecast has plummeted to -2.4%. We had been enjoying near full employment, moderating yields, and inflation. So, what was the purpose of starting a trade war other than the fact that one of Mosler’s innocent frauds was fully embraced by this administration that clearly did not understand the potential ramifications. They should have understood that a tariff is a tax that would add cost to every item imported. Did they not understand that inflation would take a hit? In fact, a recent survey has consumers expecting a 6.7% price jump in goods and services during the next 12-months. This represents the highest level since 1981. Furthermore, Treasury yields, after initially falling in response to a flight to safety, have marched significantly higher.

Again, I ask, what was the purpose? Did they think that jobs would flow back to the U.S.? Sorry, but the folks who suffered job losses as a result of a shift in manufacturing aren’t getting those jobs back. Given the current employment picture, many have been employed in other industries. So, given our full-employment, where would we even get the workers to fill those jobs? Again, we continue to benefit from the trade “imbalance”, as we shipped inflation overseas for decades. Do we now want to import inflation?

It is through fiscal policy (tax cuts and government spending) that we can always sustain our workforce and domestic output. Our spending is not constrained by other countries sending us their goods. In fact, our quality of life is enhanced through this activity.

It is truly unfortunate that the tremendous uncertainty surrounding tariff policy is still impacting markets today. Trillions of $s in wealth have been eroded and long-standing trading alliances broken or severely damaged. All because an “innocent” fraud was allowed to drive a reckless policy initiative. I implore you to stay away from Social Security and Medicare, whose costs can always be met since U.S. federal spending is not constrained by taxes and borrowing. How would you tell the tens of millions of Americans that rely on them to survive that another innocent fraud was allowed to drive economic policy?

03.31.25
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ARPA Update as of March 28, 2025

By: Russ Kamp, CEO, Ryan ALM, Inc.

Welcome to the last update of March. If you are a fan of both Men’s and Women’s college basketball, there wasn’t as much “madness” as usual during the respective tournaments, as all #1 seeds made the men’s Final Four, while only teams seeded either #1 or #2 made the woman’s Final Four. However, these teams should make for a very exciting and competitive games as they conclude. I’m still waiting for Fordham to get there one day.

Now onto the task at hand. Regarding ARPA and the PBGC’s implementation of this critical legislation, last week was fairly busy. Three non-priority group funds, including United Food and Commercial Workers Unions and Participating Employers Pension Plan, Roofers Local 88 Pension Plan, and Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund, filed initial applications seeking a total of $241.7 million in Special Financial Assistance (SFA) that will support the promised benefits for 14,769 workers. There are 22 funds that currently have an application before the PBGC.

In addition to the new fillings, Oregon Processors Seasonal Employees Pension Plan, received approval of its revised application. They will receive $19.9 million in SFA and interest to help cover the promised pensions for 7,279 members. There were no applications denied during the previous week, but there were a couple of initial applications from non-priority group members withdrawn. Distributors Association Warehousemen’s Pension Trust and Alaska Teamster – Employer Pension Plan were seeking $206.6 million in SFA for nearly 12,200 participants.

In other ARPA news, the PBGC recouped  $994,701.30 or 1.55% in excess SFA paid by The Newspaper Guild International Pension Plan. The PBGC has now recouped $202.2 million in excess SFA from grants totaling $47.5 billion or 0.42% of the proceeds. These funds, including another 4 that didn’t receive any excess proceeds, were among the roughly 60 that received awards before they were given access to the Social Security’s Master Death File.

Lastly, there was one more multiemployer fund added to the waitlist. The Plasterers Local 79 Pension Plan becomes the 117th plan to be placed on the waitlist. Fortunately, the PBGC has begun the process on all but 45 of those.

03.14.25
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Real GDP Exceeding Real Potential GDP

By: Russ Kamp, CEO, Ryan ALM, Inc.

I was introduced to the St. Louis Fed’s amazing data base – FRED – many years ago by a former Invesco colleague. What is FRED? According to the St. Louis Fed’s website, “FRED is short for Federal Reserve Economic Data, and FRED is an online database consisting of hundreds of thousands of economic data time series (presently >825k) from scores of national, international, public, and private sources. FRED, created and maintained by the Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.”

FRED is an amazing tool, but the purpose of this blog today is not to laud FRED, but to highlight two data series that I have followed for several years – Real GDP and Real Potential GDP. Real GDP is self-explanatory, but what is Real Potential GDP? “Real potential GDP is the CBO’s estimate of the output the economy would produce with a high rate of use of its capital and labor resources. The data is adjusted to remove the effects of inflation.” The data series starts in Q1’49 and currently runs to Q4’2034, which forecasts Real GDP to be $27.8 trillion at that time. Real GDP is currently (Q4’24) at $23.5 trillion.

Currently, Real GDP is exceeding what the CBO believes is the Real Potential GDP for our economy by a record amount of $616 billion in $ terms or about 2.5%. If you believe that the CBO’s estimate of potential GDP is close to reality, then it shouldn’t be surprising that inflation remains an issue, despite the marginal improvement disclosed earlier this week (core CPI at 3.1%). As my former colleague and mentor, Charles DuBois has said, “if government spending (or private spending, for that matter) exceeds the economy’s real resources available to absorb that spending, then inflation will likely result.” That’s where we are today, folks.

The growing and fairly consistent fiscal deficit continues to provide stimulus to the private sector (all spending = all income) creating demand for goods and services that exceeds the natural capacity of our economy as measured by the CBO despite the Fed’s aggressive action to temper some of that demand through elevated interest rates, which began in March 2022. While this relationship exists, it makes sense for the Fed to pause its easing of rates, which they seem to have at this time, but we’ll get more insight when they meet next week.

Also reflected in the graph above, previous peaks in Real GDP exceeding the CBO’s Real Potential GDP (’73, ’78, ’89, ’99, ’07) have been followed by economic and market disruptions, some quite significant. What does that portend for today’s market given the current levels?

03.03.25
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ARPA Update as of February 28, 2025

By: Russ Kamp, CEO, Ryan ALM, Inc.

Welcome to March!

We are pleased to provide you with the latest update on the PBGC’s implementation of the ARPA pension legislation. The last week saw moderate activity, as the PBGC’s eFiling portal was temporarily open providing three funds, Local 810 Affiliated Pension Plan, Aluminum, Brick & Glass Workers International Union, AFL-CIO, CLC, Eastern District Council No. 12 Pension Plan, and Sheet Metal Workers’ Local No. 40 Pension Plan the opportunity to submit revised applications seeking Special Financial Assistance. The PBGC has until June 26, 2025, to act on the applications that combined are seeking $112.6 million in SFA for 3,001 plan participants.

In addition to the above-mentioned filings, one pension fund, Roofers and Slaters Local No. 248 Pension Plan, a Chicopee, MA-based fund, withdrew its initial application that was looking for roughly $8.4 million in SFA for 202 members of the plan. As I said, there was moderate activity last week. Fortunately, no multiemployer pension plans were denied SFA and no other plans repaid excess SFA as a result of census issues. There were also no plans approved or added to the waitlist, which contains the names of 116 plans, of which 47 have yet to submit an application.

As you may recall, I wrote a post last week titled, “A Little Late to the Party!“. The gist of the article had to do with an effort on the part of a couple of Congressmen to get the Justice Department involved in the repayment of any excess SFA funds that have been distributed to the 60 funds that received SFA prior to the use by the PBGC of the Social Security Administrations Death File Master. As I’ve reported, this process is well underway (41 funds have repaid a portion of the SFA to date), having begun back in April with the Central States plan. It is unfortunate that pension plans used to have access to this master file, but that ability was rescinded years ago over privacy concerns. ARPA has been a huge success. The repayment of excess SFA should not taint the tremendous benefit that this legislation has brought.

02.20.25
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Parallels to the 1970s?

By: Russ Kamp, CEO, Ryan ALM, Inc.

My recollection of the 1970s has more to do with playing high school sports, graduating from PPHS in 1977, and then going off to Fordham where I would meet my wife in an economics class in 1979. I wasn’t really focused on the economy throughout much of the decade. You see, college was reasonably affordable, and gas and tolls (GWB) were not priced outrageously, so getting back and forth to the Bronx wasn’t crushing for me and my parents.

However, I do recall the two oil embargoes that rocked the economy during the decade. I vividly recall the 1973 oil embargo that was triggered by the Yom Kippur War. I was a newspaper delivery boy for the Hudson Dispatch and was frequently amazed by the long gas lines that would stretch for blocks on both odd and even days, as I drove by on my bike. The Organization of Arab Petroleum Exporting Countries instituted the oil embargo against any country supporting Israel, including the U.S. This led to a dramatic increase in oil prices from about $3/barrel to roughly $12/barrel. This action led to widespread economic disruption, and as you can imagine, significant inflationary pressures.

The 1979 oil crisis was precipitated by the Iranian Revolution which saw the overthrow of the Shah of Iran in February 1979. The Revolution created a significant disruption in oil production in Iran, causing global oil supply issues. Similarly, to the 1973 crisis, oil prices surged from about $14/barrel to nearly $40/barrel. Once again, gasoline shortages materialized and inflation rose rather dramatically. This oil impact would lead to a period of economic stagnation that would eventually be defined as “stagflation”.

Now, I am NOT saying that we are about to face significant oil embargoes. But I am reminding everyone that history does have a tendency to repeat itself even if the players aren’t exactly the same. The graph below is pretty eye-opening, at least to me.

For those of you who can recall the 1970s, you’ll remember that the US Federal Reserve tried to mitigate inflation through aggressive increases in the Fed Funds Rate, which would eventually hit 20% in March 1980. As a result of their action, U.S. Treasury yields rose dramatically, too. For instance, the yield on the US 10-year Treasury note would peak at 15.84% in September 1981. As an FYI, I would enter our industry in October 1981.

Despite the aggressive action by the Fed’s FOMC beginning in March 2022, inflation has not been brought under control. Were they premature in reducing the FFR 3 times and by 1% to end 2024? A case could certainly be made that they were. So, where do we go from here? There certainly appears to be some warning signs that inflation could raise its ugly head once more. We are in the midst of a rebound in food inflation, and not just eggs. I just read this morning that those heating with natural gas will see about a 10% increase in their bills relative to last year – ouch. There are other worrying signs as well without even getting into the potential impact from policy changes brought about by the new administration.

It is quite doubtful that we will witness peaks in inflation and interest rates described above, but who really knows? Given the great uncertainty, and the potentially significant ramifications of a renewed inflationary cycle (2022 was not that long ago), plan sponsors should be working diligently to secure the current funding levels for their plans. Why continue to subject all of the assets to the whims of the markets for which they have no control over? Inflationary concerns rocked both the equity and bond markets in 2022. In fact, the BB Aggregate Index suffered its worst loss (-13%) by more than 4X the previous worst annual return (-2.9% in 1994). Rising rates crush traditional core fixed income strategies, but they are a beautiful benefit when matching asset cash flows (principal and interest) to liability cash flows (benefits and expenses) through CFM.

As a plan sponsor, I’d want to find as much certainty as possible, given the abundant uncertainty of markets each and every day. As Milliman has reported, both private and public pension funded ratios are at levels not seen in years. Don’t blow it now!

02.03.25
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ARPA Update as of January 31, 2025

By: Russ Kamp, CEO, Ryan ALM, Inc.

Somewhat shockingly, one month of 2025 is now in the books. That said, the PBGC continues to implement the ARPA legislation, which will soon celebrate its fourth anniversary since being signed into law on March 11, 2021. By all measures, this has been an incredibly successful program, with much yet to be accomplished with 93 pension plans still in the process of securing Special Financial Assistance (SFA).

The last few weeks have witnessed a moderation in the pace of implementation. The prior week saw no new applications received or approved. There was one application withdrawn, as Rocky Hill, CT-based, Sheet Metal Workers’ Local No. 40 Pension Plan withdrew their initial application seeking $18.8 million in SFA for 984 plan participants. In addition, there was one plan, St. Louis Motion Picture Machine Operators Pension Fund, that locked in the measurement date (liability valuation) as of October 31, 2024. They submitted the request as of January 24, 2025. With this action, there are only 2 plans of the 115 non-priority plans to have not locked in a valuation date.

I’ve previously mentioned the onerous impact of MPRA which passed in 2014. Fortunately, the PBGC/ARPA provided SFA of $477 million to restore to the 18 plans affecting 11 unions that under MPRA had reduced benefits an average of 22% for 60,620 retirees in pay status with some plans reducing benefits as much as 55 percent. These plans received an additional $3.5 billion in SFA to help ensure they remain solvent and able to pay all 87,862 participants in those plans their full retirement benefits through at least 2051.