For Your Consideration | Seeking Alpha

Charles Tatelbaum is one of the premier bankruptcy attorneys in the United States. He is a Director at the law firm of Tripp, Scott. He is a great friend of mine and I bring what he wrote to me, with his permission, to your attention.

U.S. Farm Bankruptcies Hit an Eight-Year High

“Federal court data showed that U.S. farm bankruptcy rates jumped 20 percent in 2019 – to an eight-year high – as financial woes in the U.S. agricultural economy continued in spite of massive federal bail-out funding, Reuters reported. According to data released this week by the Administrative Office for the U.S. Courts, family farmers filed 595 chapter 12 bankruptcies in 2019, up from 498 filings a year earlier. The data also shows that such filings – known as “family farmer” bankruptcies – have steadily increased every year for the past five years. Farmers across the nation also have retired or sold their farms because of the financial strains, changing the face of Midwestern towns and concentrating the business in fewer hands. The increase in cases had been somewhat expected, bankruptcy experts and agricultural economists said, as farmers face trade battles, ever-mounting farm debt, prolonged low commodity prices, volatile weather patterns and a fatal pig disease that has decimated China’s herd. Even billions of dollars spent over the past two years in government agricultural assistance has not stemmed the bleeding.”

I note this today because of what is going on with the coronavirus and the effects that it is having upon the United States. Of course, our first concern is people, and the widening ramifications that it is having upon individuals. What must also be noted, in my opinion, is what it is doing to our agricultural industry and to the global supply chain that is being flummoxed by this virus. In my household, if something is made in China, then I, and the Sages, Mr. Trooper, Ms. Lalique, and Ms. Crystal, are not interested in consuming it.

The costs be could significant for the economy of China but also for the major companies that import goods from China. Then, the costs could also be significant for companies that export goods to China. I would be taking a hard look now at both the bonds and equities that you own that have major exposure to China. You may think that I am being too cautious, but I do not agree. When Grant’s first 10 Rules, “Preservation of Capital,” are on the table then being “too cautious” is not a rational sentiment.

Mainland China had its deadliest day in the coronavirus outbreak Friday, with authorities reporting 86 fatalities from the pneumonia-like illness that is paralyzing much of the country. A total of 722 people had died from the virus and 34,546 were infected in mainland China by the end of Friday, China’s National Health Commission said. There seems to be no slowdown in sight.

For those of you that are involved with Municipal bonds, Taxable or Tax-Exempt, or for those of you that are involved with infrastructure programs, or loans to Municipalities, here is some data to help guide your course. Our most indebted cities:

CITY AMT. OF MUNICIPAL DEBT PER PERSON

  • New York City $63,100
  • Chicago $37,100
  • Honolulu $26,400
  • Philadelphia $25,500
  • New Orleans $18,800
  • Oakland $18,600
  • Portland $18,400
  • San Francisco $17,000
  • Baltimore $16,000
  • Cincinnati $15,600

*Data obtained from Trust in Accounting, 2020 Financial states of Cities

Then consider the flight from the high tax States. Things are likely to get worse for some cities as the population moves, and as the revenue base decreases. Then consider the pension fund shortfall in some States:

Massachusetts

  • Funded ratio: 59.9%
  • Total pension shortfall: $35.7 billion (11th largest)
  • Gov’t workers as share of total workforce: 12.5% (4th lowest)
  • Avg. annual payout per public retiree: $31,510 (11th highest)

Pennsylvania

  • Funded ratio: 55.3%
  • Total pension shortfall: $66.7 billion (4th largest)
  • Gov’t workers as share of total workforce: 11.7% (2nd lowest)
  • Avg. annual payout per public retiree: $26,358 (17th highest)

South Carolina

  • Funded ratio: 54.3%
  • Total pension shortfall: $25.5 billion (15th largest)
  • Gov’t workers as share of total workforce: 17.2% (17th highest)
  • Avg. annual payout per public retiree: $21,247 (17th lowest)

Rhode Island

  • Funded ratio: 53.7%
  • Total pension shortfall: $5.5 billion (15th smallest)
  • Gov’t workers as share of total workforce: 12.3% (3rd lowest)
  • Avg. annual payout per public retiree: $32,658 (8th highest)

Colorado

  • Funded ratio: 47.1%
  • Total pension shortfall: $54.6 billion (6th largest)
  • Gov’t workers as share of total workforce: 16.3% (25th highest)
  • Avg. annual payout per public retiree: $34,817 (5th highest)

Connecticut

  • Funded ratio: 45.7%
  • Total pension shortfall: $34.8 billion (12th largest)
  • Gov’t workers as share of total workforce: 14.0% (11th lowest)
  • Avg. annual payout per public retiree: $39,856 (the highest)

Illinois

  • Funded ratio: 38.4%
  • Total pension shortfall: $136.9 billion (3rd largest)
  • Gov’t workers as share of total workforce: 13.5% (7th lowest)
  • Avg. annual payout per public retiree: $36,490 (2nd highest)

New Jersey

  • Funded ratio: 35.8%
  • Total pension shortfall: $142.3 billion (2nd largest)
  • Gov’t workers as share of total workforce: 14.5% (16th lowest)
  • Avg. annual payout per public retiree: $32,148 (9th highest)

Kentucky

  • Funded ratio: 33.9%
  • Total pension shortfall: $42.9 billion (7th largest)
  • Gov’t workers as share of total workforce: 16.2% (25th lowest)
  • Avg. annual payout per public retiree: $27,143 (13th highest)

*Data from the Pew Charitable Trusts

It used to be ho-hum and one more glass of wine, please. However, we may finally be getting to some sort of tipping point in some cities and in some states as the flight away from high taxes takes a major toll on some localities. I hope you are listening.

If the person you are talking to doesn’t appear to be listening, be patient. It may simply be that he has a small piece of fluff in his ear.

– Winnie the Pooh

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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