The following is from a daily, freebie email subscription I get from Larry Levin, who is a futures index trader. These are nearly always a fun read, mostly because of his sardonic approach but also because he is always right. He doesn't go into politics at all (which I prefer from the market guys I listen to) and that adds to his credibility. I'm re-publishing this because he mentions the Colorado Public Employees Retirement Association, which might be of interest to some, and should be of interest to all

Dear David

The Halloween market ended Friday and I believe it's safe to say investors received a trick rather than a treat in October. Although it had been far worse just last week, the Dow finished October -14%, while the S&P500 closed -16.9% and Nasdaq finished -17.7% lower.

Investors are surely happy that the Halloween month is behind them, with a boost of +10% from the lows during the last week leading into November taking a bit of the sting off. Is it the beginning of a bull market? Given that the market rallied on very low volume I would have to doubt it. Furthermore, the market advanced despite some pretty bad news.

However, investors will have to do a Helen Keller impersonation on Friday if it is going to continue the rally. Either that or the government will have to rig the data like never before. Current expectations are for Friday's monthly jobs data to show a significant drop on the order of -200,000 to -240,000 jobs with the official unemployment rate rising to 6.3%. Official is in italics because the overall unemployment rate is already 11%; however, the official data doesn't include all sorts of unemployed categories in order to buffalo the public as long as possible.

Going forward there will be more challenges, one of which is pension programs. Private pension plans have been in trouble before and are surely hurting now. After all, they fund pension payments via the investment theory: stocks always go up forever and ever, Amen. Public pension plans too. The difference, however, is that when a private plan's funding falls behind, the corporate sponsors have to make it up. When public pension funding falls behind, the TAXPAYER at large is usually pick pocketed in order to make the pension plans whole. Said another way, unlike your 401k, public employee retirement plans carry 100% upside and NO RISK. If the market goes down, you are forced to fund their fat retirements, which are usually 90% of their salaries until the day they die.

The pension fund of San Diego, California, may have lost at least $1 billion of its $5 billion in assets during the recent stock market sell off. Taxpayers at large will be forced to make up the difference.

Colorado PERA, which covers 413,000 employees and retirees, saw its assets plummet from $41 billion at the beginning of the year to $31 billion on Oct. 15. Taxpayers at large will be forced to make up the $10-BILLION difference.

At a time when most workers are watching their retirement savings get swallowed up by falling stock prices, it feels like a cruel trick to learn that taxpayers may have to spend $1 billion in 2010 to prop up Los AngelesCounty public-employee pensions.

New York State's pension fund has tumbled 20% in value since April. Will the already highly taxed people of New York be called upon to make this 20% drop? Most likely the answer is yes.

With stock market losses topping $50 billion since July 1st, CalPERS is on track to needing help in just two years if the nose dive continues on Wall Street. Taxpayer groups are upset that Californians have to foot the bill when many employers have moved away from pension plans. This is adding insult to injury. At the same time we're seeing our own 401k's get hit, we're on the hook to make up the shortfalls for public employees who are guaranteed their full pensions without any risk, said Jon Coupal, from the Howard Jarvis Taxpayers Association. My sentiments exactly!

Illinois taxpayers may soon be called on to bail out what is arguably the best-funded public pension plan in the state (IMRF) thanks to $3.6 billion in fund losses caused by the slumping economy. The Illinois Municipal Retirement Fund is down about 21% this year.

Question: HOW ON GOD'S GREEN EARTH IS THIS MY RESPONSIBILITY? Why should I be FORCED to make someone else whole when I don't share in the IMRF's pension goodies at all? How the hell are they allowed to participate in market gains, but NOT the losses?

I have a feeling this sentiment will spread soon!

The anger expressed above will spread indeed, because the problem is worse than it seems. Using the investment theory - stocks always go up forever and ever, Amen - the calculation is based on an assumption of annual returns of 8%, which is a flight of fancy in this environment. In fact, that assumption is laughable. When reality returns to their calculation methods, the tax hikes will be Halloween like: scary.

Although the underfunded pension data above is frightening, the truly bloodcurdling fact is the unfunded (as in ZERO in the till) liabilities of the Federal Government. The feds have promised insane amounts of money to almost all of us through Medicare, Medicaid, Social Security and pensions of federal employees. Keep in mind; the State promises mentioned above are funded while the federal promises have ZERO current funding of a staggering $53,000,000,000,000.00. That's $53-TRILLION and the check is on it's way to the table.

But a more immediate trick versus a treat will be coming in the form of lawsuits. Investors that wanted their money invested in safe investments have been hurt time and again, which I have highlighted in this blog. A story in the Chicago Tribune this weekend highlights lawsuits in the making:

When Kyle Halkola walked into the TD Ameritrade office in suburban Schaumburg this summer he had a certified check in his hand and one thing on his mind. With the financial markets threatening to implode, he just wanted a safe place to park $850,000 in cash.

Halkola had made the money over 20 years, buying and selling three homes in San Diego. When he landed a job near Chicago, he pulled out his equity and planned to buy a dream house for his wife and two young children in the Northwest suburbs.

This was money I built by giving $100 extra to the mortgage each month instead of going out to dinner, the 46-year-old engineer said. This was scratched-and-earned money I didn't want to lose a penny of.

Today, Halkola is one of hundreds of angry TD Ameritrade customers whose almost $1 billion in assets are frozen in a short-term bond fund called Reserve Yield Plus, a mutual fund managed by The Reserve in New York but largely distributed under a revenue sharing agreement with TD Ameritrade in Omaha.

Clients say TD Ameritrade misrepresented the fund as either an ultra-safe money market fund or something just as secure. And they have cried foul over the relationship between Ameritrade and The Reserve, suggesting it created a conflict of interest.

My wife's and my life savings has been frozen since Sept. 16, said Ted Gray, a Chicago native now retired in Nevada who lives on the income from $700,000 now in Yield Plus. We can get by for a couple of months, but then we're in trouble. We're scared silly.

In a telephone interview, TD Ameritrade Chief Executive Fredric Tomczyk said these clients had a valid expectation that their principal would be preserved under any circumstances, partly because of the nature of a money market fund and partly because the firm sweeps cash into these funds automatically between transactions.

Yield Plus investors, however, have received no such protections. Tomczyk argued that those investors specifically chose the bond mutual fund because of its higher yield and should have read the prospectus, which explained its higher risk profile and provided no assurances against loss, unlike a money market fund.

Investors on the Yahoo message board, however, claim TD Ameritrade had a reason to push them into Yield Plus: a distribution agreement between The Reserve and TD Ameritrade that earns Ameritrade an undisclosed slice of fee revenue.

The distribution agreement clearly got the job done. Assets in Class R shares sold almost exclusively to TD Ameritrade clients shot from almost nothing in 2006 to $770 million by March of this year, public documents show. Another class dominated by the Omaha firm shot from $2 million to $171 million.

Amazingly, Wall Street still hasn't learned its lesson. As the article shows, firms are still ripping people off for fees. Although I generally do not like to hear of lawsuits, the one that is brewing here seems valid. And there will be many more to come, up and down The Street.

Trade well and follow the trend, not the so-called experts.

I hope you found that infomative, I always do. By 'experts' he means the people you usually hear from on the news, who are mostly journalists, if there actually is such a thing anymore.

Other thoughts:

The tax hikes required to bail out PERA will necessitate a constitutional amendment. So we need to hope we can make it until the irresponsible Amendment C expires and for heavens sake, PLEASE VOTE NO ON AMENDMENT 59!

The Social Security/Medicare/Medicaid mess is a big reason why the party is over - that financing of our credit binge is coming to an end because the AAA credit rating of the United States is at risk with this kind of financial liability. It is why we will find ourselves broke by 2030 because we won't be able to sell Treasury Bonds to finance public largesse. But by then, the older folks that are currently the targets of Democrat scare-mongering that "Republicans want to take away your Social Security" will have long since passed, leaving to their children the complete burden of this mess.

It is also why an Obama socialist state will wreck the financial capacity of the United States, like the Soviet Union before it.