Bridgewater Warns on Pensions

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Published : April 10th, 2014
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Category : Opinions and Analysis

Since the financial crisis, there haven’t been too many warnings about the dim prospects for pension funds living up to their long-term promises as a result of their overly optimistic assumptions about rate of return, however, Bridgewater reinvigorated the debate as recounted in this USA Today story today that might make some Holiday Inn Express patrons choking on their cinnamon rolls.

Influential and well-regarded hedge fund Bridgewater Associates Wednesday warns public pensions are likely to achieve 4% returns on their assets, or worse. If Bridgewater is right, that means 85% of public pension funds will be going bankrupt in three decades.

Bridgewater came to these conclusions by stress testing the nation’s public pension plans, much the way banks need to be evaluated on what could happen given a wide range out outcomes.

Public pensions have just $3 trillion in assets to invest to cover future retirement payments of $10 trillion over the next many decades, Bridgewater says. An investment return of roughly 9% a year is needed to meet those onerous obligations.

This is just one more reason why the U.S. has a national imperative, ably assisted by the folks at the Federal Reserve,  to create bigger and bigger asset bubbles.

How else are pension funds going to pull this off?

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Tim Iacono is the founder of Iacono Research, a subscription service providing market commentary and investment advisory services specializing in commodity based investing.
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"How else are pension funds going to pull this off?"

It has already been happening for decades.
In the early 60's, my mother made $200/month as a LPN/receptionist.
That was roughly equivalent to 140 ozt of silver coin.
140 ozt at $20/ozt is about $2800/month.

Now imagine the above factoid applies to a defined benefits pension plan.
Bad boys, bad boys, what'cha gonna do? What'cha gonna do when the bill comes due?
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"How else are pension funds going to pull this off?" It has already been happening for decades. In the early 60's, my mother made $200/month as a LPN/receptionist. That was roughly equivalent to 140 ozt of silver coin. 140 ozt at $20/ozt is about $2800/  Read more
overtheedge - 4/10/2014 at 8:07 PM GMT
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