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Pew Finds $1.26 Trillion State Retirement Shortfall, Says States Only Have $31 Billion In Assets To Pay For $635 Billion In Liabilities

Tyler Durden's picture




 

For those wondering why the Fed's third mandate is so critical, and is arguably about more than padding the brokerage accounts of those top 400 US "taxpayers" who account for 10% of capital gains, the Pew center brings what could be the main reason. Which is that even while factoring an 8% discount rate (for most states, some are probably higher), in other words expecting 8% gains in their assets, "the gap between the promises states made for employees’ retirement benefits and the money they set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009, resulting in a 26 percent increase in one year." The difference is broken down as follows: "State pension plans represented slightly more than half of this shortfall, with $2.28 trillion stowed away to cover $2.94 trillion in long-term liabilities—leaving about a $660 billion gap, according to an analysis by the Pew Center on the States. Retiree health care and other benefits accounted for the remaining $604 billion, with assets totaling $31 billion to pay for $635 billion in liabilities." In other words, states have roughly 5 cents for every dollars in health benefits obligations. Good luck with funding that absent America becoming Weimar. 

Some more from Pew:

The $1.26 trillion figure is based on states’ own actuarial assumptions. Most states use an 8 percent discount rate—the investment target that states expect to earn, on average, in future years. But there is significant debate among policy makers and experts about what discount rate is most appropriate for states to use when valuing pension liabilities. This is an important issue because, depending on how those liabilities are calculated, states’ total funding shortfall for their long-term pension obligations to public sector retirees could be as much as $1.8 trillion (using assumptions similar to corporate pensions) or $2.4 trillion (using a discount rate based on a 30-year Treasury bond). How states value long-term liabilities going forward will play an important role in defining the scale of their challenges and the actions they will have to take to meet them.

The Pew center's conclusion:

Far too many states are not responsibly managing the bill for their employees’ retirement.

Which is why the only resolution is for the Fed to recreate Weimar and to cause state asset holdings, which lately are probably shares of 3x beta stocks, in hopes that the state pension plan will not become the next "muni" scare.

And some charts:

Full report:

Pew Pensions Retiree Benefits 1200bn Shortfall 2011

h/t John Poehling

 

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Tue, 05/03/2011 - 10:43 | 1233844 TruthInSunshine
TruthInSunshine's picture

...states have roughly 5 cents for every dollar in health benefits obligations.

 

Oh, SNAP!

 

p.s. - Ben Caught Stealing Bernank said he doesn't have legal authority to bail out (i.e. loan shark) the individual states. And he would never, ever monetize the U.S. deficit, either!

Tue, 05/03/2011 - 10:44 | 1233861 LawsofPhysics
LawsofPhysics's picture

SNAP indeed and when that is all gone, dog food.

Tue, 05/03/2011 - 10:49 | 1233881 TruthInSunshine
TruthInSunshine's picture

Here is Leo K's whining rant about "underpaid pension fund managers" (don't laugh - Leo K really published this heap of dog shit):

http://www.zerohedge.com/article/public-pension-exodus

Tue, 05/03/2011 - 11:47 | 1234177 Texas Gunslinger
Texas Gunslinger's picture

My uncle is a retired lobbyist for the Illinois Education Association, and he has a $125000 year pension, plus full benefits.

Should I kill him?

 

Tue, 05/03/2011 - 14:13 | 1235057 blunderdog
blunderdog's picture

There's some commandment or something about that I think.

Smiting him would be just fine, though.  Smite him to death.

Tue, 05/03/2011 - 15:16 | 1235378 chumbawamba
chumbawamba's picture

No, just steal his money and buy gold with it.  Then maybe give it to the schools, from where it was taken.

I am Chumbawamba.

Tue, 05/03/2011 - 10:55 | 1233919 andybev01
andybev01's picture

Indeed; dogs are quite edible...

 

(CAPTCHA: 68 minus two equals __ ...seriously?)

Tue, 05/03/2011 - 11:22 | 1234043 NotApplicable
NotApplicable's picture

And since you can't buy dog food with SNAP, a day will come when people will go to the black market to trade them for a big bag of Kibbles & Bits.

Also, the Po Folks Consumer Report will come online and begin rating the various pet foods on such scales as protein level, flavor, chewability, digestibility, and of course, price. Ratings will come from the users in exchange for free product.

Tue, 05/03/2011 - 10:51 | 1233892 SheepDog-One
SheepDog-One's picture

SNAP food stamp usage at all time record high, while wealth concentration and control is in the fewest hands ever. Well, its all seems highly bullish to me or something...I guess all that matters at all now is further Maniacal Monetization confirmed, party on at the Deadmans Ball!

PS- Ive been saying forever that bailing out states will not happen as Central Banksters gain NO benefit whatsoever in making Mom n Pops pension whole! They cant make money off it, so it will never happen!

Tue, 05/03/2011 - 10:55 | 1233914 SoNH80
SoNH80's picture

Yep, they're priming us for total abrogation.  I've said it before and I'll say it again, counting on any form of defined-benefit pension, SS, annuity, etc. is folly.

Tue, 05/03/2011 - 11:47 | 1234172 pan-the-ist
pan-the-ist's picture

Ok Genius, where do you put your money?

Tue, 05/03/2011 - 11:55 | 1234222 SoNH80
SoNH80's picture

I pay the taxes and mandatory contributions like everyone else, but what little I have left over, I put into silver and my own land.  I plan to work until I die, as much as I am able.

Tue, 05/03/2011 - 12:00 | 1234257 pan-the-ist
pan-the-ist's picture

So you'll be in the same boat as everyone else.  So why not pretend, like them, that everything will be fine?

Tue, 05/03/2011 - 12:08 | 1234313 SoNH80
SoNH80's picture

Just like I am to pretend that the Creator cares about me personally?  Well I don't, just like Thomas Paine, Thomas Jefferson, and Ben Franklin.  And, just like those men, I look at present reality and engage with it.  I have accepted my fate, and that of my nation, I try to warn those that will listen, and I try to make my own pathetic preparations for myself and my family.  What more can be done?  More and more people share Indiana Jones' horror, in "The Temple Of Doom", when he realizes that there is no one at the controls of the plane, and they are heading right for a Himalayan mountain.  So here I am puttering around on an Internet comments section, but if one person is able to improve his preparations for the future because of my insights, it's worth it.

Tue, 05/03/2011 - 11:09 | 1233979 Arrowflinger
Arrowflinger's picture

SNAP has added a million mouths in 5 months.

Tue, 05/03/2011 - 11:36 | 1234116 tarsubil
tarsubil's picture

One way they may benefit is complete control of states through Washington. Washington can hold the debts paid over every state's head and basically tell them how things will go. More control and power gets concentrated in Washington and that is a bankster paradise.

Tue, 05/03/2011 - 11:51 | 1234181 pan-the-ist
pan-the-ist's picture

So, to keep their freedom from the Federal Government, states should tax enough to meet their liabilities?  In other words, before a state can prove it can handle autonomy, it should have its house in order?

Tue, 05/03/2011 - 19:12 | 1236240 Dollar Damocles
Dollar Damocles's picture

The public sector unions are a powerful special interest in their own right.  I wouldn't be suprised at all to see a state bailout.  But maybe after they have canabalized private sector retirement funds.

Tue, 05/03/2011 - 11:29 | 1234077 Arrowflinger
Arrowflinger's picture

Forbes in January of last year featured an analysis that was much more stark, as it used 10 year Treasury yields to depict the state of the states, instead of the typical 8% return estimates.

http://www.forbes.com/2010/01/20/states-debt-pensions-interactive-map.html

 

 

 

Tue, 05/03/2011 - 18:30 | 1236062 Buck Johnson
Buck Johnson's picture

You are correct, they can't legally bailout a states pension.  They would have to change the law, but I don't think they should even though they will via printing.  Because as soon as you bailout one state or open the door to this, then the other 49 states will want a bailout too and eventually it will be in the trillions not 630 billion.  The states are in alot worse shape than they are letting on.  What the guy quoted was statements that the state have to give to the public, but much of that data can be massaged.  When this whole thing implodes, it will make people insane with rage when they find out that they don't have anything.  And if you don't believe me google Prichard, Alabama, their town just stopped paying retirees pensions and benefits because they have no money.

http://www.nytimes.com/2010/12/23/business/23prichard.html

Tue, 05/03/2011 - 10:40 | 1233845 bankrupt JPM bu...
bankrupt JPM buy silver's picture

Part 6 Bear vid out within hours.

www.silvergoldsilver.blogspot.com

Tue, 05/03/2011 - 10:39 | 1233847 In Fed We Trust
In Fed We Trust's picture

 

Come on Tyler,

Show us a picture of a headless Arab!

Please!

Tue, 05/03/2011 - 10:41 | 1233848 Azannoth
Azannoth's picture

This is why the Govermnet should be Prohibited from, any health and retirement issues!

Tue, 05/03/2011 - 10:39 | 1233851 schoolsout
schoolsout's picture

My uncle just took the job as head of retirement for the state of SC...should be interesting.

Tue, 05/03/2011 - 10:47 | 1233871 falak pema
falak pema's picture

depends what your aunt does in her spare time...if she has any to spare from her rose garden.

Tue, 05/03/2011 - 11:09 | 1233996 Arrowflinger
Arrowflinger's picture

69% funded?

Ouch.

 

Tue, 05/03/2011 - 11:25 | 1234063 schoolsout
schoolsout's picture

the term "bagholder" came up in conversation...

Tue, 05/03/2011 - 11:41 | 1234138 Arrowflinger
Arrowflinger's picture

Pinata fits better. He won't be holding the bag that gets swattted. He will be the bag.

Tue, 05/03/2011 - 10:43 | 1233855 trav7777
trav7777's picture

most of these states are absolutely FUCKED

Tue, 05/03/2011 - 10:42 | 1233863 falak pema
falak pema's picture

How would you like your 50 fucks? Sunny side up? deep fried? or scrambled?

Tue, 05/03/2011 - 10:58 | 1233933 Dr. Richard Head
Dr. Richard Head's picture

I will take them rectally as prescribed by Dr. Geithner and Nurse Bernanke.

Tue, 05/03/2011 - 11:34 | 1234096 topcallingtroll
topcallingtroll's picture

And not the way we like it either.

Tue, 05/03/2011 - 10:41 | 1233857 LawsofPhysics
LawsofPhysics's picture

This data is old, but should be noted.  Any surprise that New York has everything covered?  The financial sector remains a cancer that the broader sectors of the economy can no longer sustain.  Hedge accordingly.

Tue, 05/03/2011 - 11:59 | 1234232 dbTX
dbTX's picture

Hedge against all inevitabilities, almost all probabilities and as many possibilities as you can

Tue, 05/03/2011 - 10:41 | 1233859 falak pema
falak pema's picture

where have all the flowers gone...along with all the money...long time spending!

Tue, 05/03/2011 - 10:47 | 1233865 TruthInSunshine
TruthInSunshine's picture

Leo K said that Pension Fund Managers are woefully underpaid in an article earlier today.

I responded by telling ole' Leo that 99.99% of what are overpaid Pension Fund Managers would have done far better to have invested in Vanguard No-Load Index Funds and then fired themselves.

Here: http://www.zerohedge.com/article/public-pension-exodus

Even far better, they could have merely bought gold, that "barbarous relic."

Tue, 05/03/2011 - 10:49 | 1233896 SheepDog-One
SheepDog-One's picture

Leo is a dork.

Tue, 05/03/2011 - 10:45 | 1233875 Mr Sir
Mr Sir's picture

QE1 and QE2 already took care of this problem. This report is misleading in that it evaluates the assets as of June 2009. We all know most pension funds are 60% plus allocated to stocks which we all know are up nearly 50% since the PEW last valued the asset side of this asset/liability mismatch. Soon stocks will be at a new all-time high and then will move higher at a 45 degree angle until all of these funds are 105% funded. Problem solved.

Tue, 05/03/2011 - 10:53 | 1233895 hedgeless_horseman
hedgeless_horseman's picture

Good thing they BTFD.

Now, only the pensioners (need real returns) are screwed, and not the fund managers (need nominal returns).  Thanks, Ben!

Tue, 05/03/2011 - 11:00 | 1233930 Global Hunter
Global Hunter's picture

what happens when more and more boomers start retiring and more and more funds hit some bids to raise some cash to meet current obligations?  

Tue, 05/03/2011 - 11:53 | 1234194 pan-the-ist
pan-the-ist's picture

You mean the entire system is a ponzi?

Tue, 05/03/2011 - 21:46 | 1236628 StychoKiller
StychoKiller's picture

Ah, there you are, Mr. VanWinkle.  Enjoy your nap?  How about a shot of O.J.?

Tue, 05/03/2011 - 10:48 | 1233876 oogs66
oogs66's picture

The Fed uses wealth effect to justify the success of QE2. Most of the wealth effect goes to a small subgroup that doesn't really notice the increased wealth - at least not in terms of additional spending.  What little wealth effect the average person gets is completely wiped out by the realization that they will not be able to receive the retirement or health benefits they expected.  That is the poverty effect Bernanke is missing.

Tue, 05/03/2011 - 11:32 | 1234084 nantucket
nantucket's picture

good point, reminds me of some research i readthat indicated GDP impact of rising equity levels is incredibly small.  Here is the moneyshot info:

"it's well established - on the basis of both U.S. and international data - that the "wealth effect" from stock market changes is on the order of 0.03-0.05% in GDP for every 1% change in stock market value, and the impact tends to be transitory at that"

here is the link: http://www.hussmanfunds.com/wmc/wmc110425.htm


Tue, 05/03/2011 - 11:49 | 1234188 oogs66
oogs66's picture

thanks

Tue, 05/03/2011 - 12:33 | 1234521 samsara
samsara's picture

That is the poverty effect Bernanke is missing.

 Bullshit.  Ben isn't "Missing" it.  He Get gets paid to IGNORE it.

The Fed is in essence owned by the David Rockefellers / Rothschilds.

He works for THEM,  They pay him to IGNORE people being destitute and to mumble in front of the camera.

 

Tue, 05/03/2011 - 10:48 | 1233878 gabeh73
gabeh73's picture

So the question is does the Fed lets the states go to the shitter so they can then blame states and claim we need more centralization...order out of chaos...problem, reaction, propose a "solution"....or is chaos and disorder and anger this would cause too great to bear for TPTB?

Tue, 05/03/2011 - 10:49 | 1233880 Misean
Misean's picture

Well, DUUUUHHHHH!

This has been the 401K bubble since the 201K gallows humor jokes started 2 years ago.

Tue, 05/03/2011 - 10:47 | 1233884 Internet Tough Guy
Internet Tough Guy's picture

Big deal. Nominal promises mean nominal requirments. Print it up and hand it out. There's your worthless money, pilgrim.

Tue, 05/03/2011 - 10:52 | 1233907 Hedgetard55
Hedgetard55's picture

ITG,

     +55.

     Greenscam was quoted as saying they could guarantee your Social Security payment, but not that it would be worth anything.

Tue, 05/03/2011 - 11:12 | 1234001 blunderdog
blunderdog's picture

The States haven't started printing their own money yet, though.  It'd really be something to see the Feds bail them out, wouldn't it?

Hah.

Tue, 05/03/2011 - 10:51 | 1233886 Rogerwilco
Rogerwilco's picture

What's all the fuss about? A few years of 20% ROI and all will be forgotten. It was just a nightmare dear, now go back to sleep and dream about Chinese solars.

Tue, 05/03/2011 - 10:52 | 1233890 Thunder Dome
Thunder Dome's picture

Hopefully, this means in the near future we will quit wasting taxpayer money on lavish public sector compensation packages.  Nah.

 

Disclosure:  I know garbage men making $120k/yr.

Tue, 05/03/2011 - 10:48 | 1233891 Stuck on Zero
Stuck on Zero's picture

The big joke here is that the total net worth of the investments does not match the current dollar value.  As soon as the big funds start to draw down their assets the whole market will collapse to nada. 

Tue, 05/03/2011 - 10:50 | 1233900 Misean
Misean's picture

Shhhhhhhhhhh! People are just getting there 401K and other retirement fund reports! And didya hear?!?! That house down the street sold! Everything is gonna be just fine in a few years...

Tue, 05/03/2011 - 11:40 | 1234147 Arrowflinger
Arrowflinger's picture

Not one in 1000 reads the mice type....

Tue, 05/03/2011 - 10:48 | 1233893 TruthInSunshine
TruthInSunshine's picture

All I have to say is that the 2011 'Bernanke Put' under equity markets will work out as spectacularly as the 2007 one did.

Tue, 05/03/2011 - 10:49 | 1233894 sschu
sschu's picture

Friends act incredulous when I say it will all come crashing down and you will be left with nothing.  They see their 401Ks, 20 years of hard work in their portfolios with a nice nest egg and it makes no sense to them.

sschu must be crazy they say, he hates Obama/Bush, loves/hates war, is a birther/911truther/JFK nut.  Whatever.

The path is before us, but Bennie etal have some tricks up their sleeve for sure that may be able to extend this for a while.  At some point someone in the game calls BS and the crash will be monumental.  All that paper wealth will evaporate in seconds.

The French Revolution is the model, the 3rd Estate, guillotine, Napoleon and death in Russia are likely in our future. 

sschu

 

Tue, 05/03/2011 - 10:53 | 1233898 Josh Randall
Josh Randall's picture

Action on Muni Bonds = Burried under the Sea

Tue, 05/03/2011 - 10:53 | 1233902 Beau Tox
Beau Tox's picture

Citizens' Austerity = Government Unfunded Obligations Default

Learn how to fend for you and yours.  Eat a Bureaucrat Today!

Tue, 05/03/2011 - 10:59 | 1233937 Urban Redneck
Urban Redneck's picture

I thought we fixed this with a 2,000 page bill that "bent" the cost curve...  What are we paying the CBO & HHS for if their estimates didn't include more than $600 BILLION in underfunding less than 2 years ago?  

Tue, 05/03/2011 - 11:17 | 1234016 Arrowflinger
Arrowflinger's picture

Hey, I got a pleasant surprise with my annual health insurance premium notice.

Premiums went DOWN 10% and my deductible went down 33%.

Was I wrong about Obamacare?

 

Tue, 05/03/2011 - 10:59 | 1233939 MarketFox
MarketFox's picture

35/635th´s is a deflationary number.....

However if all shifts to 35/635th´s....

Everybody´s equal .....

......................................

Question is even though the top 400 people in the US got 10% of the total gains....

Just how would that spread out....

................................................

 

The bottom line is that the US govt. cannot create oil or jobs.....

However it can construct proper tax policies such that the jobs required can be formed....which will also enable US labor to overide BRIC´s labor advantages....

............................................

The truth is 35-635th´s is what it is....

This means that the remaining 600/635th´s is make believe counterfeit fiat money and accounting tricks....

 

So.....

 

Which would be the best policy from here on out....

 

Counterfeiting and accounting tricks ....

 

Or an actual enduring rebuilding of the US .....

 

The elimination of the corporate-individual taxes to be replaced by a 10% consumption tax would enable the US to truly rebuild.....

 

 

 

Tue, 05/03/2011 - 11:32 | 1234081 topcallingtroll
topcallingtroll's picture

Good points.

Tue, 05/03/2011 - 11:03 | 1233950 tarsubil
tarsubil's picture

Anyone notice that Alaska has a 17 billion dollar liability and only 700K people in the entire state? $24K for every person. Um, WTF?

Tue, 05/03/2011 - 11:05 | 1233973 oogs66
oogs66's picture

Its tough for states without natural resources to balance their budget.

Tue, 05/03/2011 - 11:08 | 1233990 tarsubil
tarsubil's picture

I guess the only thing to do is just laugh at how everything everywhere has gone completely mad.

Tue, 05/03/2011 - 11:14 | 1234014 Josh Randall
Josh Randall's picture

They can see Russia from there - they need to start charging a premium for their residential views

Tue, 05/03/2011 - 11:07 | 1233974 Arrowflinger
Arrowflinger's picture

Public pension managers get their fees, year in and year out, regardless of performance.

Very nice work if you can get it. Heck, you can spin toxic assets into "Guaranteed," "stable income", or 'fixed income' and make the dumb cluck captive 'beneficiaries' think they really have a retirement. The stated 'assets' are marked to fiction.

When the victims find out what has happened, the whole notion of letting 3rd parties handle one's money will be dead for a generation.

Tue, 05/03/2011 - 11:12 | 1234000 tarsubil
tarsubil's picture

Oh, and people, I can't believe you haven't jumped on this new meme. It's okay. State pension liabilities were killed today and in honor of bankster tradition buried at sea.

Tue, 05/03/2011 - 11:11 | 1234004 Crack-up Boom
Crack-up Boom's picture

I agree-  it's hard to get anyone to acknowledge that there's a real house-on-fire problem.  They nod their heads when I trot out the figures, but then shrug it off.  They just can't see the Matrix.  I suppose I should stop trying. 

Tue, 05/03/2011 - 11:36 | 1234120 Arrowflinger
Arrowflinger's picture

The even worse estimates by Rogoff in Forbes show combined liabilities that rival family incomes for the citizens of the states.

What is frightening is that JUDGES have these quarantees of health and pension coverage and can enforce payment via property taxation.

Don't worry about fellows that are oblivious.

Plan ahead. Look ahead for the dangers. Then act.

Tue, 05/03/2011 - 11:11 | 1234007 ElvisDog
ElvisDog's picture

Interesting. WA, my home state, has a fully funded pension program but has put nothing aside for retiree health costs. Apparently, they're counting on the old people all moving to AZ to escape the cold and rain.

Tue, 05/03/2011 - 11:19 | 1234031 Seasmoke
Seasmoke's picture

nope, you will still be on the hook to the public leeches and they will spend their checks and pay taxes in Arizona, that is until the checks stop coming.....as this PONZI will fall like a bunch of dominos......dumb dumb public employees

Tue, 05/03/2011 - 11:11 | 1234008 writingsonthewall
writingsonthewall's picture

I've got a spare $5 from my last holiday to Amerika - do you think the US Government wants to borrow it?

I also have some change...

Tue, 05/03/2011 - 11:26 | 1234065 topcallingtroll
topcallingtroll's picture

We'll take it, thanks.

You got any odd jobs for america to earn some spare change? Clean your house? Maybe patrol your country?

Tue, 05/03/2011 - 11:18 | 1234019 dick cheneys ghost
dick cheneys ghost's picture

The states are abosolutly screwed........Ive got 275 stories from around the country on the dire condition of the states and cities..........the 2012 state budgets are starting to come together and its not GOOD........

 

Im not trying to get anyone to leave the ZH website but if one wants to get a sense of how bad things really are, I invite you to peruse the headlines at

 

http://nakedempire2.blogspot.com/search/label/the%20states

 

cop, firefighters, hospitals, teachers, public employees.............it is going to be a bloodbath....

Tue, 05/03/2011 - 11:26 | 1234056 topcallingtroll
topcallingtroll's picture

Naah.

Those selfish boomers will pile more debt and taxes on their children and grandchildren.

Tue, 05/03/2011 - 11:18 | 1234024 Agent P
Agent P's picture

I really need to get out of Illinois.

Tue, 05/03/2011 - 11:23 | 1234052 NotApplicable
NotApplicable's picture

If only Chicago would secede, the rest of the state might not be so bad. Well, except Springfield, but hopefully all of the cockroaches there would scurry off to Chicago once the plundering season ends.

Tue, 05/03/2011 - 12:09 | 1234343 samsara
samsara's picture

That's what everyone from UPSTATE new york thinks about NYC.   (Upstate is everything North of Westchester Co.).

If we could get rid of NYC and have it be a City State,   Upstate NY would be great.

 

Tue, 05/03/2011 - 11:44 | 1234166 SoNH80
SoNH80's picture

At least you have plenty of fresh water, top-quality soil, and some very smart business minds in metro Chicago.  Now, Maine....

Tue, 05/03/2011 - 11:56 | 1234229 Agent P
Agent P's picture

We do have top-quality soil, I just wish we'd stop using it to grow corrupt politicians and taxes.

Tue, 05/03/2011 - 12:17 | 1234427 SoNH80
SoNH80's picture

Too many pinky-ring wearers (just like Mass. and N.J.) I suppose.  Once "The Boys" take over a state legislature, it's terminal.

Tue, 05/03/2011 - 11:16 | 1234027 TruthInSunshine
TruthInSunshine's picture

The second bite is what does the trick. If once bitten are twice shy, twice bitten either get enraged or despondent.

The second bite will sting much greater.

Tue, 05/03/2011 - 11:58 | 1234219 writingsonthewall
writingsonthewall's picture

This is true - as it was in 1931.

 

The investing public (or as I call them - cannon fodder) will run away from the stock market if it screws them twice in a decade.

 

Light blue touchpaper and stand well back - NEVER return to economy once it's lit.

Tue, 05/03/2011 - 11:21 | 1234046 topcallingtroll
topcallingtroll's picture

With a 50/50 allocation between stocks and bonds it means a 5% return on bonds and 11% return on stocks.

Anybody who has kept up with the debate knows that is impossible.

Record profits already as percent of gdp...regression to mean.

Trailing PE of 15 gives us returns in the stock market in the average to low range.

Underfunded and overoptimistic equals disaster.

Tue, 05/03/2011 - 12:12 | 1234344 TruthInSunshine
TruthInSunshine's picture

Madoff made 12% each and every year, and even during the biggest times of bubbles, massively wealthy people ran to him with bags of money because of that 'sure thing.'

Harry M, the whistleblower, knew that 12% was statistically impossible year after year (data suggest that 8% is just as farcical).

I believe Shiller has demonstrated that after survivorship bias, but before taxes, and other costs are taken into account, equities have returned less than 2.2% annually, over a 80 year+ history.

Tue, 05/03/2011 - 11:36 | 1234125 gwar5
gwar5's picture

Yep.

I think the pension system will panic or implode if the Bernank does not keep their stocks growing. Otherwise they might (gasp!) have to buy gold.

Everybody who does not already have a self directed IRA, should.

Tue, 05/03/2011 - 11:45 | 1234161 Arrowflinger
Arrowflinger's picture

Everybody who does not already have a self directed IRA, should.

Anyone with a hefty 401k offered severence and a buyout should take a really hard look at that advice and jump on it.


Tue, 05/03/2011 - 11:48 | 1234182 I am Jobe
I am Jobe's picture

Agreed. What do you mean by Hefty in Dollar or Ben Dollars? Will 250K do or does it need ot be higher to leave the USA.

Tue, 05/03/2011 - 12:45 | 1234601 topcallingtroll
topcallingtroll's picture

You pick the right place and that will get you a nice apartment and fulltime house servant by only withdrawing 5 percent per year. If you get bored then teach english for extra money.

You will get laid all the time by younger ladies.

Tue, 05/03/2011 - 13:03 | 1234679 Truthiness
Truthiness's picture

Where is this great country you speak of? And what investment is going to allow me to withdraw 5% per annum on $250k...?

Tue, 05/03/2011 - 13:39 | 1234861 technovelist
technovelist's picture

Where do you suggest? I've heard good things about Uruguay, but it doesn't seem that cheap these days, at least if you want a well-built and managed apartment.

Tue, 05/03/2011 - 14:53 | 1235276 PulauHantu29
PulauHantu29's picture

ENRON should have already taight people that sad lesson...but I guess it hasn't.

Tue, 05/03/2011 - 11:46 | 1234169 GubbermintWorker
GubbermintWorker's picture

Hmmmm, time to buy more silver.

Tue, 05/03/2011 - 11:47 | 1234174 I am Jobe
I am Jobe's picture

Bend over America's Pensioners. You will live like the rest of the fucking commoner and you will know what it feels like.

Tue, 05/03/2011 - 11:48 | 1234184 nantucket
nantucket's picture

so many people at so many levels for so many years have shirked their duty to get involved and keep an eye on the workings of govt.  i'm guilty also.  part of me thinks that i elected people that should have acted on our behalf and been our vigilant watchguards against such destructive imbalances.  if i was to take the necessary time to figure out all of the rube goldberg systems, and rules, and regulations, i could not have held a full time job and supported my family. 

So you are faced with the choice of knowing that the elected won't protect you (and you wind up financially destroyed) or you quit your job to be the watchdog (and be financially destroyed).  The only way to "win" the game was to be a part of the elected that set the rules...they always take care of themselves. That, in effect, is giving up and becoming the destroyer we so despise.

the size and complexity of the federal govt and all its working that have a massive impact on the average citizen, simply got too big for the average citizen to understand and excercise diligent control over.  

It's so effing large and convaluted with so many agencies and bureaucracies that it's grossly unfair/unreasonable to expect the average citizen to be able to effectively understand it well enough.  

WTF?  How did we get here?  I know how we did, it's a rhetorical questions.

 

 

Tue, 05/03/2011 - 15:48 | 1235519 Vashta Nerada
Vashta Nerada's picture

Yes, the people we elected are both greedy and foolish, but the far bigger problem is that government has grown too large.  We need to start shuttering whole government departments, starting with the EPA, the FDA, the Fish and Wildlife Service and the Dept. of Education.

Tue, 05/03/2011 - 11:51 | 1234202 ReallySparky
ReallySparky's picture

When the boomers wake up they are going to be sooooo mad.

Tue, 05/03/2011 - 12:00 | 1234256 Thunder Dome
Thunder Dome's picture

Tough titty.  If they couldn't get rich in one of the greatest boomtime periods in american history, they deserve an austere old age.

Tue, 05/03/2011 - 12:06 | 1234291 topcallingtroll
topcallingtroll's picture

Yeah.

And they are going to take it out on their grandchildren by loading them up with debt before they can vote.

Tue, 05/03/2011 - 14:37 | 1235183 Bicycle Repairman
Bicycle Repairman's picture

No, the boomers are going to load you up with debt.  Then you'll try to pass it to your children, but I expect it will all blow up in your face.  Apres the boomers, le deluge.

Tue, 05/03/2011 - 12:08 | 1234305 TruthInSunshine
TruthInSunshine's picture

Ron Paul:   So Ben, I really hate the idea you're intervening in the markets.

Bernank:   Well, Congressman, you do know that if we didn't intervene, equities would crash, and this would take down pensions, 401(k)s, IRAs and many other forms of retirement classes. It would also cause major contraction of tax revenues. And since we have little in the way of organic domestic investment, and our manufacturing base has been wiped out stateside, it could cause a complete depression.

Ron Paul:  So Ben, are you saying we have to do what the Soviet Union did in its waning days?

Bernank:   Precisely, Congressman. Precisely.

Tue, 05/03/2011 - 12:12 | 1234375 davepowers
davepowers's picture

the percentages are likely overstated for all states with a significant part of their pension pool invested in private equity. Valuations for those illiquid investments lack objective standards and are basically what the con artists, excuse me, PE operatives say they are. If reality ever hits the PE world, then knock some more percentages off the pensions' performance.

Tue, 05/03/2011 - 12:22 | 1234443 machineh
machineh's picture

Ever heard of moral hazard? Unlike corporate pension plans, government plans (state and federal) are exempt from the Erisa Act of 1974, which would require them to keep their pension plans properly funded ... as well as to appoint trustees with a fiduciary duty to the beneficiaries.

When government exempts itself from its own prudential rules, a financial hole predictably opens up. 

The sovereign privilege of exempting itself from its own laws is a doomsday mechanism for both the economy and civil liberties, starting with the Federal Reserve's exemption from fraud and counterfeiting laws.

Tue, 05/03/2011 - 12:23 | 1234451 gigeze787
gigeze787's picture

Dear Proletariat:

With this report, let me introduce you to one of the primary purposes behind QE2...regardless what comes out of my mouth.

QE2 is all about preventing a middle class revolt by inflating the stock market to mollify aging and feckless baby boomers (i.e. voters) about their diminished retirement funds.

This is why your hypocritical, self-serving, and profoundly stupid members of Congress have hardly objected to QE2, and not raised the obvious objection that I am breaking the law by violating the only two mandates of the Federal Reserve Act -- price stability and full employment. These politicians ALL want a centralized government to solve the problem they created -- so "free market capitalism" is dead until I say otherwise.

Love,

BB

Tue, 05/03/2011 - 12:26 | 1234473 TruthInSunshine
TruthInSunshine's picture

You forgot the p.s.

 

p.s. - or until I lose control of interest rates and/or the rate of the USD decline, at which point, welcome to WeimarAmerika, Bitchez!

Tue, 05/03/2011 - 13:22 | 1234783 FreeNewEnergy
FreeNewEnergy's picture

Must.Plant.Corn.

Tue, 05/03/2011 - 13:47 | 1234918 Hacksaw
Hacksaw's picture

Duh, did anyone honestly think that governments would stay out of large pools of money? Back in the 1990s I read a report by the Clinton administration that said the last large source of money was retirement accounts, including SS, and the government had to figure out how to access that money. Bam! about 20 years later pensions and SS are going broke. Welcome to the real world morons, the government borrowed/stole your retirement money to pay for pork projects, to give to the top 1%, to pay for the defense of the rest of the free world and now the tax payers don't want to pay it back. So, SCREW YOU !

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