Wednesday, September 29, 2010

Those Public Employee Pensions? Ruh-Roh

Ticker uses material from someone he really does NOT like: Gross of PIMCO.

One of Gross' observations that should be a big red flag (repeat: BIG RED FLAG):

Investors are faced with 2.5% yielding bonds and stocks staring straight into new normal real growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the long run at 12% returns.


Looks as though public-employee pension funds (and for that matter, private-employee funds--the "fixed payment" pensions) which made promises based on 'normal' 6%++ returns (or worse, 7%++ "normal" returns) may be in trouble.


1 comment:

Art Deco said...

I am not sure who made those promises. I do know that the last time I checked, there were $2.4 tn invested in defined-benefit pension plans. Citigroup alone had $2.2 tn in assets in 2007. These pension shortfalls are bad but we have been facing worse.