Agree with him, they all should be in prison, every single one of them.
"Wednesday, August 12. 2009
Karl Denninger 08:55
"Warned You: Pensions
"I warned about this in the 2008 "Look Ahead", and then several times during 2008: Nobody cared.
Now, CALPERs chief actuary is finally speaking up:
Ron Seeling, the CalPERS chief actuary, described the process used to “smooth” the rate increases that will be imposed on the 1,500 local government agencies in CalPERS in 2011 in the wake of the stock market crash.
Instead of a rate increase of 4 to 20 percent of pay, the smoothing will reduce the rate hike to a more manageable 0.5 to 2 percent of pay.
“I don’t want to sugarcoat anything,” Seeling said as he neared the end of his comments. “We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions.”
Oh, but he DID sugarcoat it.
See, the problem here is that these pension managers bought into the hype too. They even bought into real estate developments - buying into the "everything goes up 10% a year forever."
Never mind that an actuary has as his primary job understanding the long-term impact (and possibility) of compounding and exponential growth. That is what an actuary does!
It is particularly galling to hear pension actuaries spout off about how there's a "problem" with the sustainability of their funds. Where were they a year, two years, five years ago? Where were they when the pension fund bought into the real estate hype? When it bought into stocks trading near all-time highs? When The Fed and others in policy roles were making decisions that would drive down bond yields?
Silent, that's where.
These people should be in prison. All of them.
But they won't be, and you will be the one who takes it on the chin.
No, folks, it will not be "ok" in your retirement. CALPERs is not the only fund like this in serious trouble - in point of fact, essentially all of them are. These funds and the entities that sponsor them have all made promises with their mouth that were predicated on investment returns (and growth) that were absolutely impossible, on a mathematical basis, to be sustained.
The fun in this regard is just getting started; I tried to get people interested (especially union folks who could raise hell quite effectively) last year on this matter, but nobody wanted to listen when the sun was still out (spring and early summer), even though there were ominous clouds gathering on the horizon.
Now, a year later, its too late. The tsunami is now clearly visible and curling over, its moving at 70mph, and you can run - at best, and for a short while - at 15mph.
Got life vest?"