Pension Funds attempt to look out 50 years in their investment horizon. The problem is that they are just a group of men taking their best educated guess. In the 1980’s I had a life insurance policy that assumed long term rates to average 9%… wrong! This was after the Federal Reserve had pushed rates up to 15% and above. Now long term rates are pathetic and have lasted for 5 years due to another action by the Fed. Detroit can thank the Federal Reserve in part for its bankruptcy. Pension Funds are suppose to be self-funding based on the contributions of those who are now receiving checks. However if you have financial bubbles popping everywhere, how can you properly invest the principal? Money Managers used to look at “return on investment”. Now they look at “return OF investment”. There are no safe paper assets anymore. You can thank the American Politicians for allowing banks to become casino operations. The only assets with no intrinsic liability attached are gold, silver, oil, gas, farm land, and other tangible assets.
“Muni Retirees Face 90% Loss Under Detroit’s Pending "Free-Fall" Bankruptcy”
Wouldn’t you hate to wake up to that headline after spending 20-40 years as a city employee?
This is the historical 10 Year U.S. Government Bond Yield. Get the picture?
