Author Topic: The $2 Trillion Hole (Barron's)  (Read 590 times)

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Offline zeitgeist

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The $2 Trillion Hole (Barron's)
« on: March 16, 2010, 05:27:46 PM »
Looking for the next bubble?  

LIKE A CALIFORNIA WILDFIRE, populist rage burns over bloated executive compensation and unrepentant avarice on Wall Street.

Deserving as these targets may or may not be, most Americans have ignored at their own peril a far bigger pocket of privilege -- the lush pensions that the 23 million active and retired state and local public employees, from cops and garbage collectors to city managers and teachers, have wangled from taxpayers.

Some 80% of these public employees are beneficiaries of defined-benefit plans under which monthly pension payments are guaranteed, no matter how stocks and other volatile assets backing the retirement plans perform. In contrast, most of the taxpayers footing the bill for these public-employee benefits (participants' contributions to these plans are typically modest) have been pushed by their employers into far less munificent defined-contribution plans and suffered the additional indignity of seeing their 401(k) accounts shrivel in the recent bear market in stocks.
Link to entire article

I found the part on Muni's very interesting.

The municipal-bond market, for one, seems vulnerable to the growing public pension mess. Warren Buffett, in his 2007 Berkshire Hathaway annual report, inveighed against the "woefully inadequate" funding in many public pension funds to meet "huge" promised payments to retirees. True to his word, Buffett has sold precious little municipal-bond insurance in a Berkshire Hathaway unit he set up for that purpose in 2008.


Anyone who follows Howie Carr knows his reliance on his Muni's...

Should one a man of wisdom meet
who points out faults and gives reproof,
who lays a hidden treasure bare,
with such a sage should one consort.
Consorting so is one enriched
and never in decline.