The Gathering Pension Fund Storm
Every morning, I walk out the door of my K street condo and hook a left at the Pension Benefit Guaranty Corporation on 12th Street. Like clockwork, a kaleidoscope of activity surrounds the federal corporation created in the mid-1970s to protect the pensions of American workers.
You might imagine, then, my interest in this recent supposition from our Libertarian friends at Reason magazine that our next financial catastrophe may well be the implosion of pension funds worth trillions of American dollars.
Like many caught in this financial quagmire, I regularly confront the rhetorical question: when -- and where -- will this financial mess end? Unlike collateralized debt obligations—previously easy to sell and now impossible to price—pension funds were supposed to be really safe investments. At least that was my view until I learned that "defined benefit funds—those promising a predetermined amount of retirement money to the payee—averaged losses of 26 percent, making it the worst year on record for corporate and public pension funds.
"Traditionally, public investments and union-based corporate pension funds were managed according to strict fiduciary principles designed to protect workers and taxpayers,” says Reason. “For the most part they invested in safe government securities, such as bonds or U.S. Treasury bills. Professional managers oversaw the funds with little political interference.
“But during the last 30 years, state pension funds began playing the market, putting their money into riskier and riskier securities—first stocks, corporate bonds, and foreign investments, then real estate, private equity firms, and hedge funds.”
Sure, it sounded good at the time; Americans are all to blame for lacking restraint. But the financial “experts” in charge of this money should have taken a conservative approach; instead, they ignored their primary responsibility to protect shareholder value, opting instead to aggressively attempt to grow it through the complex schemes that the average participant would not have considered. Their duplicity continues to blow my mind, but so does the crumbling faith in any investment system out there.
Maybe we should just throw out all of the old formulas—risk adjusted returns, arbitrage pricing theory—and wait for the apocalypse. What’s the point of institutional investment when the safest place to put your money is under your mattress?
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The Oxfam report prompted Anand Giridharadas to tweet: "Don't be Pinkered into everything's-getting-better complacency."
- A new report by Oxfam argues that wealth inequality is causing poverty and misery around the world.
- In the last year, the world's billionaires saw their wealth increase by 12%, while the poorest 3.8 billion people on the planet lost 11% of their wealth.
- The report prompted Anand Giridharadas to tweet: "Don't be Pinkered into everything's-getting-better complacency." We explain what Steven Pinker's got to do with it.
Moans, groans, and gripes release stress hormones in the brain.
Could you give up complaining for a whole month? That's the crux of this interesting piece by Jessica Hullinger over at Fast Company. Hullinger explores the reasons why humans are so predisposed to griping and why, despite these predispositions, we should all try to complain less. As for no complaining for a month, that was the goal for people enrolled in the Complaint Restraint project.
Participants sought to go the entirety of February without so much as a moan, groan, or bellyache.
- Facebook and Google began as companies with supposedly noble purposes.
- Creating a more connected world and indexing the world's information: what could be better than that?
- But pressure to return value to shareholders came at the expense of their own users.
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