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Now I know it's gonna get worse
Old 08-14-2008, 02:53 PM   #1
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Now I know it's gonna get worse

Here's a scary thought - for those that think it can't get any worse.

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Aug. 14 (Bloomberg) -- Public pension funds in the U.S. are increasing bets on high-risk hedge funds and real estate in an attempt to fill deficits in retirement plans and make up for their worst performance in six years.
New York Comptroller Thomas DiNapoli is asking lawmakers to increase a cap limiting the amount of so- called alternative investments in the state's Common Retirement Fund, the third-biggest U.S. public pension at $153.9 billion. South Carolina's retirement system adopted a plan in February to invest as much as 45 percent of its $29 billion in hedge funds, private equity, real estate and other alternatives, from nothing 18 months ago.
Bloomberg.com: Invest

Methinks Wal-Mart is the key current investment for the future. They will have an unlimited supply of aged pensionless greeters, cashiers and other "associates" with medicare - no complaints about health benefits.
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Old 08-14-2008, 03:03 PM   #2
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A bit late to the party...
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Old 08-14-2008, 03:44 PM   #3
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No big deal. Not like it would be possible for gov or state pensions to go belly up.. right?...right..8)
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Old 08-14-2008, 03:49 PM   #4
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You mean Swenson's methods aren't good enough for pension funds?
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Old 08-14-2008, 06:42 PM   #5
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You mean Swenson's methods aren't good enough for pension funds?
Swenson's results were achieved in an environment of only moderate competition for these assets.

An unalterable and beautiful law of capitalism is that yields must fall as more money is attacted to any asset.


I think that is what HFWR meant by "late to the party". A lot of the vintage Bordeaux has been served, soon to come might be 2 Buck Chuck.

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Old 08-14-2008, 07:29 PM   #6
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Biggest strain on state pensions, is teachers. There's alot of them, with a strong union, and the public illusion that they're underpayed. Their DB pensions dwarf most federal ones, with union contracts manipulating the "high 3" formula where they retire on 80-90% of pay. I know a couple, where the guy was a principal, the wife a teacher. Never saved much their whole life, yet are retired at 55 on $10K a month for the rest of their life. Nice work if you can get it I suppose.
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Old 08-14-2008, 07:32 PM   #7
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Nice work if you can get it I suppose.
Not that I would want to do it, but there are openings.

Teaching jobs and teaching positions in education
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Old 08-14-2008, 08:44 PM   #8
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"South Carolina's retirement system adopted a plan in February to invest as much as 45 percent of its $29 billion in hedge funds, private equity, real estate and other alternatives, from nothing 18 months ago."

Here's a magazine article that would suggest it is unwise to use South Carolina as an example of government trends, especially on tasks with a fiduciary responsibility:
A Government Adrift

South Carolina still runs on its 1895 constitution. Guess what? It doesn't work.
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Make public employee pension plans available to non-employees?
Old 08-14-2008, 08:48 PM   #9
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Make public employee pension plans available to non-employees?

The same issue of Governing has an article that's a bit off-topic to the original post regarding pension investment strategies, but relevant to a general discussion on government pension policy:
Public Pension Prowess

Some state pension plans are doing so well that the private sector could use their advice...
"Some, like CalPERS, have "developed brand-name equity," says Brad Barber, professor of finance at the University of California-Davis. "They've earned solid rates of return for money they have invested."

This has led to a surprising development: A growing number of states are looking at pension plans as a partial solution to the problem that afflicts private-sector employees.


Fifty percent of the private workforce has no pension plan — no 401(k) or any other retirement savings program. So, officials in several states think the pension plans could do some good by helping to design work-based retirement savings programs for small businesses or even manage private retirement programs. Under some scenarios, public pension plans would, in effect, become agents for private employers — to administer and invest money placed in, say, an individual retirement account or a 401(k)-style plan."
Since so many RE forum members are on track for a pension or have had the foresight to pursue DIY investing for retirement, relatively few of us would directly benefit from such proposals. But we can still have opinions on whether this a promising idea for the "50% of the private workforce that has no pension plan".

Provided that cool heads and institutional safeguards are in place to counterbalance wacky management examples like South Carolina, I'm open to it being on the table. What's a better alternative for the average Joe with a high-school education, waiting for blood-sucking annuity salesmen and get-rich-quick schemers Wall Street to set up IRA kiosks in check-cashing stores?
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Old 08-14-2008, 09:33 PM   #10
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Biggest strain on state pensions, is teachers. There's alot of them, with a strong union, and the public illusion that they're underpayed. Their DB pensions dwarf most federal ones, with union contracts manipulating the "high 3" formula where they retire on 80-90% of pay. I know a couple, where the guy was a principal, the wife a teacher. Never saved much their whole life, yet are retired at 55 on $10K a month for the rest of their life. Nice work if you can get it I suppose.
I don't know about the couple you're talking about, but I have a definite impression that teachers are underpaid (although I also agree that their unions are a pain in the ass.) Several years prior to retiring from the Navy, I did serious research into becoming a teacher for a second career. What I found were that:
- there were high barriers to entry (as the economists say), owing primarily to the influence of the teachers' unions
- there was modest (at best) pay which rose over time to decent pay but never became great pay
- if you were going to do it right, the hours you had to invest during the first several years (while you got your act together) were incredible! (Lesson planning, etc.) Even after getting by those years, it still involved a lot of hours.

I understand summers off, but a lot of them take courses, teach summer school etc.

I've probably wandered off the topic of public pensions (which I understand are in trouble) but I just want to make the point that my research showed that teaching is a really demanding profession (if you do it right) and the pay is, all things considered, quite modest.
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Old 08-14-2008, 09:45 PM   #11
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I've probably wandered off the topic of public pensions (which I understand are in trouble) but I just want to make the point that my research showed that teaching is a really demanding profession (if you do it right) and the pay is, all things considered, quite modest.
The lifetime pay, including vacations, holidays and very long retirements with mostly COLA pensions and health care is very high.

As far as "if you do it right", if they did it right 90 of the science and engineering PhD candidates in US universities would not be foreigh nationals.

They clearly rarely do it right, and the safest career path is mediocrity. Admittedly most of that is demanded by inane school boards, superintendents, principals and the entire unholy tribe.

The simple truth is that American schools, until the university level and too often including the university in all but hard science, are engaged in indoctrination, not education.

Ha
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Old 08-14-2008, 09:51 PM   #12
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"South Carolina's retirement system adopted a plan in February to invest as much as 45 percent of its $29 billion in hedge funds, private equity, real estate and other alternatives, from nothing 18 months ago."
Pretty typical of an endowment-type asset allocation. Not to say that these are good or bad investments. But in the right allocations they've done pretty well in the past. Of course, the guys doing the endowment investing are warning that these obscure classes wont do as well in the future because they're over-exposed. But then again Warren keeps saying his company is going to have crappy returns next year... :
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Old 08-15-2008, 10:23 AM   #13
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The bottom line is that we need to draw a line in the sand. Those public employees who are already in the system and promised indeterminate retirement benefits through retiree health insurance and DB pensions should receive them. But no more new hires should be put into that unsustainable system that threatens to bankrupt us all and require more and more taxes to bail out.

The worse this gets, the more you'll see taxpayer backlash as people who don't get these retirement benefits grow more and more resentful of paying ever higher taxes to sustain these perks for others.
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Old 08-15-2008, 11:55 AM   #14
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Originally Posted by Htown Harry View Post
Here's a magazine article that would suggest it is unwise to use South Carolina as an example of government trends, especially on tasks with a fiduciary responsibility:
A Government Adrift

South Carolina still runs on its 1895 constitution. Guess what? It doesn't work.
I do like this part:
South Carolina also has a champion of restructuring in Sanford himself. Truth be told, though, that's more of a curse than a blessing. Sanford is a combative, uncompromising loner who has few allies within his own Republican majority. He is not the sort of governor to whom even the more reformist members of the legislature would feel completely comfortable delegating new powers. Still, the chances seem good that, before too long, South Carolina government will step out of its 19th-century clothing and move toward the structure that prevails virtually everywhere else in America.

Needless to say, I love the guy:"...combative, uncompromising loner". SC isn't really a leader in anything except maybe teen pregnancy or something along those lines. And heck, the 1895 constitution, why that's newfangled thinking around these parts. and um, we've got chiggers and rattlesnakes, and fire ants, too. (how'm I doin' REW?)
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Old 08-15-2008, 11:58 AM   #15
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Old 08-15-2008, 01:02 PM   #16
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Originally Posted by ziggy29 View Post
The bottom line is that we need to draw a line in the sand. Those public employees who are already in the system and promised indeterminate retirement benefits through retiree health insurance and DB pensions should receive them. But no more new hires should be put into that unsustainable system that threatens to bankrupt us all and require more and more taxes to bail out.

The worse this gets, the more you'll see taxpayer backlash as people who don't get these retirement benefits grow more and more resentful of paying ever higher taxes to sustain these perks for others.
I think the point is that by leaving the current system in place, the new workers 'taxed' for the plans helps to continue pumping money in long enough for the current aged retirees to continue to receive benefits, and that system will run long enough for the current folks running the plans to retire or move on to other jobs.

After that its someone elses problem!

Wave after wave of funny little bubbles have washed over us. At the root of each one is an "I got mine" attitude, a "Thats someone elses problem" mentality and a "If it all falls apart, someone will bail me out" line of thinking.
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Old 08-15-2008, 01:03 PM   #17
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Originally Posted by ziggy29 View Post
The bottom line is that we need to draw a line in the sand. Those public employees who are already in the system and promised indeterminate retirement benefits through retiree health insurance and DB pensions should receive them. But no more new hires should be put into that unsustainable system that threatens to bankrupt us all and require more and more taxes to bail out.

The worse this gets, the more you'll see taxpayer backlash as people who don't get these retirement benefits grow more and more resentful of paying ever higher taxes to sustain these perks for others.
Sounds a bit like the SS problem, or the solution of many to the impending collapse, disaster, trainwreck problem a decade or so from now.
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Old 08-15-2008, 03:54 PM   #18
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The bottom line is that we need to draw a line in the sand. Those public employees who are already in the system and promised indeterminate retirement benefits through retiree health insurance and DB pensions should receive them. But no more new hires should be put into that unsustainable system that threatens to bankrupt us all and require more and more taxes to bail out.
To some degree, I think that's what happened to Federal employees a number of years ago. They used to have a system (CSRS) to which they contributed a percentage of their pay and got a really sweet pension upon retirement. They were not part of Social Security. Now they contributed to SS, have a 401K equivalent and (maybe - I don't exactly recall) a far less generous pension arrangement. (Or maybe part of the 401K equivalent is mandatory and part of it is voluntary - I don't really recall and haven't the interest in researching it right now.) At the time, I was assigned in the military to a Federal agency there was a period during which some (civilian) people were locked into the old system, newer hires were locked into the new system and some people had the choice of rolling over from the old to the new. From everything I heard, virtually everyone stayed with the old system because it was so much more generous.
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Old 08-15-2008, 03:58 PM   #19
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The lifetime pay, including vacations, holidays and very long retirements with mostly COLA pensions and health care is very high.

As far as "if you do it right", if they did it right 90 of the science and engineering PhD candidates in US universities would not be foreigh nationals.

They clearly rarely do it right, and the safest career path is mediocrity. Admittedly most of that is demanded by inane school boards, superintendents, principals and the entire unholy tribe.

The simple truth is that American schools, until the university level and too often including the university in all but hard science, are engaged in indoctrination, not education.

Ha
Several of your points are well taken. The retired military guys I know (both officer and enlisted) who went into teaching as a second career almost unanimously describe teaching as "the hardest and most challenging - but most satisfying - job I've ever had." So I presume they're either "doing it right" or their military careers were a cake walk. And I doubt the latter is true.
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Old 08-15-2008, 05:18 PM   #20
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Several of your points are well taken. The retired military guys I know (both officer and enlisted) who went into teaching as a second career almost unanimously describe teaching as "the hardest and most challenging - but most satisfying - job I've ever had." So I presume they're either "doing it right" or their military careers were a cake walk. And I doubt the latter is true.
Finally, a comment with perspective. Most teacher-haters wouldn't last two days in the classroom.
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