The Mess That Greenspan Made - Part 5

Bridgewater Warns on Pensions

Since the financial crisis, there haven’t been too many warnings about the dim prospects for pension funds living up to their long-term promises as a result of their overly optimistic assumptions about rate of return, however, Bridgewater reinvigorated the debate as recounted in this USA Today story today that might make some Holiday Inn Express patrons choking on their cinnamon rolls.

Influential and well-regarded hedge fund Bridgewater Associates Wednesday warns public pensions are likely to achieve 4% returns on their assets, or worse. If Bridgewater is right, that means 85% of public pension funds will be going bankrupt in three decades.

Bridgewater came to these conclusions by stress testing the nation’s public pension plans, much the way banks need to be evaluated on what could happen given a wide range out outcomes.

Public pensions have just $3 trillion in assets to invest to cover future retirement payments of $10 trillion over the next many decades, Bridgewater says. An investment return of roughly 9% a year is needed to meet those onerous obligations.

This is just one more reason why the U.S. has a national imperative, ably assisted by the folks at the Federal Reserve,  to create bigger and bigger asset bubbles.

How else are pension funds going to pull this off?

All the Gold in China

This chart depicting the dramatic rise in China gold demand from Sharelynx appears to be making the rounds this morning and it really is stunning. Note that the 2013 demand total of nearly 1,600 tonnes shown below is considerably higher than the World Gold Council figure, but also considerably lower than some of the more bullish estimates.

Granted, most U.S. investors could care less about this sort of thing, that is, so long as share prices for such companies as Tesla and Facebook continue to rise.

But, others around the world have noticed the sharp increase in gold demand from the Middle Kingdom and the possible (actually, pretty likely) future impact on prices, the latest example being China ‘has more gold than official figures show’ in today’s Telegraph.

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Thursday Morning Links

MUST READS
Huge demand for Greek five year bond – BBC
The rebound in Greece is astonishing – Reuters
Fed Plays Down Own Interst Rate Forecasts – Bloomberg
Bank of England holds fire but set to lead on rate hike – CNBC
UK and US interest rate rises: who will blink first? – Telegraph
Jobless Claims in U.S. Drop to Lowest Level Since May 2007 – Bloomberg
Currency War: Europeans Ordered to Start Consuming – Dollar Collapse
Putin Expected to Sign China Gas Deal as Crisis Forces Hand – Bloomberg
Report: 85% of pensions could fail in 30 years – USA Today
Yes, the SEC was colluding with banks on CDO prosecutions – Reuters
SAC Capital to be sentenced in $1.8B fraud deal – Washington Post
Ambivalence About Front-Running – Forbes
What you need to know about the Heartbleed bug – AP

MARKETS/INVESTING
Asia stocks seesaw as China trade drops – AP
Who wins when ‘activists’ invest? Not you – MarketWatch
Why Do Investors Make Bad Choices? – Bloomberg
Do you own stock? You’re getting a 23% raise – USA Today
Yes, stocks are rigged and Fed is the biggest rigger – MarketWatch
U.S. To Withdraw $430B From Stocks In 2014 – Most Since Last Bubble – Zero Hedge
Treasuries Advance, Yield Drops to 3-Week Low on Fed, China Data – Bloomberg
Gold at 2-1/2-week high after Fed minutes ease rate fears – Reuters
Solid Gains for Gold as Market Place Deems Fed More Dovish – Kitco
Citi remains negative on Gold mining sector – BullionStreet
China ‘has more gold than official figures show’ – Telegraph

ECONOMY/WORLD/HOUSING/BANKING
The Rise of the Secular Stagnationist – PragCap
Stiglitz: Inequality an Equal Concern for China, U.S. – Caixin Online
China says no major stimulus planned; March trade weak – Reuters
Economists up German growth forecast to 1.9 pct – AP
Unemployment still main worry for Spanish: study – xinhuanet
Spain Borrowing at German Yields? It’s Possible, Thanks to U.S. – Bloomberg
How Western Is Germany? Russia Crisis Spurs Identity Conflict – Spiegel
Canada’s housing market boosts soft landing view – Finance & Commerce
Banker Who Helped Crash Housing Market Crafting Mortgage Reform – Free Beacon
Fed’s hard line on funding to bring more pain to Wall Street – Reuters
Fed officials fretted over investor reaction to rate forecasts: minutes – Reuters
How the Feds Blind Us To Our Malaise – RCM

 

Where in the World is Ukraine?

There are some pretty fascinating details behind the map below from this Washington Post survey where respondents were asked to locate Ukraine on a map of the world.

To wit:

We wanted to see where Americans think Ukraine is and to learn if this knowledge (or lack thereof) is related to their foreign policy views. We found that only one out of six Americans can find Ukraine on a map, and that this lack of knowledge is related to preferences: The farther their guesses were from Ukraine’s actual location, the more they wanted the U.S.  to intervene with military force.

Most thought that Ukraine was located somewhere in Europe or Asia, but the median respondent was about 1,800 miles off — roughly the distance from Chicago to Los Angeles — locating Ukraine somewhere in an area bordered by Portugal on the west, Sudan on the south, Kazakhstan on the east, and Finland on the north.

Interestingly, members of military households were no more likely to correctly locate Ukraine (16.1 percent  correct) than members of non-military households (16 percent  correct), but self-identified independents (29 percent  correct) outperformed both Democrats (14 percent  correct) and Republicans (15 percent  correct).

That last part – on party affiliation – speaks volumes about the nation’s political woes…

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