A federal agency rolls the dice to fund busted pension plans, showing that the gambler's thinking that got us into the housing and credit mess is alive and well.
What's the scariest investing story of 2008 so far?
It's not news that the median price of a new house is down 17% from its 2007 high --- and still falling.
Or that Miami has a 37-month supply of unsold condos, with 19,000 more new units set to hit the market this year.
Or even that losses at banks and investment banks in the debt-market meltdown could hit $400 billion.
Here's my nominee:
The Pension Benefit Guaranty Corp., the government agency that protects the pensions of 44 million workers in case their employers can't (or won't) pay promised benefits, has announced that to avoid going bust it will double the percentage of its portfolio -- to 45% -- that it puts into stocks. An additional 10% will go into alternative investments, including hedge funds.
In other words, facing a $14 billion deficit and even larger projected shortfalls, the Pension Benefit Guaranty Corp., or PBGC, decided not to save (by raising premiums) or to live within its means (by cutting benefits) but to gamble in the financial markets by taking on more risk. The PBGC was so proud of its new strategy that it announced it on Presidents Day, when the U.S. financial markets were closed and almost no one was paying attention.
Talk back: Are you concerned about this federal agency's gamble?
So why is this so scary?
Because as a result of 10 years of booms and busts -- the Asian currency crisis, the Long Term Capital Management hedge fund disaster, the tech stock bear market of 2000-02, the housing smash-up, the debt market debacle -- I've increasingly come to believe that those of us who play by the rules (work hard, live within our paychecks, save) are chumps. The way to get ahead is to gamble big and then, if you lose, find someone to cover your losses.
Anger and fear
I've been hearing the same thing in e-mails from some of you. There's sympathy for families that were defrauded in the housing boom and now face foreclosure. There's a willingness to fix the system so that buyers with a mortgage they can't afford don't lose everything. But there's also a deep anger from those of you who played by the rules and didn't buy more house than your paychecks would cover and are now paying the price in falling home values, a slowing economy, jobs lost and a sinking stock market.
http://articles.moneycentral.msn.co...tInvestingNews.aspx?GT1=33002&ref=patrick.net
What's the scariest investing story of 2008 so far?
It's not news that the median price of a new house is down 17% from its 2007 high --- and still falling.
Or that Miami has a 37-month supply of unsold condos, with 19,000 more new units set to hit the market this year.
Or even that losses at banks and investment banks in the debt-market meltdown could hit $400 billion.
Here's my nominee:
The Pension Benefit Guaranty Corp., the government agency that protects the pensions of 44 million workers in case their employers can't (or won't) pay promised benefits, has announced that to avoid going bust it will double the percentage of its portfolio -- to 45% -- that it puts into stocks. An additional 10% will go into alternative investments, including hedge funds.
In other words, facing a $14 billion deficit and even larger projected shortfalls, the Pension Benefit Guaranty Corp., or PBGC, decided not to save (by raising premiums) or to live within its means (by cutting benefits) but to gamble in the financial markets by taking on more risk. The PBGC was so proud of its new strategy that it announced it on Presidents Day, when the U.S. financial markets were closed and almost no one was paying attention.
Talk back: Are you concerned about this federal agency's gamble?
So why is this so scary?
Because as a result of 10 years of booms and busts -- the Asian currency crisis, the Long Term Capital Management hedge fund disaster, the tech stock bear market of 2000-02, the housing smash-up, the debt market debacle -- I've increasingly come to believe that those of us who play by the rules (work hard, live within our paychecks, save) are chumps. The way to get ahead is to gamble big and then, if you lose, find someone to cover your losses.
Anger and fear
I've been hearing the same thing in e-mails from some of you. There's sympathy for families that were defrauded in the housing boom and now face foreclosure. There's a willingness to fix the system so that buyers with a mortgage they can't afford don't lose everything. But there's also a deep anger from those of you who played by the rules and didn't buy more house than your paychecks would cover and are now paying the price in falling home values, a slowing economy, jobs lost and a sinking stock market.
http://articles.moneycentral.msn.co...tInvestingNews.aspx?GT1=33002&ref=patrick.net