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| Economy |
| The Last Sucker into the Stock Market Was the Pension Guaranty Corp. |
| 2009-03-31 |
| You simply cannot make this stuff up. The Pension Benefit Guaranty Board, which backstops defined benefit plans (yes, Virginia, they still exist) faced a rather sizable gap between its expected returns on its $64 billion in holdings and its expected liabilities. So in a stroke of sheer genius, it increased its allocation to risky assets considerably at precisely the time those assets started tanking. It even managed to cut its allocation to Treasuries way back, reducing its participation in the big Treasury rally of last year. Now anyone who was finance literate would look at the PGB's new asset allocation and recognize it as conventional wisdom as dispensed by pension fund consultants. And if you had read Benoit Mandelbrot or Nassim Nicolas Taleb, you'd also know that those pension fund consultants base their prescriptions on theories that simply do not pan out empirically, and worse, greatly understate risk. Wasn't sure if it should be filed under Lurid Crime Tales or Economy. Balance at the link. |
| Posted by:Besoeker |
| #1 I'm not sure this is accurate. Yes, PBG planned, in mid 2008, to reallocate in late 2008 through 2009 but we don't know what they actually did. |
| Posted by: mhw 2009-03-31 13:59 |