The Celebrity Solution to the Pension Crisis
Fish, oil and California.
BY Paul Williams | May 20, 2010
It is the weekly bloggers meeting here at investmentreview.com and Editor-in-Chief Caroline Cakebread is on my case. “You haven’t posted a blog in 24 hours,” said Caroline. “What have you got? (Actually, it’s been more than a week, but, hey, who’s counting?)
I informed her I was working on a piece about the median Canadian pension fund posting returns of 1.9% in the first quarter, based on a RBC Dexia study.
“That’s sort of boring, “she said.
But there is more to this, I informed her. Reuters is reporting that Norway’s “oil fund” posted a 3.9% return in the first quarter of 2010. The $468.5 billion fund said it was “slightly underweight” in stocks from Portugal, Greece, Italy and Spain. Europe’s biggest equity investor also has reported it was “significantly underweight” in bonds from these same countries.
So, my question was, why was this large European fund able to outperform its Canadian counterparts. Was it simply that they got the Greek mess right?
“Maybe it’s because they eat a lot of fish,” piped in the editorial intern who was sitting in on the meeting at the end of the table.
Caroline patiently explained to the intern about de-risking, liability-driven investments and currency exposure, and concluded by telling him to shut up.
She then turned to me. “Look, we need page views! Don’t you have anything sexy like a celebrity?”
Well, actually I do.
How about California governor Arnold Schwarzenegger on the mess California pensions are in? According to The Terminator, California has a $500 billion pension liability. “In California, we had the internet bubble, the housing bubble, next is the pension bubble, and it already starting to burst.”
In his weekly Youtube address Schwarzenegger went on to say that he is asking, “the legislature to make this the top priority.”
And what ideas does Governor Schwarzenegger have to solve the pension mess? Why, rolling back the benefits for new hires, of course. That should solve the $500 billion.