Pension Pulse

Martin Z. Braun of Bloomberg reports, New Math Deals Minnesota’s Pensions the Biggest Hit in the U.S. (h/t, Suzanne Bishopric): Minnesota’s debt to its workers’ retirement system has soared by $33.4 billion, or $6,000 for every resident, courtesy of accounting rules. The jump caused the finances of Minnesota’s pensions to erode more than any other state’s last year as accounting standards seek to prevent governments from using overly optimistic assumptions to minimize what they owe public employees decades from now. Because of changes in actuarial math, Minnesota in 2016 reported having just 53 percent of what it needed to cover promised benefits, down from 80 percent a year earlier , transforming it from one of the best funded state systems to the seventh worst , according to data compiled by Bloomberg. “It’s a crisis," said Susan Lenczewski, executive director of the state’s Legislative Commission on Pensions and Retirement . The latest reckoning won’t force Minneso...

Daniel Desrochers of the Lexington Herald Leader reports, ‘It affects everything.’ What’s at stake as Kentucky’s pension war begins : Trenches have been dug, heels are firmly planted, fingers are locked and loaded, ready to point at the most convenient scapegoat — the war over Kentucky’s public pensions has begun. The first strike came Monday, when a state-paid consulting group, PFM, issued a report recommending drastic changes to the pension plans that cover most of Kentucky’s public employees — retired, active and future. Read more here: http://www.kentucky.com/news/politics-government/article170086847.html#storylink=cpy Lawmakers were quick to point out that the recommendation was just that — a recommendation . “There’s good ideas in there. I will say there’s a lot of good ideas, some of them may be implemented, some of them may not be,” Gov. Matt Bevin said in a Facebook Live video hours after the report. “There’s some that, quite frankly, I don’t think there will b...

Tim Wallace of The Telegraph reports, Prepare for negative interest rates in the next recession, says top economist : Negative interest rates will be needed in the next major recession or financial crisis, and central banks should do more to prepare the ground for such policies, according to leading economist Kenneth Rogoff. Quantitative easing is not as effective a tonic as cutting rates to below zero, he believes. Central banks around the world turned to money creation in the credit crunch to stimulate the economy when interest rates were already at rock bottom. In a new paper published in the Journal of Economic Perspectives the professor of economics at Harvard ­University argues that central banks should start preparing now to find ways to cut rates to below zero so they are not caught out when the next ­recession strikes (click on image). T raditionally economists have assumed that cutting rates into negative territory would risk pushing savers to take their money out...

Michael Katz of Chief Investment Officer reports, Norway’s Sovereign Wealth Fund Returns 2.6% in Q2 : Norway’s $977.4 billion Government Pension Fund Global returned 2.6%, or 202 billion kroner ($25.53 billion), in Q2 of 2017. The fund had a market value of 8.020 trillion kroner as of June 30, of which 65.1% was invested in equities, 32.4% in fixed income, and 2.5% in unlisted real estate. Equity investments returned 3.4%, while fixed-income investments returned 1.1% for the quarter. Investments in unlisted real estate returned 2.1%, and the total return on investments was 0.3% higher than the return on the benchmark index . “The stock markets have performed particularly well so far this year, and the fund’s return in the two first quarters was 6.5[%]. This gives a total return of 499 billion kroner, which is the best half-year return measured in Norwegian kroner in the history of the fund,” said Trond Grande, deputy CEO of Norges Bank Investment Management. However, Grande ...

Andy Blatchford of the Canadadian Press reports, Rising Household Debt Risks Canada's Long-Term Economic Health: Confidential Memo : Even debt-free Canadians could eventually feel a pinch from someone else's maxed-out credit cards, suggests research presented to senior officials at the federal housing agency. Canada Mortgage and Housing Corp. board members received an update in March on the country's credit and housing trends. The presentation contained a warning: the steady climb of the household debt-to-GDP level had put Canada's long-term economic growth prospects at risk . The document pointed to a study that argued household debt accumulation eventually hampers economic growth over the longer term, eclipsing the nearer-term benefits of consumption . The strong expansion of household spending, encouraged by a prolonged period of historically low borrowing rates, has created concerns over Canadians' record-high debt loads. It has also been a majo...

Jeff Cox of CNBC reports, Ray Dalio: US most divided socially and economically since 1937 : Americans are divided socially and economically in ways that have not been seen since the worst days of the Great Depression and as the world was heading into another global conflict, hedge fund king Ray Dalio said Monday. In an essay on LinkedIn , the head of Bridgewater Associates compared the current U.S. climate to 1937, as Adolf Hitler rallied Germans ahead of World War II and the U.S. plunged further into the economic abyss that had begun in 1929 . "It seems to me that we are now economically and socially divided and burdened in ways that are broadly analogous to 1937," Dalio wrote. "During such times conflicts [both internal and external] increase, populism emerges, democracies are threatened and wars can occur. I can't say how bad this time around will get. I'm watching how conflict is being handled as a guide, and I'm not encouraged." The missi...