
Pension funds have loaded up on risk - Four_Star
http://thesoundingline.com/wolf-ritcher/
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lkrubner
About this:

" _And that’s clearly what the central banks wanted, what the Fed wanted. They
wanted every investor to go way out on the risk branch and pension funds have
done that and now the price, as your said, is right here in front of us_ "

When there is an excess of savings over investment, the price of money
decreases. Many things can lead to turmoil in the world: war, depression,
resource shortages, revolutions, demographics. Given a scenario where people
and institutions are saving up money, and turmoil limits the investment
opportunities, obviously, the interest rate has to go down. If there is too
much supply, and not enough demand, for anything, you should expect the price
to go down. And that is what happened. The price of money declined, because
there was an excess of savings, and not many good investment opportunities.

When we say "risk increased" we also mean that the payoff from an investment
shifted out to the future. In good times, you might think you will get your
money back after 5 years, whereas now you (the generic investor) are aware
you'll need to wait 20 years. And long-term thinking is an appropriate way to
deal with a major recession. The organization that is best positioned to think
long-term is the government, which is exactly why the government should be the
entity that uses the surplus of savings during major recessions. A major
recession is a good chance for the government to engage in long term bets,
such as rebuilding the infrastructure.

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AndrewKemendo
It's a fairly well understood concept in economics that low interest rates
create macroeconomic risk because people by nature seek yield.

If the "safest" assets, like treasury bonds and cash have effectively 0
expected return then funds and individuals have to branch out to other riskier
assets in order to find the yield they need.

This runs somewhat contrary to the popular trope that high interest rates are
bad because they hamper growth. In fact though the "growth" that people
discuss in low interest rate environments is really a probability distribution
over the risk environment. It's effectively having faith that markets will
efficiently allocate capital in a way that returns a multiple, in the time
period that you desire it to - something that is treacherous territory at
best.

So when you hear things like "The fed is raising interest rates" and the stock
market falls - it's basically saying that risk, and thus _possible_
opportunity for growth, is being lowered. That's good for stability, but bad
for possible growth that comes from that risk.

You can't have safety and fast growth in your investments at the same time.
It's a tenet of pricing and efficiency.

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dmm
My state's employee pension is funded with a investment return assumption of
7.5%. You're not going to get that with govt bonds unless inflation is crazy.

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resnapremi
Basic spelling errors, no comparisons with how pensions were previously run,
no analysis.

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laythea
Pension funds. What a con.

~~~
dang
Maybe so, but could you please not post unsubstantive comments to Hacker News?

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

~~~
laythea
On reflection, I agree and apologise. I should have expanded my argument.

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acover
This seems like spam. Who is this person? Why should I trust his analysis and
information on a topic so easy to get wrong?

They only seem to have this website and 13 Twitter followers.

~~~
Four_Star
It is information that is mostly self-evident and, if you find interesting,
you can verify.

You shouldn't trust it more if you had found the author had more twitter
followers.

~~~
acover
I found very little of it to be self evident. It's a nice theory. There were
no sources for even his most basic assertions.

The only reason I mentioned Twitter was it was the only other thing I could
find about him.

Edit: you have a new account that only posts links from that domain. :(

