Conspiracy of Dunces

When I first looked at the funded status of the New Jersey public pension plans I wondered why participants, taxpayers, and politicians weren’t alarmed.  Even now there’s about$70 billion in assets with up to 38% in hedge funds, $8 billion gets paid out annually and, in a good year, $4 billion comes in.  You have nowhere near enough money to annuitize retiree benefits, never mind the 500,000 other participants.  Couldn’t anybody tell that the actuaries were throwing around phony numbers to keep everybody happy and their fees coming in?

Then, after closer inspection of the government process, it hit me.  It’s in nobody’s immediate interest to recognize the truth.  If you have ‘professionals’ advising that you can lie, cheat, and steal and politicians dumb enough to believe them, this is what you get.  For example…….

Union County is misappropriating their Open Space trust fund money to circumvent the tax levy cap.   After receiving detail on projected debt payments I noticed:
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As positive as I am that the New Jersey Retirement Plans will go bankrupt primarily through a conspiracy of professionals acceding to the whims of politicians too dumb to realize they are being lied to, I am equally certain that the financial professionals within Union County have cooked up a scheme to misappropriate trust fund money that they’ve slipped past a group of politicians eager to be lied to so as to keep their gravy trains on the track.

12 responses to this post.

  1. Posted by Tough Love on June 29, 2012 at 7:57 pm

    If you think the actuaries have screwed this up, just wait till Life Insurance “formula reserves” are replaced with PBR Reserving.

    Reply

  2. Posted by Anonymous on June 29, 2012 at 8:01 pm

    Bring back GW Jr, he will bail us out, no problemo!!!!!
    After all he bailed out the private sector!!!!! lololololololololl How soon we forget

    Reply

  3. Posted by Javagold on June 29, 2012 at 9:40 pm

    they are stealing everything from anywhere they can now, before it all collapses…..

    Reply

  4. Posted by Eric on July 1, 2012 at 9:33 am

    John:
    The numbers here do not seem quite as dire as you reported in your New Jersey Pension Tops Another List article. It seems that the payout, according to this latest blog, may continue longer than you cited before or am I missing something?
    Please enlighten me.
    Thanks
    Eric

    Reply

    • The COLA elimination saved a few billion but the obvious unanticipated boon are the 20% annual earnings arising from investing 38% of the money in hedge funds where you can make up your own asset values.

      Reply

      • Please explain make up own asset numbers?
        Thanks

        Reply

        • One of the ‘benefits’ of alternative investments is that, by definition, you make up your own value for them:
          http://en.wikipedia.org/wiki/Alternative_investment
          which is exactly what government pensions need so they can inflate values and not alarm the gullible. South Carolina having 50% of their assets in alternative investments is the primary reason they got 23.5% earnings for the year-end 6/30/11 – they’re making up their own numbers. NJ raised their limit on alternative investments from 28% to 38% last year for the same reason.

          However, another characteristic of these investments is their illiquidity which is suicidal for these government plans that need as much liquidity as possible to pay an exploding retiree population.

          Reply

          • Posted by TREEeditor2 on July 3, 2012 at 6:19 pm

            john, you are righty about the boutique alternative investments being illiquid. Only when they liquidate they become marked to market, in between it can be assigned any number they want to use basically within reasonable standards of course but more than likely always a fudged postive return……..until the liquidity.

          • That’s what I understand though it’s not my field and I actively dissuade my pension clients from asking me about investments. And there is no regulation of them either which means there must be plenty of ponzi schemes that nobody will find out about until it’s time to cash in. But for now, a 20% investment return looks good – until you start thinking about it.

  5. Posted by s2192a on July 1, 2012 at 10:16 pm

    Word is King Fahd will buy the assets at stated value in exchange for destroying Iran via Syria. So there is no problem.

    Reply

  6. Posted by Eric on July 1, 2012 at 10:35 pm

    John:
    I wonder if one of the alternative investments has been made to MF Global which ended up in JP Morgan’s coffers?
    Eric

    Reply

  7. “That’s what we discovered,” Gann said, when asked if his findings compared to those of Burien’s. “We estimated at least $150 billion throughout the state of California, at the state and local government level, in investment money pools. What happens is people approve a bond sale for capital improvements, bonds are issued but instead of making the capital improvement right away, they [the government agency] take the money and invest it. Sales tax increases that are supposed to pay for repairing earthquake damage is invested.

    Reply

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