Pension Musings Squared
In early June the State of Illinois issued $10 billion of 25 and 30 year bonds in order to shore up its unfunded pension liability, estimated at $35 billion. This liability could be actually much larger if one were to assume a more conservative rate of return on their assets than the 8.5% they are currently using. Of the $10 billion in proceeds, approximately $2 billion went immediately to pay off 2003 and 2004 obligations. Of the $8 billion left, it is believed (by my contacts in Illinois) that around $2 billion found its way directly into the stock market. If this is not leverage, I don't know what is.
So in response to my friend Scott Reamer's question, even though I agree with everything he is saying (in spades) about corporate pension funds fueling the rally, let's not forget our friends from the public side. The real interesting thing is that they are getting other people to take the risk for them. It's one big party and all are invited.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter