Pension liabilities surface

The Forum of Americas conference report on pensions:

Pension Bubble  – Pension funds, which have been issuing over-optimistic revenue forecasts for years, aren’t going to earn nearly enough money to pay the benefits recipients expect.

Much of this relates to secular stagnation in the economy.

Bonds, which from a major part of most plans’ holdings earn next to nothing in interest.

Stocks, which are trading at record levels, despite falling corporate earnings, look to have more downside risk than upside potential.

Worse, if bond returns average 2%, balanced portfolios projecting 7% to 8% annual returns, have to earn 12% to 14% on equities investments to make up the difference. That’s unlikely to happen.

The numbers seem right to me.  The funds need to pay retirees, they need to draw down the 8% eer year they earned in stock prices.  That puts the market into bear territory, pension obligations get worse..