Buffett Warns of Pension Crisis
for Decade
Saturday, 01 Mar 2014 08:47 PM
By Todd Beamon
Billionaire investor Warren
Buffett warned on Saturday that the growing crisis in public pension
plans will continue — with "a lot" of more bad news to come.
"Local and state financial problems are
accelerating, in large part because public entities promised pensions they
couldn't afford," Buffett, the chairman of Berkshire Hathaway Inc., said
in a letter to shareholders. "Citizens and public officials typically
under-appreciated the gigantic financial tapeworm that was born when promises
were made that conflicted with a willingness to fund them.
"Unfortunately, pension mathematics
today remain a mystery to most Americans," Buffett said.
"During the next decade, you will
read a lot of news – bad news – about public pension plans," he added.
"I hope my memo is helpful to you in understanding the necessity for
prompt remedial action where problems exist."
The predictions were tucked away on page
21 of Buffett's 24-page letter to shareholders. Berkshire
Hathaway held its annual meeting on Saturday in Omaha, Neb.,
where his company is based.
Buffett, 83, has run Berkshire
since 1965, and the company now has more than 80 businesses — encompassing
business categories including insurance, railroads, utilities, and ice cream.
It also holds more than $117.5 billion in stocks.
Pension funds differ from plans like 401(k) retirement savings plans in that employers guarantee
a certain retirement benefit. A 401(k) plan includes no such promise — if
employee's investments goes sour, the money has been lost.
Many pension plans became underfunded
because of the financial crisis. This has left many state and local governments
still struggling to meet their financial obligations to retirees, especially
since the crisis put huge burdens on state and municipal budgets. Poor
decision-making by fund managers and governments have also been a factor.
For instance, Detroit cited a $3.9 billion deficit in its
pensions when it filed for bankruptcy last year. Its emergency manager, Kevyn
Orr, estimated that pension and retiree health-care liabilities made up half of
the city's $18 billion in debts cited in the July bankruptcy filing.
In fact, local officials in at least 10
states from New York to California now are trying to cut the pensions of
municipal workers — or eliminate the plans outright — pointing to Detroit's
bankruptcy as an example of what could happen with spiraling retirement costs
amid a struggling economy.
In his letter, Buffett made reference to a
memo he wrote in 1975 to Katharine Graham, who was chair of the Washington Post Co., about the problems arising from the
promises made by pension programs and the importance of a strong investment
policy.
The first rule in monitoring pension
costs, Buffett said in the memo, was "to know what you are getting into
before signing up.
"There probably is more managerial
ignorance on pension costs than any other cost item of remotely similar
magnitude," he wrote. "And, as will become so expensively clear to
citizens in future decades, there has been even greater electorate ignorance of
governmental pension costs."
In the memo, Buffett said that it was
"next to impossible to decrease pension benefits in a large profitable
company — or even a large marginal one."
He said that language allowing companies
to terminate or alter their pension plans had been gradually eroded by law.
Graham, who died in 2001, took Buffett's
advice — seeking a manager for the Post's pension funds that shared his strategy
on increasing investment returns while lowering expenses and risk — and as
recently as 2012 the company ended the year with its pension fund overfunded by
about $600 million.
Buffett joined the Post's board in 1974,
stepping down in 2011. Last year, The Washington Post newspaper was sold to
Amazon.com founder Jeff Bezos for $250 million.
Buffett, the world's fourth-richest
person, is seeking to sell his $1.1 billion stake in Graham
Holdings, which had been the parent company of the Post newspaper.
Warren Buffett
Warren E.
Buffett is the chairman & CEO for Berkshire
Hathaway Inc., and an adviser for the Nuclear Threat Initiative (think tank), a life trustee at the Urban Institute (think tank), and was a
director at the Washington Post Co.
Note: Ronald
L. Olson is a director at Berkshire
Hathaway Inc., a director at the
Nuclear Threat Initiative (think tank), a director at the Graham Holdings Co., was a director at the Washington Post Co., and a trustee at the Committee
for Economic Development.
Berkshire
Hathaway Inc. is a stockholder for the Graham Holdings Co.
Graham
Holdings Co. is the successor company for the Washington
Post Co.
Carnegie
Endowment for International Peace (think
tank) was a funder for the Nuclear
Threat Initiative (think tank).
Jessica Tuchman Mathews
is a director at the Nuclear Threat
Initiative (think tank), the president of the Carnegie Endowment for International Peace (think
tank), a director at the American Friends of Bilderberg (think tank), was an honorary
trustee at the Brookings Institution (think
tank), and a 2008 Bilderberg conference
participant (think tank).
Ed Griffin’s interview
with Norman Dodd in 1982
(The investigation into
the Carnegie Endowment for International Peace uncovered the plans for
population control by involving the United States in war)
Foundation
to Promote Open Society was a funder for Carnegie
Endowment for International Peace (think tank), the Urban Institute (think tank), the Brookings Institution (think tank), and the
Committee for Economic Development.
George Soros
was the chairman for the Foundation to
Promote Open Society.
Lois
Dickson Fitt was a guest scholar at the Brookings
Institution (think tank), and a director at McGraw Hill Financial Inc, and is a life
trustee at the Urban Institute (think tank), Susan E. Rice’s mother.
Standard
& Poor's is a subsidiary of McGraw
Hill Financial Inc.
Buffett posts record profit but
loses again to S&P (Past Research for Warren Buffett)
Sunday, March 2, 2014
Robert C.
Pozen is a senior fellow at the Brookings
Institution (think tank), the president of Fidelity
Management & Research, and the chairman for Fidelity
Investments.
401(k) Rollover to IRA
Fidelity makes rolling over an old retirement savings plan from a
former employer easy for you. Our tax-deferred account can help you invest for
growth or income.
Larry D.
Thompson is a trustee at the Brookings
Institution (think tank), a trustee at the Committee
for Economic Development, a director at the Graham
Holdings Co., and was a director at the Washington
Post Co.
Lee C.
Bollinger is a trustee at the Committee for Economic
Development, a director at the Graham Holdings Co.,
and was a director at the Washington Post Co.
Donna S.
Morea was a trustee at the Committee for Economic
Development, and the EVP for the CGI Group
Inc.
CGI
Group Inc. was the Obamacare contractor
that developed Healthcare.gov web site.
Obamacare
is Barack Obama’s signature policy
initiative.
No comments:
Post a Comment