[quote=CA renter][quote=FlyerInHi][quote=CA renter]Let’s not forget that the pension benefit enhancements during the stock market bubble has also contributed to the current underfunding in the pension plans. If not for the stock market bubble, I believe these enhancements would never have happened.
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It’s like saying that if it weren’t for the stock market, I would have saved more for retirement. I didn’t; so it’s the financial industry’s fault.[/quote]
No, that’s not it at all. SK knows what I’m talking about.[/quote]
I’m not sure exactly which stock market bubble you’re referring to. I don’t think there was a stock market bubble before the crash in ’08. I think a bubble would imply an over-valuation. There were some segments, and clearly some companies that were over-valued, but for the most part, the market was fairly valued based on earnings. Earnings went down (way down in some cases), valuation went down. I don’t think that’s a bubble. The dot-com bubble in the late ’90’s was a real bubble. Companies valued based solely on future earnings. Kinda like Amazon, Facebook and Tesla now. But it was then much of the market.
But to your other point, it’s probably true with regard to public pensions, particularly in California. The RE bubble unreasonably inflated tax revenues. Good investment returns over more than a 15 year period ending in 2008 made it seem the funding for DB plans was sufficient. Why? Because public employee pension funds had been investing in higher risk investments. Even when the Fed funds rate was NOT kept artificially low. But then when those higher risk investments failed, it became time to blame the Fed for “forcing” them into higher risk investments.
