The unfunded liabilities of the San Diego County Employees Retirement Association have increased every year for the last five years, reaching $2.45 billion last year, more than quintuple the level in 2008. The calculation of how big the shortfall is assumes that the fund is going to be able to earn a 7.75% return on its investment after subtracting administrative costs. If it earns less than 7.75%, the shortfall will be even bigger. A 10-year Treasury bond currently pays 2.4%, and a typical stock has a dividend yield under 2%. So what do you do if you’re in charge of the system’s $10 billion in assets?
Author Archives: James_Hamilton
Investment slumps
I was interested to take a look at our recent weak economic performance from a longer-term perspective.
Links for 2014-08-03
Quick links to a few items I found interesting.
Finally, some economic growth!
The Bureau of Economic Analysis announced today that U.S. real GDP grew at a 4.0% annual rate in the second quarter. Hopefully that’s the start of something good; but so far, it’s only a start.
China’s financial risk
Three years ago I called attention to the NYU Stern Volatility Laboratory. Since then it’s grown into an even more amazing resource, giving anyone access to constantly updated information about financial conditions in dozens of countries around the globe. Of particular interest are recent changes in their measure of the systemic risk posed by financial institutions.
The Changing Face of World Oil Markets
Here’s the introduction to a new paper I just finished:
This year the oil industry celebrated its 155th birthday, continuing a rich history of booms, busts and dramatic technological changes. Many old hands in the oil patch may view recent developments as a continuation of the same old story, wondering if the high prices of the last decade will prove to be another transient cycle with which technological advances will again eventually catch up. But there have been some dramatic changes over the last decade that could mark a major turning point in the history of the world’s use of this key energy source. In this article I review five of the ways in which the world of energy may have changed forever.
Below I provide a summary of the paper’s five main conclusions along with a few of the figures from the paper.
Keeping oil production from falling
Production flows from a given oil field naturally decline over time, but we keep trying harder and technology keeps improving. Which force is winning the race?
Links for 2014-07-13
Quick links to a few items I found interesting.
Current economic conditions
I am a little slow responding to the stunning revision to the first-quarter GDP estimates that came out two weeks ago, but here are my thoughts about the new estimates.
Gasoline prices in perspective
Many reporters have been pushing the meme that:
Consumers will pay the highest Fourth of July gasoline prices in six years.