STUMP » Articles » What a Week: Meep, Music, and Mulling » 11 November 2016, 05:43

Where Stu & MP spout off about everything.

What a Week: Meep, Music, and Mulling  


11 November 2016, 05:43

I am so bone tired.

And no, it has very little to do with politics. It’s that damn DST change.

But first, a hearty thanks to all who link to me:

Thanks to Rex the Wonder Dog who linked me in the comments from this Wirepoints piece on falling Illinois tax revenue, I have no idea why somebody came from the WashPo corrections guideline (I follow no particular guidelines when I admit I made a boo-boo), or from SDCERA (sorry, haven’t covered the Dakotas, really), The Atlantic (huh?), and a few other random links…. perhaps this records people who were reading the other page first and then clicked their bookmarks or something? Howdy to the guys coming from the Russian sites, btw.

I don’t know how my referrer logs work, and that’s just not something I look too deeply into.

Howdy to my buddies from the Actuarial Outpost, if they’re stopping by. I’m still amassing explanations for this thread, but it will be a while before I get it all together. We’ll be chewing over this for years to come.


Lots of things to think about, and I’m bone tired, as mentioned earlier.

So some links to things I’m looking at.

Mastery, Expertise, and the Limits of Experts:

We’re all fond of citing “experts” in order to win arguments or promote policies. But we tend to be remarkably casual about what expertise actually means, or whether and when an expert’s opinion ought to carry outsized weight.
Expertise is not readily transferable or transportable. In fact, the world is rife with evidence that experts are pretty limited when it comes to prognosticating future outcomes or applying their skills beyond their narrow field of mastery. For instance, nearly 90% of professional mutual fund managers consistently underperform the stock market. Yep, generally speaking, you’re better off letting a kindergartener pick your stocks than letting an expert stock picker do so.
As long as we respect its limits, of course, expertise has enormous value. But let’s also keep in mind that it was “expert” Thomas Watson, the chairman of IBM, who predicted in 1943, “I think there is a world market for maybe five computers.”

Expertise isn’t always all that it’s cracked up to be.

Speaking of expertise, I’ve bought a copy of Don Surber’s Trump the Press, which came out in July, after Trump had won the nomination.

A description from the Amazon page:

From Steven Hayward of Power Line: “The independent internet journalist Don Surber has produced a terrific short catalogue and analysis of how everyone—but especially the conservative commentariat—missed or misunderstood the rise of Donald Trump.

“The book is a wonderful catalog of all the pundits who completely dismissed Trump from the beginning (including yours truly, though Don was kind enough not to quote my faulty Los Angeles Times prediction last August that Trump would be gone by Thanksgiving).”

This is partly why I amass predictions and revisit them all the time. If you never look back at how wrong you were (or others were), you never learn to correct your cognitive biases that prevented you from seeing evidence you didn’t want to see.

I’ve bought some of Surber’s books in the past, like Exceptional Americans 2: The Capitalists, which were nice capsule bios of a mix of people I already knew and ones I was getting to know for the first time. I look forward to reading Trump the Press.


RIP, Leonard Cohen.

What a year.



Don’t worry, I’ll be getting back to the public pensions/finance grind soon enough. I have to see how all those ballot initiatives came down, after all.

In the meantime, a piece from The Hill on this huge issue forgotten in the Presidential Election:

From the tiny Citrus Pest Control District in California to the giant Illinois Teachers Retirement System, pension woes have settled in across the nation. This massive and growing disaster – that currently stands at nearly $2 trillion in debt for our country – must be a priority of our next President.

Taking a look at the past few decades, there has been a tendency to count on high earnings assumptions that never panned out, and common practice to “look the other way” on the gap between what plans promise and the amount of money set aside to pay for those promises. Many plans, like those in Illinois, California, Kentucky, Louisiana and Connecticut, have been troubled by years of official neglect.

But recently, the Society of Actuaries and The American Academy of Actuaries commissioned a study of earnings rates and found that assumptions are far too optimistic across the board. The founder of Vanguard Mutual Funds, recently said that in the age of zero interest rates, investors must expect no more than a 2% return on their investments for the next ten years. The Governmental Accounting Standards Board (and accounting industry rule maker) is now weighing in and requiring pension plans to report their liabilities with more realistic rates.

In 1961, private sector plans were in trouble after years of unregulated abuse. President Kennedy appointed a committee to study the problem and the result was 1974’s Employment Retirement Income Security Act (ERISA). The next President and Congress cannot wait that long to act. They must get ahead of this gathering storm and appoint a commission to study the problem and provide solutions like mine, soon. If not, this drama will be an unnecessary tragedy for beneficiaries and taxpayers alike.

Note that it took 13 years for the first substantive action on private pensions.

And if you’re interested, here’s the research study on pension plan discount rates. I’ll revisit that another time.

To be sure, there have been multiple non-federal bodies who have been looking into public pension issues, and I’ve been watching bills proposed in Congress (that never make it out of committee….or even to committee, it seems). So it may be that something a little quicker than 13 years will happen. Especially given some of the pensions are going to have serious cashflow problems before 2029….

I do not expect bailouts (not real bailouts, that is), but look at Puerto Rico and Detroit to get an idea.

But in addition to public pensions, we have the matter of multiemployer plans, including the coalminers pension situation, and Social Security to deal with. There was a little gab about Social Security during the campaign, but not much.


We’ll see what happens next. I don’t think that pensions are as sexy an issue as many other things that will likely grab the spotlight next year, and maybe it will stick to just local areas…. but who knows.

I certainly don’t.

Enjoy the weekend.

I may get some sleep. I hope.

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