Tuesday, August 9, 2011

More Certainty vs. Uncertainty

March 4, 2011
Certainty vs. Uncertainty

Click to enlarge.

Here is where we are now.

Click to enlarge.

Look how far the "You Are Here" point has moved in the last 5 months. Amazing.

The Good News

1. We've been sticking to the blue line lately. That means inflation expectations are fairly well anchored.

The Bad News

1. There is no guarantee that we will stay on the blue line.
2. Huge moves along the blue line are indicative of real growth uncertainty.
3. The huge move has been to the downside.
4. Investors are now willing to lock in zero real growth for the next decade.
5. Pension funds still assume 8% returns.

October 4, 2010
Pension Funds Feel Pressure to Trim Return Assumptions

According to the National Association of State Retirement Administrators (NASRA), since 1985 public pension funds have exceeded their assumed rates of return on investments. On its face, there seems little reason for a change.

8% return still the goal

In a recent NASRA study, 51 out of 124 public pension funds are assuming an annual return of 8%, and 35 assume a return of more than 8%.

Here's one potential flaw in the "little reason for a change" theory. Here's another.

Source Data:
FRB: Selected Interest Rates
US Treasury: Interest Rates


Stagflationary Mark said...

As a side note, if I ever build a mall I intend to use these charts as the mall directory.

Everyone loves a bit of certainty and uncertainty when shopping. ;)

mab said...

That's amalling humor.

BTW, my wife has an awful sense of direction. Except in malls where her sense of direction is unparalleled. No joke.

Stagflationary Mark said...


I just hope I can entice Sears to come to my mall.

Help! Someone throw me an anchor store! ;)

mab said...

Help! Someone throw me an anchor store!


I live in Northern NJ. We define ourselves by what mall or highway exit we live near. I'm not kidding. The old saw about "what exit", "what mall" is true.

At least our air is unclean!

Stagflationary Mark said...


We define ourselves by what mall or highway exit we live near.


Guilty plea in Southcenter mall slaying