Monday, November 15, 2004

This (from The New York Times) was my favorite news story of the day. It says that the Teamsters' Central States Pension Fund was doing just fine back in the old days, when it was a slush fund for Jimmy Hoffa and invested heavily in Las Vegas casinos, but it's now in trouble, even though, under orders from the feds, it's been managed for year by the highly respectable likes of Morgan Stanley and Goldman Sachs.

Now, you might think the old style of Teamster investing was risky, but the fund stayed solvent. (Well, sure -- Vegas was a good inestment.) By contrast, the Wall Street fund managers who later stepped in put the money in "legitimate" investments such as, er, Russian banks.

A possible moral to the story: Fund managers aren't geniuses, even though they played geniuses on TV back in the '90s. Another possible moral: When you're gambling, the odds are always in the house's favor -- and the Central States fund is now the gambler, whereas in the past it was, in effect, the house. Something to keep in mind if you're rooting for Social Security privatization.

(By the way, when the pension fund of the Western Conference of Teamsters went legit, it invested primarily in stodgy long-term Treasury bills and bonds -- investments with zero excitement but guaranteed payouts. The Western Conference fund is boring, but it's still solvent, according to the Times.)

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