While dropping off a child’s forgotten lunch box, this morning, I heard John DePetro replaying a segment of this weekend’s Newsmakers program interviewing Rhode Island General Treasurer Seth Magaziner. Responding to observations that the state pension fund’s investments are treading water or even losing money, Magaziner repeatedly insisted that the proper time frame over which to consider investments of this sort is the “long term,” and in that regard, the fund is on the right track.
This is not true, and journalists shouldn’t let him get away with the lie anymore. As I’ve written before, if you define “long term” as any time longer than five years and shorter than 30 (which is far back as I’ve seen data), the fund is not on the right track. The reality is that Magaziner, like Gina Raimondo before him, has a small window during which a “long term” view of about five years makes it look like the pension fund is viable.
Starting the measurement at the bottom of the housing bubble crash and carrying it through a few years during which the federal government and Federal Reserve were inflating stock values makes it look like the pension fund could actually earn 7.5% returns every year, on average. The idea that such returns could be maintained for decades is so inconceivable that politicians like Magaziner must be relying entirely on the reluctance of people to investigate their claims.