Had brunch with some friends yesterday. She does benefits for Carnival/Princess Cruises, used to do them for Schwab. He did benefits for Weyerhauser and then Associated Grocers. I was discussing the rise of questionable debt.

"So most of these plans were designed to work at a 6% return," I said.

"7 to 12%, depending on how optimistic the fund was," she said.

"And most of them have been lucky to make 3% since 2000," I said.

"3.6% if they were all in cash in 2008. Otherwise 1.7%," she said.

"And the Chicago Fed telegaphed last month that we'll be lucky to make 3% for the next ten years," I said.

"Well, that I hadn't heard," he said.

So. These are the people who, while not directly responsible for the investments, are directly responsible for using the money that comes from those investments. And their figures were more dire than mine.

It's one thing if you're trying to make money because you're greedy. It's another thing if you're trying to make money because you fuck over tens of thousands of current and former employees if you can't. Never mind avarice; the bond market is driven largely by obligations and financial structures that collapse if yields aren't made.

And funds have no choice when an investment goes south: if the fund has within its bylaws the requirement that all investment instruments must be Moody's AA or above, as soon as one of them drops to B they have to sell it. They are compelled by law to sell it.

No one is compelled by law to buy it.

So they sell it at a steep loss and now they have to invest in something else. And it must be Moody's AA or above. And they were likely not the only fund in that instrument so they're not the only ones dumping garbage and trying to buy sterling.

Repeat times every local, municipal, national, corporate, private and educational equity firm.

I also think there is an interaction effect between corporate debts/spurious VCs, student loan debt/spurious degrees and the erosion of the middle class that is entirely sidelined here.

Mauldin is pretty good about completely ignoring that which does not have his attention at the moment.