Warren Buffett Predicts A Decade Of 'A Lot Of News - Bad News' Regarding A Warning He Sounded In 1975

Warren Buffett's most important comments of late are tucked away in three paragraphs on page 21 of his annual letter to Berkshire Hathaway shareholders.

It's a warning about public pension plans:

Local and state financial problems are accelerating, in large part because public entities promised pensions they couldn't afford. Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them. Unfortunately, pension mathematics today remain a mystery to most Americans.

Investment policies, as well, play an important role in these problems. In 1975, I wrote a memo to Katharine Graham, then chairman of The Washington Post Company, about the pitfalls of pension promises and the importance of investment policy. That memo is reproduced on pages 118 - 136.

During the next decade, you will read a lot of news - bad news - about public pension plans. I hope my memo is helpful to you in understanding the necessity for prompt remedial action where problems exist.