Billionaire Warren Buffett has a warning for investors in his 2014 annual letter to Berkshire Hathaway shareholders released Saturday: During the next decade, there will be a lot of bad news about public pension funds.
Mr. Buffett wrote in the letter that “local and state financial problems are accelerating, in large part because public entities promised pensions they couldn't afford.”
“Citizens and public officials typically underappreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them.”
In his letter, Mr. Buffett referred to a 1975 memo he wrote to Katharine Graham, then-chairwoman of The Washington Post, regarding the “pitfalls of pension promises and the importance of investment policy.”
Mr. Buffett writes the memo is “helpful to you in understanding the necessity for prompt remedial action where problems exist.”
The memo is reproduced on pages 118-138 of Berkshire Hathaway's 2013 annual report, which is available on Berkshire Hathaway's website.