Teaching the Wall Street Journal About Pensions and Stock Returns

The Wall Street Journal had a column this week that would terrify its readers, if they took its columns seriously. The piece, by Andy Kessler, derided the 7.5 percent return assumed by the Calpers, the public employer pension fund in California. Other pensions, both public and private, make comparable return assumptions.

The piece tells readers:

"Who wouldn't want 7.5%-8% returns these days? Ten-year U.S. Treasury bonds are paying 1.74%. There is almost zero probability that Calpers will earn...