Open Letter to Herbert M. Allison, Jr., Chairman of TIAA-CREF, Re Threat of Future Stagflation to Account Holders' Funds

PO Box 130
West Shokan, NY 12494
May 19, 2008

Herbert M. Allison, Jr.
TIAA-CREF
730 Third Avenue
New York, NY 10017-3206

Dear Mr. Allison:

I hold a TIAA-CREF account through my employment at the City University of New York and have done so since 1991

TIAA-CREF should implement a commodity index fund and a foreign-currency denominated interest bearing fund. Doing so would fulfill your responsibility to be prudent to your account holders. I say this despite current short-term overheating in the commodities markets.

The 1970s were a period of significant challenge to TIAA-CREF because the stock market declined while inflation accelerated. This caused pensioners to receive reduced payments at the very time that inflation posed high costs. TIAA-CREF has a fiduciary duty to take action to anticipate the realistic risk that Federal Reserve Bank policy will again cause stagflation. Conversely, it is imprudent to pretend that stock and interest bearing investments provide all of the diversification that investors need when the Federal Reserve Bank has expanded the money supply by eight percent annually for the past two and one half decades.

To be prudent, you ought to diligently consider the risk of stagflation and take action. Both the stock market and interest bearing dollar denominated accounts are ultra-risky in a stagflationary period, yet those are the only alternatives TIAA-CREF currently has on offer. By failing to diversify into alternative currencies you are shooting craps with shareholders’ accounts. Inflation-indexed bonds are a crap shoot as well because interest rates may skyrocket at the very time that inflation goes up.

Sincerely,


Mitchell Langbert, Ph.D.

Cc: Chronicle of Higher Education