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Old February 29th, 2016, 11:10 AM   #16
Paul Matthews
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I'm going to guess dapompous is referencing the pension cuts for the Teamsters etc. The reason for those cuts is so many companies went into bankruptcy there is not enough money to go around to cover all of the pension plans. That and their investments went south
Add corruption in the central states pension bled off by organized crime sure didn't help. And most of these guys still think Jimmy Hoffa was a saint. Unbelievable.
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Old March 1st, 2016, 09:31 AM   #17
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I posted the real reason why pension funds and insurance companies will fail. None of you were even close. U people went on some crazy anti-union rant. Seems to me it is like you people are programmed to do so. Here is the real reason. The banks are at fault and are responsible, they continue to destroy America.




"A couple of years ago when the debate was over whether The Fed would stop QE. I argued at the time that math required them to do so, in that bond ladders would force the decision.

I was right, but the decision may still have been taken too late, which is incidentally the Fed's history in virtually everything it has ever done.

Let me remind you of the problem: Any sort of firm that has an "annuity" style business, such as an insurance company, is required by both basic common sense and business balance to build a laddered portfolio that can satisfy its obligations.

So, for example, let's say you have an annuity business and your math wonks (actuaries) tell you that the average duration of your obligation to these people is going to be 20 years. You will, as a result, go out and build a bond portfolio with a duration that stretches over that time or perhaps a bit longer, and 1/20th of those bonds will mature each and every year and have to be replaced.

This matches your income (from premiums) with your outflow (from payments.)

Every insurance-like business, whether it be an actual insurer or a firm that has parts of its business book that act like one, has this sort of structure in its financial picture. It must because otherwise there is no reasonable assurance that such a long-dated obligation will be able to be paid.

Remember that a dividend is elective; any company can choose to suspend or revoke its dividend at any time. A pension, annuity or other similar payment is not elective; it is an obligation and if they do not pay as-agreed they're in default and the immediate next step is bankruptcy and dissolution of the firm.

Now here's the problem: The Fed drops short term rates from 4% to 0%. The entire curve collapses, and bonds that used to yield 6-7% for a 20 year duration, or 5% at the "risk free" rate (e.g. TYX) drop to half that or less.

This would instantly destroy said firm's cash flow except that they have that ladder in place. So instead what happens is that the first year 1/20th of the cash flow drops by half -- in other words, their incoming cash flow drops by an almost-imperceptible 2.5%.

But for each year that ZIRP continues so does the accumulation of the damage. By the time we get five or six years into this stupidity cash flow has dropped by 15% against a fixed obligation at the higher, original and contractual amount.

What's worse is that if you stopped ZIRP tomorrow the damage would continue until that entire segment of the portfolio rolled off; that is, it would not start to dissipate for another fifteen years.

All companies have some reserve amount of cash laying around, or available from various sources (e.g. borrowing, the market, etc) for some period of time. But once the market figures out what I just outlined above, and that income will be less than expenses for the next decade, people start to run the numbers on those reserves and every one of those companies looks bankrupt at some deterministic point in the future and there is nothing that anyone can do about it.

It's starting folks, and there is no policy response that can be made which will "fix" it."

Karl Denninger
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Old March 1st, 2016, 10:52 AM   #18
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And that is exactly why private businesses got out of pensions 30 years ago. It is a form of gambling and the beneficiaries are living much longer. They pushed us all into 401k plans and the risk is shifted to the individual employee.
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Old March 1st, 2016, 12:11 PM   #19
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Yeah a 401 k is safer, even when those can be halved in a matter of months. This quarter every major bank lied on their quarterly report and people should go to jail. Billions of dollars of bad oil loans went bust but yet the banks refused to report it even though it is on the books. At least one bank admitted to it and are building cash reserves now that earnings season is over.
EHHH it is a world economy where NIRP is becoming the normal. In Japan safes are impossible to find because of NIRP. Which I find funny. It took negative interest rates to get some Japanese citizens to say fu to the banks. Paying banks or governments money to hold your money is becoming the new normal across the world. Might be our future also.
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Old March 1st, 2016, 01:31 PM   #20
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The point is not that they are safe. They shifted responsibility to the employee from the company. Buy some gold.
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Old March 1st, 2016, 02:10 PM   #21
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Yeah lets do away with the pension plans of all police officers, fire and military people. After all they were protecting your sorry asses for 20 years and promised a pension to do that...**** them....oh and lets allow the thugs to take your fishing poles and shove them up your ass!
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Old March 1st, 2016, 02:31 PM   #22
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No, let's keep the pensions for Fire and Police and shove it up the ass of the DMV, the IRS, OSHA, EPA and every other piece of shit government employee. Maybe essential services only. You dumbasses always whine about cops and firemen to protect the union class. Maybe we should just keep stealing from our grandkids until the country is completely bankrupt.
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Old March 1st, 2016, 03:37 PM   #23
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All pension funds will fail in the future along with insurance companies, lol. It isn't if it will happen, it is when will it happen. Doesn't matter if is private or government they are all doomed to fail because of one policy decided by the few and not the majority.
I sure hope not.. I work for an insurance company and have a great pension plan to go along with my 401K.
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Old March 2nd, 2016, 10:01 AM   #24
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No, let's keep the pensions for Fire and Police and shove it up the ass of the DMV, the IRS, OSHA, EPA and every other piece of shit government employee. Maybe essential services only. You dumbasses always whine about cops and firemen to protect the union class. Maybe we should just keep stealing from our grandkids until the country is completely bankrupt.
Let us not forget teachers. The people that destroyed the bond ladder are accountable but they were rewarded free money.
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Old March 2nd, 2016, 10:14 AM   #25
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I sure hope not.. I work for an insurance company and have a great pension plan to go along with my 401K.
Your pension money is invested in a bond ladder. Since 08 the yield on bonds have been halved. Why this happened is because big banks are to big to fail and needed free money. In order to save big banks there was going to have to be sacrifices. And your pension is one of those sacrifices. The bankers thank you for their bonuses. According to Ringer there is no such thing as a private pension. Those disappeared 30 years ago. U have to be full of shit about your pension then. LOL. JK.
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Old March 2nd, 2016, 11:45 AM   #26
DaPompous
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I sure hope not.. I work for an insurance company and have a great pension plan to go along with my 401K.
One day the United States Department of Treasury will make a decision about your pension. Even though it is a private matter and not a government issue. Politicians new this day would come and passed a law for it a few years back. It's the new craze of the world economy. Just wait until rates go negative. Then u will pay banks and the government a percentage to hold your retirement.
Remember banks are to big to fail.
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