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Funded Status of US Plans Drops in May
The
funded status of US corporate plans dropped
to 82% in May:
Falling stock markets in May sent
pension plan assets lower, resulting in the worst funded status for the
typical U.S. corporate pension plan since October 2009, according to
monthly statistics published by BNY Mellon Asset Management. The funded
status in May declined 4.3 percentage points to 82.0 percent.Through
the end of May, the funded status of the typical U.S. corporate plan is
down 3.5 percentage points for the year.The falling stock
markets resulted in a decline of 4.8 percent in assets at the typical
U.S. corporate plan, while liabilities were little changed in May,
rising 0.3 percent, as reported by the BNY Mellon Pension Summary Report
for May 2010.Plan liabilities
are calculated using the yields of long-term investment grade corporate
bonds. Lower yields on these bonds result in higher liabilities."U.S.
stocks in May had their worst month since February 2009, declining
nearly eight percent, while a weakening euro helped to send
international stocks down more than 11 percent, said Peter Austin,
executive director of BNY Mellon Pension Services, the pension services
arm of BNY Mellon Asset Management. "May's results wiped out equity
gains on a year-to-date basis.Unfortunately,
there was no relief on the liability side as the Aa corporate discount
rate remained essentially flat despite a 30-basis-point widening of
spreads to Treasuries."Austin added, "The May 6 U.S.
market flash crash reminds us that the equity markets remain very
sensitive. Continuing fears over the European sovereign debt crisis and
the fragility of the global economic recovery are likely to result in
increased market volatility for the near term. In response to this
expected volatility, we are hearing from a growing number of
corporations that are seeking new solutions to manage financial risks
posed by their pension plans. There appears to be growing interest for
funding strategies that seek to establish deadlines to achieve and
maintain specific funding levels, with the goal of providing a buffer
against wide swings in either the equity markets or in interest rates."
State
pension funds are not fairing any better. Weak equity markets and low
bond yields are exacerbating pension deficits. This is a long-term
structural problem that will require difficult decisions.
Below, a
humorous look at the growing problem of underfunded public pension
plans. I thank Bill Tufts of Fair Pensions For All
for sharing it with me.
»
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Solar energy is fine for passive applications like small calculators and highway cell phones.
But it's never going to be helpful for power generation, nor for moving a vehicle more than a few hundred feet before recharging for a few hours.
Renewable energy, ex hydro and certain rich geothermal applications, does not seem likely to benefit us any time soon. If ever.
Nuclear has significant potential to deliver cost effective grid power that may be competitive with coal.
Solar power subsidies have enriched many politically connected persons but society cannot afford them much longer - just ask Spain.
http://pajamasmedia,com/blog/spains-gree
Leo: In my backyard, my local soon-to-be-dismissed politicians have been enriching Solarworld by giving credits not only to them, but also to those that buy their forever unprofitable solar panels. This cannot persist. Solarworld's stock is off 90%...At the same time the State has decreased its tuition contribution to the Universities so that our State Schools are now funded 70% by tution. I think they need to drop the State School title. So, we are spending tax dollars we don't have to enrich a German company. You guys (leaders) are bright! My point is, that choosing this feel good, uneconomic solution, solar, is as bad as unsustainable pensions and that eventually they will go too. Solar is a very flawed solution, unless you put a crazy artificial value on the very molecule of life, carbon. Don't get me started on battery technology. I am 50, an electrical engineer, and have fooled around with PV my whole life. I like it, but I would not bet my kids financial future on it.
When this "correction" is complete, I find it far more likely that we will be hydraulic mining in the Sierra Nevada's again, burning coal to heat our homes, and dumping industrial waste behind day care centers, before we will be investing in solar innovation. I hope it works for you Leo, but I think we're too many trillions in debt for it to take off.
Colonel is correct. Going broke is no way to get green. In fact, the brownest countries are always the poorest. Ironic, that we made ourselves poor by subsidizing solar. My brilliant local leadership put in a snuggly solar panel farm for a mere $1.3 million that generates the equivalent of $6000 electricity. That will pay for itself never. Ever. And we are laying off cops and teachers. Hippies and do-gooder boomers are really bad at math.
Leo: On the solar front, here is my thought, and it relates to pensions. Governments have propped up solar so far. They now have to make cuts. They might choose solar panels, via the insane 65 cent a kwhr subsidy...but I will bet they don't. We will be stuck with panel capacity for a long, long time. It will be obsolete before it will ever be fully utilized. The stuff is cruising at the fan, quickly...
That Hitler video has had so many great derivations. The sentiments of this one ring painfully true. The pensioners could not care less that the math used to calculate their pensions was nothing more than complicated theft. And to stare at that reality without blinking and demand "pay up" is bizarre. You folks, are no better than Bernie Madoff's unwitting employees - just part of a machine that attempted to steal from honest people. The funny thing, though, is we all knew that we would be screwed by social security and so we built assets outside the system...the public pensioner? Good luck.
Leo-
I agree with you about solars some day being big,
but for now the cost per watt is too high. They need
much higher efficiency % and lower costs to really take off.
Right now $2 a watt solar verses 5 cents a kilowatt(1000 watts)
for other power isn't profitable enough for commercial power generation.
Um, you may want to delete your second link, it's
not supporting your outlook much.
Pensions are one of the main reasons for the Fed's "all-in" moves to date; however I think eventually people will realize that haircuts and less benefits will be in order. Not to state the obvious, but that will be a messy situation once it gains steam.
Leo,
Eventually a number of people are going to figure out how to more precisely measure "stock market wealth" than simply multiplying outstanding shares by today's closing price.
The most ridiculous statement regarding BP last week was that BP lost $75 billion in value when the share price declined.
If you understand my point, BP didn't lose a dime of value when the share price declined last week. There may or may not have been an overall reduction in present value of the enterprise BP as measured by the "stock market" valuation of BP.
The "stock market" value of BP (used by pension funds and others) really doesn't measure how much cash all the outstanding shares of BP can be exchanged for. Yet, everyone values their BP shares as if that were true.
Until people realize, understand and digest what the stock market really is in terms of value, any valuations of pension funds ability to meet future obligations is currently overstated in the extreme.
poorold,
Excellent points, but we still need to measure the solvency of pension funds. But I understand what you're trying to say here. By the way, some think liabilities are grossly understated (not just assets grossly overstated).
You are one of the biggest bulls on the site; economy gaining strength, blow out jobs numbers, shouldn't your ridiculous and baseless bullishness find it's way to your pension expectations. If all these great things are going on in the economy can't the actuaries model them into their projections. Both you and the pension plans are offside but you are more so. How can you be so bullish but they can't.
Another good call by Leo, Santander down 18% since your comment below. You'll eventually be right but how much $ will be lost first. I guess that's o.k. cuz it's not yours:
by Leo Kolivakis
on Wed, 05/05/2010 - 11:13
#332617
So go ahead, be my guest and short Banco Santander. You're going to get your ass handed to you.
Other great Leo calls; sell gold (at lower price) buy equity dips hard, especially chinese solars (at higher price), GGBs (free money, per Leo), and many, many more. Someone is definitely getting their ass handed to them.
I love douches who come on to my pension posts to tell me that I made bad calls on Santander, Chinese solars, GGBs. Listen up, keep shorting the Dow till it reaches zero - then you'll have nothing left to short. (By the way, where do you think those underfunded pension funds are going to get the juice to meet their obligations? Stocks or bonds?)
Leo: Here's what - the pensions will default on their obligations. Unless Ben lends them a printer, in which event hyperinflation will make the FRNs utterly worthless when they are paid out.
Obligations will not be met.
Find work you love and never mind a pension - we will be working until we die. Is that not the point anyway, to find and do what you enjoy, that helps bring prosperity to you and yours ??
Working where?
You just don't get it. A little humility would serve you well. I know it's tough to admit when you've made a bad call Leo, but we all screw up. It would be nice for you to just admit it. You would have lost people's money many times over with your recent ideas. You have more money losing ideas than we all have money. Love the name calling too, in the absence of a defence it's always a good choice.
The number one person who has lost money on my calls is ME. But I have not changed any of my opinions. I keep buying solars even though they have been slaughtered, and will siton them. Nobody here has to do what i do. I am a risk taker, especially when I have conviction. As for the name calling, it's all part of the bullshit I endure daily here. You guys have no guts. Where are you putting your money???? Easy to take shots at me, much harder to add value.
Im putting my money into a safe deposit box and into Maple Leafs.
Good luck with your solar stocks , youre going to need it.
Out of curiosity, what do you know about the solar industry? All fluff, all hype? Mark my words, solar will be huge - industrial revolution "huge" - and one day you're going to be kicking yourself for not buying solar shares trading at sub $10. No worries, big hedgies are loading up as of this writing. They know where the next rising sun lies.
Hint: In the future, electric cars will have solar panelled sunroofs, recharging their batteries.
Leo, don't get mad when we point out your calls. Just man up. I'll go on the record as long gold, and practically nothing else. If I'm wrong feel free to bring it up often.
You are a pretty arrogant guy, you take no responsibility for bad calls, you say you are the smart money and we are a bunch of rubes. When you get your ass handed to you, look in the mirror for the responsible party.
As for quadrupling down on solars, well, whatever. It's your funeral and you don't manage my pension so go for it. If you are right we will never hear the end of it but you will have a right to brag. You may be the first person to make the martingale strategy work, but I doubt it.
http://en.wikipedia.org/wiki/Martingale_(betting_system)
I'd rather keep buying solars at these levels than chasing gold higher. Again, these are long-term positions. I do not need this money anytime soon. Gold is simply not my thing, and I do realize hedgies own gold too, but I prefer solars.
Enough whining Leo, you signed up for it Big Boy. I hope my value added is to discourage people from listening to your nonsense. You should lose money, actually you deserve to. Look at some of the research posted on ZH, there are some people doing some real hard roll up their sleeves work. You do not.
That's your opinion. Some of what you call "research", I call noise.
Unfortunately, neither is going to provide said juice.
Thanks for the very informative post, NICE JOB!!
Leo - that video was a great find.
I thought the folks behind Downfall had rooted out all of the Hitler parodies from Youtube. Very funny!
PierreLegrand
To be fair to Leo, I read similar thoughts at Business Insider.
For example
http://www.businessinsider.com/goldman-the-us-trucking-rebound-2010-6
Bears Need To Explain Away The U.S. Trucking Boom
http://www.businessinsider.com/all-this-talk-of-a-double-dip-recession-is-almost-certainly-nonsense-2010-6
All This Talk Of A Double-Dip Recession Is Almost Certainly Nonsense
Two quick reactions to the Business Insider pieces:
first, the trucking article. Sorry, I need a lot more proof than numbers from Goldman Sachs to call out a super-revival in interstate trucking. Frankly, I don't believe a word of it. Neither should you.
second, the premise of the sseocnd article is simply this: despite an avalanche of facts saying otherwise, this recession is no different from any other that we have had since post WW II and any minute now the US Cavalry and 400K new jobs a month will show up. That's it, nothing else. No facts to back it up.
Methinks "Business Insider" would be better named "Business Insider Who Sticks His Head In Sand and Utters Complete Nonsense."
Sorry, but is there a Latin phrase for "I no Longer Tolerate Happy Nonsense."
I read both of them. My first thought was: I want the last five minutes of my life back.
Douches.
Life isn't fair...
Life's a bitch...get a helmet.
So these folks actually believed that we could avoid paying the bills by merely printing more money? Hey why stop at 14 trillion? Shit print up 100 trillion and have Leo and Helicopter Ben drop the bills over the US. If a healthy economy is really driven by folks spending money then that should fix us right up! Hell we can all sit at home smoking crack, fucking and collecting government checks. After all that is the gist of the Keynesian dream isn't it?
Why worry Obama has my back!
How is that boom coming Leo?
http://finance.yahoo.com/banking-budgeting/article/109739/the-bad-news-b...
a different view on jobs....
That is an article Leo you need to read, master, ingest, grok, whatver - it is reality, I'm afraid. There are no new jobs coming, there is no "recovery" coming. There are no new industry drivers, there is no comsumer returning to the marketplace to buy up over priced Chinese manufactured knick-knacks. Why do you think Wal-MArt's sales are down? For the near future, look for the dip when the stimulus wears off- wait until we all see the combined bad news on housing and employment in a month or two. Hot summer coming, and the elections in the fall. Our leaders are captive to Wall Street bankers and corrupt.
The "happy talk" has to stop, and should no longer be tolerated - it encourages, leaves unchallenged and fosters policies that benefit the wealthy oligarchs, and does nothing to advance the interests of the common man in the USA.