Pension World Reeling
Most US pension plans assume returns of six to seven percent. They have shied away from government bonds because yields have been too low.
Bloomberg reports Pension World Reels From ‘Financial Vandalism’ of Falling Yields
A once-unthinkable collapse in global bond yields is forcing pension funds to buy bonds that offer negative returns — putting the financial security of future retirees in jeopardy.
U.S. institutions managing trillions of dollars in retirement savings — including the California Public Employees’ Retirement System — have been ratcheting down return expectations. Japan’s Government Pension Investment Fund, the world’s largest, has warned that money managers risk losses across asset classes. In Europe, pension funds may be forced to cut benefits in part thanks to the decline in rates.
“The true madness is pension funds being forced to invest in assets which will be guaranteed to lose, such as in the case of long dated inflation-linked gilts at real yields of -3%,” said Mark Dowding, chief investment officer at BlueBay Asset Management, which has pension-fund mandates. “It is financial vandalism and the government and central banks need to wake up to this.”
Vandalism or Fraud?
I commented on this previously.
Pick the term that suits you.
Five Choice Terms
- Fraud
- Theft
- Counterfeiting
- Robbery
- Vandalism
The first four are the most accurate but it is good to see someone else thinking about the situation along the right lines.
I discussed this setup in detail in Negative Yield Curves to Infinity and a Reader Question Regarding Fraud
Please read the above link if you don’t understand why negative yields constitute fraud, theft, or counterfeiting, and why negative yields can never occur in the absence of manipulation.
Mike “Mish” Shedlock
حجر هاشمي
الحجر الهاشمي
الحجر الهاشمي
حجر هاشمي
حجر هاشمي
مصاعد كهربائية
تركيب مصاعد
اسعار المصاعد
مصاعد كهربائية
Fake
واجهات حجر هاشمي
واجهات حجر فرعوني
واجهات حجر هاشمى ابيض ازازي
اسعار البازلت فى مصر
تركيب ارضيات حجر بازلت
واجهات حجر فرعوني
اسعار الحجر الابيض الازازي ,سعر متر الحجر الابيض الازازي
اسعار الحجر الهاشمي
انواع الحجر الهاشمي , انواع الحجر الطبيعي , انواع الحجر الطبيعي فى مصر
حجر هاشمى
واجهات فلل حجر هاشمي
واجهات قصور حجر هاشمي
واجهات منازل حجر هاشمي
واجهات بيوت حجر هاشمي
واجهات عمارات حجر هاشمي
واجهات اسوار حجر هاشمي
واجهات حجر هاشمي هيصم
واجهات حجر هاشمي في مصر
واجهات حجر هاشمي ابيض
واجهات حجر هاشمي فاخر
واجهات حجر هاشمي كريمي
واجهات حجر هاشمي مودرن
واجهات حجر هاشمي كلاسيك
Anyone expecting a pensions, SS, or living off of savings can tell you they have been sacrificed for int’l entities with too much dollar-based debts. The question that govt knows the answer to is – what the Hell are you going to do about it?
Bloggers pontificate their mouse while Rome burns. Why haven’t bloggers collaborated to get the masses in the streets or boycott the money center banksters, big pharma, and the others that openly violate the law with no fear of prosecution?
. Company issues BBB bonds. Not quite junk.
. Pension fund buys said bonds.
. Company uses bond sale proceeds for stock buy-back.
. Company thus increases EPS.
. Company’s stock price increases as a result.
. Company’s executives profit from increase in value of stock and options.
. Pension fund profits from higher interest income and stock price growth.
. All is well…..for a while.
Potential problems: In an economic downturn, the BBB bonds may be downgraded to junk, requiring the pension fund to sell the bonds. State tax receipts could be reduced, thus reducing pension funding source to buy bonds. And, a stock market drop further hurts pension fund returns.
Meanwhile 10,000 a day are turning 65.
Guys, If Trump has bankrupted so many businesses, it’s all because of other people faults!
Pensions in many ways are the biggest Ponzi Scheme of modern man. Pension payouts are predicated on the idea the money invested in these funds will yield seven to eight percent a year and in today’s low-interest rate environment, this has forced funds into ever riskier investments.
The PBGC America’s pension safety net is already under pressure and failing due to the inability of pension funds to meet their future obligations. The math alone is troubling but when coupled with the overwhelming possibility of a major financial dislocation looming in the future a nightmare scenario for pensions drastically increases. More on this subject in the article below.
a nightmare scenario bound to come true ….the article is merely about the US situation, the EU, social paradise as it is , is even WORSE off …..
Pensions weren’t created for a world of constantly changing money supply. Or a world of funny accounting. Or a world where growth is something that should be managed, not observed. Or a world where employers ever go out of business.
One simple observation Guy Haselman makes – Central Bankers have taken on the role of Central Planners but unelected.
Thinking this way its almost along the lines of a coup where a shadow Gov sets the price of money, value of the plebs labour, and the plebs are just pawns with no say or control.
This offers at least 2 ways forward.
A) Elected officials use this as an excuse to take control of the CBs and sell it to the plebs as making CBs accountable and democratically legitimate – disaster.
B) Some Trump types comes forward to change/eliminate/replace the current system and exposes it to gain electoral support.
A good youtube via with Guy Haselman and Yra Harris in Financial Repression Authority. Released recently. Touches on moral hazard and possible outcomes etc. Worth a listen.
I would add a 6th term to describe negative yielding bonds: Stupidity.
Perfect time to cut Social Security. If we keep this up, someday Latin America will be complaining about all those greengo fruges fleeing the USA and driving down wages in their countries and demanding border walls. “Everything is proceeding as I have foreseen.” – Evil Emperor Darth Sidious
Nobody is being forced to buy these bonds. There is certainly no buyer’s strike, forcing up the interest. It would seem there is a dearth of bonds. The lower the interest rate, the more funds need to invest to fund their liabilities. Every halving of the interest rate means they need double the amount in bonds. With Central Banks bidding up the price (in the vain hope that people will borrow to invest in the actual economy), they are fueling the need for bonds in a self-reinforcing loop.
“Nobody is being forced to buy these bonds.” – Pensions legislation in many countries forces pension funds to allocate certain percentages of their holdings in these bonds. So yes, there are those forced to buy them.
Correction to title of article.
Private pension plan will be wrecked.
Public union pension plans, no matter how fiscally untenable, will be made whole by raising taxes.
Which is exactly why government employees don’t care about this.
Raise taxes on corporations? Or the general public? Over the last 40 years, people have been hoodwinked into choosing the latter (because the former ostensibly “creates jobs” – abroad.)
Before we cry too much about the sinking yields (and I am as my main retirement fund only adds value from yield not bond prices), lets remember that bond PRICES must be skyrocketing upward as well. And if there is no obvious “popping” of the bond bubble right away, some of these investment pools are gonna become very rich. I used to like to deal in dividend paying stocks, till someone mentioned how WAY more important capital gains are. Same thing with bonds.
For private, conservative investors, bond prices above 100 are virtual, imaginary, unless you sell of course , but why did you buy then in the first place , and what to do these days with your new cash apart from investing into yet another bubble ?
So, so many ominous signs out there. The gap between reality and public perception is a yawning chasm. One can only marvel at how the “greatest economy ever” claim is believed by tens of millions!
To think that Trump’s devotees are the “fed up” contingent, while their opponents are the “America’s already great” crowd… yikes! Both groups are so far from reality they’d need the James Webb telescope to catch a glimpse of it.