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Pension Woes Beginning To Show


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Looks like the pension monster is crawling out from under the bed at last. As more and more of these stories emerge, this should be a catalyst for the next decline:

 

Raytheon warned after hours that 2004 earnings would fall short of Wall Street forecasts, citing higher pernsion costs, and said higher labor costs from power plant construction would increase a 4th quarter 2002 charge.

 

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Shares down after hours... :P

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Lemme tell ya.

 

Here on Long Island every town has it's own little local newspaper.Maybe 8 pages-once a week.

 

Ya know the kind that tells ya who the homecoming queen was and how well the cub scouts tied their knots this week.

 

 

Anyway it seems the teachers union pension fund for our little district is suddenly ---that's it you guessed it----underfunded.

 

Why?

 

The usual reason------investing it in the stock market.

 

So quietly and without any fanfare , debate or finger pointing , our taxes will go up to cover this little shortfall.

 

And as it is discovered that the county workers, police, garbage men, etc etc. are all in the same boat, they will inch up the taxes little by little, quietly and in the dead of night when no-one is looking.

 

So when the WSJ or The Times run stories about public companies like Ford or whomever being underfunded, we must be aware that they are the tip of the iceberg and that local townships , municipalities, counties etc. are all about to become an even bigger drain on the economy than ever.

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COMING TO A THEATER NEAR YOU....................

 

F, GM, IBM................etc., etc.........................

 

It is going to be painful watching the "gubbamit" subsidize these schmoes just like the airlines..................

 

Don't worry Uncle Al will print with abandon...............

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As per GM, note that their response to being woefully underfunded in the pension department was to 'true it up' by (get this, it's good) lowering their projected rate of return to 9.5% from 10% and then covering the difference.

 

That little difference turned out to be just north of $1b (!!!). This impacted their earnings but good. Imagine if they'd adjusted it to a more realistic return of, say 4% (5.3% on their bonds and negative returns on their stock portfolio...). This crappy, obvious pension gaming is still confusing the 'experts' who can't seem to figure out that the story is there is a HUGE problem here.

 

Hey Krudlow, what's the correct multiple for a market with no growth and no earnings again? 30.4?

 

And Ned38 - the homeowners/property owners are going to catch it in the shorts badly over the next few years because, as Yobob points out a full freaking 1 in 6 people work for the government! How can this be?!? I gotta pay for all their bennies? Foreever? This ain't going to be pretty.

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MISS MONEYPENNY--I guess you've heard what the wags are saying about G.E.--it's a pension fund that happens to manufacture cars--I'd reckon one could apply that to many other entities....thanks for the stats-to see them in that format really bring into focus the "sickness unto death" of the current corporate financial landscape--remember from about 1995-2000 how the "American financial model" was trumpeted as the one to emulate?--At that time we cognoscenti immediately thought back to Japan in the 80s when American management had visions of American workers becoming vacation-eschewing robots like the Japanese...as t'is written in Kohellet: "Aiyn ha-dash tachat ha-shemesh"-(nothing new under the sun).

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MISS MONEYPENNY--I guess you've heard what the wags are saying about G.E.--it's a pension fund that happens to manufacture cars--I'd reckon one could apply that to many other entities....thanks for the stats-to see them in that format really bring into focus the "sickness unto death" of the current corporate financial landscape--remember from about 1995-2000 how the "American financial model" was trumpeted as the one to emulate?--At that time we cognoscenti immediately thought back to Japan in the 80s when American management had visions of American workers becoming vacation-eschewing robots like the Japanese...as t'is written in Kohellet: "Aiyn ha-dash tachat ha-shemesh"-(nothing new under the sun).

Electric Cars? :unsure:

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Expect to see some more pension surprises this coming earnings season.

 

SEC Faults Pension Reporting, Wants More "Reality"

 

 

SEC Commissioner Cynthia Glassman says that companies aren't cutting their expected rates enough.

 

``I think in the current environment at some firms they may be too high,'' says Glassman, without referring to any particular company. ``It's important that companies can justify the rates they are using, and take into account both the good times and the bad that we've been experiencing over the last ten years.''

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