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| Tickerguy With Warren Pollock (Part 1, Pension Ponzi) in forum [Market-Ticker]
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Mannfm11
Posts: 3530
Incept: 2009-02-28
DFW, Tx
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Watch a few years and you will see what the 1.5% means. All other returns are going to adjust to that number. The masses are getting less and less money to pay these returns.
I have never been able to make sense out of the divided returns in annuity policies. I would bet this one is a variable and the 8% is some number based on how much money is going to be paid out in the future with no interest. Someone reinsured this nonsense. Seems General RE has a sizable chunk of this stuff.
It is my understanding that the state insurance is that the other insurance companies are going to pick up the contracts. I believe there is a guarantee that is a hell of a lot lower than the 8%. The problem is that even the barest minimums in the contracts I have looked at are 1.5% to 2%.
We are about to see a lot of rich people go broke. The game that has worked for 60 years isn't going to work. The broken stock markets I have seen over history remain under the 50% level for decades. Take a look at the post 1929 Dow. The Nikkei. It took a lot of inflation to get these indexes back above the level. This is because the income eventually fails to support or grow the value of the security and time makes so many of them obsolete. This whole game is likely screwed.
I am licensed to sell annuities. I have never even considered selling one that has the guarantees these guys are peddling. It is a ponzi. I wouldn't sell any of them at this time, due to the risks involved. insurance companies in Japan went broke attempting to honor 4% and lower guarantees.
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The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
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Donethat
Posts: 770
Incept: 2009-04-22
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Much2learn
Posts: 313
Incept: 2008-02-02
Alabama
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Good conversation, enjoyed it.....
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Jata1
Posts: 5052
Incept: 2009-03-08
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Karl, that was really interesting. You always seem to be such a clear thinker and stick to the math and ignore the political BS that inundates every other discussion on this matter. It seems we are boxed into a corner on this one. If the necessary thing is done, cut pensions to a reasonable facsimile of what they should be, the impact will be huge as I'm sure a lot these pensioners are still levered up on houses and toys, etc. No reason to save money when you have a "guaranteed" pension. Even the ones who are not, it will have a huge impact on consumption. If they don't cut them it goes kaboom anyways and the impact is even worse. I don't see the way out of this mess.
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Gamma
Posts: 5546
Incept: 2008-01-20
Northern CA
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Your face is getting quite a bit more dour in your old age, Gen.
Long before I had anything but the most amorphous idea of the Ponziness of our system, I always wondered how in the bloody hell does any kind of conceivable mathematics support a teacher or fireman retiring and drawing their salary (in the form of a pension) or 90% or 80% of their salary for the next 35 years...when they are contributing nothing at all for those years. How could it be that whatever a school district or fire district decides to pay an employee is in effect doubled or even tripled?
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This stuff we're going through, this is nothing compared to the Middle Ages.
They told me if I voted for John McCain, an idiot would be a heartbeat away from the presidency. Sure enough...
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Lugnut
Posts: 347
Incept: 2008-09-24
New Jersey
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Just wanted to say I really enjoyed both parts of this. Thumbs up!
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Anti
Posts: 4278
Incept: 2007-10-09
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TXN retirees - programmers and such, the better and brighter of 30 years ago - laid off in their mid-50s get a pension of around $1500/month depending on lots of stuff. It can be almost $0 if they insure their spouse through the company. They may be better off than many engineering jobs, because they have cheap health insurance, if they were with the company for long enough, though their spouse is supposed to ESAD in that regard.
It's justice that a run of the mill government employee is worth 5 or 10 times that in retirement?
Maybe some years hence the TXN retirement will be a great deal, because the H1Bs employed as technical workers will take their $1500/month back to India and be well-off there.
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