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Author: rustybell Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35379  
Subject: Re: OT: On United Pension Plan Follies Date: 7/31/2005 10:36 PM
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I consider this issue of considerable import as it represents another obligation that could very well wind up in the lap of US citizens; and another promise reneged.

Mark: Can't tell from your comments whether you deny there is a problem or just that you thought the article didn't present it very well but, here's a few other references...it's not just the airlines, nor just publicly held corportations.

"Pensions that Bear Mention"
http://www.forbes.com/work/management/2005/07/07/pensions-ibm-hp-cz_bc_0707pensions.html

"Sinkhole!
How public pension promises are draining state and city budgets"
http://www.businessweek.com/magazine/content/05_24/b3937081.htm

As for one of the reasons why this occurred:

"40 companies sitting on pension time bombs"
http://moneycentral.msn.com/content/P87329.asp

Oddly, companies are allowed to include returns on pension investments in their net income -- even though they owe the money to retirees, and those returns are based on assumed rates of return of 8% to 12% that are far bigger than real market returns in many years.

Another interesting tidbit:

"While pensions fall short, CEOs fly high"
http://moneycentral.msn.com/content/P119362.asp

So I wouldn't be inclined to say that asset allocation per se is the sole culprit. But I'd think that a more market neutral investment strategy would make a lot of sense even if it meant going against the advice of money managers who have a vested interest in charging fees from purchasing equities when that is a high risk gamble.

A fiduciary duty was neglected. The relative safety (and suitability) of bonds was under-utilized. Perma-bullishness and Enron-style accounting became the norm and guess who is going to suffer the consequences...

Rusty


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