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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Joan Osland Graffius who wrote (211333)	12/25/2002 11:04:32 AM
From: Wyätt Gwyön	Read Replies (2) of 436258

re: the "pension problem", S&P puts core earnings at just 18 bucks and change on the SPX, as opposed to 40 or 50 bucks maintained by the fiction writers with day jobs on Wall Street. this just shows how much of so-called earnings are not real money but just accounting fiat. high return assumptions and discount rates keep forward pension liabilities low and hence current "earnings" high. (this discrepancy alone should convince people that the so-called Fed model of earnings yield is bunk, since the 10yr is a cash return and the SPX earnings yield is a fantasy return.) but at the same time we have a "leak" of several hundred billion a year of hard cash which cos must add to their pension portfolios to prop up even their current lofty assumptions. it seems to me that in today's low-interest-rate environment, return assumptions should not be over 5%, and even that is kind of high. if the SPX all had to shift to 5% assumptions, what would this do to the market's perception of the pension "situation", and the SPX itself, and hence the actual pension portfolios? lots of reflexivity there and it all seems to point DOWN. happy christmas!

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