Value Investing Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Rex Torro who wrote (46003)	1/9/2012 10:16:04 AM
From: Spekulatius	Read Replies (2) of 78751

re Pension fund deficit in the US: ai-cio.com I believe 2012 will become a moment of truth for companies with a Pension fund deficit. As I understand it, changes implemented back in 2006 are now leaving less leeway if pension funding levels drop below 80% and 60%. Then, there is also the issue with still high expected rates of returns (typically ~8.5%), which I think is going to be hard to achieve given record low interest rates and a 40-50% of bonds in the asset mix. Reducing the expected rate of return will dramatically increase liabilities (for infinite duration, you need 5% more assets if you assume 5% lower interest rate, to at a 8% level, a 0.5% reduction in Return will increase liabilities by 6.25%). Given the already low coverage, I expect that many companies have to kick in significant cash to keep the funding levels reasonable. Defense companies are particularly vulnerable, I found that most have a pension deficit equal to ~20% of their revenues, now image revenues shrinking and having to cough up real cash to sustain the pensions. Maybe a short opportunity even... XLS is one of the worst offenders in that regard, with pension deficit (pre-tax) of 45% of the revenues.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next