Asia Forum 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 : Asia Forum

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Alias Shrugged who wrote (6506)	9/18/1998 1:55:00 PM
From: Robert Douglas	Read Replies (1) of 9980

Mike, Thanks for sharing your expertise on this subject. The interesting thing about pensions and how they effect earnings is that it won't take a decline in the market to effect earnings, all it will take is a return to average rates of return. Let me illustrate. Suppose a company usually places a fixed amount in its DB pension plans each year. Further suppose that their accountants told them some time ago that with the rise in the stock and bond markets that they were over-funding the plan and therefore the last three years they have cut this contribution in half, letting the asset appreciation compensate for the smaller contribution. Well this year the market rises at the assumed rate of the plan and this means that the contribution must return to the normal amount. Well Wall Street has grown accustomed to this half contribution and has built it into all future earnings models. This return to normal contributions cuts into projected earnings and a whole bunch of short sited Wall Street analysts suddenly are cutting their forecasts. Snared once again by that sneaky second derivative - the change in the change. I never knew my calculus would come in handy. -Robert

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next