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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: gregor_us who wrote (231)	2/19/2004 11:39:59 AM
From: mishedlo	Respond to of 116555

Two Good Articles:Pension Funds, German Recovery morganstanley.com Corporate defined benefit pension plans weathered a "perfect storm" in 2000-02, as a once-in-a-generation plunge in both equity markets and interest rates opened a huge funding gap. Unfortunately, however, it's not all smooth sailing ahead for DB plans. Their problems run far deeper than suggested by today's (or even next year's) funding gap, which is only a snapshot of their financial health. Demographics are unfavorable, flawed accounting induces risky investment practices and masks plans' underlying health, and both funding and tax rules are inappropriate, in our view. The result: economic mismatches created by years of underfunding relative to the promises made, and by overly optimistic assumptions about mortality and retirement. These problems are most evident in the increasing ratio of inactive to active plan members. That demographic mismatch will magnify the drain on plan sponsors' operating performance from any negative market outcomes. ====================================================================== Today’s Q4 GDP data out of Germany confirm last week’s flash estimate, which showed real GDP rising by a non-annualised 0.2%Q between September and December of last year. This leaves growth in Europe’s largest economy at an unchanged below-trend rate. Contrary to initial expectations, the recovery did not gain momentum in late 2003. Together with potential downside risks to our Q1 GDP estimate, which currently stands at 0.5%Q, today’s report puts our full-year forecast of 2.1% GDP growth in Germany under review. The initial downside surprise in the Q4 GDP data alone would shave off about two tenths from this year’s growth rates as the economy entered the New Year with less momentum than previously thought. That said, we expect the recovery to gain further momentum in the coming months as domestic demand conditions should continue to improve.