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

To: Chispas who wrote (43927)	1/5/2006 6:00:44 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Damn I was hoping for a picture. Mish

To: Chispas who wrote (43927)	1/5/2006 8:41:34 PM
From: mishedlo	Respond to of 116555

IBM to Freeze $48B Pension Plan in 2008 Thursday January 5, 5:39 pm ET By Brian Bergstein, AP Technology Writer IBM to Freeze $48B Pension Plan in 2008, Enhance 401(k) Benefits for 125,000 Employees in U.S. BOSTON (AP) -- Furthering corporate America's move away from pensions, International Business Machines Corp. said Thursday it will freeze its $48 billion pension plan in 2008 and instead enhance its 401(k) benefits for its 125,000 U.S. workers. Nearly all IBM's U.S. employees -- everyone hired before Jan. 1, 2005 -- have pension benefits accruing under a traditional annuity-like plan or a cash-balance plan, which gives workers interest-bearing funds that they can take with them if they leave the company. But these "defined-benefit" plans are becoming rarer. Companies say the plans carry too many uncertainties, largely because swings in interest rates and investment performances change accounting considerations and the amounts businesses must contribute to their pension funds in a given year. Industrial giants such as IBM and airlines that still carry pension obligations say the costs and complexities hamper their ability to compete with younger, more nimble rivals that aren't saddled with pension obligations. Beginning in 2008, then, IBM workers' pension benefits will be locked in place, based on salary and length of service. The accrual of benefits will stop, meaning future raises or additional years with the company will not signify bigger pension checks upon retirement. Instead, IBM will increase its contribution to its 401(k) plans, in which workers get a defined, predictable amount from the company that they're responsible for investing. IBM will double the percentage of employees' contributions that it matches, to 6 percent of salary; certain employees will be eligible to receive more. Current retirees will see no changes. IBM executives said that by no longer having to account for pension accruals that would have mounted after 2008, the Armonk, N.Y.-based technology giant will save between $450 million and $500 million this year alone and up to $3 billion from 2006 through 2010. However, the change will result in a $270 million charge in the just-completed fourth quarter of 2005. The action mirrors steps IBM has already taken in other countries, and follows IBM's decision to offer 401(k) plans only -- no pensions -- to workers hired after Jan. 1, 2005. Similarly, rival Hewlett-Packard Co. decided last year to offer only a 401(k) plan to U.S. workers hired this year and beyond. Patrick Kendall, a pension expert at Diversified Investment Advisors, a consulting firm specializing in retirement plans, said the "hard freeze" IBM announced Thursday was almost inevitable considering the company's earlier "soft freeze" of closing the plan to new employees. "I think a lot of these sponsors would like to get out of (defined-benefit plans) entirely, just terminate the plan," he said. But many companies find that termination fees and other complications negate that strategy, he said. Pensions have been a touchy subject for IBM, which was hit with a federal lawsuit -- settled for up to $1.4 billion -- filed by employees who contended that IBM committed age discrimination when it shifted to a cash-balance plan. Randy MacDonald, IBM's head of human resources, said the decision was unrelated to the lawsuit. "It's all about cost-competitiveness, so that we could continue to be the financially viable company that we are," he said. biz.yahoo.com

To: Chispas who wrote (43927)	1/5/2006 8:52:56 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

China hints at shift away from dollar China indicated on Thursday it could begin to diversify its rapidly growing foreign exchange reserves away from the US dollar and government bonds – a potential shift with significant implications for global financial and commodity markets. Economists estimate that more that 70 per cent of the reserves are invested in US dollar assets, which has helped to sustain the recent large US deficits. If China were to stop acquiring such a large proportion of dollars with its reserves – currently accumulating at about $15bn (€12.4bn) a month – it could put heavy downward pressure on the greenback. In a brief statement on its website, the government's foreign exchange regulator said one of its targets for 2006 was to "improve the operation and management of foreign exchange reserves and to actively explore more effective ways to utilise reserve assets". It went on: "[The objective is] to improve the currency structure and asset structure of our foreign exchange reserves, and to continue to expand the investment area of reserves. "We want to ensure that the use of foreign exchange reserves supports a national strategy, an open economy and the macro-economic adjustment." The announcement came from the State Administration of Foreign Exchange (Safe). It gave no more details about whether this meant a big shift in the investment strategy for Chinese reserves, which according to local press reports reached nearly $800bn at the end of last year and are expected by economists to near $1,000bn this year. The regulator also said it would end quotas on the amount of foreign currency Chinese companies can acquire to invest in overseas assets, a decision that removes a bureaucratic hurdle facing companies that plan to make international acquisitions. The statement comes at a time of growing debate in China on how the reserves are invested. Some economists have called on Beijing to use the funds to finance infrastructure investment and clean up state-owned companies, or to invest in higher-yielding assets rather than financing US borrowing. However, according to Stephen Green, economist for Standard Chartered in Shanghai, although the language was "vague", Thursday's statement was the first time Safe has publicly indicated a shift away from dollar assets. "It is a subtle but clear signal that they are interested in moving away from the US dollar into other currencies, and are interested in setting up some kind of strategic commodity fund, maybe just for oil, but maybe for other commodities," he said. The Group of Seven leading industrialised economies has repeatedly called for an adjustment in global trade imbalances, including a rise in the renminbi. The US has expressed frustration that China has not allowed its currency to rise significantly after last July's 2 per cent revaluation. That saw China move from a dollar peg to managing its currency against a basket of currencies, potentially allowing the renminbi to rise against the dollar. John Snow, US Treasury secretary, speaking earlier on Thursday, repeated his call for China to allow the renminbi to rise against the dollar. "The trade deficit is influenced by lots of things, differential growth rates, differential savings rates and investment rates and so on. But clearly, getting the [Chinese currency] more appropriately valued will be helpful to the global adjustment process," he said. However, some economists believe it would be a mistake for China to shift its reserves into domestic investment or other asset classes. msnbc.msn.com