The Stingy News Weekly (10/17/2010)
The Financial Time Bomb of Longer Lives
"First the good news: We’re living longer, healthier lives than ever before.We’re already so used to the idea of greater longevity, in fact, that it may seem ho-hum to learn that boys and girls born in 2008 in the United States have life expectancies of 75 and 81, respectively.Those life spans, however, represent a bonus of about three decades, compared with Americans born in 1900, according to a report last year from the Census Bureau. And, by the way, Spain, Greece and Austria fared even better, proportionally: Life expectancies in those countries doubled over the course of the 20th century.Now for the bad news: At this rate, we can’t afford to live so long."
How to Erase the Lost Decade?
"Whatever figure turns out to be right, the bottom line is that “people should ratchet down their expectations for stocks,” he said.“There’s no harm in hoping that things turn out better,” Mr. Arnott added. “But the danger is assuming and planning for the best while saving as if the market can do your work for you.”"
No Margin of Safety
"This creates a terrible problem for investors here. Given that the yield on the SandP 500 is now below 2%, it is essential for investors to recognize that they now rely on the achievement and maintenance of sustained bubble valuations in the years ahead. Unless investors believe that bubble valuations can be maintained indefinitely, they can expect little but abysmal returns over the coming 5- 7 year period."
"It is likely that someone who engaged in large amounts of deliberate practice in mathematics could perform extremely well on mathematical tests, exams, and other competitive measures so long as these tests involved calculations or derivations that had been practiced. The problem is that by their nature inventions and discoveries involve problems that have never been solved by anyone. There is no way to practice in this way."
The Crisis in Local Government Pensions
"We calculate the present value of local government employee pension liabilities as of June 2009 for approximately 2/3rds of the universe of local government employees. Using local government accounting methods, the total unfunded liability in these areas is 190 billion or over 7,000 per municipal household. When government accounting is corrected by discounting already-promised benefits at zero-coupon Treasury yields, the total unfunded obligation is 383 billion or over 14,000 per local household."
N.Y. Faces 200 Billion in Retiree Health Costs
"The health benefits are entirely separate from the pensions that New York’s public workers have earned. Governments have reported their pension obligations for years, but their retiree medical obligations have been building up unseen, because governments were not required to account for them. The information is starting to come to light because of a new accounting requirement."
Congressional Staffers Gain From Trading in Stocks
"The aides identified by the Journal say they didn't profit by making trades based on any information gathered in the halls of Congress. Even if they had done so, it would be legal, because insider-trading laws don't apply to Congress."
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