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World's Best-Run Pension Funds Say It's Time to Start Worrying

166 points by kungfudoi 7y ago

throw0101a 7y ago
The "best-run" rating comes from the Melbourne Mercer Global Pension Index: * http://www.mercer.com.au/globalpensionindex http://www.mercer.com.au/globalpensionindex * https://australiancentre.com.au/projects/melbourne-mercer-global-pension-index/ https://australiancentre.com.au/projects/melbourne-mercer-gl... Technically Denmark is the second-best, with a score of 80.2 versus Netherlands' 80.3
tamaharbor 7y ago
We do not need to see the Bloomberg smear job on Hacker News. Thank you.
TaylorSwift 7y ago
Does anyone know how to bypass Bloomberg's paywall?
- boring_twenties 7y ago
  Simply disable JS or use Firefox's Reader Mode.
- tehlike 7y ago
  https://outline.com/Jr68vZ https://outline.com/Jr68vZ
- lamename 7y ago
  https://github.com/iamadamdev/bypass-paywalls-firefox https://github.com/iamadamdev/bypass-paywalls-firefox Posted just the other day here by another user Disclaimer: i haven't used it
- StanAngeloff 7y ago
  https://github.com/iamadamdev/bypass-paywalls-firefox https://github.com/iamadamdev/bypass-paywalls-firefox
StanAngeloff 7y ago
Nobody "wants" another recession. We all read these articles, though, and then go on to spread them amongst peers like wild fire. The echo chamber only gets louder as time goes on. At some point those predictions/analyses become irreversible and de facto a self-fulfilling prophecy. I've started refraining from talking about negative financial news with friends and family.
- toomuchtodo 7y ago
  This is not about a recession. This is about fundamental shifts in financial market expectations (the exhaustion of growth, ~$17 trillion in bonds offered at negative interest rates, etc). If your entire socioeconomic model is based on positive rates of return (retirement, pensions, investment income, etc), and you can no longer obtain those returns safely, things start to break down. Maybe the idea of retirement is an aberration in history if we're not going to provide for it through a transfer system. Maybe a dollar today is just as valuable as a dollar tomorrow, or ten years from now (time value of money). Do you save for retirement if you absolutely can never save enough due to the rate of return? Do you no longer care about all of that extra fiat (speaking about corporate finance) when its utility rapidly declines to near zero? This is not constrained to just Europe. Look to both Japan, where the Bank of Japan owns a non-insignificant amount of the Nikkei, or the US where the Federal Reserve is already dropping rates again. This comes to every first world country eventually, the financial version of the Langoliers.
  - fennecfoxen 7y ago
    Until humanity is operating at its full economic potential, then money will continue to have time value, for it can be invested to increase economic potential. And if you think that humanity is operating at a fraction of its economic potential, even just given today's technologies, well, take a look at the world. The current state of sub-Saharan Africa comes to mind as an obvious counterexample. "The exhaustion of growth" is political rhetoric meant to excuse anti-growth policy environments which actively suffocate growth by destroying incentives for growth and misallocating resources away from growth.
all_blue_chucks 7y ago
The headline sounds worrying but the article is merely about technicalities of European pension regulations in light of low bond yields.
- ganitarashid 7y ago
  In a way europeans are reaping what they sowed
  - simongr3dal 7y ago
    What has Europe sowed and what is it reaping?
- walshemj 7y ago
  And in on particular country - and I do know that one of the biggest UK pensions fund derisked years ago and sacked its mangers and went self managed.
jacquesm 7y ago
The time to start worrying is long past. If you aren't worried yet then you've been ignoring the tell tale signs that are all over the business world. Safeguards instigated after the last close call are being relaxed, whole asset classes (including regular savings) are no longer viable and pensions are being cut while at the same time the age at which you get are eligible is being raised. 2008 wasn't the worst crisis ever, that doesn't mean we've seen the bottom of the pit yet. If you are counting on others for your old age then maybe think again.
- czechdeveloper 7y ago
  In such scenario you can't count on traditional investments either.
  - jacquesm 7y ago
    Traditional: stocks, bonds, savings, real estate. Some of those work, some don't and some of them are best avoided unless you plan on making a life around the theme of investing (and even then you will most likely get burned one day).
- tptacek 7y ago
  This isn't an article about pensions and retirement savings. It's an article about financial indicators, which pension funds, with their enormous amounts of funds under management, have a unique perspective on. Most of your comment isn't responsive to this article at all.
  - jacquesm 7y ago
    On the contrary. This is all about the 'solvability' demands on pension funds, which are driven to a large degree by computations involving future yields, which in turn depend on interest rates and other market indicators. The trends has been - for years - that the combined elements of demographic time bombs and historically low yields spell out that pension funds will likely not be able to fulfill their obligations. So if you are going to depend on one of these for your future sustenance you need to re-do your homework or you may end up with a real problem in old age.
aazaa 7y ago
> The warning comes as pension firms across Europe struggle to generate the returns they need to cover their growing obligations. In Denmark, some funds saddled with legacy policies guaranteeing returns as high as 4.5% have had to use equity to meet their obligations. Using equity to meet current obligations sounds a lot like a Ponzi scheme: > A Ponzi scheme ... is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[2] The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds. https://en.wikipedia.org/wiki/Ponzi_scheme https://en.wikipedia.org/wiki/Ponzi_scheme Provided that the equity drain is limited in scope, a pension fund can continue to fight another year. The more interesting (or scary) question is what happens when tapping into the equity becomes the norm? At what point does the fund manager level with pensioners and inform them that the fund is in fact insolvent?
- tlb 7y ago
  When interest rates are negative, there is no other option than to fund current obligations from equity. You can't do it from interest, because there isn't any.
  - aazaa 7y ago
    Depending on the fund, there may in fact be another option: more risky assets. As noted in the article: > In the meantime, pension funds have been coping by buying up riskier assets. The Dutch, ranked with Denmark as the world’s best performing pension providers by Mercer, have complained to the European Central Bank about the fallout on the industry. And this is where things start to go off script pretty quickly.
    - pmiller2 7y ago
      And, yet, somehow, I’m expected to fund my own retirement, and these “riskier” investments are literally the only way I can accumulate enough to do so. I know this is about European pension funds, but the US has been “off script” for some time.
    - 7y ago
curiousgal 7y ago
To a student looking to go into quantative finance instead of data science, the number of negative finance headlines on the front page is worrying.
- elhudy 7y ago
  go into data science and dont look back.
- justicezyx 7y ago
  Anyone who still want to devote themselves to financial industry, probably is more interested in money than the greater good of society..
  - elhudy 7y ago
    Everything is about money when you first graduate, unless you want to be supporting the financial industry with your minimum payments for 10+ years. someone with quantitative finance skills could likely move horizontally into any industry or business. Finance, economics, and money are the rock that every company sits on.
    - justicezyx 7y ago
      https://news.ycombinator.com/item?id=21173925 https://news.ycombinator.com/item?id=21173925 Let's be honest, you can chase for money, but this type of predatory behavior is pretty much a fundamental part of financial industry. Be willing to accept that. I cannot
    - kgilpin 7y ago
      Finance, economics and money become irrelevant pretty fast if you aren’t making something people want to buy.
      - jimhefferon 7y ago
        > you aren’t making something people want to buy I hear you but in 2018, finance and insurance represented 7.4 percent (or $1.5 trillion) of U.S. gross domestic product.
robk 7y ago
European pensions may be well run but they are hugely under exposed to venture and tech overall so I'm skeptical of them crying wolf about the tech industry when they have so little exposure to it.
- tptacek 7y ago
  Are American pension funds particularly exposed to venture? My understanding of this industry comes almost entirely from the Kauffman report, which I'm sure is very dated, but that understanding is that venture as an asset class is just a small slice, and invested in primarily because of asset manager requirements to look for un-correlated assets. If that were true, that wouldn't be an argument that a collapse in tech wouldn't be a systemic failure, because of course all sorts of other actors are connected to tech.
tekkk 7y ago
I am already worrying but so what? Sell everything and have all cash? And what then, wait for the "crash" to happen? Sure the article gets clicks but in reality, if you have invested smartly and with a long-term outlook it shouldn't matter if the market took a momentary nosedive. Good companies remain good companies and I don't mind being invested in them even while my holdings go temporarily to perhaps negative. One of the most annoying things as an investor I feel is the constant pressure to validate my investments to see if I should I sell them or not. It's just too much of a hassle and unless the company really does something dumb, I'll keep holding until the sun starts shining again. I'm not in a hurry either way as a young person, so time is on my side.
- throw0101a 7y ago
  > I am already worrying but so what? Sell everything and have all cash? And what then, wait for the "crash" to happen? Unless you can predict the crash / dip to with-in the day, dollar cost averaging and just hanging on for the ride is the best strategy: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/ https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co... Simply change the equity-bond allocation balance the closer you get to your retirement date.
  - mpalczewski 7y ago
    All that shows is that dollar cost averaging has been better than the strawman he set up. 1. It might not be the case in the future. 2. There may be better strategies not explored. 3. It relies on the stability of the financial system and has extreme home country survivorship bias. Of course the richest country for the last 100 or so years is going to look like it has a stock market that can't loose. In other words this look backward only, and beats the shit out of a lousy straw man.
    - throw0101a 7y ago
      > All that shows is that dollar cost averaging has been better than the strawman he set up. What strawman? The "buying the dip" is a popular strategy that lots of people try to employ: * https://www.thestreet.com/investing/earnings/when-to-buy-the-dip-in-disney-stock-15049068 https://www.thestreet.com/investing/earnings/when-to-buy-the... * https://www.bloomberg.com/news/articles/2019-09-03/look-who-s-buying-this-dip-do-they-know-better-taking-stock-k03g7c6b https://www.bloomberg.com/news/articles/2019-09-03/look-who-... * https://www.nerdwallet.com/blog/investing/buying-the-dip-stocks/ https://www.nerdwallet.com/blog/investing/buying-the-dip-sto... It explores two strategies that have are used by many people: yes there are others, but it simply does A/B testing to try to find the better of these two. It seems that DCA is better than buying the dip (BtD); that doesn't mean there's something better than DCA, but it says that DCA wins over BtD in this part of the bracket. It looks at past data to build a model and makes future predictions: we can invest theoretical money and test the theory that DCA is better the BtD, and check back in a few years to see if the prediction is correct.
glofish 7y ago
One thing I have learned is that when it comes to mass media articles the best bet is to always do the opposite they are saying. Like "George" in Seinfeld, they are most of the time wrong, thus doing the opposite is right.
DoctorOetker 7y ago
to me what is worrying is not that pension funds are crying about trouble (although it may end sadly for those to be covered) what is worrying is that people keep the current economical system which creates the need for pension funds. if all immobilia were rent only, and the rent was continuously redistributed per capita to the population, then everyone would enjoy the average rent: housing: everyone sleeps somewhere and the total expenditure on housing is fairly redistributed, food: everyone eats something and the farmers use the bulk of their income to rent the land, so the population gets a significant fraction of their food payed back energy: wind and solar take up space, competing with farms and housing, and the energy companies spend the bulk of their income on renting that land ecology: we can democratically agree to leave a fraction F for nature of different degrees of wildness, and only put up the the rest for human rent in such a world, why do I need a pension fund? when I am old and less mobile, I can be satisfied with smaller housing, less transportation to compensate for my probable inability to work. If you look at how elderly are [mal]treated in elderly homes etc, I would prefer to be in control of my fair share of average rent, so that if I don't like a place I can go rent somewhere else. Instead of having to gamble today if insurance company X will be solvent in the future, or even if it is, if the resulting pension will even cover for food, housing, ... while with average rent, while the average rent does not devalue with respect to the average rent other people receive... why would I need health insurance? in the current world I would need it because of unexpected lump payments to hospitals etc, but in the system of average rent (under correct compliant conditions), I could set up a standard smart contract for health: "if you treat me now, part of my future income will be diverted for a duration long enough to cover the medical bill", or I can choose to disagree at the moment itself! The current system requires you to predict in advance for all possible medical urgencies, and across all available treatments if you agree on average. There are situations where I would decide against a certain proposed treatment, with another treatment not being covered. But then why did I pay medical insurance for the last X years?? With a system of average rent, your expense is a free trade at the moment it arises and you are capable of consulting your feelings about a certain proposal, instead of having to guess in advance if you will like what is compatible with your insurance plan...
- sm4rk0 7y ago
  > what is worrying is that people keep the current economical system which creates the need for pension funds Exactly. And what is worrying is that your comment (laying at the bottom of the page) is the only one so far talking about solving the problem by thinking out of the box. I'd be even more free to mention a money-less world, or resource based economy as a solution, but people are too deep into this system to even comprehend that idea, let alone believe in it. Edit: Related article: https://news.ycombinator.com/item?id=21173493 https://news.ycombinator.com/item?id=21173493
blhack 7y ago
The most worrying thing is that the media machine seems to want this recession to happen. It's madness. It's like they want to destroy the world's economy for their own short-term click metrics.
- sjg007 7y ago
  It was the same way in 2012.. 2009.. it's always been this way. A recession is two quarters of negative GDP. What you really are concerned about is a depression. I don't see that happening in any shape or form.
- n0t-satoshi 7y ago
  Recessions aren't due to how people feel. It's the freezing and culling of debt.
  - zxcmx 7y ago
    You stated that rather authoritatively but I'm not convinced there's any real consensus on the matter. After all, why do people freeze / cull debt?
    - raducu 7y ago
      Because in non-negative interest world there's a limit on how much debt you can take?
      - zxcmx 7y ago
        I agree! But a person or business choosing whether to take on more debt is going to rely on just the cold calculus of income and outgoings? I believe that how take into account how secure they feel in their job, whether everyone else seems to be panicking about the economy, housing fomo, etc.
viburnum 7y ago
The underlying problem is that, aside from hoarding canned food, consumption in the future must be produced by workers in the future. How do you make claims on the output of workers in the future? Pension funds buy up financial assets, so workers in the future will have to give money to the owners of those assets (old people) as interest payments on debt and corporate profits on the goods and service they buy. All of this is intermediated by the financial sector. Financial sector profits and executive compensation keep going up, which means less is left over for investors. The share going to the financial sector is increasing because they are winning the class struggle. One alternative is to bypass the financial sector completely, and simply give old people money and finance that with taxes. Social Security transfers a little under 5% of GDP from working people to old people, with very little overhead, independently of financial market tempests.
- omegaworks 7y ago
  >Social Security transfers a little under 5% of GDP from working people to old people And since it is capped at $132,900, the burden falls on working people and not on those making more. There is no reason for that cap to exist. In fact, that the ultra-wealthy aren't progressively taxed to fund Social Security ensures the burden falls entirely on people dependent on their labor for survival.
  - sk5t 7y ago
    In theory, SS payouts to each individual are proportional to each individual's payments in. In that light what proper purpose is there in forcing higher wage earners to save more?
    - gshubert17 7y ago
      The relationship between average wages and SS benefits: those earning lower amounts receive a higher percentage of their wages as benefits, compared to those earning higher amounts. See [0]. Another way to view this is that there is a welfare component to Social Security. And then there is a component that is based on what you earn. This was the basic compromise when Social Security was created in the 1930s. The upper limit to FICA (Federal Insurance Contributions Act) taxes on wages, is a way to downplay the welfare aspect of Social Security. Some people think we should acknowledge the welfare aspect and go ahead and tax all wages (like the US does for Medicare), but others don't think that's fair to high wage-earners. [0] https://financialducksinarow.com/4414/social-security-income-replacement-rates/ https://financialducksinarow.com/4414/social-security-income...
ThrustVectoring 7y ago
The fundamental issue is that saving financial assets today has essentially zero impact on the total consumption of future retirees. Instead, what matters is 1) the amount of real goods and services future workers generate, 2) how much of this production they give up in tax transfers to retirees or sold for financial assets owned by retirees, and 3) how many workers there are per retiree. As a society, we cannot collectively save our way out of the coming pension crisis. Already economic growth is basically not capital-constrained - if an extra billion dollars starts sloshing around the system, it simply raises the market capitalization of existing bonds, businesses, and real estate by a billion dollars. Public companies, on net, return cash each year to investors. Saving doesn't make future retirees as a class wealthier, it simply rearranges the rank ordering of future retiree wealth while allowing current retirees to spend more via higher asset prices. So, what can future retirees collectively do? Have more children, allow more immigrant workers, increase future tax transfers, force higher savings rates on future workers (eg, student loan debt, mortgage repayments, land rents), retire later, or accept a lower standard of living. What individual options are there? Basically all you can do is save more and wind up in a more privileged tranche of future retirees, and hope that society winds up rich enough to support your retirement dreams. There's some room for optimizing your investment strategy so that it minimizes costs and risks, via tax-advantaged accounts owning broad-market index funds, but there's only so much juice to squeeze there.
- dcolkitt 7y ago
  > Already economic growth is basically not capital-constrained I really disagree with this. Consider a simple counter-example. Workers in the Bay Area are substantially more productive than the American average. One simple way to use capital to increase GDP is to build more housing and infrastructure in places like the Bay Area. Even if the population doesn't grow, that housing stock will allow future workers to move from West Virginia to San Francisco. By shifting future workers from low-productivity job markets to high-productivity job markets, we can substantially increase total economic. Even with the same population and the same technology base. The only constraint is the tight housing supply in places like the Bay Area. But we know how to build more housing, all it takes is a willing political system and capital investment.
neonate 7y ago
https://outline.com/Jr68vZ https://outline.com/Jr68vZ
deleted 7y ago
[deleted]
rolltiide 7y ago
And then the ECB calls all the debt, gutting all Europe based corporate borrowers for actual assets on ECB balance sheet And then Germany seizes ECB Germany finally wins European Single Market, and predictably steers productivity as their culture was already optimized to do
huffmsa 7y ago
If you get rid of the pensioners, there's no more pension crisis.... Just a thought.
- Noumenon72 7y ago
  I hope they get greedy enough to offer free euthanasia to any who want it -- I'll save them 20 years of pension money _and_ I'll get to enjoy my final five years without having to hold back most of my money against the off chance I live to 100.

166 points by kungfudoi 7y ago

The "best-run" rating comes from the Melbourne Mercer Global Pension Index: * http://www.mercer.com.au/globalpensionindex http://www.mercer.com.au/globalpensionindex * https://australiancentre.com.au/projects/melbourne-mercer-global-pension-index/ https://australiancentre.com.au/projects/melbourne-mercer-gl... Technically Denmark is the second-best, with a score of 80.2 versus Netherlands' 80.3

tamaharbor 7y ago

We do not need to see the Bloomberg smear job on Hacker News. Thank you.

TaylorSwift 7y ago

Does anyone know how to bypass Bloomberg's paywall?

boring_twenties 7y ago
Simply disable JS or use Firefox's Reader Mode.
tehlike 7y ago
https://outline.com/Jr68vZ https://outline.com/Jr68vZ
lamename 7y ago
https://github.com/iamadamdev/bypass-paywalls-firefox https://github.com/iamadamdev/bypass-paywalls-firefox Posted just the other day here by another user Disclaimer: i haven't used it
StanAngeloff 7y ago
https://github.com/iamadamdev/bypass-paywalls-firefox https://github.com/iamadamdev/bypass-paywalls-firefox

StanAngeloff 7y ago

Nobody "wants" another recession. We all read these articles, though, and then go on to spread them amongst peers like wild fire. The echo chamber only gets louder as time goes on. At some point those predictions/analyses become irreversible and de facto a self-fulfilling prophecy. I've started refraining from talking about negative financial news with friends and family.

toomuchtodo 7y ago
This is not about a recession. This is about fundamental shifts in financial market expectations (the exhaustion of growth, ~$17 trillion in bonds offered at negative interest rates, etc). If your entire socioeconomic model is based on positive rates of return (retirement, pensions, investment income, etc), and you can no longer obtain those returns safely, things start to break down. Maybe the idea of retirement is an aberration in history if we're not going to provide for it through a transfer system. Maybe a dollar today is just as valuable as a dollar tomorrow, or ten years from now (time value of money). Do you save for retirement if you absolutely can never save enough due to the rate of return? Do you no longer care about all of that extra fiat (speaking about corporate finance) when its utility rapidly declines to near zero? This is not constrained to just Europe. Look to both Japan, where the Bank of Japan owns a non-insignificant amount of the Nikkei, or the US where the Federal Reserve is already dropping rates again. This comes to every first world country eventually, the financial version of the Langoliers.
- fennecfoxen 7y ago
  Until humanity is operating at its full economic potential, then money will continue to have time value, for it can be invested to increase economic potential. And if you think that humanity is operating at a fraction of its economic potential, even just given today's technologies, well, take a look at the world. The current state of sub-Saharan Africa comes to mind as an obvious counterexample. "The exhaustion of growth" is political rhetoric meant to excuse anti-growth policy environments which actively suffocate growth by destroying incentives for growth and misallocating resources away from growth.

all_blue_chucks 7y ago

The headline sounds worrying but the article is merely about technicalities of European pension regulations in light of low bond yields.

ganitarashid 7y ago
In a way europeans are reaping what they sowed
- simongr3dal 7y ago
  What has Europe sowed and what is it reaping?
walshemj 7y ago
And in on particular country - and I do know that one of the biggest UK pensions fund derisked years ago and sacked its mangers and went self managed.

jacquesm 7y ago

The time to start worrying is long past. If you aren't worried yet then you've been ignoring the tell tale signs that are all over the business world. Safeguards instigated after the last close call are being relaxed, whole asset classes (including regular savings) are no longer viable and pensions are being cut while at the same time the age at which you get are eligible is being raised. 2008 wasn't the worst crisis ever, that doesn't mean we've seen the bottom of the pit yet. If you are counting on others for your old age then maybe think again.

czechdeveloper 7y ago
In such scenario you can't count on traditional investments either.
- jacquesm 7y ago
  Traditional: stocks, bonds, savings, real estate. Some of those work, some don't and some of them are best avoided unless you plan on making a life around the theme of investing (and even then you will most likely get burned one day).
tptacek 7y ago
This isn't an article about pensions and retirement savings. It's an article about financial indicators, which pension funds, with their enormous amounts of funds under management, have a unique perspective on. Most of your comment isn't responsive to this article at all.
- jacquesm 7y ago
  On the contrary. This is all about the 'solvability' demands on pension funds, which are driven to a large degree by computations involving future yields, which in turn depend on interest rates and other market indicators. The trends has been - for years - that the combined elements of demographic time bombs and historically low yields spell out that pension funds will likely not be able to fulfill their obligations. So if you are going to depend on one of these for your future sustenance you need to re-do your homework or you may end up with a real problem in old age.

aazaa 7y ago

> The warning comes as pension firms across Europe struggle to generate the returns they need to cover their growing obligations. In Denmark, some funds saddled with legacy policies guaranteeing returns as high as 4.5% have had to use equity to meet their obligations. Using equity to meet current obligations sounds a lot like a Ponzi scheme: > A Ponzi scheme ... is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[2] The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds. https://en.wikipedia.org/wiki/Ponzi_scheme https://en.wikipedia.org/wiki/Ponzi_scheme Provided that the equity drain is limited in scope, a pension fund can continue to fight another year. The more interesting (or scary) question is what happens when tapping into the equity becomes the norm? At what point does the fund manager level with pensioners and inform them that the fund is in fact insolvent?

tlb 7y ago
When interest rates are negative, there is no other option than to fund current obligations from equity. You can't do it from interest, because there isn't any.
- aazaa 7y ago
  Depending on the fund, there may in fact be another option: more risky assets. As noted in the article: > In the meantime, pension funds have been coping by buying up riskier assets. The Dutch, ranked with Denmark as the world’s best performing pension providers by Mercer, have complained to the European Central Bank about the fallout on the industry. And this is where things start to go off script pretty quickly.
  - pmiller2 7y ago
    And, yet, somehow, I’m expected to fund my own retirement, and these “riskier” investments are literally the only way I can accumulate enough to do so. I know this is about European pension funds, but the US has been “off script” for some time.
  - 7y ago

curiousgal 7y ago

To a student looking to go into quantative finance instead of data science, the number of negative finance headlines on the front page is worrying.

elhudy 7y ago
go into data science and dont look back.
justicezyx 7y ago
Anyone who still want to devote themselves to financial industry, probably is more interested in money than the greater good of society..
- elhudy 7y ago
  Everything is about money when you first graduate, unless you want to be supporting the financial industry with your minimum payments for 10+ years. someone with quantitative finance skills could likely move horizontally into any industry or business. Finance, economics, and money are the rock that every company sits on.
  - justicezyx 7y ago
    https://news.ycombinator.com/item?id=21173925 https://news.ycombinator.com/item?id=21173925 Let's be honest, you can chase for money, but this type of predatory behavior is pretty much a fundamental part of financial industry. Be willing to accept that. I cannot
  - kgilpin 7y ago
    Finance, economics and money become irrelevant pretty fast if you aren’t making something people want to buy.
    - jimhefferon 7y ago
      > you aren’t making something people want to buy I hear you but in 2018, finance and insurance represented 7.4 percent (or $1.5 trillion) of U.S. gross domestic product.

robk 7y ago

European pensions may be well run but they are hugely under exposed to venture and tech overall so I'm skeptical of them crying wolf about the tech industry when they have so little exposure to it.

tptacek 7y ago
Are American pension funds particularly exposed to venture? My understanding of this industry comes almost entirely from the Kauffman report, which I'm sure is very dated, but that understanding is that venture as an asset class is just a small slice, and invested in primarily because of asset manager requirements to look for un-correlated assets. If that were true, that wouldn't be an argument that a collapse in tech wouldn't be a systemic failure, because of course all sorts of other actors are connected to tech.

tekkk 7y ago

I am already worrying but so what? Sell everything and have all cash? And what then, wait for the "crash" to happen? Sure the article gets clicks but in reality, if you have invested smartly and with a long-term outlook it shouldn't matter if the market took a momentary nosedive. Good companies remain good companies and I don't mind being invested in them even while my holdings go temporarily to perhaps negative. One of the most annoying things as an investor I feel is the constant pressure to validate my investments to see if I should I sell them or not. It's just too much of a hassle and unless the company really does something dumb, I'll keep holding until the sun starts shining again. I'm not in a hurry either way as a young person, so time is on my side.

throw0101a 7y ago
> I am already worrying but so what? Sell everything and have all cash? And what then, wait for the "crash" to happen? Unless you can predict the crash / dip to with-in the day, dollar cost averaging and just hanging on for the ride is the best strategy: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/ https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co... Simply change the equity-bond allocation balance the closer you get to your retirement date.
- mpalczewski 7y ago
  All that shows is that dollar cost averaging has been better than the strawman he set up. 1. It might not be the case in the future. 2. There may be better strategies not explored. 3. It relies on the stability of the financial system and has extreme home country survivorship bias. Of course the richest country for the last 100 or so years is going to look like it has a stock market that can't loose. In other words this look backward only, and beats the shit out of a lousy straw man.
  - throw0101a 7y ago
    > All that shows is that dollar cost averaging has been better than the strawman he set up. What strawman? The "buying the dip" is a popular strategy that lots of people try to employ: * https://www.thestreet.com/investing/earnings/when-to-buy-the-dip-in-disney-stock-15049068 https://www.thestreet.com/investing/earnings/when-to-buy-the... * https://www.bloomberg.com/news/articles/2019-09-03/look-who-s-buying-this-dip-do-they-know-better-taking-stock-k03g7c6b https://www.bloomberg.com/news/articles/2019-09-03/look-who-... * https://www.nerdwallet.com/blog/investing/buying-the-dip-stocks/ https://www.nerdwallet.com/blog/investing/buying-the-dip-sto... It explores two strategies that have are used by many people: yes there are others, but it simply does A/B testing to try to find the better of these two. It seems that DCA is better than buying the dip (BtD); that doesn't mean there's something better than DCA, but it says that DCA wins over BtD in this part of the bracket. It looks at past data to build a model and makes future predictions: we can invest theoretical money and test the theory that DCA is better the BtD, and check back in a few years to see if the prediction is correct.

glofish 7y ago

One thing I have learned is that when it comes to mass media articles the best bet is to always do the opposite they are saying. Like "George" in Seinfeld, they are most of the time wrong, thus doing the opposite is right.

DoctorOetker 7y ago

to me what is worrying is not that pension funds are crying about trouble (although it may end sadly for those to be covered) what is worrying is that people keep the current economical system which creates the need for pension funds. if all immobilia were rent only, and the rent was continuously redistributed per capita to the population, then everyone would enjoy the average rent: housing: everyone sleeps somewhere and the total expenditure on housing is fairly redistributed, food: everyone eats something and the farmers use the bulk of their income to rent the land, so the population gets a significant fraction of their food payed back energy: wind and solar take up space, competing with farms and housing, and the energy companies spend the bulk of their income on renting that land ecology: we can democratically agree to leave a fraction F for nature of different degrees of wildness, and only put up the the rest for human rent in such a world, why do I need a pension fund? when I am old and less mobile, I can be satisfied with smaller housing, less transportation to compensate for my probable inability to work. If you look at how elderly are [mal]treated in elderly homes etc, I would prefer to be in control of my fair share of average rent, so that if I don't like a place I can go rent somewhere else. Instead of having to gamble today if insurance company X will be solvent in the future, or even if it is, if the resulting pension will even cover for food, housing, ... while with average rent, while the average rent does not devalue with respect to the average rent other people receive... why would I need health insurance? in the current world I would need it because of unexpected lump payments to hospitals etc, but in the system of average rent (under correct compliant conditions), I could set up a standard smart contract for health: "if you treat me now, part of my future income will be diverted for a duration long enough to cover the medical bill", or I can choose to disagree at the moment itself! The current system requires you to predict in advance for all possible medical urgencies, and across all available treatments if you agree on average. There are situations where I would decide against a certain proposed treatment, with another treatment not being covered. But then why did I pay medical insurance for the last X years?? With a system of average rent, your expense is a free trade at the moment it arises and you are capable of consulting your feelings about a certain proposal, instead of having to guess in advance if you will like what is compatible with your insurance plan...

sm4rk0 7y ago
> what is worrying is that people keep the current economical system which creates the need for pension funds Exactly. And what is worrying is that your comment (laying at the bottom of the page) is the only one so far talking about solving the problem by thinking out of the box. I'd be even more free to mention a money-less world, or resource based economy as a solution, but people are too deep into this system to even comprehend that idea, let alone believe in it. Edit: Related article: https://news.ycombinator.com/item?id=21173493 https://news.ycombinator.com/item?id=21173493

blhack 7y ago

The most worrying thing is that the media machine seems to want this recession to happen. It's madness. It's like they want to destroy the world's economy for their own short-term click metrics.

sjg007 7y ago
It was the same way in 2012.. 2009.. it's always been this way. A recession is two quarters of negative GDP. What you really are concerned about is a depression. I don't see that happening in any shape or form.
n0t-satoshi 7y ago
Recessions aren't due to how people feel. It's the freezing and culling of debt.
- zxcmx 7y ago
  You stated that rather authoritatively but I'm not convinced there's any real consensus on the matter. After all, why do people freeze / cull debt?
  - raducu 7y ago
    Because in non-negative interest world there's a limit on how much debt you can take?
    - zxcmx 7y ago
      I agree! But a person or business choosing whether to take on more debt is going to rely on just the cold calculus of income and outgoings? I believe that how take into account how secure they feel in their job, whether everyone else seems to be panicking about the economy, housing fomo, etc.

viburnum 7y ago

The underlying problem is that, aside from hoarding canned food, consumption in the future must be produced by workers in the future. How do you make claims on the output of workers in the future? Pension funds buy up financial assets, so workers in the future will have to give money to the owners of those assets (old people) as interest payments on debt and corporate profits on the goods and service they buy. All of this is intermediated by the financial sector. Financial sector profits and executive compensation keep going up, which means less is left over for investors. The share going to the financial sector is increasing because they are winning the class struggle. One alternative is to bypass the financial sector completely, and simply give old people money and finance that with taxes. Social Security transfers a little under 5% of GDP from working people to old people, with very little overhead, independently of financial market tempests.

omegaworks 7y ago
>Social Security transfers a little under 5% of GDP from working people to old people And since it is capped at $132,900, the burden falls on working people and not on those making more. There is no reason for that cap to exist. In fact, that the ultra-wealthy aren't progressively taxed to fund Social Security ensures the burden falls entirely on people dependent on their labor for survival.
- sk5t 7y ago
  In theory, SS payouts to each individual are proportional to each individual's payments in. In that light what proper purpose is there in forcing higher wage earners to save more?
  - gshubert17 7y ago
    The relationship between average wages and SS benefits: those earning lower amounts receive a higher percentage of their wages as benefits, compared to those earning higher amounts. See [0]. Another way to view this is that there is a welfare component to Social Security. And then there is a component that is based on what you earn. This was the basic compromise when Social Security was created in the 1930s. The upper limit to FICA (Federal Insurance Contributions Act) taxes on wages, is a way to downplay the welfare aspect of Social Security. Some people think we should acknowledge the welfare aspect and go ahead and tax all wages (like the US does for Medicare), but others don't think that's fair to high wage-earners. [0] https://financialducksinarow.com/4414/social-security-income-replacement-rates/ https://financialducksinarow.com/4414/social-security-income...

ThrustVectoring 7y ago

The fundamental issue is that saving financial assets today has essentially zero impact on the total consumption of future retirees. Instead, what matters is 1) the amount of real goods and services future workers generate, 2) how much of this production they give up in tax transfers to retirees or sold for financial assets owned by retirees, and 3) how many workers there are per retiree. As a society, we cannot collectively save our way out of the coming pension crisis. Already economic growth is basically not capital-constrained - if an extra billion dollars starts sloshing around the system, it simply raises the market capitalization of existing bonds, businesses, and real estate by a billion dollars. Public companies, on net, return cash each year to investors. Saving doesn't make future retirees as a class wealthier, it simply rearranges the rank ordering of future retiree wealth while allowing current retirees to spend more via higher asset prices. So, what can future retirees collectively do? Have more children, allow more immigrant workers, increase future tax transfers, force higher savings rates on future workers (eg, student loan debt, mortgage repayments, land rents), retire later, or accept a lower standard of living. What individual options are there? Basically all you can do is save more and wind up in a more privileged tranche of future retirees, and hope that society winds up rich enough to support your retirement dreams. There's some room for optimizing your investment strategy so that it minimizes costs and risks, via tax-advantaged accounts owning broad-market index funds, but there's only so much juice to squeeze there.

dcolkitt 7y ago
> Already economic growth is basically not capital-constrained I really disagree with this. Consider a simple counter-example. Workers in the Bay Area are substantially more productive than the American average. One simple way to use capital to increase GDP is to build more housing and infrastructure in places like the Bay Area. Even if the population doesn't grow, that housing stock will allow future workers to move from West Virginia to San Francisco. By shifting future workers from low-productivity job markets to high-productivity job markets, we can substantially increase total economic. Even with the same population and the same technology base. The only constraint is the tight housing supply in places like the Bay Area. But we know how to build more housing, all it takes is a willing political system and capital investment.

neonate 7y ago

https://outline.com/Jr68vZ https://outline.com/Jr68vZ

deleted 7y ago

[deleted]

rolltiide 7y ago

And then the ECB calls all the debt, gutting all Europe based corporate borrowers for actual assets on ECB balance sheet And then Germany seizes ECB Germany finally wins European Single Market, and predictably steers productivity as their culture was already optimized to do

huffmsa 7y ago

If you get rid of the pensioners, there's no more pension crisis.... Just a thought.

Noumenon72 7y ago
I hope they get greedy enough to offer free euthanasia to any who want it -- I'll save them 20 years of pension money _and_ I'll get to enjoy my final five years without having to hold back most of my money against the off chance I live to 100.