Pension Risk Blog Is Eight Years Old

Wow - eight years and counting since I started www.PensionRiskMatters.com. I have worked with the Lex Blog team for half a dozen years and credit them for wonderful technical support and customer service.

Well over a million viewers and nearly a thousand posts later, I am told that my analyses and educational insights about a host of timely topics have been helpful to others. As I look back on what I have written over the years, I am struck by how much of what was deemed critical in its day remains immensely important now. Indeed, one might assert that topics such as pension risk management, service provider due diligence, fiduciary education and fee benchmarking have taken on a new life. There is more scrutiny of what goes on inside the investment committee meeting room and litigation seems to be on the rise. According to the producer of the upcoming American Conference Institute about the topic of ERISA litigation, he is facing a sell-out crowd this year. (I am happy to announce that I will be a co-panelist for a session at this conference and will address the topic of how to work effectively with an economic expert.)

I am deeply grateful for the feedback from this blog's many readers and always welcome comments and suggestions.

Happy 8th birthday PensionRiskMatters.com!

Happiness and the Bottom Line

In case you missed it, March 20, 2014 was International Happiness Day. Sponsored by the United Nations International, the Day of Happiness is a reminder that there are lots of good things in this world and a moment of reflection is a nice way to celebrate our gifts. Interestingly and not surprising, eighty-seven percent of people who took the online poll at www.dayofhappiness.net say that happiness trumps wealth. Is this bad news for the financial community? No it is not and here's why.

Research studies repeatedly link emotional well-being with economic productivity. In his informative book entitled "What Happy Companies Know: How the New Science of Happiness Can Change Your Company for the Better," Dr. Dan Baker (with Cathy Greenberg and Collins Hemingway) extols the virtues of businesses that recognize the importance of motivating workers with carrots and not sticks. By extension, happy workers will remain employed and their incomes typically rise as they carry out their duties with a smile. This is great news for the advisers who want to help those with money to invest.

Happiness is certainly a big business. A quick search of Amazon.com for books on this topic yields nearly 40,000 results. There's even a magazine called Live Happy. One of my favorite tee shirt companies is called Life is Good. You can watch "The Economics of Happiness" documentary and follow along with a study guide.

Some people keep a gratitude journal. Setting aside a few minutes of quiet time is likewise popular. ABC reporter Dan Harris must have struck a nerve as his book about meditation is a best-seller. Click to learn more about his 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works -- A True Story.

As readers of this blog know. I am a devotee of yoga and try to take a class whenever I can. My reasons include a desire to be fit and numerous advantages of taking deep breaths and focusing on the moment. The boost to concentration levels, especially for challenging projects, is a significant plus. The medical community continues to pay attention to the benefits of mindfulness. In late 2013, Bloomberg wrote about Harvard Medical School researcher, Dr. John Denninger, and his research about yoga, brain activity and immune levels. Since six to nine out of ten visits to see a doctor are cited as stress-related, costing companies roughly $300 billion per year, his federally-funded science can be helpful indeed to both individuals and employers. See "Harvard Yoga Scientists Find Proof of Mediation Benefit" by Makiko Kitamura (Bloomberg, November 21, 2013). Also check out "Take a Deep Breath," posted on the American Institute of Stress website.

Have a good day!

Romance Is Big Business

Despite a softer economy than in the past, Valentine's Day is still celebrated by millions of people with money to spend, billions of dollars in fact. According to information provided by the National Retail Federation, aggregate monies spent on flowers, candy and other tokens of affection are estimated at $17.3 billion, with the typical purchase in the amount of $133.91, a modest increase from last year's $130.97.

Candy, flowers, jewelry, cards and dinners out top the lift of favorite gifts to give. The U.S. Census Bureau sheds more light on Cupid's holiday spending bonanza. According to "Valentine's Day 2014: Feb. 14" (Profile America: Facts for Features, January 14, 2014), there were nearly 1,200 chocolate and cocoa product manufacturing establishments in 2011 that accounted for $13.5 billion in shipments that same year. Over 15,000 florists accounted for an estimated $355 million in fresh cut roses. The History Channel website counts 150 million cards that are sent each year, "making Valentine's Day the second most popular card-sending holiday after Christmas." That's a lot of affection for your favorite friends and family members.

Besides gift giving, a survey carried out by the National Confectioners Association reveals that six out of ten people "agree that celebrating holidays like Valentine's Day brings happiness in tough economic times." See "New survey says Americans will choose chocolate over flowers this season" (January 29, 2014). The United States is not alone when it comes to February 14. See "Valentine's Day around the world" for a nice wrap-up, courtesy of New Zealand 3News.

Here's to a fun day of celebrating good things. In case one day is not enough, National Gumdrop Day follows on February 15, along with a continuation of the Random Acts of Kindness Week that runs through February 16, 2014.

Effective Communication in Business

It's official. I am now part of THAT generation that is no longer twenty-one. I shudder at the idea of staying out with friends until dawn before heading to an early morning class, fueled with espresso coffee. Don't get me wrong. There are some amazing traits associated with persons who are classified as belonging to Generation Y or Z. (According to a United Nations paper entitled "Traditionalists, Baby Boomers, Generation X, Generation Y (and Generation Z) Working Together," someone born between 1981 to 1999 belongs to "Gen" Y. If someone was born in 2000 or thereafter, they are considered part of Generation Z.)

Their comfort level with technology is viewed by many experts as a big plus. This is especially true at a time when cost-effective innovations are enabling people in far-flung corners of the world to enjoy access to information and knowledge that arguably opens the door to job opportunities and the ongoing development of new skills. This development is beneficial to employers in need of skilled workers as well. Unfortunately, just as technology has its advantages, it is not perfect. One disadvantage for some of our smart phone-obsessed youth may be the fact that communications are shrinking down to short bursts of text that make no sense to older managers.

As someone who marvels at the literary artist with a flair for correct grammar and clever writing (or speaking), I don't understand the need to have the word "like" appear in a conversation over and over. According to "The Rampant Overuse of the Word "Like" is Making People Seem Stupid" (September 11, 2007), Consumer Guide editor David Bellm writes that clients and managers may interpret an excess use of the word "like" as an indication of "flightiness, poor communication skills, and an uncertainty in your own thoughts...Not exactly the stuff on which great careers are built."

The ability to communicate clearly and concisely is an important skill and one that cannot be mastered without continued work. Courtesy of my father who constantly urged me to look up words in a dictionary and to read "difficult" articles and books, I appreciate the role of practice (and outside reviewers) in mastering one's mother tongue. I am still learning. In my work as a forensic economist, being able to appropriately interpret words such as "risk" is a critical part of resolving a business dispute.

Poor communication skills cost time and money and could create confusion. Consider the following example.

"OMG - We did not do enough to like vet our vendor. We like lost money. DQMOT but this is like BAU. BLNT."

Huh?

Interpretation (according to "Text Messaging Abbreviations & Shortcuts"): "Oh my gosh, We did not do enough to vet our vendor. We lost money. Don't quote me on this but this is business as usual. Better luck next time."

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"The Internship" and Getting a Second Chance at Work

I am not a big fan of silly movies and try to avoid sophomoric humor at all costs. I like witty comedies that combine laughs with a message. That is one of the reasons why I enjoyed seeing "The Internship" the other day. Not being 21, I confess that some of the pop culture references were lost on me. Other than that, this somewhat charming tale of two unemployed sales persons is worth the price of a ticket for its life lessons. Having been fired from their job after their employer closes its doors, they seek a chance to intern at Google and hopefully retool their way back into the workforce. An early interview scene when they struggle to use a laptop with a webcam while sitting on little stools in the children's section of the local library is telling. Once they arrive on campus at Google, they fail at numerous tasks that require a real knowledge of programming and computers. Over time, they are shown as studying what they don't know, putting in long hours and motivating their team of young people, not picked by the Ivy League graduates, to keep trying. There is a romantic sub-plot of course and an obvious ending. They win the challenges set before them and get to stay at Google as full-time employees. Despite the formulaic approach to story telling, Owen Wilson has a point when he urges a colleague to live life without regret. Actor Vince Vaughn supposedly wrote the story and co-wrote the screen play as a way to encourage individuals to regain their business mojo by opening themselves up to the excitement of trying something new.

CBS News went a step further. In "The Internship: 6 real-life lessons from the movie" (June 18, 2013), job seekers are urged to consider any or all of the following actions:

  • Take a low or no paying job as a way to gain experience that might otherwise be difficult to obtain.
  • Be yourself in a job interview.
  • Become technology literate as quickly as possible.
  • Focus on action. A name school degree may get you in the door but what you do thereafter is the key to success.
  • Be respectful of others and demonstrate the ability to be a part of, or better yet, lead a team.
  • Stay focused on the possibilities of starting over instead of conceding defeat.

If you are inspired, you can check out information about the Google's summer internship program. For everyone else, "Starting Over" 10 Tips to Reboot Your Career" by Anne Favreau (US News, January 8, 2013) offers a wonderful tip. Figure out what needs to be done, understand the necessity to keep learning and be a problem-solver.

My dad, now retired, once told me about a colleague who left engineering in his fifties to become a veterinarian. He himself went back to school later in life to learn Computer Aided Design ("CAD") and Computer Aided Manufacturing ("CAM") in order to develop skills that he needed to get hired as a consultant.

Walt Disney said it best. "The way to get started is to quit talking and begin doing."

 

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The Larry Crowne Approach to Enjoying Life

Congratulations to Tom Hanks for his rendition of what a tough economy looks like for more than a few individuals. While his newest film falls short of legendary, it is an entertaining reminder that every day presents a second chance if one is open to Phase Two.

Playing a Navy veteran who gets downsized for lack of a college education, Hank's character Larry Crowne gets the idea of going back to school. With none other than Julia Roberts as his burnt out speech teacher who comes to life as her students progress, the movie's protagonist keeps his cool and sunny disposition as he navigates homework, financial distress and the uncertainty of a different tomorrow than what he originally planned.

I like the central message, however Hollywood it may seem.

It is always nice to think that the next day brings about renewal, excitement, satisfaction and maybe even a bit of fun.

Given current demographic patterns, a large number of individuals are working longer and living well past age 65. A cheery attitude (and hopefully the gift of good health too) are the stuff of fortunes.

Career consultant and transition coach Donna Bradshaw offers some unique advice. "Don't actually retire. Stay in shape. Take up a cause." Check out her top ten list by visiting "Making the Most of Retirement" (May 19, 2011).

On a practical note, check out "Special Report: Making the Most of Retirement" by Janet Novack, Forbes.com, September 15, 2010 for comments about savings and geographically desirable places to live after a certain age.

Charles Dickens describes Father Time as one who "often lays his hand lightly upon those who have used him well; making them old men and women inexorably enough, but leaving their hearts and spirits young and in full vigour. With such people the grey head is but the impression of the old fellow's hand in giving them his blessing, and every wrinkle but a notch in the quiet calendar of a well-spent life."

Words to live by and savor...

Unemployment at the Movies

If you haven't yet seen "The Company Men" with Ben Affleck, Tommy Lee Jones, Chris Cooper and Kevin Costner and don't need a lot of laughs, it's a worthwhile flick about the U.S. economic problems of late. The plot centers on a successful sales executive who gets the boot from a Massachusetts conglomerate that started out as a manufacturer of ships. A wholesale layoff of otherwise talented professionals still leaves the company exposed to a hostile takeover so another round or two ensues, with Affleck's boss ultimately getting the pink slip from his lover, played by a glamourous Maria Bello. (Hey, it's the Hollywood version of Corporate America.)

Similar to "Up In The Air" with George Clooney, this film's message seems to be that management is bad, labor is good and that family is what really counts. While I wholeheartedly endorse the message about counting one's blessings in the form of loved ones, friends and colleagues, I'm agnostic about the general "we versus them" theme and prefer to consider one company at a time.

If we've learned anything from the past decade, it's that production is increasingly mobile across borders. Beyond that, C-level leaders in the United States have a legal duty to their shareholders to create wealth (which is not necessarily the same thing as boosting the bottom line but that's a topic for another day). While I am not alone in opining that well-run companies recognize the importance of human capital (employees, clients, vendors) and that is why they can generate healthy returns for their investors, it is also important that individuals retool as often as is necessary to remain competitive.

In 2002, Daniel H. Pink extolled the virtues of independence in his best selling book entitled Free Agent Nation: The Future of Working for Yourself. The numbers speak for themselves with a continued increase in freelancers, temps, affiliated parties and smaller consulting networks that work from home or close by, create their own revenue path and are happy campers. However, for those who desire more stability and structure by working for larger employers, the concept of free agent is still worth pondering. Specifically, if your industry is changing around you, maybe it's time to take stock of how you stack up against others. My dad, now a retired engineer, went through this process about fifteen years ago when he took it upon himself to study computer assisted design at night since younger hires were facile with the newer technology tools and he was not.

As a young banker, I had a boss who urged me to think of myself as a box of raisin bran. Every year, he told me to figure out how to be "new and improved." I would complete a skills inventory checklist and then commit to improve as needed.

"The Company Men" was an enjoyable cinematic outing and a great reminder that dues paying never stops. Learning and career development is a lifetime endeavor, especially now. With longer lifespans and, for millions of people, the need and/or desire to work beyond 65 years of age, it is critical to stay current with requisite skills and experience.

National Nothing Day

Are you ready to celebrate National Nothing Day on January 16 of each year? Created by late newspaperman Harold Pullman Coffin, 1973 marked the debut of this unusual event. The stated goal is for Americans to relax without worrying about missing an observance or celebration of something.

Perhaps not surprisingly, there is mounting evidence that relaxation and good health go hand in hand. According to the Mayo Clinic website, yoga (a type of relaxation activity) reduces stress, enhances fitness, helps with the management of chronic health problems and can keep weight gain in check. Writer Gloria Charlier cites an interview with Dr. Herbert Benson by veteran broadcaster Diane Rehm about his 2010 book entitled The Relaxation Revolution. The central premise is that a mind-body connection exists and must be nurtured. He's in good company since numerous prominent medical experts share his view. For businesses, the introduction of wellness programs can lower health care costs and encourage happier, and logically more productive, employees. Click to read "The relaxation response is healing" (Cincinnati Examiner, August 26, 2010).

If you get antsy sitting around this Sunday doing nothing, check out Meeting Wizard. A colleague tipped me off about this free site that finally (!) gets a handle on email and telephone tag when trying to set up multiple-person meetings.

Wages in Kind - I'll Have An Olive With That

In watching a British comedy film this weekend, actor Colin Firth used the expression "Dutch courage" in passing a flask to a fellow character. Ever curious, I looked up the term and discovered an interesting tidbit about early compensation schemes.

According to the website for the Gin and Vodka Association, "Dutch courage" describes a medicinal spirit that was produced in Holland as early as the 17th century. Gin as it was then known was "sold in chemist shops to treat stomach complaints, gout and gallstones." Apparently a nasty taste led to flavoring with juniper which itself was deemed restorative for health purposes. As it made its way to British troops during the Thirty Years' War, a colorful history unfolded that led to the promulgation of the Gin Act in 1736 which in turn encouraged riots in the street over expensive consumption taxes. (Was this a harbinger of modern-day protests against federal levies around the world?) In 1742, the Gin Act was repealed and the distribution of spirits came under the supervision of magistrates in Britain.

In the meantime, there were instances of gin being distributed as part of one's wages. That caught my attention since too much of anything has its own ill-effects. It's hard to imagine people drinking on the job and being able to adequately perform.

For interested readers, click to read "Gin History, Development & Origin."

 

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Random Act of Culture

As you ready for the holidays, full of hope and excitement, but perhaps stressed out over a growing "to do" list at work, enjoy this musical interlude. Shoppers in the City of Brotherly Love joined the Opera Company of Philadelphia for an uplifting rendition of Handel's Messiah, Hallelujah Chorus. Whatever your beliefs, it is heart-warming to watch the crowd join in.

Click for some holiday cheer in the form of Handel's Messiah, Hallelujah Chorus.

What Can You Do With Five Cows? Morality Tale for Financial Reform?

When I am not traveling for business, I drive the back roads from my house to our company office in Shelton, CT. For those who don't know, Shelton is south of New Haven and north of New York City. While true that either city is relatively close by, I live in a somewhat rural area. Our town boasts about 20,000 people with one McDonald's, a few gas stations, some sheep, lots of deer and five cows.  I know this because I pass by a corner house on what is, for local denizens, a main road.

Ordinarily, I just scoot by, anticipating my morning expresso. However, since warm weather began, I've noticed that a handful of friendly bovines are out and about each morning, chewing, mooing and looking generally happy. Since this house is not a farm, I've been pondering of late why someone would own five cows. Do they make for good pets? Can you sell milk on the side and, if so, is the money worth the fuss? What the heck do you do with a few furry friends who are bigger than a breadbox and seldom house trained?

One of these days, I ought to stop my car and politely ask the man or woman of the house why they collect cows. Until then, I've concluded that this may be the small town version of the theater of the absurd.

That brings me to the topic of financial reform. Oh boy, where does one start? Those who pushed for strong reform are disappointed. Critics think the impending bill goes too far. According to writer Alain Sherter in "Funny Business: Why the Financial Reform Bill Has Become a Joke" (BNET.com, June 30, 2010), taxpayers are left holding the bag in more ways than one. Let us count the ways: 

  • Regulatory consensus is needed to address systemic risk
  • Behemoth financial institutions are free from arduous capital reserve requirements
  • Credit rating agencies will be studied but not immediately reformed.

Worse yet, "its passage would create a false sense of security, a hollow complacency" while it "entrenches Wall Street's control over the financial system."

Only time will tell if this sweeping "reform," destined to become the nation's law, will thwart future meltdowns. I'd much prefer to see capital market participants taking steps towards a robust risk management culture (if not in place already) and then providing transparency to interested parties about their risk mitigation (not the same as minimization) policies and procedures.

Animals and supposed strict mandates may seem warm and inviting but might end up costing a lot, generating few benefits and urging rational thinkers to ask why.

P.S. A future post will address the issue of derivatives and financial reform.

Healing Power of Gratitude

I happen to have a window office in a local corporate park that overlooks a sculpture garden. Every night, I have a front row seat to the majesty of pink and purple hues as the sun sets behind a billow of clouds. It is an amazing reminder of all those little things in life that we sometimes take for granted, especially now. So many of us are confronted with challenges on countless fronts - the care of aging parents, crazy markets, state, national and global economic woes, discerning the meaning of life and so on.

You've probably heard the adage that the alternative to getting older is not a pleasant one. In that vein, I'd like to share the words of President John F. Kennedy who is quoted as saying that "As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them." How true. When I read some of the headlines of late about scandal and fraud, I am grateful that I have the opportunity to work with organizations that share our focus on growing the value proposition pie for our shareholders and clients alike as opposed to viewing the upside as fixed and therefore fighting to the bitter end for the last morsel.

"Thank you" has benefits that go beyond the warm and fuzzy. Increasing amounts of research substantiate the positive. In her bestselling book, "Thank You Power: Making the Science of Gratitude Work for You," Deborah Norville documents studies that link "yes" thinking to all sorts of rewarding outcomes. Dr. Dan Baker has conducted extensive work in this area of happiness and productivity. He is the author of "What Happy Companies Know" and "What Happy People Know."

As we head into a long weekend, I plan to spend some time in the office. I'm not complaining. I'm grateful for the chance to (hopefully) be making a difference in the way people view investment best practices. I'm appreciative of another lovely sunset, a chance to listen to classical music while I work and to live to see another day.

 How lucky is that?

 

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Business Etiquette: Handshake or Kiss?

Etiquette is important but sometimes more an art than a science. Consider my close encounter today with a gentleman whom I respect and like as a perfect example of trying to figure out what to do, without offending anyone or seeming "uncool."

Here's what happened.

In between meetings, I stopped by a local cafe to pick up a sandwich. To my delight, I spied said gent having lunch with colleagues, deep in conversation. When he saw me, he signaled to his colleagues that he was taking a break, came over to say hello and gave me a kiss on my cheek. If memory serves, I think my face grazed his, I passed him a business card (reflecting new contact information), offered a 60 second update on our business and held out my hand for an exit that may have been, in hindsight, anything but graceful.

Paying for my take-out order, I wondered if his buss, followed by my handshake, was an insult. Keep in mind however that this is suburban CT, not Paris. Should we have pecked cheeks again as a more appropriate sendoff, simply said goodbye or nixed the face action to begin with?

It's all so complicated.

I'm sure Jerry Seinfeld could get a lot of chuckles with this topic. Apparently, he had an episode about the "Kiss Hello" though I did not see it.

According to New York Times reporter Elizabeth Olson, "the cheek, or social, kiss is displacing the handshake, once the customary greeting in American social and business circles" but just make sure you get the positioning right. See "Better Not Miss the Buss" (April 6, 2006).

In "Do you shake hands, hug or kiss?" (April 12, 2006), Today Show anchor Al Roker and now prime time news gal Katie Couric acknowledge that a kiss is okay when you know the colleague well but head for the right cheek. Leaning left is outre. Their guest Peggy Post suggests a firm grasp of the hands instead, but "no pumping." Grasp the hand and be done with it. Other suggestions include an air kiss or double peck.

I'm not sure I will remember all of these greeting "do's and don'ts."

It was a special surprise to bump into this smart, funny and high integrity colleague, even if I didn't get the hello and goodbye parts down right.

Linking this topic back to investment matters, is there a protocol for the buy side - service provider reviews that take place every quarter? For example, if an asset manager has lost money for an institutional investor, does that nip any chance of a hug or smooch, no matter how long the relationship? Are puckers prohibited for service contracts above a certain amount or when a discussion is unduly serious? When is the double or triple cheek kiss appropriate? What if two parties are from different countries and the buss rules conflict with each other?

Let's see if Miss Manners can help.

Information Economics

I sometimes forget that not everyone is familiar with my favorite idioms. For example, in speaking to one of our legal research consultants today, I told her that I would be "out of pocket" for a few days around the holidays. When she queried as to what I meant, I explained to her my use of the term and then, being curious, took two minutes to search the web as to where the expression originated. According to a blog entitled "the hubbub: Language, behavior, technology," this term had once only referred to tax deductible expenses but has morphed into meaning that an individual is unavailable. Indeed, in its October 7, 2006 blog post entitled "Office Talk: 'Out of Pocket'," the authors suggest that something more sinister may be afoot. Not only unavailable, "out of pocket" is a possible diss, a warning not to bother ... "you can use email, phone, IM, SMS, carrier pidgeon -  there's nothing you can do to reach me at that time."

This got me to thinking about the implications overall for investment professionals for whom information is arguably the lifeblood of money flows.

  • Can we be over exposed to individuals or is there always room for more?
  • Is there such a thing as too much information?
  • How should we be sorting "good" information from "bad?"

In 1997, I published a doctoral dissertation about the information economics associated with high frequency trading. Entitled "Are Institutional Investors and Analysts Informed Traders? An Empirical Examination," I investigated trading volume and costs for "visible" exchange-traded stocks on one end of the spectrum in terms of institutional ownership and analyst following and "neglected" equity securities at the other extreme. As expected, I was able to document informational inefficiencies, leading to the conclusion that there might be "gold in them thar hills" if one is to pay close attention to micro data trends.

Expect more from me on the topic of information arbitrage. It is both mysterious and puzzling but certainly worth further investigation.

Gordon Gekko and Over Funded Pensions

Talk about a blast from the past. As I prepared dinner this weekend, I caught bits and pieces of Wall Street. According to this film that won Michael Douglas an Oscar for his portrayal of Gordon Gekko, "Greed is Good," bad companies deserve to be destroyed and employees are collateral damage. What particularly caught my attention was the reference to an overfunded pension that., post corporate break up, would net this arbitrageur over $60 million in cash.

Wow - have things changed.

In "5 years of corporate funding gains gone" (June 1, 2009), Pensions & Investments reporter Rob Kozlowski reports that the "top 100 U.S. corporate pension plans saw their funded status drop by nearly 30 percentage points in 2008." In dollar terms, the plans reported a deficit of nearly $200 billion compared to a surplus in excess of $111 billion in 2007.

The fallout is no doubt painful for plan sponsors and participants alike. What will be interesting to watch is the plethora of new products being developed to help address funding gaps and better manage plan risk.

Editor's Note: A sequel to Wall Street is under way. I'll buy the popcorn for that movie! Sounds intriguing. Click to read more.

Don't Ever Let Others Destroy Your Dream - What a Lovely Inspiration

 

In case you missed it, and if you need a wonderful pick-me-up in these gloomy economic times, you MUST listen to Susan Boyle singing "I Dreamed a Dream." Pay attention to the audience members who, presumably based on Susan's appearance and carriage, turned from doubting Thomases to hugely appreciative fans.

I love this video for several reasons. First, I am so sick of reading about arrogant "leaders" who are anything but (in contrast to those humble folks who just keep plugging along, trying to do the best job possible). Second, this woman (who apparently sacrificed a lot to care for her ailing mother) finally got a chance to shine and yet took the accolades in stride. Third, Susan Boyle is 48 years old, proving that it is NEVER too late to grab the brass ring, whatever that happens to be for you. Fourth, she was thrilled with a job well done, taking pride in quality, rather than waiting for praise.(She walked off the stage after receiving a standing ovation but before hearing the judges' comments.) Fifth, she is proof once again that if someone says "no," keep trying to figure out a way to get to "yes." 

You go girl and many, many thanks for being an inspiration to all of us!

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Happy National Teach Children to Save Day

When my nephew was a little boy, he used to ask his mom (my sister) and dad about going to the grocery store to get money. What he wanted was a trip to the ATM machine (by the veggies counter). Type a few numbers and voila - lots of green things to buy toys. How amazing!

Alas, young men and women grow into adults who work, pay taxes and hopefully save for vacation, a new home and retirement. Unfortunately, mounting per capita debt makes it harder to plump the coin jar, regardless of discipline. According to Owen and Payne, we each owe $184,000. Ouch!

Looking on the bright side, getting started early is a good idea. Kudos to the ABA Education Foundation for creating National Teach Children to Save Day - April 21, 2009 this year. The goal is to teach youngsters about "four important money choices: SAVE, SPEND, DONATE and INVEST."

Kiddies - just remember. Too much government pork robs you little ones of enough disposable income to add to Mr. Piggy Bank (but that's a topic for another day).               

2008 Letter to Pension Santa

Dear Santa:

I've worked hard this year so I hope I get something other than a lump of coal or a pink slip. It's been a tough year, with market volatility, investment complexity and unexpected large-scale fraud making me nervous about allocating monies to anything other than cash and zero return government IOUs. What happened to the era of big bonus paychecks and change to spare?

I need a few goodies to keep me going. I'll won't forget you. The cookies and milk are waiting in the usual spot by the fireplace.

Here's my wish list.

1. Steady returns that don't cost me a fortune in terms of hidden fees or excessive risk

2. Independent service providers who take risk management seriously

3. Someone to help me plan for a retirement before I'm too old to enjoy it

4. Someone to help me figure out how to get a job at 70 if I can't afford to retire by then

6. Someone to explain why the U.S. national debt clock had to add extra digits

7. Lawmakers who give me the straight skinny on the financial health of national safety net programs

8. Matching contributions to my 401(k) plan

9. A meaningful chance to replenish my broken nest egg

10. An occasional chuckle now and then as a break from very somber economic and financial news

By the way, I heard that even the North Pole is cutting back. Maybe you can unfreeze the elves' pension plan when things rebound.

Hang in there Santa!

HWP
Hard Working Person

P.S. If you want a bit of silliness, "elf yourself."

Editor's Note: Drop us a note and tell us what is on your wish list for 2009 and happy holidays!

It's a Dog's Life - Literally...Puppy Pension Slashed. How is Your Nest Egg?

According to New York Post reporter Dareh Gregorian ("Screw the Pooch," June 16, 2008), Leona Helmsley's furry friend will have to make do with a paltry $2 million trust fund. Allegations that Helmsley may not have had full faculties when she wrote her will, and a single stroke of the pen by Manhattan Surrogate Judge Renee Roth, takes $10 million away from Trouble's nest egg. The remainder goes to the former hotelier's charitable foundation. For pet lovers, don't despair. Apparently, this still leaves ample money to cover her annual expenses of $190,000 for the expected remainder of his life (10 human years or 70 dog years). By the way, the lion's share of per annum costs go for security ($100,000) and guardian fees ($60,000). 

If you are a member of the baby boom generation (and the Federal Reserve Bank of St. Louis counts "79 million Americans born between 1946 and 1964" in this category - plus countless others outside the U.S.), $190,000 per year looks mighty good. With fewer and fewer workers to support national safety net programs, private savings and employer-provided benefits take center stage. Ask yourself this. How "retirement ready" are you? Will you be living in style or struggling to make ends meet? Check out this online retirement calculator, courtesy of the AARP (American Association of Retired Persons).

For pension fiduciaries, a critical question is whether (and to what extent) you have responsibility for empowering your workers to sufficiently fill the piggybank. Even in the absence of legal mandates, how does an organization attract and keep good workers when talent is in short supply around the world? According to a March 2008 survey, conducted by Deloitte Consulting and the International Society of Certified Employee Benefit Specialists, "A shortage of skilled and talented workers has become the most pressing concern among employers." Other worries include "the cost of providing retirement benefits to employees" and the appeal of company reward programs to "attract, motivate, and retain the talented employees" needed to "effectively run" an organization. Click to read the "2008 Top Five Total Rewards Priorities Survey."

If you are a taxpayer, you may be putting money aside for your personal rainy days at the same time that you pay taxes to help finance public pension programs (state, county, city). And if Social Security, Medicare and/or the Pension Benefit Guaranty Corporation needs a bail-out, who ya gonna call? Tax Busters (taxpayers)! 

According to then U.S. Comptroller General, David Walker, "A tsunami is building and ready to hit future generations, but this one won't be set off by earthquakes or other natural disasters. Instead, it will be a fiscal calamity created by the failure of government and business leaders to deal with the financial drain of millions of retiring baby boomers." (Walker now serves as President and CEO of the Peter G. Peterson Foundation.)

So Trouble may be literally living a dog's life but her retirement plan, albeit reduced, will keep the furball cozy. We could all be so fortunate!

Trying to Find A Chuckle or Two in Bad Times

It's unclear to me who designed the Crisis Management Flowchart Tool for today's market environment. Apparently, it's been making the rounds on various financial blogs. Taking it mainstream, Financial Times reporters include this creative attempt to introduce some levity into an otherwise grave situation, along with a few tall tales, a poem and a plea to send your humorous contributions. (See "Smile through the crisis," March 19, 2008. A subscription may be required to access this article.)

           

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Presidential Pensions

According to Infoplease.com, not all fifty states celebrate President's Day but instead acknowledge George Washington (1st U.S. President) and Abraham Lincoln (16th U.S. President) with two separate holidays. (Click here for a visual history for each leader.) Whatever February 18, 2008 represents to you, here's the scoop on pensions for presidents.

  • The Internet Public Library reports that pensions paid to U.S. Presidents vary according to the "current salary of Cabinet members."
  • In 1998, the National Taxpayers Union estimated then President Bill Clinton's cumulative pension at over $6 million if he "lives to the age of 81.4 years." In comparision, they estimated the lifetime pension amounts for earlier predecessors as follows: Jimmy Carter, $4.15 million; Ronald Reagan, $2.28 million; George Bush, $2.96 million.
  • Many U.S. Presidents will receive income from state or local coffers, reflecting other offices held before moving to 1600 Pennsylvania Avenue.
  • In January 2008, the Congressional Research Service issued a report that details all sorts of goodies owed to former Presidents. Click to read "Former Presidents: Federal Pension and Retirement Benefits" by Stephanie Smith.
  • Harry Truman was the first U.S. President to receive monies under the Former Presidents Act of 1958, though benefits were applied retroactively. When he left office, he had only his Army pension of $112.56 per month. Under this new law, he would receive $25,000 per year in retirement benefits.

If you have any interesting tidbits to share about Presidential pensions, drop us a line.

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Move Over Madonna - Pension Tension Blues Video Debuts


A few months ago, Pension Governance, LLC introduced PENSION TENSION BLUES in MP3 file form. We now present our 5-minute musical commentary, written for fiduciaries and beneficiaries, as a video for your viewing pleasure. We hope PENSION TENSION BLUES will make you laugh and cry at the same time. (Email us if you want a medium or high resolution version of this video.) You can also watch the video directly on YouTube.com.

Inspired by those who bring attention to serious issues through humor, Dr. Susan M. Mangiero (President and founder of Pension Governance, LLC) and Mr. Steven Zelin (The Singing CPA) have co-created a (hopefully) memorable ballad about the state of affairs in retirement benefits land. Pension Governance, LLC is committed to helping fiduciaries do a better job of identifying, measuring and managing financial risk. We hope the song is a friendly reminder of the hard work ahead. The decision to use satire is in no way meant to impugn the countless fiduciaries already on the right track. We simply want to draw attention to areas of growing concern to employees, retirees, shareholders and taxpayers alike.

To those in the vanguard of pension governance, bravo! Email your success stories and we will gladly publish them.

If you want to sing along, here are the lyrics.

PENSION TENSION BLUES
Words by Susan M. Mangiero and Steven Zelin
Music by Steven Zelin
Copyright 2007 Pension Governance, LLC and Steven Zelin.
All rights reserved.
71 bpm

I work for a corporation. I’ve been there 30 years
But my pension plan went bankrupt;
It has left me in tears
They’re telling me now I gotta work till I’m 432
I got the pension tension bliss suspension nobody ever mentioned blues

I signed that stupid paper 100 years ago
It said if I worked forever, they’d give me lots of dough
I wish I knew what happed; I can’t find many clues
I got the pension tension bliss suspension nobody ever mentioned blues

I thought the plan was looked at by a bunch of CPAs
Thought they said it all looked just fine, then gave their Okay’s
But I guess something was happening outside their view, now
I got the pension tension bliss suspension nobody ever mentioned blues

They invested in some hedge funds and paid up lots of fees
They gambled all my money, with no guarantees, now
I’ve got nothin’ for tomorrow and you know I’m gonna sue
I got the pension tension bliss suspension nobody ever mentioned blues

Guess I should have realized my account was discretionary
Now all I got is these papers. What’s a fiduciary?

I’m putting all my stuff on e-bay, I gotta raise some cash
My piggy bank is empty, my portfolio has crashed
I read that Social Security has gone down the tubes
I got the pension tension bliss suspension nobody ever mentioned blues
I got the pension tension blues
I got the pension tension blues

Bill Gate's Last Day in the Office - Retiring in Style?

Unfortunately, few of us are ready to retire. Savings rates are low. Credit card debt is large. A pronounced migration away from traditional pension plans puts more responsibility on the employee to save early and often.

As you plan what we hope are your golden years (as opposed to financial struggles), consider mogul Bill Gates' fictional last day in the office. The video is a lighthearted look at this Microsoft superstar's transition into retirement.

Can Sub-Prime be Funny? Listen for the Pension Punchline

If you are looking for a few chuckles and a satiric view of the sub-prime crisis, this video of British humorists John Bird and John Fortune may be the answer. On a very serious note, listen for the last line about pension funds.

Enjoy!

  

2007 Letter to Pension Santa

Dear Santa:

I've worked hard this year so I hope I get something other than coal. (Hey, we had to freeze the plan. Our stock was sagging.) It's been a tough year, with market volatility, investment complexity and ERISA lawsuits taking up much of my time. I thought 2008 would be a lay-up after a tough 2007 but it's not looking good. There's sub-prime fallout, low employee morale and a depressing outlook for growth in corporate profits. How much more can a fiduciary take?

I need a few goodies to keep me going. I'll won't forget you. The cookies and milk are waiting in the usual spot by the fireplace.

Here's my wish list.

1. Stable returns that don't cost me a fortune in terms of hidden fees or excessive risk

2. Independent service providers who take risk management seriously

3. Someone to help me select the right qualified default alternative investments, taking new rules into account

4. Recognition that my job adds value to thousands, perhaps millions of employees ( a thank you now and then)

5. Adequate resources to do my job properly

6. Someone to explain the ABC's of liability-driven investing, portable alpha and variable annuities without putting me to sleep or causing me to tear my hair out

7. Hedge funds that gladly offer full disclosure and don't require long-term lock-ups

8. Actuaries and accountants who agree on what constitutes the correct defined benefit plan liability (that ideally reflects economic reality)

9. Attorneys who will keep me up to date on my fiduciary duties and tell me how to avoid allegations of breach

10. An occasional chuckle now and then as a break from my very serious (but important) job - We have attorney, actuary and CPA jokes but nothing for pension fiduciaries. I wonder why.

By the way, I heard that even the North Pole had to cut back on legacy benefits for the hard-working elves. I hope you are giving them a good 401(k) plan instead.

Hang in there Santa!

HWPF
Hard Working Pension Fiduciary

P.S. If you want a bit of silliness, "elf yourself."

Editor's Note: Drop us a note and tell us what is on your wish list for 2008 and happy holidays!

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Pension Tension Blues - Musical Commentary

Pension Governance, LLC is proud to present a musical commentary for fiduciaries and beneficiaries alike. PENSION TENSION BLUES will make you laugh and cry at the same time.

Inspired by those who bring attention to serious issues through humor, Dr. Susan M. Mangiero, PG president and founder, and Mr. Steve Zelin, the Singing CPA, have co-created a (hopefully) memorable ballad about the state of affairs in pension land. Mangiero adds "Pension Governance, LLC is committed to helping fiduciaries do a better job of identifying, measuring and managing financial risk. We hope the song is a friendly reminder of the hard work ahead."

The decision to use satire is in no way meant to impugn the thousands of hard-working fiduciaries but rather to draw attention to areas where some plans can make improvements.

Click here to listen to a one-verse sampler with a play time of slightly over one minute.

Click here to listen to the full five-verse song with a play time of just over four minutes.

If you want to sing along, here are the lyrics.

PENSION TENSION BLUES
Words by Susan M. Mangiero and Steven Zelin
Music by Steven Zelin
Copyright 2007 Pension Governance, LLC and Steven Zelin.
All rights reserved.
71 bpm

I work for a corporation. I’ve been there 30 years
But my pension plan went bankrupt;
It has left me in tears
They’re telling me now I gotta work till I’m 432
I got the pension tension bliss suspension nobody ever mentioned blues

I signed that stupid paper 100 years ago
It said if I worked forever, they’d give me lots of dough
I wish I knew what happed; I can’t find many clues
I got the pension tension bliss suspension nobody ever mentioned blues

I thought the plan was looked at by a bunch of CPAs
Thought they said it all looked just fine, then gave their Okay’s
But I guess something was happening outside their view, now
I got the pension tension bliss suspension nobody ever mentioned blues

They invested in some hedge funds and paid up lots of fees
They gambled all my money, with no guarantees, now
I’ve got nothin’ for tomorrow and you know I’m gonna sue
I got the pension tension bliss suspension nobody ever mentioned blues

Guess I should have realized my account was discretionary
Now all I got is these papers. What’s a fiduciary?

I’m putting all my stuff on e-bay, I gotta raise some cash
My piggy bank is empty, my portfolio has crashed
I read that Social Security has gone down the tubes
I got the pension tension bliss suspension nobody ever mentioned blues
I got the pension tension blues
I got the pension tension blues

If You Need a Chuckle, Sing "Happy Birthday SOX"

Click here for a video homage to Sarbanes-Oxley. Courtesy of the Singing CPA, Steve Zelin, and Approva Corporation, our senses are treated to a "poke" at one of the most profound laws in terms of corporate spending and (hopefully) improved best practices.

We just discovered Approva's website and blog, Audit Trail.  (We've added a link to the blog. See "Links" on the left hand side.)

We first read about Steve in CFO Magazine. Click here to read the online version. After several calls and meetings, we decided to work with Steve. The result? A new song entitled "Pension Tension Blues."

Coming VERY soon...

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Pension Valentine

How do we need you? Let us count the ways.
We need you from the depth and breadth and height
Our portfolio statements will allow
We need you to the level of everyday's
Most urgent wants, for food and shelter

With apologies to Elizabeth Barrett Browning, it's true that pension fiduciaries often stand between a comfortable retirement and a financial struggle. Their job, if done properly, can make a real difference in the lives of individuals, still working or now retired.

This blog primarily addresses pension financial risk issues from a fiduciary perspective. Yet we've received more than a few emails from persons seeking assistance to recover lost or diminished pensions. Descriptions of tough economic times are poignant. They serve as a constant reminder that what pension fiduciaries decide has consequences.

Happy Valentine's Day!

Happy Holidays!



We're taking two days off to spend with family. We'll be back next week with posts we hope you'll find informative and timely.

Our best wishes for a joyous holiday season!
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Tis the Season for All Pension Fiduciaries ...



Dear Santa:

I've been a good pension fiduciary this year so I hope you remember me in a few days. It's been a tough year, with 2007 definitely looking grim. Do I merit a few extra brownie points for tackling my work with a smile and "can do" attitude? I'm trying hard but each day seems to bring a bundle of new challenges.

Here's the rest of my wish list.

1. Ten percent or better equity returns

2. Conflict-free service providers who really try to understand what problems we need to solve

3. Regulatory guidance that promotes a better understanding of how to comply with the Pension Protection Act of 2006

4. Recognition that my job is important

5. Liability insurance protection that helps me do a good job without worrying about significant personal exposure

6. Clarity about the incremental risks associated with strategies such as liability-driven investing, portable alpha and plan design

7. No major hedge fund blow-ups

8. Consultants and money managers who speak plainly

9. User-friendly analytics that support fiduciary due diligence

10. Vacation between the "pension problem" and the "health care crisis"

I better stop here so I can get this note to the North Pole in time for a jolly holiday arrival. By the way, what is your pension plan like? Say hi to Rudolph.

Thanks Santa!

HWPF
Hard Working Pension Fiduciary


Editor's Note:

Click here if you'd like to add to the list or see what your peers think. Neither your name nor your email address will be made public.

Pensions for Pets?



With an estimated $40 billion at stake, pets are a big business. According to the American Pet Products Manufacturers Association, 63 percent of U.S. households own a pet with more than 90 million cats, 73 million dogs and 139 million freshwater fish claiming a place in more than 69 million homes.

While many of us work hard to prepare for life after work, serious pet owners are just as concerned that Fido and Puss have enough biscuits and balls in their golden years.

The Humane Society of the United States offers a free kit, Providing for Your Pet's Future Without You, including a "six-page fact sheet, wallet alert cards, emergency decals for windows and doors, and caregiver information forms." Click here for more information.

USA Today reports that many states have relaxed rules to set up trusts for pets, with an average bequest of $25,000. (See "Animal owners set up trust funds for their pets" by Richard Willing, August 15, 2002.)

So to those friends and family members who dote on their cats, dogs, rabbits, hamsters, birds and fish, retirement planning takes on a whole new meaning.

Arf!

Dogs Get the Blame



Pension risk is serious stuff so this author has been reluctant to post anything "cute" or "funny", instead opting to write about topics that resonate with our readers. From the feedback and tremendous growth in visits, we seem to be on the right track. In fact, the list of topics we want, and plan, to address is huge and continues to grow.

As a humble thank you to this blog's readers, please permit a bit of whimsey as a quick diversion. The inspiration? Almost everyone in pension land (hedge fund land too) seems to be insanely busy this summer. Instead of thoughts about languorous vacation days stretching into balmy nights, it's more about taking an expresso break as a way to get a few minutes in the sunshine, walking to and from the office.

So perhaps it is not surprising that quirky facts and bits of knowledge make for a welcome respite. Talking about the hot, muggy weather with a colleague, we spent several minutes debating the genesis of the expression "dog days of summer". In taking yet another minute or two to research (in lieu of that aforementioned expresso break), the conclusion was that more than a few popular idioms involve dogs.

Here are some examples.

1. We're going to the dogs.

2. This is a dog-eat-dog world.

3. You'll end up in the doghouse.

4. He is sick as a dog.

5. This investment is a dog.

6. He leads a dog's life.

7. I've been working like a dog.

8. It's raining cats and dogs.

9. Every dog has its day.

10. Her bark is worse than her bite.

11. Let sleeping dogs lie.

12. You can't teach an old dog new tricks.

To dog lovers everywhere, hang in there. We don't mean any harm. We're in search of a quick smile.

Now back to work ...
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Pension Haiku




Haiku, a type of Japanese poetry, consists of three sentences, each one containing five, seven and five syllables, respectively. The goal is to convey a message in simple terms. Here are a few tries.

Pensions are crucial
People are not saving much
Will we always work?

Governance is key
Bad decisions cost money
Who will take the blame?

The point is this. Clear and simple communication is a precursor to change. Solving the retirement benefits problem is far from easy and a cacophony of dissident opinions, without some unifying end goal, spells disaster.

Wouldn't it be nice to simplify, clarify and streamline? Answering questions such as those shown below is a good start towards implementing meaningful reform.

1. What is the problem that needs to be solved?
2. Who currently bears the cost(s) of not having a solution in place?
3. What are the alternative solutions?
4. How do they compare/contrast in terms of costs and benefits?
5. Who should make the decisions about what benefits to offer?
6. How much responsibility should employees enjoy with respect to pensions?
7. Who currently "owns" the pension "problem"?
8. Who can effect change?
9. Who should be able to effect change?
10. What lessons can be learned from past mistakes with respect to pension funding?

We'd love to publish your poems, musings or anecdotes. Write to pension@bvallc.com
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