Is Your Pension/Annuity Safe?

[JK]

FWIW -

The World's largest insurance company that manages/guarantees pensions and annuities is American International Group (AIG).

Currently they are in a cashflow crunch/meltdown.

Specifically, because their credit worthiness of their assets have been cut by S&P and Moody's (large derivative exposure/pending write-offs), AIG needs an IMMEDIATE cash infusion, or it will default on its obligations, thus having to declare bankruptcy.

In short, if AIG doesn't get bailed out, this week, your pension or annuity may not get paid. And the amount of cash infusion in question approaches $100.0B.

In summary, this crisis has immediate ramifications and consequencies to many MOA members.

JMHO

J.K. :wow

P.S. More info: http://www.nytimes.com/2008/09/16/business/16aig.html?pagewanted=2&_r=1&ref=business

P.P.S. Same's true for AIG life insurance policies being in jeopardy.

[sjbmw]

The scramble to save AIG is on. The treasury bailing out an insurance company. What's the world coming to?

Oh yeah, credit default swaps. The "Financial weapons of mass destruction".

Got pension?


http://www.nytimes.com/2008/09/16/opinion/16lewitt.html?_r=1&partner=rssnyt&emc=rss&oref=slogin


Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

[SIBUD]

Mine is guaranteed by the Illinois Constitution. If the State of Illinois goes bust, then I'm on the street.

[JK]

The scramble to save AIG is on. The treasury bailing out an insurance company. What's the world coming to?

Oh yeah, credit default swaps. The "Financial weapons of mass destruction".

Got pension?


http://www.nytimes.com/2008/09/16/opinion/16lewitt.html?_r=1&partner=rssnyt&emc=rss&oref=slogin


Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

Hi SJ -

Words like contagion, tsunami, and hystemic are being bantered about for the current global Market meltdown.

Basically, when someone gives you a peice of paper, it's the full faith and confidence that someone else will exchange a tangible commodity of equal value that keeps our world's financial system afloat.

Sadly, it's the sudden realization that "honest" brokers aren't, that causes the proverbial train to fall off the tracks.

In the current case, it's a shame that our global train has been caught on such a high trestle, while traveling at such a breakneck speed.

J.K. :wow

[hlothery]

Why would anyone in our time have just one egg ? Being invested in one country ? Being invested in one market ? Involved one investment vehicle ? Or even being trained in one profession ?

Wait a minute........I only have one bike!:scratch

[Rpbump]

USN Retired plus Social Security for at least a few years. :usa

[SIBUD]

Why would anyone in our time have just one egg ? Being invested in one country ? Being invested in one market ? Involved one investment vehicle ? Or even being trained in one profession ?

I know why I have only one wife. :whistle

[petepeterson]

So why invest in stocks with no certain future.....Makes no sence to me... The little man puts in a dollar so someone else can make a dollar...

There are safe ways to secure a future for retirement... You might want to just go to a casino every payday and gamble alittle,,, same as the stock market.......... Don't forget the more democrats we elect the more entitlements we will get:whistle ...............Pete

[ultracyclist]

When a life insurance goes bust a number of things happen.
First and foremost, the the protection of the policy holder is paramount. The state insurance commissioners work out a plan. Essentially, financially healthy insurance companies will buy at a discount the various blocks of life, health, and annuity business.

In some cases the policy holder may have to accept some concessions in order to maintain the level of coverage, but the level of coverage is protected. For example, in exchange for maintaining the coverage and cash values with the take over carrier, the take over carrier will stipulate that the policy holder keep the contract with the new company for a minimum of 5 years. In this way the consumer has the coverage, the takeover carrier has a predictable cash flow to recover costs, and the insurance commissioners are happy that it all worked out.

Now property and casualty insurance is a different topic, and I do not know much about those lines.

Generally, the state where the life insurance is domicilied, the insurance commissioner of that state calls the shots in the rehab or take-over.

I am waiting for a European or Arab financial consortium to enter the fray.

Let's all take a deep breath on this one.

[john1691]

Looks like we the Tax Payers :usa will be bailing out the Fat Cats once again.........If the government would just stay out of the real estate, insurance, financial markets to begin with, the market would make smaller adjustments all along, rather than have finances guarenteed by the Fed and then have a huge bail out because in looking for huge payouts, the top management make risky business decisions. Anybody know what AIG's top guys made in salary and bonuses last year and the year before? Any chance they'll give it back? :laugh

[JK]

When a life insurance goes bust a number of things happen.
First and foremost, the the protection of the policy holder is paramount. The state insurance commissioners work out a plan. Essentially, financially healthy insurance companies will buy at a discount the various blocks of life, health, and annuity business.

In some cases the policy holder may have to accept some concessions in order to maintain the level of coverage, but the level of coverage is protected. For example, in exchange for maintaining the coverage and cash values with the take over carrier, the take over carrier will stipulate that the policy holder keep the contract with the new company for a minimum of 5 years. In this way the consumer has the coverage, the takeover carrier has a predictable cash flow to recover costs, and the insurance commissioners are happy that it all worked out.

Now property and casualty insurance is a different topic, and I do not know much about those lines.

Generally, the state where the life insurance is domicilied, the insurance commissioner of that state calls the shots in the rehab or take-over.

I am waiting for a European or Arab financial consortium to enter the fray.

Let's all take a deep breath on this one.

FWIW -

Uncle Sugar dug deep this afternoon and nationalized the Insurance Industry by "buying" an 80% stake in American Insurance Group (AIG) in exchange for an $85.0B, two-year "loan."

Coupled with the Fannie and Freddie ($200.0B) bailout last weekend, and I'd say the Federal printing press will be working overtime in the years to come as Washington Mutual (WM) is the next Wall Street entity on the Treasury's chopping/shopping block.

At $285.0B, this recent Federal shopping spree will take future drunken sailors to task.:bottle


J.K. :wow

[JK]

Is the MOA nest egg safe ?

As long as it's implanted in a surrogate and fed a lot of B-12.

Get the picture? It's Ultra "sound." :thumb

J.K. :wow

[Greenwald]

Mine is guaranteed by the Illinois Constitution. If the State of Illinois goes bust, then I'm on the street.

In a 'similar boat' to the north of you. Perhaps we could revive vaudeville if it comes to that.

Pension mailed from the State of WI, who manages the fifth largest pension fund ($79+ Billion) in the nation.

But while we enjoyed a 7+ % raise this May on our pension checks, our investments are undoubtably taking a thrashing in the markets....time will tell. Probability of a raise next spring? Not good.

Billions of dollars of wealth wiped out overnight worldwide by a nervous Wall Street.

Makes me worry, not so much for myself, but for our children.

[RJM2096]

They will get bailed out, their current executives will get massive bonuses, and the retirees will get their annnuties which have been ravaged by inflation because of the massive money the goverment will print to pay for these bailouts. Are we screwed or what?

Economist said we do not need a manufacturing economy bcause we have a finiancial economy...how long did that last? Anyone want to train to be a teller?

http://i259.photobucket.com/albums/hh310/RJM2096/MoneyBurning.jpg

[hlothery]

Billions of dollars of wealth wiped out overnight worldwide by a nervous Wall Street.

.

And will be, similarly, restored within the next few years. Don't panic........stay the course. :thumb

[JK]

And will be, similarly, restored within the next few years. Don't panic........stay the course. :thumb

Obviously, you're not an AIG investor. Or WM fan. either. :banghead

J.K. :wow

P.S. http://www.bloomberg.com/apps/news?pid=20601087&sid=aptzSDlRtrTk&refer=home

[lamble]

Where's the surprise in any of this?
The stock markets of the world are large gambling dens. For there to be winners, there have to be losers. Ups and downs.

I keep seeing posts of doom and gloom, JK. No posts on solutions though.
If you want to establish the finacial sector as "your thing", perhaps a little more than cut and paste news would help. FWIW IMHO! :thumb

PS. It's a good topic and worthy of further monitoring.

[jaherbst]

How many executives from AIG will run now with their "golden parachutes"? These are in millions of dollars. They will be rewarded for AIG's failure???? It happens everytime a company fails or is bought out. Same thing at Fanny and Freddie MAE is happening. The past Federal Director of Fanny Mae is now Barack Obama's campain finance director.

We need to go back to Federal regulation of our Airlines, Banks, Insurance, Investment Co. etc. Look what deregulation has done for us these past thirty years beginning with the Airlines, Phone Companys, Banks, and the finance companies in general. I am tired of the government bailing out all of the above with my tax money while the people in charge run with there multimillion dollar severance packages. Why are we rewarding bad management? Who is responsible for putting the company there in the first place? Please put them in jail before you use my hard earned taxes for bailout!

The company I worked for last went bankrupt and the President was paid a bonus of $29,000,000.00 dollars and got to keep his job to reorganize the airline while employees took a forty percent pay cut and over 4000 Mechanics lost there jobs while others are on long time layoff. Yes we do need regulation because of the greed.

[JK]

Where's the surprise in any of this?
The stock markets of the world are large gambling dens. For there to be winners, there have to be losers. Ups and downs.

I keep seeing posts of doom and gloom, JK. No posts on solutions though.
If you want to establish the finacial sector as "your thing", perhaps a little more than cut and paste news would help. FWIW IMHO! :thumb

PS. It's a good topic and worthy of further monitoring.

Solutions??? -

Let's see, "electronic markets/computer trading/transfers," "unregulated derivative creation/leverage," Glass-Steagall Act repeal," "gold standard decoupling," are a good place to start when untangling this Gordian Knot.

Or a swift swing of the sword to quickly cut through this naughty knot.

Instead of the smoke and mirrors of financial flim-flammery and the fraud of social engineering, refocus our National attention on actually making and manufacturing stuff with a good old Puritan work ethic.

But then again, who reads the warnings of Ayn Rand these days, anyway?

J.K. :wow

P.S. Eye-wash isn't a simple solution...

[lamble]

Solutions??? -

Let's see, "electronic markets/computer trading/transfers," "unregulated derivative creation/leverage," Glass-Steagall Act repeal," "gold standard decoupling," are a good place to start when untangling this Gordian Knot.

Or a swift swing of the sword to quickly cut through this naughty knot.

Instead of the smoke and mirrors of financial flim-flammery and the fraud of social engineering, refocus our National attention on actually making and manufacturing stuff with a good old Puritan work ethic.

But then again, who reads the warnings of Ayn Rand these days, anyway?

J.K. :wow

P.S. Eye-wash isn't a simple solution...

The USA can't afford to make things, because it's cheaper to buy them in and who'd want to buy more expensive versions of what can be bought cheaply?
Granted, this then beggars the question of what can the US use to create the wealth to buy the cheaper produced goods?
Perhaps use credit?
Oooeeer, isn't that a problem too?


On a personal note...lot's of credit to you for using, 'flim-flammery'.

[JK]

Where's the surprise in any of this?
The stock markets of the world are large gambling dens. For there to be winners, there have to be losers. Ups and downs.

I keep seeing posts of doom and gloom, JK. No posts on solutions though.
If you want to establish the finacial sector as "your thing", perhaps a little more than cut and paste news would help. FWIW IMHO! :thumb

PS. It's a good topic and worthy of further monitoring.

Solutions... -

Fundamentally, it gets down to educating the great unwashed masses (GUMs) that there's no such thing as a "free lunch."

From unfunded Federal mandates to "Great Society" programs and transfer payments, the dumbing down of the public to expect Government to "solve" their problems, these issues have echoed throughout the halls of history, ever since the Forum of Roman times.

The classic conflict between Patrichians to Plebians, and a human willingness to be herded into slavery and boundage, have fueled political and philosophical debates and discussions since Socrates and Plato. :violin

In short, people need to pay attention to what's happening in the world around them. And then they need to get involved with things that are tangible.:thumb


J.K. :wow

[JK]

The USA can't afford to make things, because it's cheaper to buy them in and who'd want to buy more expensive versions of what can be bought cheaply?
Granted, this then beggars the question of what can the US use to create the wealth to buy the cheaper produced goods?
Perhaps use credit?
Oooeeer, isn't that a problem too?


On a personal note...lot's of credit to you for using, 'flim-flammery'.


Whether beggars or buggers, price and value are not synonymous.

The overall cost of something cheap, in the short term, may not bear out in the long term.

In short, there's something innately noble in the concepts of self-reliance and independence, versus the go-along/get-along of globalization. :dance

J.K. :wow

[Peter_Krynicki]

One of the comentators on the Newshour last night made an interesting comment. "In the US profits are privatized while losses are socialized.

[JK]

One of the comentators on the Newshour last night made an interesting comment. "In the US profits are privatized while losses are socialized.

And the prepetrators institutionalized/lionized (in the Halls of Congress and the sidewalks of Wall Street).

J.K. :wow

[lamble]

Whether beggars or buggers, price and value are not synonymous.

The overall cost of something cheap, in the short term, may not bear out in the long term.

In short, there's something innately noble in the concepts of self-reliance and independence, versus the go-along/get-along of globalization. :dance

J.K. :wow

There's not a snowball's hope in hell, that the USA can now manage by taking an isolationist stance. Those days are long gone JK, however noble they might seem to be, through rose coloured glasses and however attractive it may appear, in light of the current situation.

Trade embargoes and excessive import tariffs go both ways.'Global' is the only way the US economy can travel.

[JK]

There's not a snowball's hope in hell, that the USA can now manage by taking an isolationist stance. Those days are long gone JK, however noble they might seem to be, through rose coloured glasses and however attractive it may appear, in light of the current situation.

Trade embargoes and excessive import tariffs go both ways.'Global' is the only way the US economy can travel.

Sorry Lamble -

But didn't the British quest for "Empire" teach you anything in the last few centuries, when it comes to globalization?

J.K. :wow

P.S. No wonder the debate over adopting sharia law has entreached itself on the shores of the British Isles.

P.P.S. The last guy to nearly go global was called Genghis Khan, so be careful for what you wish for!

[BONEY]

My pension is controlled by a separate entity that handles all the retirements for my municipality. It's is separate from the city/county budget, cannot be borrowed against and is run by some serious brainiacs.

The rest of the stuff I've been squirreling away has been in cash for many months now.

[JK]

My pension is controlled by a separate entity that handles all the retirements for my municipality. It's is separate from the city/county budget, cannot be borrowed against and is run by some serious brainiacs.

The rest of the stuff I've been squirreling away has been in cash for many months now.

How a pension is managed, and how its funds are pledged/invested are two different things.

Specifically, Money Market Funds are suddenly going below $1.00, this week, and are consequently blocking withdrawals in the first time of their history.

Remember how a Rogue Trader pledged the assets of his French Bank to the tune of $72.0B, when the total worth was only $36.0B?

And there where another two dozen traders also pledging the same collateral!


J.K. :wow

P.S. That's why we're in the current meltdown, because the same collateral has been multiply pledged and leveraged.

[sjbmw]

There's not a snowball's hope in hell, that the USA can now manage by taking an isolationist stance. Those days are long gone JK, however noble they might seem to be, through rose coloured glasses and however attractive it may appear, in light of the current situation.

Trade embargoes and excessive import tariffs go both ways.'Global' is the only way the US economy can travel.

Up until the 1950's, the USA manufactured the highest quality goods, was the world's #1 creditor, and exporter, and also had the highest wages to boot.


We think that foreign cheap labor, or global competition is to blame (Europe was industrialized before the USA) is somehow to blame, but it's not, as our past is evidence.

This problem is the growth in the size of government. The expansion of government has made us the #1 debtor nation, and the world's largest importer.

[JK]

Up until the 1950's, the USA manufactured the highest quality goods, was the world's #1 creditor, and exporter, and also had the highest wages to boot.


We think that foreign cheap labor, or global competition is to blame (Europe was industrialized before the USA) is somehow to blame, but it's not, as our past is evidence.

This problem is the growth in the size of government. The expansion of government has made us the #1 debtor nation, and the world's largest importer.

Ditto!

When our investment banks are locked into leveraged positions that average 30 to 1, with the same collateral being pledged for multiple positions, the explosive growth of derivate created wealth has overwelmed the global economic system.

Clearly, growth of government has reliquished its role to the cancer of unbounded greed.

J.K. :wow

[RJM2096]

My pension is controlled by a separate entity that handles all the retirements for my municipality. It's is separate from the city/county budget, cannot be borrowed against and is run by some serious brainiacs.

The rest of the stuff I've been squirreling away has been in cash for many months now.

No doubt private industry has squandered their pension programs and most governments now are underfunding their current contributions. It is possible that the babyboomers in the next decade could bankrupt your pension funds, despite what you think.

[lamble]

Sorry Lamble -

But didn't the British quest for "Empire" teach you anything in the last few centuries, when it comes to globalization?

J.K. :wow

P.S. No wonder the debate over adopting sharia law has entreached itself on the shores of the British Isles.

P.P.S. The last guy to nearly go global was called Genghis Khan, so be careful for what you wish for!

Unworthy of a sensible debate, JK. the question you posed is if the pension/annuity is safe. The USA doesn't invest solely in the USA, that's obvious. US companies do not operate solely within the USA, that too is obvious.
Retrenchment back into the isolationist 30's (the golden era) is not remotely feasible, however jingoistic a slant that gets put on it.

Let's take automotive. USA stance, no foreign imports, or prohibitive tax. World response?
Do you think GM, or Ford would last more than a couple of years...really?

The USA is part of the rest of the world, whether you like it or not. Take all the Indians, Chinese, Koreans and Europeans out of Microsoft for instance and repatriate them, so US citizens can fill their jobs. Sounds fine, but find the qualified people. The USA can't even supply its own military with aircraft, within a scope that's acceptable.

Stay clear of the tawdry repartee, it adds nothing. Stick with the here and now and add factual input where possible. You've cited inside sources that you have, what better than to refer to them, rather than take a silly pop at the British Empire and Ghengis Khan, it does you no credit. I'd thought we'd got passed that stage JK.

So, back to the point at hand. Globalisation is here and now and for the future and the USA is intrinsically part of it, like it or not.

It's a smaller planet than it used to be.

[JK]

Unworthy of a sensible debate, JK. the question you posed is if the pension/annuity is safe. The USA doesn't invest solely in the USA, that's obvious. US companies do not operate solely within the USA, that too is obvious.
Retrenchment back into the isolationist 30's (the golden era) is not remotely feasible, however jingoistic a slant that gets put on it.

Let's take automotive. USA stance, no foreign imports, or prohibitive tax. World response?
Do you think GM, or Ford would last more than a couple of years...really?

The USA is part of the rest of the world, whether you like it or not. Take all the Indians, Chinese, Koreans and Europeans out of Microsoft for instance and repatriate them, so US citizens can fill their jobs. Sounds fine, but find the qualified people. The USA can't even supply its own military with aircraft, within a scope that's acceptable.

Stay clear of the tawdry repartee, it adds nothing. Stick with the here and now and add factual input where possible. You've cited inside sources that you have, what better than to refer to them, rather than take a silly pop at the British Empire and Ghengis Khan, it does you no credit. I'd thought we'd got passed that stage JK.

So, back to the point at hand. Globalisation is here and now and for the future and the USA is intrinsically part of it, like it or not.

It's a smaller planet than it used to be.

When Ivan says "NYET!" and Putan claps shut the cookie jar by closing Russian Trading Markets, I wish you were right.

http://www.bloomberg.com/apps/news?pid=20601213&sid=aLwxHK3Ygc8s&refer=home

Unfortunately, this "intrinsic" discussion, like the Isle of Wight, runs in circles and curcuits.

J.K. :wow

P.S. GlobaliZation...:usa

[sjbmw]

Gold is up $80/oz (10%), silver up 13%. No doubt short covering.

By way of comparison, oil is only up 3%, gasoline is down 1%, copper is down 1.6%.

=market showing respect for monetization of financial market bailout

[dmr]

"The World is Flat".

Although the historical references are interesting, there may not be many examples from which we can gain some insight into what is coming. At least, not reliably.

I hope this is not too political, but perhaps globalization will create an interdependence that will require more cooperation and less competition for resources. Perhaps more cooperation will make armed conflict superfluous and counter productive. Snowball's chance, maybe. Naive, maybe. :dunno

DR

[mrich12000]

So is anyone going to purchase the funeral insurance, IAG is offering .LOL:banghead :banghead :scratch :dunno

[lamble]

So is anyone going to purchase the funeral insurance, IAG is offering .LOL:banghead :banghead :scratch :dunno

AIG also sponsor Manchester United and have a big logo emblazoned across their shirts. Expect their next match on Saturday to be topless!

Glaziers have said there's not an issue with AIG's cash for sponsorship.

[JK]

FWIW -

Electronic Markets exacerbate trading swings and accelerate fluxuations.

In an attempt to stem the flood, Deutsches Bank has gone to manual executions.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aVPgSYNhS8r4&refer=home


J.K. :wow

P.S. Saddam should have been so lucky....

[BONEY]

No doubt private industry has squandered their pension programs and most governments now are underfunding their current contributions. It is possible that the babyboomers in the next decade could bankrupt your pension funds, despite what you think.

Thanks for all the doom and gloom comments.:scratch

I am aware of the pitfalls of my retirement system. I also ask lots of questions whenever I'm around some of the managers. Still, I intend to have enough money set aside so that I don't need my retirement when I retire.

I'm curious though, where your comments about the baby boomers bankrupting the system come from. Perhaps you'd like to elaborate.

[88bmwJeff]

Up until the 1950's, the USA manufactured the highest quality goods, was the world's #1 creditor, and exporter, and also had the highest wages to boot.


We think that foreign cheap labor, or global competition is to blame (Europe was industrialized before the USA) is somehow to blame, but it's not, as our past is evidence.

This problem is the growth in the size of government. The expansion of government has made us the #1 debtor nation, and the world's largest importer.

I wish it were that simple. But, it's not the governments fault corporate executives would rather pump their stock prices up for the stock holders instead of concentrating on producing a good product. It's not the government's fault we as employees want top notch salaries and benefits, but then as consumers go to WalMart/Target etc. and purchase goods made at a fraction of the cost. We have a large government debt because neither the Republicans or Democrats care about running our government. They only care about getting re-elected.

[JK]

FWIW -

As economic concerns take the lion-share of media reporting, special attention must be taken to keep informed about the progress of Iranian nuclear ambitions and their impact upon the region.

Specifically, this JP post highlights the likelihood of an American pre-emptive strike on Iranian nuclear facilities from the in depth viewpoint of VP Cheney's recent adviser on the region.

http://www.jpost.com/servlet/Satellite?cid=1221489051828&pagename=JPost%2FJPArticle%2FShowFull

J.K. :wow