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The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis. All posts prior to September, 2007 are in the public domain, but after September 4, only subscribers to The Analyst's Accounting Observer will see all posts going forward. Only selected, occasional posts will be released to the public domain from September 4 forward.

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Accounting Observer: Pension Panic Anew?
Location: BlogsAAO Weblog (Public)    
Posted by: Jack Ciesielski 8/23/2007 5:24 AM
Don't let the headline scare you. The investor mood towards benefit plans is more like complacency. Plan sponsors share that complacency.

But - moods can turn on a dime on Wall Street. Just think about the subprime panic of the last few months. Complacency now could be replaced with fear later. And investors will wonder about the need to feed benefit plans, just like they did a few years ago.

(Hint: one way to feed them would be to cut share buybacks.)

You may have noticed the blogs have been a little light the last few weeks. I've spent the past month working on a study of the benefit plans in the S&P 500. Some things we've studied:

  • Funding (not bad, could be better)

  • Contributions (almost laughable)

  • What's in the wallet? (many firms' "other investments" include hedge funds & private equity - but give no clue about the riskiness. And who knows about subprime exposure?)

  • Statement 158 effects (a gouge from equity for many)

  • Underlying assumptions (more solid than usual)

    All stuff that could come back to bite at year end when remeasurement occurs. Maybe now is a good time to tune in.

    If you're an institutional investor and you've enjoyed The AAO Weblog so far, I invite you to sign up for a trial subscription to The Analyst's Accounting Observer. That invitation is also open to members of a corporate finance/accounting function. (As long as you haven't had a trial subscription before. Yes, we do keep a list.)

    Sign up now and you'll receive the report soon. And we'll check the BigDough database to see if you're an institutional investor, which is our litmus test.
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