FEDEX - $1.2B Bond Offer to Fund Pensions
#21
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Maybe we should all take a deep breath (and maybe get a dog?).
https://www.bloomberg.com/news/artic...-you-re-single
MM
Maybe we should all take a deep breath (and maybe get a dog?).
https://www.bloomberg.com/news/artic...-you-re-single
MM
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#22
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Looking at the DJIA historical chart indicates that the recovery in the DJIA from a downturn to pre-downturn levels can take a long time (5-7 years). Longtime being you retire at a peak then a downturn occurs within 3-4 years, it could be 5-7 years later until it recovers. What happens to your retirement during this period?
#23
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Looking at the DJIA historical chart indicates that the recovery in the DJIA from a downturn to pre-downturn levels can take a long time (5-7 years). Longtime being you retire at a peak then a downturn occurs within 3-4 years, it could be 5-7 years later until it recovers. What happens to your retirement during this period?
Of course, a retirement plan that is paying out benefits to retirees isn’t (hopefully) heavily invested in equities
It will be much closer to a 50/50 allocation between equities & bonds
This will of course dampen the downside risks if DJIA drops
However, it also dampens the upside benefit when DJIA rebounds
Hopefully, no one is expecting the fund to make long term, smoothed, average returns based on DJIA...or S&P500...or some other pure equities based benchmark
That’s not how our current A Plan is invested or should be invested
However, if the company’s contributions are Fixed and the fund drops significantly, what additional pressure will the fund managers be under to outperform the hurdle rate to restore previous benefit levels?
Will current retirees be patient and willing to wait?
What’s the mechanism to balance the needs of active employees vs retired employees?
Variable Benefit plans are labeled “variable” for a reason.
Let’s get all the details and think critically
#24
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What will be the management fees? 0.1% or more like a actively managed fund? subtract that from the returns?
URL: https://www.thebalance.com/stocks-an...80-2013-417028
Return Data, 1928-2013
Once the sample is enlarged, the performance gap increases. The Federal Reserve Bank of St. Louis has measured the returns of stocks, Treasury bills, and 10-year Treasury bonds since 1928. Note that these represent different investments than those presented above since neither the S&P 500 or the Barclays Aggregate dates back that far. Three key takeaways are:
URL: https://www.thebalance.com/stocks-an...80-2013-417028
Return Data, 1928-2013
Once the sample is enlarged, the performance gap increases. The Federal Reserve Bank of St. Louis has measured the returns of stocks, Treasury bills, and 10-year Treasury bonds since 1928. Note that these represent different investments than those presented above since neither the S&P 500 or the Barclays Aggregate dates back that far. Three key takeaways are:
- Stocks averaged an annual return of 11.50% in the period from 1928-2013, while T-bills and T-bonds averaged 3.57% and 5.21%, respectively.
- $100 invested in stocks in 1928 would have grown to $255,553.31 by the end of 2013, while $100 in T-bills and T-bonds would have grown to $1,972.72 and $6,925.7940, respectively.
Last edited by Huh really; 11-19-2017 at 08:44 AM. Reason: clarity
#25
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What will be the management fees? 0.1% or more like a actively managed fund? subtract that from the returns?
URL: https://www.thebalance.com/stocks-an...80-2013-417028
Return Data, 1928-2013
Once the sample is enlarged, the performance gap increases. The Federal Reserve Bank of St. Louis has measured the returns of stocks, Treasury bills, and 10-year Treasury bonds since 1928. Note that these represent different investments than those presented above since neither the S&P 500 or the Barclays Aggregate dates back that far. Three key takeaways are:
URL: https://www.thebalance.com/stocks-an...80-2013-417028
Return Data, 1928-2013
Once the sample is enlarged, the performance gap increases. The Federal Reserve Bank of St. Louis has measured the returns of stocks, Treasury bills, and 10-year Treasury bonds since 1928. Note that these represent different investments than those presented above since neither the S&P 500 or the Barclays Aggregate dates back that far. Three key takeaways are:
- Stocks averaged an annual return of 11.50% in the period from 1928-2013, while T-bills and T-bonds averaged 3.57% and 5.21%, respectively.
- $100 invested in stocks in 1928 would have grown to $255,553.31 by the end of 2013, while $100 in T-bills and T-bonds would have grown to $1,972.72 and $6,925.7940, respectively.
However, you have a point - will the management of those fees/costs be a company concern/responsibility or the collective responsibility of the funds participants ?
Regarding the use of historical return rates by equities or bonds, I’m somewhat skeptical about assuming the future behaves like the past
I find equity returns from more than 25 years ago almost irrelevant because corporations and equity markets have changed so much
Similarly, more current bond fund returns, which have enjoyed over 15 years of liberal monetary policy, will be very difficult to replicate as interest rates move up from historical lows
I’m more intrigued by forecast, forward looking, Expected Return on Assets - equities and bonds - by truly independent sources
See other thread for the Expected Return on Assets used by FedEx’s own accountants and actuaries
#26
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Forbes article from 3 weeks ago...
https://www.forbes.com/sites/baldwin.../#3e42c41d7c75
Hmmmm....what’s the VB hurdle rate?
https://www.forbes.com/sites/baldwin.../#3e42c41d7c75
Hmmmm....what’s the VB hurdle rate?
#27
#28
#29
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Posts: 62
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I share Dlax's skepticism about future earnings. From one of his articles "The 3% forecast assumes, optimistically, that P/E ratios remain on a permanent high plateau. Robert Shiller, of Irrational Exuberance fame, is skeptical that they will do that. His recent bearishness has not yet been vindicated, but it might be, starting maybe next week or maybe in 2023. If multiples contract, you’ll get less than 3% a year over the next quarter century." Compounded with where the management fee comes from, this could be ugly. So, who bears this risk? We all need to seriously examine the details when they come out, as that is where the devil of it will be.
Personally, i think the train has left the station. All there is is the brakeman who is called "50%+1". This thing will be a huge pot of money which means a big pot of management fees. That is a strong incentive for any union to gets it's fingers in (local or national), or any one who can finagle a way to get a drop. And, everyone wants to save face. It takes a strong person to say, "I just wasted XX months/years of my life on XX and it was a bust". And, as for the company, this thing can be structured in the details so they really go for it on top of offloading the risk issue. Over the course of the last two decades and some, how many former union officers ended up in management? I not saying this is inherently bad, but if you could secure a different pension plan from the company that is better than our A plan, would you take those actions to do it?
Personally, i think the train has left the station. All there is is the brakeman who is called "50%+1". This thing will be a huge pot of money which means a big pot of management fees. That is a strong incentive for any union to gets it's fingers in (local or national), or any one who can finagle a way to get a drop. And, everyone wants to save face. It takes a strong person to say, "I just wasted XX months/years of my life on XX and it was a bust". And, as for the company, this thing can be structured in the details so they really go for it on top of offloading the risk issue. Over the course of the last two decades and some, how many former union officers ended up in management? I not saying this is inherently bad, but if you could secure a different pension plan from the company that is better than our A plan, would you take those actions to do it?
#30
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Projections From Vanguard - Apr 2017
Infographic: A breakdown of our 2017 economic and market outlook
https://institutional.vanguard.com/V...EMOinfographic
Historical Reurns 1926-2016
Fixed Income - 5.4%
Equities - 10.0%
Vanguard projections used in their Capital Markets Model which drive their retirement planning software
Fixed Income 1.5 - 2.5%
Equities 5.0 - 8.0%
A 60% Equities / 40% Fixed Income Plan would yield 3.6% - 5.8%
Their single value forecast - 5.5%
In a slightly more conservative 50% / 50% Fund allocation, driven by an institutional retirement plans responsibility to generate income to pay current retirees, the projected return range drops to 3.25 - 5.25%
This would drop the single value forecast to ~ 5.1%
Infographic: A breakdown of our 2017 economic and market outlook
https://institutional.vanguard.com/V...EMOinfographic
Historical Reurns 1926-2016
Fixed Income - 5.4%
Equities - 10.0%
Vanguard projections used in their Capital Markets Model which drive their retirement planning software
Fixed Income 1.5 - 2.5%
Equities 5.0 - 8.0%
A 60% Equities / 40% Fixed Income Plan would yield 3.6% - 5.8%
Their single value forecast - 5.5%
In a slightly more conservative 50% / 50% Fund allocation, driven by an institutional retirement plans responsibility to generate income to pay current retirees, the projected return range drops to 3.25 - 5.25%
This would drop the single value forecast to ~ 5.1%
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