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Thread: Detroit Files for Largest Municipal Bankruptcy in US History

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    Detroit Files for Largest Municipal Bankruptcy in US History

    Quote Originally Posted by rabbitcaebannog View Post
    Towers Watson, the global human resources consultant, found that pension-style plans beat 401(k)-style offerings by nearly 3 percentage points in 2011, the latest study year. Pensions made investment returns of 2.74% while defined contribution plans lost money, banking -0.22%.

    It’s no fluke. Pension plans often beat 401(k) plans. Since 1995, Towers Watson found, defined benefit plans outperformed by 76 basis points annually (0.76%). The did so in nearly all of those years except years in which stocks boomed, such as 2009.

    Part of the reason is mutual fund fees. Mutual funds in the plans studied had weighted average expenses of 65 basis points in 2011, a drag which reduced overall returns by 31 basis points. Nearly half of the 401(k)-type plans were composed of mutual funds, compared to just 14% in the pension-style plans.

    “The spread between the two has been narrowing, and with many sponsors adjusting the asset allocation strategy of their DB plans to better match assets to liabilities, the disparity may diminish further in the future,” said Chris DeMeo, head of Investment, Americas, at Towers Watson.

    Translation: Pension plans do a better job with less risk. Pension Plans Beat 401(k) Savers Silly -- Here's Why - Forbes
    This is so distorted its like Apples to Cinder Blocks- not even close of a comparison.

    Pension funds are managed by a consortium of instructional portfolio managers- 401k assets are not! Instead participants are given a menu like assortment of mutual funds to chose from. The performance of a plan is directly related to how it's non-sophisticated participants allocate their money so it's no surprise the Pros beat Mr. Joe Schmo. Furthermore, pensions can invest in alternative strategies like PE that a 401k can't.

    Furthermore, the only way to measure outperformance is on a risk-adjusted manner.
    Last edited by greyhat; 07-19-13 at 05:24 PM.

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    Re: Detroit emergency manager files bankruptcy

    Quote Originally Posted by Hatuey View Post
    ....Which? I'd love to know. These ones?



    The reality is a simple one. If a state is getting bailed out, the money will come from rich blue states.
    Put that in context.

    Red states are cheaper to live. Lower costs of living mean lower wages than average as well. When you use one-size-fits-all government policies, more people will qualify for these government subsidies.

    Blue states, higher wages, more tax revenue.

    Red states, lower wages, lower tax revenues... progressively...

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    Re: Detroit Files for Largest Municipal Bankruptcy in US History

    Quote Originally Posted by greyhat View Post
    This is so distorted its like Apples to Cinder Blocks- not even close of a comparison.

    Pension funds are managed by a consortium of instructional portfolio managers- 401k assets are not! Instead participants are given a menu like assortment of mutual funds to chose from. The performance of a plan is directly related to how it's non-sophisticated participants allocate their money so it's no surprise the Pros beat Mr. Joe Schmo. Furthermore, pensions can invest in alternative strategies like PE that a 401k can't.

    Furthermore, the only way to measure outperformance is on a risk-adjusted manner.
    Yes, a benefit of pensions is they are handled by professionals rather than employees which makes it less subject to kinds of mistakes inexperienced employees may make.
    But, the biggest advantage for both employers and employees is that the administrative expenses as a percentage of assets are much
    lower for defined benefit plans: 0.3 percent compared to 0.9 percent for defined contribution plans.

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    Re: Detroit Files for Largest Municipal Bankruptcy in US History

    Quote Originally Posted by haymarket View Post
    Ah yes - serve the needs of the rich corporations over the needs of the common people. Got it.
    follow the law rather than whining about capitalism. One of the incentives of a bondholder is certain guarantees. What part of contract do you not agree with?



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    Re: Detroit Files for Largest Municipal Bankruptcy in US History

    Quote Originally Posted by rabbitcaebannog View Post
    Oh sure let's make it dog eat dog. That is what the wealthy people who decide to do these things want us to do in response.
    oh, hey, look!



    A strawman!

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    Re: Detroit Files for Largest Municipal Bankruptcy in US History

    Quote Originally Posted by cpwill View Post
    oh, hey, look!



    A strawman!
    Just responding to your "we should screw over private sector retirees in order to better benefit public sector retirees."

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    Re: Detroit emergency manager files bankruptcy

    Quote Originally Posted by Lord of Planar View Post
    Put that in context.

    Red states are cheaper to live. Lower costs of living mean lower wages than average as well. When you use one-size-fits-all government policies, more people will qualify for these government subsidies.

    Blue states, higher wages, more tax revenue.

    Red states, lower wages, lower tax revenues... progressively...
    Yeah. I've seen that measure before. It's also counting military bases and all the income that go to servicemembers as a form of aid.

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    Re: Detroit Files for Largest Municipal Bankruptcy in US History

    Quote Originally Posted by rabbitcaebannog View Post
    Just responding to your "we should screw over private sector retirees in order to better benefit public sector retirees."
    It was haymarket that argued that this was a conflict of interest group v interest group, rather than a matter of applying the law. I was pointing out that he was inaccurately describing the interest groups when he called for prioritizing one over the other - that "screw over private sector retirees in order to better benefit public sector retirees" was his argument, not mine. Mine was and remains that we should apply the law.

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    Re: Detroit emergency manager files bankruptcy

    Quote Originally Posted by Conservative View Post
    Detroit emergency manager files bankruptcy - Chicago Sun-Times

    Amazing how successful the liberal economic policies are for major cities in this country. This is the largest city in the nation to file for bankruptcy with more to come. Liberals better wake up
    This is what happens when you elect community organizers into office. It's utterly fantastic for the organizers, but total hell for the organized.

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    Detroit Files for Largest Municipal Bankruptcy in US History

    Quote Originally Posted by rabbitcaebannog View Post
    Yes, a benefit of pensions is they are handled by professionals rather than employees which makes it less subject to kinds of mistakes inexperienced employees may make.
    But, the biggest advantage for both employers and employees is that the administrative expenses as a percentage of assets are much
    lower for defined benefit plans: 0.3 percent compared to 0.9 percent for defined contribution plans.
    Pensions are based on future guarantees- that's the whole reason they've gone away- they're expensive even if your Pros can manage the assets well, there is still a much higher cost of funding.

    A good approach would be to allow 401k plan participants to hire pros to help them; however ERISA rules make this a very tricky process.

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