April 22 2009 2: Not If But When.

Ilargi: Today was one sad day among many to come. General Motors finally gave up on survival today, a development which is deeply tragic for its employees and pensioners, more than most of them realize right now. And perhaps someday we'll know why Freddie Mac's acting CFO David Kellerman was found hanging in his basement. The upcoming revelations of large scale defaults on the firm slash federal agency slash toxic dumpster's mortgages may well be the main reason. Fannie Mae and Freddie Mac, with $5-6 trillion in their combined portfolio's (not counting their deep dabbling in securities), are powderkegs waiting to blow up. The old “not if, but when” question, just like at GM.

Fannie and Freddie should never have existed in the first place, but they should certainly have been wound down long ago. As it is, what's slushed through to Wall Street via AIG is but a pittance compared to what's being parked at Fannie and Freddie. And there's a limit even to that game. After all, California defaults just rose to new highs again.

Read on...

Peacenik is sitting in Peacenik's office listening to the Canadian Autoworkers protesting in Queen's Park that their pension plans are going bust. Someone is playing music. Peacenik saw the line of portable toilets set up on Peacenik's way to work. Peacenik wondered what what going on. Then Peacenik read about the protest in the Star.

The lack of sympathy/empathy shown towards the CAW pensioners in the comments of the Star piece made Peacenik wonder about how people are going to work together to survive societal collapse. Most of the comments seemed resentful towards the pensioners. Were these same commenters resentful towards the big ongoing Canadian bank bailout?

This isn't going to turn out well when citizen is turned on citizen. Worker on worker. Unemployed on unemployed. And pensioner on pensioner. Everyone is going to need help in the future. Everyone deserves help in the future. But 30 years of Ann Randism has destroyed the concept of helping your neighbour. Is it going to be a dog eat dog future? Peacenik hopes not.

Update: Peacenik just got back from the pension protest at Queen's Park. It was huge. Multi-generational. Not just the CAW. The police directed traffic and were jovial.
The portable toilets were overwhelmed.

There is nothing like standing in solidarity with your fellow men and women. Was the protest a success? Peacenik thinks this is just the beginning of protests.

It was a good beginning.

Black Hole Alert: The Last Sucker into the Stock Market Was the Pension Guaranty Corporation

You simply cannot make this stuff up.

The Pension Benefit Guaranty Board, which backstops defined benefit plans (yes, Virginia, they still exist) faced a rather sizable gap between its expected returns on its $64 billion in holdings and its expected liabilities.

So in a stroke of sheer genius, it increased its allocation to risky assets considerably at precisely the time those assets started tanking. It even managed to cut its allocation to Treasuries way back, reducing its participation in the big Treasury rally of last year.

Now anyone who was finance literate would look at the PGB's new asset allocation and recognize it as conventional wisdom as dispensed by pension fund consultants. And if you had read Benoit Mandelbrot or Nassim Nicolas Taleb, you'd also know that those pension fund consultants base their prescriptions on theories that simply do not pan out empirically, and worse, greatly understate risk.

Read on...

There is little doubt that one of the reasons the Pension Guaranty Corporation switched to equities, was to prop up the stock market, prevent a crash during Bush's presidency and give big fees to Wall Street movers and shakers. This is the same reason Bush was so desperate to privatize social security. So now we have pension plans all over North America and the world that are unable to meet their obligations.

Do you think it is different in Canada? Is Air Canada's pension secure? Is GM Canada's? Is Ford Canada's? Is Manulife's? Peacenik just emailed and asked if Peacenik's penison is secure. Ominously Peacenik has not gotten an answer. The whole corrupt system has imploded. And the commerical real estate markets and credit card markets are only in the early stages of collapse. But Harper says Canadian banks are a model for the world. Harper says things are going to get better. Thank goodness.

Black hole gapes for pensions

By Henry C K Liu
More than three years before the current financial crisis, in a series Greenspan, the Wizard of Bubbleland that began on September 14, 2005, I warned:

Through mortgage-backed securitization, banks now are mere loan intermediaries that assume no long-term risk on the risky loans they make, which are sold as securitized debt of unbundled levels of risk to institutional investors with varying risk appetite commensurate with their varying need for higher returns. But who are institutional investors? They are mostly pension funds that manage the money the US working public depends on for retirement. In other words, the aggregate retirement assets of the working public are exposed to the risk of the same working public defaulting on their house mortgages.

Read on...

Peacenik wonders what it will take before the sheeple get out their pitch forks. This article in the Asia Times documents the downward spiral not only of pension plans but of all savings. And the recent talk in the Toronto papers about helping Canadian pension plans may not help them at all. Peacenik doubts that there is enough money in the whole world to fill the black hole. Have a good weekend.