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Subject: pension plans

A retirement plan is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment. Often retirement plans require both the employer and employee to contribute money to a fund during their employment in order to receive defined benefits upon retirement. Funding can be provided in other ways, such as from labor unions, government agencies, or self-funded schemes. Pension plans are therefore a form of “deferred compensation”. (Wikipedia Feb 2010)

Q1 2006

Stock buybacks up fivefold

Corporate buyback executives in a feeding frenzy

Net repurchases of equity by nonfinancial domestic corporations soared to an annual rate of $586.8 billion in Q1 2006 (a new record), pushing stock prices slightly higher. Domestic investors, through mutual funds, and foreign investors helped push prices upwards by buying equities.

This frenzied buying was five times the buyback rate in 2000, the year the Great Bubble collapsed!

FASB

Pension accounting rules tightened slightly

Accounting rules effect real people

FASB concept statement No. 5 represents a further slow tightening of the screws as to the way pension liabilities are reported — one step in a long, excruciating journey that has been underway for decades. This rule is expected to have an incremental negative impact on old, unionized companies, further decline in private defined-benefit plans, and higher state and local taxes.

The Buyback Era

Household stock sales outpace buybacks

Americans Sell Equity Holdings

The Federal Reserve national flow of funds accounts show that over the last five years, net sales of corporate equities by US households proceeded faster than corporations could match with buyback programs. The relative size and correlation between household stock sales and corporate equity buybacks indicates that most liquidations by individuals are related to executive option programs.

From 2001 to 2005, net equity sales by households totaled $1,156 billion, which suggests that corporate profits transferred to option holders in half a decade may have been on the order of one trillion dollars.

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Featured articles on inside pages

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Stock buybacks, refusing to die, live on

In Q1 2009, stock buybacks came back, driving up equity prices and sparking a rally by dominating a thin market. These equity repurchases were financed from depreciation and bond issues. More ...

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How much are US equities overvalued?

By 2007, commonsense analysis suggested that US equities were at least 40% overvalued. This conclusion was supported by many academics and by John Burr Williams's formula. More ...

US Politics

America grows with legal immigration

Legal immigration has resulted in solid growth of the US population, despite declining birth rates and an increasing number of old people. This is good news for investors in stocks and real estate. Illegal immigration appears to be less than 5% of legal immigration, and legal immigration is at an all time high.
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US equities

Stocks surge on spurious earnings

In Q1 2009, stock buybacks came back, driving up equity prices and sparking a rally by dominating a thin market. These equity repurchases were financed from depreciation reserves and bond issues. More ...

US Bonds

The collapse of the dollar and US bonds?

The extreme spending of the Obama government, combined with irresponsible bank lending policies promoted by Barney Frank and Chris Dodd, portend rising interest rates, the collapse of the bond market, and the end of dollar supremacy. More ...

World Economy

Working off the US trade deficit

Foreigners hold $16.8 trillion in US financial assets as a result of selling more goods to Americans than they buy from them. Since the 'deficit' is in dollars, the US has no problem in 'paying it off'. More ...

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2011-03-25 16:02