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November 16, 2005
Gosh my timing is good on pensions
Yesterday I posted about the pension overhang as the next big bubble to burst. Today: Guardian Unlimited | World Latest | Senate Passes Bill to Shore Up Pensions The Senate passed (97-2 this is a no brainer) a bill to shore up company funding of pension plans, estimated to bu underfunded by $450 Billion. That is a BIG number. Guess who picks that up? Yes the tax payer through the PBGC. Think the National debt is bad? Think the war is expensive? Think it is costly to clean up Katrina? Think about picking up that tab. So in uncharacteristic form, the Senats is moving early (ish) on this and trying to force companies to catch up funding over the next 7 years (oh, those poor airlines have 20 years). Sounds good eh? Make the suckers pay. But what does it mean for earnings? What does it mean for restatements? GM got downgraded to junk and their stock took a big hit when they decided to account (only partially) for their underfunded liability. Think what will happen when companies fully fund the pensions. Earnings will tank. Look through your stock portfolio. Sell the ones with large underfunded liabilities. Buy companies without pension plans.
Posted by Martin at November 16, 2005 7:40 PM
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