Ego's Journal

[Ego]

@chenda, I don't know how our system works for private pensions.

@guitarplayer, he was rather stoic. His wife had a very good government job which cushioned the blow. I peppered him with questions and he gladly volunteered amounts. He was one of the first African American managers at Bethlehem Steel, so we talked about what that was like too. Interesting guy.

[zbigi]

Bethlehem Steel underfunded pensions by $3.2b by the time of bankruptcy, with 13,000 employees and 70,000 pensioners drawing from the plan.


Any one company with a pension could fail like Bethlehem Steel. leaving the employees holding the bag. When companies transfer their pensions obligations en masse to too-big-to-fail insurers, are they successfully shifting the obligations to the taxpayers?

There isn't that much investment risk in funding pensions if the payout amount is not 100% guaranteed (you can make payouts contingent on inflation, GDP growth, FED rates or some other metric that is tied to performance of investments). I don't see a large risk of government bailouts there. What you're describing in case of Bethlen Steel is more like fraud, where company underfunded pensions and made pension fund too small to cover all obligations. Presumably, insurance company just wouldn't let company like BS underpay their premiums.

There is however a risk of company like AIG just going bankrupt for unrelated reasons, obliterating pensions of many people in the process. That could trigger a bailout. However, AIG was bailed out once already, so I wouldn't say transferring private pensions to AIG increases probability of AIG bailout, because it was high already anyway.

[jacob]

@Ego/chenda - Some frameworks that will significantly help to think about these things are:

Pensions are but an insurance scheme that takes a premium in a predicable return for keeping the money in the short time (and making some more money from it in the meantime) but having to pay it out in a statistical way in the longer term. (Many large scale ways to deal with the future are like this.) The larger the base, the longer the timescale... and this is how re-insurance become a thing too.

As such it's all about managing an often very leveraged risk curve (more lenses) by involviong ever more players at ever longer time scales until the belief-curve is solidly locked in ... too large to risk or rather too large to afford to change.

In the US, private pensions are split between "defined benefit" and "defined contribution". The difference between the two is about who holds the hot potato risk. For "defined benefit", the corporation or the government hold the risk. For "defined contribution" the worker or future generations hold the risk.

The US is moving away from defined contribution towards defined benefit ASAP as promises are getting harder to keep. Some laws have been enacted wherein corporate defined benefit has been punted to defined contribution insurance schemes. Here's the situation:

At the zeroth order (when the tide is rising), this is a positive sum game: Invest the money now so it will become more money later and in that way get a free ride.

At the first order (when the tide is no longer rising and it comes down to the waves of politics and the economic situation), it becomes a a zero-sum game: Play hot potato. Kick the can down the road. Push the risk to the gullible and the uneducated. Lobby politicians. Make promises that can't be held hoping that investors and voters won't catch on until it's too late.

At the other zeroth order (when the tide is going out), it becomes a negative sum game: Get out as fast as you can. Blame the other. If fair negotiations get shut down by current laws, try to make them happen with political leverage or by changing the laws. If that fails too, start at war.

Ultimately, pensions are but promises made by the present to the future. The details are all about whether those promises are or can be kept and when the transitions between the three states happen.

[suomalainen]

The US is moving away from defined contribution towards defined benefit ASAP as promises are getting harder to keep. Some laws have been enacted wherein corporate defined benefit has been punted to defined contribution insurance schemes. Here's the situation:

You have the first sentence backwards.

[jacob]

@suo - Yes, indeed.

[UrbanHomesteader]

One big reason why defined benefit pension plans are not popular with businesses is that the government requires minimum funding levels each year (based on the benefit formula, life expectancies and set rate of return projections). So, if the stock market tanks like it did in 2008-2009, the employer is required to pony up a massive contribution to offset the paper losses in the short term. That big employer contribution may hit at the worst possible time if the business is also struggling with reduced revenue due to the recession.

On the flip side, with a defined contribution plan an employer can pause their portion of the contribution (i.e. profit sharing and match) during lean times, allowing them to ride out a recession rather than be destroyed buy it.

I was working at an actuarial firm that administered pension plans during the Great Recession, and I remember it vividly.

I personally am done morning traditional pensions. They were generally structured to encourage employees to stick around the same employer for decades, to maximize the pension. The main advantage was that the employees didn't have to come up with their own investment plan.

[delay]

On the flip side, with a defined contribution plan an employer can pause their portion of the contribution (i.e. profit sharing and match) during lean times, allowing them to ride out a recession rather than be destroyed buy it.

Defined benefit is not inflexible either. The starting age changes, the benefit gets eaten up by inflation, and the pension fund can be restructured. Defining a benefit is making a promise, and a corporation can't keep a promise if the money is not there.

A defined contribution scheme sounds like "we agree on what you pay, and we promise nothing". My parent's generation would not have accepted that, they would have opted out. The younger generation is more trusting, making the switch from defined benefit to defined contribution possible. Perhaps in 20 years companies switch back to defined benefit!

[Ego]

We are, once again, on the ground in Europe researching my heritage.

Back in 1905, my great-grandfather left a small village in Calabria and made his way to the port of Messina in Sicily. There he boarded the S.S. Algeria for the journey to United States by way of Ellis Island. His brother sponsored him and another sibling. The village they left, while picturesque, was slowly dying due to the disintegration of the feudal, aristocratic land system that was used to rule the area since the Middle Ages. In the United States, he met a girl who emigrated from a similarly dying village near Foggia, and for the rest of his life he worked at the Stetson hat factory in Philadelphia. John B. Stetson was forward thinking and treated his employees surprisingly well for the time. My great-grandparents had five children, four of whom survived.

The Stetson Hat Factory, Philadelphia

[Frita]

Cool history and pictures, I enjoy the generational stories-aspect of genealogy. There are lots of steps to hat making. Do you know any more about your great-grandfather’s work on the line?

[Ego]

@Frita, I wish I knew more. On the ship manifest at Ellis Island he was listed as a hatter. It was also on this death certificate when he died from TB at 47. Other than that and the story my father told me, I know nothing about what he did there.

[Frita]

Ah, the TB diagnosis jogged my memory of a poorly written local piece on Stetson having the same disease and inventing the Cowboy hat when he came west. (My dad wore the things daily.) I won’t post that one but did find a better one here: https://jmarkpowell.com/how-illness-cre ... owboy-hat/ It gives a few tidbits about the Philly factory and Stetson’s philanthropic work.

[Ego]

That's a great story! I've owned an old 1960's Stetson Open Road for years and wear it often when at home.

I was listing to TWiV today and heard that TB regained the top spot of deadliest infectious diseases. My GGF died from both Miliary TB and TB meningitis.

[chenda]

It was a brutal thing TB. My great-grandmother was one of 13 children, 10 of whom died of TB mostly in early adulthood. The deaths happened almost one-by-one year after year. Interestingly, universal vaccinations against TB were ended in 2005 as apparently infections rates and dropped to new lows.

[Ego]

We finally left Italy. One of the goals for this trip was to determine if we would enjoy living in Southern Italy. The first few days in Palermo were encouraging, but the longer we stayed, the less enthusiastic we became.

Petty tyrants are everywhere in the world and anyone who travels has to deal with them every once in a while. Some places have few. Some have more. In Southern Italy, they are everywhere and they take particular pleasure in using their small bits of power to harass and harangue, often coupling it with tantrums.

Bus drivers. Shop owners. Grocery checkers. Trash truck workers. Taxi drivers. Fruit stall venders. Public toilet attendants. Tourist information officials. Train conductors. They seem to take pleasure in manufacturing problems. Tiny misunderstandings that would be laughed off elsewhere are amplified. I can only imagine how it would be to deal with government officials on a regular basis. No thanks.

Of course, we met a lot of really nice people too. It was just that the percentages were skewed. While we are pretty good at dealing with this kind of stuff and it is good to practice standing up to bullies every once in a while, we don't want to live in that world full time. We can decide to live elsewhere. So we will.

Live and learn.

[delay]

The first few days in Palermo were encouraging, but the longer we stayed, the less enthusiastic we became.

Thanks for your journal update! I wonder if the problem is with Sicily or more general. What areas are there where you became more enthusiastic over time?

[Ego]

@delay, that is a good question. We spent the first six months of this trip in Southern Europe looking at relocation locations with weather similar to Southern California. We really enjoyed Southern Portugal and Southern Spain. Both of them left us thinking we could happily live there. Greece was nice as well, but island life is limiting, especially in the off season. Arriving in Sicily, we really wanting to like it.

In general, we become more enthusiastic about a place when we spend more time there. Thailand, Bali, Colombia, Mexico City, Vina/Valparaiso, South Africa.... I can think of a many examples.

[Frita]

@Ego The benefit you have from your extensive travel experience is knowing what is a better fit. Plus you have the wisdom to test out places for longer times and not personalize situations. How does the evaluation process work as a couple versus as an individual?

Bus drivers. Shop owners. Grocery checkers. Trash truck workers. Taxi drivers. Fruit stall venders. Public toilet attendants. Tourist information officials. Train conductors. They seem to take pleasure in manufacturing problems. Tiny misunderstandings that would be laughed off elsewhere are amplified. I can only imagine how it would be to deal with government officials on a regular basis. No thanks.

I am trying to understand what sounds like a community tolerance/preference to high conflict and all the “excitement” that can create. Is this a communication, power, and/or value difference (or something else)?

[chenda]

South Africa

How did you find South Africa?

[7Wannabe5]

I've also developed an interest in genetic/ancestry research recently. The science and available data have improved to the extent that I was able to determine with near certainty that one of my great-grandmother's great-grandfathers was a Chief of the Cayuga within the Iroquois Confederation whose daughter was the first wife of a British Loyalist granted land in Canada in region where Iroquois were "re-settled" on reservation early in 19th century. My great-grandmother Lillian might not have known her maternal grandfather "Black John", because her mother immigrated to Michigan from Canada and died fairly young.

Because the genetic analysis is broken down by parent and particular chromosome, and I also have access to my mother's genetic analysis and that of one of my paternal-line cousins and one of my father's maternal-line cousins, I can also determine oddities such as the fact that I happenstance inherited much more genetic material from my paternal grandfather than my paternal grandmother, rendering me less "Irish" and more "British by way of the Vikings" than random roll of chromosomes would predict. The math puzzle aspect of this research has caused me to change my mind towards now seeing genetic inheritance of traits as more stable and significant, although this is absolutely not to imply anything like ethnicity is destiny. More like the likelihood that you might display the very same distinctive type of nose that your Italian 5th great-grandfather displayed is greater than I would have previously guess-timated.

My Great-Great-Great-Grand-Uncle's Grandson William Wedge Pinetree Chief and Firekeeper circa 1900

[Henry]

Pinetree Chief and Firekeeper

That explains the two hats he's wearing.