Pension shortfall

Biggest among S&P 500!

467,000 Pensioners 

The $31 Billion Hole in GE’s Balance Sheet That Keeps Growing

Part of it has to do with the paltry returns that have plagued pensions across corporate America as ultra-low interest rates prevailed in the aftermath of the financial crisis. 

But perhaps more importantly, GE’s dilemma underscores deeper concerns about modern capitalism’s all-consuming focus on immediate results, which some suggest is short-sighted and could ultimately leave everyone -- including shareholders themselves -- worse off.

DYI:  Sub atomic low interest rates have reduced returns for the bond component well below the assumed 8% return that the majority of old style pension plans attempt to attain.  A typical pension allocation of 60% stock – 30% bonds – 10% bills estimated average annual return for dollars invested today and held for the next 10 years is 0% - 2%!  At least the return is not negative.  Nevertheless GE is going to need to pump in billions to bring the pension back to a fully funded state.

This high flying stock market and sub atomic low interest rates are playing havoc across all pension type plans including the biggest bulk in the 401k market as short falls will be a biblical event as future seniors and current seniors attempt to fashion some semblance of retirement without entering poverty.  The general population is primarily savers – not investors – as their pension plans (401k, IRA’s, annuities, etc.) are invested in money market or bond investment with minuscule amount of stocks.  The bulk of their savings are just that – CD purchasers at their local bank.  The sub atomic low interest rates have crucified these savers with the Fed’s financial repression tactics – interest rates significantly below the REAL inflationary rate.  Why financial repression?  BANK BAILOUT!  All at the expense of the American public to benefit the few – the elites.         

But if nothing else, balancing the competing interests of its shareholders and employees has proven to be especially hard for GE. Immelt began ramping up GE’s buybacks in 2015, shortly after 

Peltz’s Trian Fund Management took a stake in the industrial giant and recommended that the company step up the repurchases to boost its stock price. 

GE bought back about $23 billion that year and then $22 billion in 2016. Last year’s total was more than double the amount GE spent in 2013, data compiled by Bloomberg show.

DYI:  Purchase a stake large enough to have a seat on the board of directors and then heavily advocate stock repurchasing to elevate the price.  This smacks of nothing more than front running – if it is not illegal at the corporate level it damn well should be.  At the very least it is unethical as hell.

Definition:  Front Running

In the context of stock trading, front running is the practice of stepping in front of orders placed or about to be placed by others to gain a price advantage. For example, a broker receives an order from a client to buy 500,000 shares of XYZ Company. ... That form of front running is not only unethical, it is illegal.

 DYI