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SA Chris said:
Late Middle Aged delusions of grandeur maybe? A realisation that your life is not amounting to as much as you hoped, and you therefore start to look for a deeper meaning somehow, or start to think there is more to everything that there appears to be, and you are the only one (or one of the few) who knows the TRUTH.

You either start to blog about the deep value / meaning of a relatively trivial activity (often surfing, astronomy, photography, road biking or running) and mistake the minor endorphin hit for visions of enlightenment.

Hmmm...

Yeah, I can see that.

I’m going down that route, but I feel compelled to start a new religion, rather than a blog.

What do you reckon to the worship of Extra Mature Cheddar on toast? Slightly overdone?

I feel possessed by the holy spirit, just thinking about it.
 
That's the other one. Faced with their own mortality they find / found a religion, or get all spiritual, go vegan or start doing yoga.
 
seankenny said:
thought this was cool, six seminal econ papers:
https://www.economist.com/sites/default/files/econbriefs.pdf

Thanks for the link. Just read those and they were all really interesting
 
Johnny Brown said:
But at a deeper level I wonder if it isn't being driven by the failure of the modern civilisation - and late capitalism in particular - to deliver us an attractive vision of the future. Instead we are faced with a global tragedy of the commons with those in charge seemingly unable to direct either the government, businesses or people in a more sustainable direction. And that has led a lot of people to genuinely have had enough of experts.

This ^^

And I'm not Millennial! (not sure what I am, generation Y?) the offspring of the baby-boomer generation who have made the rules, played the rules and are still desperately trying the keep a grip of the rules. I can't help but feel that our generation understands the fuckups that have been set in the stone of modern society, but we're too ingrained in the system, and too powerless against the structures, hierarchies and inertia of the machine to do anything about it. Oh, and we have endless instabangs and youtubes to distract us whenever we start questioning things. And we're scattergunned by the million potential truths.
 
I thought this was a fascinating lecture on the way demographics have created the current generational divide.

https://youtu.be/O9kYLPbOyQA

In the context of growing conspiracies and blaming the self-serving rich etc, it's useful to see the wide-ranging effects that can be created by a very simple input variable (a large cohort - the boomers) on a complex system. Willetts is a Tory life peer, but you wouldn't know it from his analysis or conclusions, and I daresay he would have no place in today's party. Also worth watching the q & a which largely consists of him effortlessly batting aside boomers' attempts to blame the young.
 
In reply to Sean,
I’ve just come back to this thread, after being thoroughly pissed-off by what I perceived was the dismissive and condescending tone of Sean’s reply to what was a genuine question by me.

But reading your following reply about anti-vaxxers etc. (which I hadn’t seen) explains a bit more. I share your distaste of people ‘into bullshit’ so thanks for explaining.

In case there’s an assumption behind why I asked about that blog in particular - for e.g. me being one of those bro-science cat-nippers ‘excited by a new thing’ (as hinted).

I posted a request for opinions on that guy’s theories because there seem to be some relatively knowledge people on ukb who’s opinions I respect, or at least am always interested to hear. I was hoping Sean and maybe one or two others might reply.

It had nothing at all to do with any ‘fascination in alternative theories’, in case that’s how it looks.
The reason for asking about that blog was because the author, Gervaise Heddle, is the ceo of a company which I researched in the late summer of 2018, and then went ‘all in’ in autumn 2018. My investment now has the potential to be life-changing (and already is to some extent) by allowing me to retire at 45. Provided a few more events play out as research suggests they might (but might not). I don’t assume anything, I could be working until I’m 80 :)
So, when I found out last week that GH had written a personal blog in 2014 expressing some of his personal theories on economics I was naturally curious to read it - as an interesting, but very minor, side note to the 2 years of ongoing research I’ve already done in the company and its management team.

I was just curious about the coherence of some of the personal views, of someone who’ll play a central role in the outcome of what is a life-changing investment for me.
That is literally all. Nothing more than that. All I’m interested in is trying to understand more than I do.

The theories being above my head, I thought I’d ask the options of more informed people on here.

I was hoping for some factual rebuttals (or otherwise) of GH’s personal views, by people with more knowledge of economics than me. (What do I know - only looking at making a million through research, instinct and nerve ;))

I think you could have just as easily replied factually without the haughty tone, and without presuming I was someone with an unhealthy interest in alternative theories. But you gave a great answer so thanks.

I didn’t appreciate the comments that I’m ‘excited by a new thing’.
or being told ‘sorry to piss on your bonfire’, not that I’m ‘loftily proclaiming’.

I could have just explained in the first place why I was asking for opinions on THAT blog in particular. But I naively thought I shouldn’t need to explain.

edit: grammar
 
A lot of nuance can be missed on the internet, something I've learnt the hard way, and this looks like a classic example. Hope the investment works out as you plan.
 
Johnny Brown said:
I thought this was a fascinating lecture on the way demographics have created the current generational divide.

https://youtu.be/O9kYLPbOyQA

In the context of growing conspiracies and blaming the self-serving rich etc, it's useful to see the wide-ranging effects that can be created by a very simple input variable (a large cohort - the boomers) on a complex system. Willetts is a Tory life peer, but you wouldn't know it from his analysis or conclusions, and I daresay he would have no place in today's party. Also worth watching the q & a which largely consists of him effortlessly batting aside boomers' attempts to blame the young.

Cheers for linking that Adam, I watched both the lecture, and the Q&A linked. Nice to have some stats and a theory to take into arguments with "family friends".
 
galpinos said:
Cheers for linking that Adam, I watched both the lecture, and the Q&A linked. Nice to have some stats and a theory to take into arguments with "family friends".
Agreed, that was a really good summary, thanks Adam. I’ve been banging on about DB pensions from a public vs private sector angle for years, but I’d never considered the generational aspect of it before.
 
So what is wrong with DB schemes? Do you think it's OK to change such schemes because others are worse? The cost of DB is largely manufactured by a faulty valuation system that just doesn't work in the unusual times we are living in.

https://www.professionalpensions.com/opinion/3033124/death-discount-rate-fundamental-flaws-accounting-approach-pension-scheme-valuation

The most embarrassing evidence of this is the Coal Miners' scheme. The Telegraph and anti DB campaigners complained that this would cost the taxpayers a fortune when the government took this on. This is the reality.. well over. £10 billion profit so far.

https://www.walesonline.co.uk/news/wales-news/miners-furious-uk-government-taken-14503996

I agree with Willets on housing but he was part of a government that removed a fairer rates system and gave away council housing to private ownership at ludicrous discounted levels that helped make that bubble. If people are earning vast sums from their home, just tax it.

I've said many times that I think we currently live in a kleptocracy. The super rich and globalised multinationals get away with murder and the average tax payer picks up the pieces. The ironic good side to this is Willets' cost estimates are overblown as people have stopped living longer and the estimates had lifespan growth built in. It's desperately unfair for the young but can be resolved by an improved tax system and blocking the theft.
 
Nothing wrong with DB pensions as such, but comparing public and private sector salary doesn’t recognise the value of the DB pension contribution by the employer/state. Take my salary, add on the employer contribution to DC pension and the value of other benefits and that gives a total reward package. Do the same for a public sector worker and that gives a fairer comparison than comparing salary. That has always been my issue with DB schemes. So do I think they should be changed because other schemes are worse? No, but members should recognise how much their benefits cost.

On your discount rates point, I largely disagree. Firstly, discount rates are only part of the problem. Saying that discount rates are manufacturing a high cost ignores the contribution of life expectancy and the differential between wage inflation and the return on appropriate investments. Secondly, that Professional Pensions article takes a really complicated issue and tries to simplify it with a few broad brush comments/conclusions and it isn’t that simple. For one, the discount rate changes the timing of the funding but not the actual amount of money paid out in pensions. A lower discount rate brings forward funding payments so provides greater security for member benefits if all other things remain equal (demographics, investment strategy/returns, etc.). In a world of volatility, I’d see that security as a positive.

On the Coal Miners scheme, that article doesn’t give me enough information to comment, but I doubt it’s as clear cut as is made out. All the comment is from one side so it’s not a balanced piece and therefore not the whole story
 
The DB employer cost is right now significantly down to the specific financial requirements; they are probably double what they need to be with a still prudent but more sensible valuation method. In the past in 'good times' there were employer pension holidays as the methodology problems work in the other direction then. I know it's more complicated than the article illustrates (but the requirements are the main problem) as I've worked a little with actuaries on USS at national level.
All the identified problems add costs or reduce income below likely values. Overly prudent calculations mean more money is available than on current valuations so less employer and employee payments are required per year.

https://www.pensions-expert.com/Special-Features/Roundtables/Is-the-gilts-plus-model-broken?ct=true

http://www.actuarialpost.co.uk/article/half-of-schemes-feel-gilts-plus-valuation-method-unhelpful-11137.htm

https://www.actuaries.org.uk/news-and-insights/media-centre/media-releases-and-statements/longer-term-influences-driving-lower-life-expectancy-projections

https://moneyweek.com/484169/why-the-uks-company-pension-schemes-are-in-such-bad-shape

https://www.bankofengland.co.uk/working-paper/2018/growing-pension-deficits-and-the-expenditure-decisions-of-uk-companies

DC pensions make the investment companies much more money from fees per employee per year on the schemes than DB and push the market uncertainty onto the employee. For the same investment outcomes on average they would provide a lower pension at higher risk.

The closed Coal Miners' scheme really is that clear cut. The DB critics did say it would cost the tax payer a fortune and the government has pocketed over £10 billion from it so far and there are decades to run yet. That's real money not actuarial prediction.. it's clear evidence the arguments used by the likes of the Telegraph against public sector DB schemes are untrustworthy. I tried to find a link without spending much time .. they are available.

https://www.telegraph.co.uk/finance/comment/2794289/Taxpayers-may-have-to-dig-deep-for-miners-pensions.html

https://www.pensionsage.com/pa/Govt-defends-position-on-Mineworkers-Pension-Scheme-open-to-cross-party-talks.php

Finally the tax relief side of pensions is a mess and very much benefitting higher rate tax payers and increasing intergenerational issues.

https://www.theguardian.com/business/2019/oct/10/pensions-tax-relief-set-to-cost-government-almost-40bn
 
My curiousity got the better of me but I keep only being able to see a paragraph at a time of that Telegraph article about the miners scheme before I'm invited to start a trial I don't want. Can you confirm whether my summary from that is right?
- the schemes were very aggressively invested for fairly mature schemes when compared against conventional wisdom
- that therefore allowed the scheme actuaries to justify quite a high rate of return, which justified bonuses
- equities did actually do well over that period, so surpluses and bonuses arose
- the other chap pointed out that if you use a lower discount rate (which is the same as saying your assets earn less and perform less well) then the scheme would in fact run a deficit.

If correct this all feels broadly like a statement of the obvious (insomuch as anything about DB pensions is obvious). The amount of assets you need depends on the returns they earn and if you assume more you need less and if you assume less you need more. It was inevitable that one of them was going to be right and the other wrong.

The only real question in my mind is whether the index linked gilt was a sensible rate to choose or not. Presumably it is the rate you would choose for a scheme that couldn't take any investment risk - you're buying risk free inflation linked cash flows and using those to provide inflation linked pensions. It's not obviously suited to a scheme heavily invested in equity, but I guess maybe the point he was trying to make was that the schemes *shouldn't* have been that heavily in equity. I don't know. Most sponsors probably wouldn't want the volatility. But then the government isn't most sponsors.
 
The trick is to quickly snap, scroll, snap some screens with another device.

What you gathered is pretty much correct. The investigation was by John Ralfe, a self appointed pensions expert, who is a firm believer in the current valuation method and probably feeling pretty pissed off that the government were disproving his pet theories.

In DB the tail ended up wagging the dog. That some private companies ended up with Ralfe's so called near 100% bonds (nothing like true for all) was due to adding unneccesary caution upon caution, but even that helped kill the scheme as other overly pessimistic parts of the actuarial calculation got into trouble as QE hit guilt plus numbers. Back in the world of real money the Miners' scheme was worth £27 billion in actual assets when the government took it over and despite its continued liabilities being safely met, according to actuaries, just the surplus to date is already about half that and this includes the 2008 crash hit on equities.

At one point last decade in the scheme I was briefed on, USS, assets grew 16% in a year but despite no other significant changes the fund deficit, by the formal required calculation, grew by a similar order of percentage, as QE hit the measurement system. It was clear as day to me that something needed fixing somewhere. How can something who's real assets grow that much in a year be valued as a similar amount less

Back to Willets, DB pensions are actually being stolen from the young as an opportunity. They were never unaffordable but a mechanism made them look to be so (and incorrectly made them look over-funded in better times). Yes some of the false liabilities are currently being passed down to those employees outside the schemes as real remuneration losses. Yet the schemes will benefit the future young to an extent, as when the assets do turn out to have a massive surplus over liabilities (as it is very likely most will follow the path of the miners' scheme) that will add to organisational coffers that own the scheme. Coincidentally the biggest gains in the shift from DB are made by companies selling DC schemes with their higher company profit levels, and the rescue funds who buy company schemes, at a heavy discount, that look shit but are really gold. The bogus scheme deficits are also a handy political weapon for privatising the public sector and their pensions; those who believe in small government.
 
Good to know I gathered the correct gist.

I don’t especially want to get involved in another debate around this, but the scheme actuaries would have been the ones supporting the current method, not Ralfe, because they have no choice but to be compliant with the rules. The article isn’t explicit on what they were doing since it only quotes his method in any detail, but my assumption is that it would have been “gilts plus something” (only based on the fact that that’s the common approach) just a larger “something” than you might get implicitly from the index linked gilt yield. Index linked gilt yields would be “gilts minus” in that terminology (but to use it correctly you would have to use different cash flows in the calculation, so the plus and minus are not immediately comparable).

I feel we’ve had the discussion about many of the other elements before so won’t repeat myself. The only thing that’s worth mentioning is that the primary advantage of being 100% bonds would have been that (assuming the right bonds to generate cash flows at the same time as the assumed outgoings) the surplus/deficit would have been largely immune to QE and other interest rate movements. That’s just the way the maths falls through.
 
AJM - good summary.

AJM said:
I don’t especially want to get involved in another debate around this.

Me neither. This is getting dangerously close to work for me, so I’m going to stop. I’ve not said anything contentious so far, but clearing up some of the misunderstandings and misconceptions has the potential to get quite technical and I’d end up having to caveat all my comments appropriately. Suffice it to say that I think of the issue of DB affordability as far more complicated/nuanced than you’re making out, Offwidth.
 
Stabbsy said:
AJM said:
I don’t especially want to get involved in another debate around this.

Me neither. This is getting dangerously close to work for me, so I’m going to stop.

Starts to feel like a busman's holiday pretty quick :)
 
AJM said:
Good to know I gathered the correct gist.

I don’t especially want to get involved in another debate around this, but the scheme actuaries would have been the ones supporting the current method, not Ralfe, because they have no choice but to be compliant with the rules. The article isn’t explicit on what they were doing since it only quotes his method in any detail, but my assumption is that it would have been “gilts plus something” (only based on the fact that that’s the common approach) just a larger “something” than you might get implicitly from the index linked gilt yield. Index linked gilt yields would be “gilts minus” in that terminology (but to use it correctly you would have to use different cash flows in the calculation, so the plus and minus are not immediately comparable).

I feel we’ve had the discussion about many of the other elements before so won’t repeat myself. The only thing that’s worth mentioning is that the primary advantage of being 100% bonds would have been that (assuming the right bonds to generate cash flows at the same time as the assumed outgoings) the surplus/deficit would have been largely immune to QE and other interest rate movements. That’s just the way the maths falls through.

The Miners' scheme actuaries were working for the government and Ralfe was accusing them of not using the standard valuation methodology. At the time Ralfe said the scheme was in deficit if they had used it, yet a surplus had been taken (implied mispractice). The surplus has continued to be taken for the years since then. The scheme also looks to be in surplus for years to come (note: I've not checked the impact of the covid crash) which is why ex miners are campaigning hard to get more of what was, after all, their money to help with work related industrial injuries (mainly lung problems).

I remember our previous discussions on USS where you pointed out how some gains are apparent because of other factors (which I've forgotten the detail but did accept to an extent, despite being counter intuitive) but not what was more than a 20% gap in one year between asset growth and scheme value in the stable period well post 2008 crash... this shows the valuation methodology is broken.

Yes bonds would have been safer in bad times but overall they grow much less fast over long time periods. A mix is best if you want to safely build assets.
 
Stabbsy said:
. Suffice it to say that I think of the issue of DB affordability as far more complicated/nuanced than you’re making out, Offwidth.

I though I was saying perfectly good schemes were being trashed by a combination of changes to make them look unaffordable and that it was complicated. The closed schemes will on average yield big surplus profits despite the dire current valuations. I gave the Miners' scheme as an example with Ralfe's dishonest portrayal of the risks that turned out to be BS, despite unexpectedly troubled times for scheme assets since then. Where am I making any error with this, and where was Ralfe right?

Not having these schemes is a big loss to future employees. That a perfectly good pension vehicle ended up this way is a scandal.

https://theconversation.com/britains-great-pension-robbery-why-the-defined-benefits-gold-standard-is-a-luxury-of-the-past-100844
 


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