The telecoms meltdown and pensions

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: CHACHAOK () aol com
Date: Wed, 20 Nov 2002 23:26:30 -0500 (EST)
To: dave () farber net
Subject: The telecoms meltdown and pensions

The telecoms meltdown is now affecting retirees from bankrupt
companies who are losing health benefits and receiving pared down pension
payments.  It is also affecting those retirees with companies that are
simply 

threatened with bankruptcy and have had to slash employment to remain
solvent.  This article amply illustrates the problem - "Another Cloud on the
Horizon for Lucent Retirees":

http://www.nytimes.com/2002/11/20/technology/20LUCE.html?pagewanted=1&;
todaysheadlines

Lucent is paring it's work force to 35,000 employees, yet it's pension fund
now supports more than 275,000 retirees.  In my view, the final blow for
many 

near bankrupt telecoms companies like Lucent will be the inability to fund
massive payments to make up pension fund deficits for a retiree population
that is far larger than its current work force. The day of reckoning can be
postponed for two or three years through optimistic assumptions allowed
under 

GAAP about the long term rate of return on pension fund investments despite
their being at odds with the current negative rates of investment returns.
If there is not a major rebound in the investment climate in the next year
or 

two, virtually all ailing telecoms companies like Lucent will go bankrupt.

The economic consequences will be far more severe in Europe than in the U.S.
since there is no pension fund bankruptcy net in Europe like the one in the
U.S.

Best regards,
Charlie Sands 


------ End of Forwarded Message

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