Will recent "events" cause a rethink of DC pensions?

badmemory

It is all a game, now the markets are up he & his pals will sell again & then we all know what will happen, a very short 90 days.  I am embarassed to say that I am considering wishing good luck to China.

GenX0212

Cobbler_tone said:

I'm sure as much as some people have lost plenty of money, some closer to the coal face would have made an absolute killing.

Thankfully 'he who should not be named' has obviously had some sense talked into him and the recovery has started....for now. It may present the opportunity for some to make some of the paper losses back and a chance to reconsider their pension investment options.

 No recovery yet for me, my pot has dropped even further today.

Bostonerimus1

Hoenir said:

SVaz said:

I’m more concerned by the fact that China holds a £Trillion dollars worth of US Government debt in Treasury bills,  I really don’t understand what it *could* mean but it doesn’t seem good when they are effectively playing a giant financial game of Chicken. 

Highly leveraged US hedge funds hold around $1.5 trillon. The real problem may well be closer to home. China owns around half this amount. 

Japan owns most US Treasuries with China second at around $0.75 Trillion. By selling they could certainly drive up interest rates and more folks would probably follow them and sell. I think China will want to use this leverage in any negotiations so they will be measured. As with Liz/Kwasi any moves that cause confidence in the economic management in a country to collapse will be reflected in the bond/Gilt markets with rates rising. The US can take a lot more pain than the UK, but the increase in US borrowing costs obviously spooked the Americans. For now the bond markets seem to have stabilized, but I think they'll be a hangover of reduced confidence for a while and businesses and funds are going to be waiting a few years to see if these policies persist past the next election cycle. Rather than encouraging domestic investment I think the uncertainty will make people and companies sit on their money and growth will be hard to come by.

kinger101

As annoying as it is to see a five figure sum wiped off my DC fund, I don't see anything has fundamentally changed that what cause me to alter strategy.

It's not even a crash.  Yet.  But if I had to alter my plan in response, than my original plan would have been wrong.  Which it may have been, but finding a better direction is difficult in a fog.

SouthCoastBoy

No my strategy is staying put, even after a 150k plus loss

kinger101

SouthCoastBoy said:

No my strategy is staying put, even after a 150k plus loss

I think you're rushing into doing nothing. Mull it over for a while.

Hoenir

Bostonerimus1 said:

Hoenir said:

SVaz said:

I’m more concerned by the fact that China holds a £Trillion dollars worth of US Government debt in Treasury bills,  I really don’t understand what it *could* mean but it doesn’t seem good when they are effectively playing a giant financial game of Chicken. 

Highly leveraged US hedge funds hold around $1.5 trillon. The real problem may well be closer to home. China owns around half this amount. 

Japan owns most US Treasuries with China second at around $0.75 Trillion. By selling they could certainly drive up interest rates and more folks would probably follow them and sell. I think China will want to use this leverage in any negotiations so they will be measured. As with Liz/Kwasi any moves that cause confidence in the economic management in a country to collapse will be reflected in the bond/Gilt markets with rates rising. The US can take a lot more pain than the UK, but the increase in US borrowing costs obviously spooked the Americans. For now the bond markets seem to have stabilized, but I think they'll be a hangover of reduced confidence for a while and businesses and funds are going to be waiting a few years to see if these policies persist past the next election cycle. Rather than encouraging domestic investment I think the uncertainty will make people and companies sit on their money and growth will be hard to come by.

The bond markets stabilised as Trump was forced to back track very quickly. The problem hasn't gone away though. The collapse and bail out of Long Term Capital (LTCM) in 1998 was also due to failed basis trades. Is history about to repeat itself yet again. As with Lehman Bros in 2007.  What you cannot see is the real problem. The financial markets being a complex web of interconnected transactions. 

The Chinese, and Japanese can simply allow bonds to mature and not reinvest the proceeds.  Who is going to buy the $7 trillion of US Treasury stock that's maturing in the next 4 years ( and what yield will they demand at auction to cover the risk premium of an unreliable Government). 

Bostonerimus1

Hoenir said:

Bostonerimus1 said:

Hoenir said:

SVaz said:

I’m more concerned by the fact that China holds a £Trillion dollars worth of US Government debt in Treasury bills,  I really don’t understand what it *could* mean but it doesn’t seem good when they are effectively playing a giant financial game of Chicken. 

Highly leveraged US hedge funds hold around $1.5 trillon. The real problem may well be closer to home. China owns around half this amount. 

Japan owns most US Treasuries with China second at around $0.75 Trillion. By selling they could certainly drive up interest rates and more folks would probably follow them and sell. I think China will want to use this leverage in any negotiations so they will be measured. As with Liz/Kwasi any moves that cause confidence in the economic management in a country to collapse will be reflected in the bond/Gilt markets with rates rising. The US can take a lot more pain than the UK, but the increase in US borrowing costs obviously spooked the Americans. For now the bond markets seem to have stabilized, but I think they'll be a hangover of reduced confidence for a while and businesses and funds are going to be waiting a few years to see if these policies persist past the next election cycle. Rather than encouraging domestic investment I think the uncertainty will make people and companies sit on their money and growth will be hard to come by.

The bond markets stabilised as Trump was forced to back track very quickly. The problem hasn't gone away though. The collapse and bail out of Long Term Capital (LTCM) in 1998 was also due to failed basis trades. Is history about to repeat itself yet again. As with Lehman Bros in 2007.  What you cannot see is the real problem. The financial markets being a complex web of interconnected transactions. 

The Chinese, and Japanese can simply allow bonds to mature and not reinvest the proceeds.  Who is going to buy the $7 trillion of US Treasury stock that's maturing in the next 4 years ( and what yield will they demand at auction to cover the risk premium of an unreliable Government). 

Confidence is hard to regain once lost. US Government debt is only attractive if you think America is being well run and is the safest place to stash cash. As this all drags on I can see US investment being hit by uncertainty  and also a need for bond rates to increase to attract buyers which will really stress the US budget...oops there goes my Social Security check or at least it might get cut in some way.

Storcko14

kinger101 said:

As annoying as it is to see a five figure sum wiped off my DC fund, I don't see anything has fundamentally changed that what cause me to alter strategy.

It's not even a crash.  Yet.  But if I had to alter my plan in response, than my original plan would have been wrong.  Which it may have been, but finding a better direction is difficult in a fog.

I think this is why an understanding of macro economics and geopolitics (and allowing discussion of on fora such as this) is essential if you're investing in a globally inter-connected market.

MeteredOut

Storcko14 said:

kinger101 said:

As annoying as it is to see a five figure sum wiped off my DC fund, I don't see anything has fundamentally changed that what cause me to alter strategy.

It's not even a crash.  Yet.  But if I had to alter my plan in response, than my original plan would have been wrong.  Which it may have been, but finding a better direction is difficult in a fog.

I think this is why an understanding of macro economics and geopolitics (and allowing discussion of on fora such as this) is essential if you're investing in a globally inter-connected market.

Is anyone who invests in a global fund (even indirectly through their employer pension in the default fund) not invested in a globally inter-connected market?

Should we really expect them to have an understanding of macro economics and geopolitics?