Pension investments/Global crash

kinger101

Nebulous2 said:

It's a surprisingly warm day for the time of year. I've been out on my bike and I'm now having a beer. 

Reading this I'm not sure whether to have a few more, or whether to go and buy 200 tins of soup. Tesco are doing 10 tins of Heinz for £9. 

If a doomsday scenario, such as; a super volcano erupting, a major electromagnetic event which wipes out all data and electronic money, a pandemic which kills 90% of infected people, a nuclear war or a plague of frogs and locusts occurs, then I think we'll have more to worry about than where our pensions are invested. 

Or maybe more people simply need to get or use their bikes?  

Just make sure your tin opener is analogue.

Aretnap

SVaz said:

Norway has the right idea,  if we’d gone that way with a sovereign wealth fund built from North Sea gas and oil and not sold off our gold and other assets to foreign owners, we would be in a far better position to weather any global catastrophy, whether war or natural like a massive CME or Yellowstone erupting.  

Go on then, how is having a load of yellow metal in a bank vault or certificates to say that you own shares in foreign companies going to help in the event of Yellowstone going pop?

Aretnap

booneruk said:

SVaz said:

Yes, it’s an unlikely ( hopefully) scenario but we’ve never been closer to a doomsday event. 

How on earth are you judging that? Heard of the Cuban missile crisis? I'd argue that was as close to doom as we've been

It's quite amusing to look at what the stock market did during the Cuban Missile Crisis... Pretty much sod all. Which rather supports the theory that financial markets are extremely bad at assessing major systemic risks.

(See also the 2% drop in the German stock market after the battle of Stalingrad)

Nebulous2

kinger101 said:

Nebulous2 said:

It's a surprisingly warm day for the time of year. I've been out on my bike and I'm now having a beer. 

Reading this I'm not sure whether to have a few more, or whether to go and buy 200 tins of soup. Tesco are doing 10 tins of Heinz for £9. 

If a doomsday scenario, such as; a super volcano erupting, a major electromagnetic event which wipes out all data and electronic money, a pandemic which kills 90% of infected people, a nuclear war or a plague of frogs and locusts occurs, then I think we'll have more to worry about than where our pensions are invested. 

Or maybe more people simply need to get or use their bikes?  

Just make sure your tin opener is analogue.

Heinz soup has ringpulls.... I do have an old-fashioned tin opener to open my beer bottles. 

Bostonerimus1

Nebulous2 said:

kinger101 said:

Nebulous2 said:

It's a surprisingly warm day for the time of year. I've been out on my bike and I'm now having a beer. 

Reading this I'm not sure whether to have a few more, or whether to go and buy 200 tins of soup. Tesco are doing 10 tins of Heinz for £9. 

If a doomsday scenario, such as; a super volcano erupting, a major electromagnetic event which wipes out all data and electronic money, a pandemic which kills 90% of infected people, a nuclear war or a plague of frogs and locusts occurs, then I think we'll have more to worry about than where our pensions are invested. 

Or maybe more people simply need to get or use their bikes?  

Just make sure your tin opener is analogue.

Heinz soup has ringpulls.... I do have an old-fashioned tin opener to open my beer bottles. 

One of the ring pulls broke off in my hand the other day. The geometry of the can didn't work with a rotary can opener so I had to resort to the old opener with the pointed blade.

ClashCityRocker1

Albermarle said:

ClashCityRocker1 said:

So - is there a "safe" pension fund? I'm with L&G so if I moved all my pension investment into their cash fund would that remain completely unaffected by a market crash? Or just less so?

No you would be OK.
However if a crash does not materialise in the short term, you may well have missed out on some growth.
Whatever you do there is a risk.

I probably won't be doing that but just wondered. Thank you for the reply.

OldScientist

SVaz said:

I was talking about total financial meltdown.
Something like China suddenly up and selling their vast holdings of UK and US Gilts / Tbonds to sink our economies.
If the UK or US went bankrupt and couldn’t make payment on Gilts and other debt. 

At least the US still has the Federal Gold reserve,  we have sod all. 

Financial protection would fail - perhaps not likely but not impossible. 

Norway has the right idea,  if we’d gone that way with a sovereign wealth fund built from North Sea gas and oil and not sold off our gold and other assets to foreign owners, we would be in a far better position to weather any global catastrophy, whether war or natural like a massive CME or Yellowstone erupting.  

The proportion of UK gilts held by foreign investors is about 30%. Most of the rest is held by UK pension schemes and insurance companies and a tiny fraction by me. If China was to suddenly sell all of its debt and cause a financial meltdown its own industries would collapse (since they would have no buyers for their goods).

Countries who issue their own currency cannot go bankrupt in the same way that private companies can (e.g., Greece could issue debt but not its own currency). There are a number of solutions, the country can
1) default on debt (which obviously reduces the credit quality and cost of subsequent debt, but doesn't mean that no-one will buy it, e.g., Argentina).
2) They can rollover debt (probably at higher yields) provided they can find buyers.
3) Other strategies. For example, in the 1980s, gilts were issued with low coupons (3%) instead of the prevailing yields to reduce regular repayments (because coupons were then, as now, taxable this actually made these gilts very valuable which pushed down the yields)
4) Print more money, with subsequent inflation.
5) Raise taxes and and/or cut spending.

Britain still retains just over 300 tonnes of gold which is down from a peak 2500 tonnes in the late 1950s, it fell to 580 tonnes by 1980 (did anyone notice?) remaining there throughout that decade and the 1990s before reaching 700 tonnes in 1999. The current value of the UK gold reserves are about £30billion (in other words about 2.5% of UK annual government spending - roughly a week's worth). I note that the BoE holds a lot more than this but it doesn't all belong to us. There is a reason that the UK left the gold standard nearly a century ago and the US over 50 years ago.

In the event of financial meltdown, I suspect the value of any sovereign wealth fund will also diminish. However, I note that in the long term the alternative adopted by the UK, i.e., tax cuts introduced through the 1980s, doesn't appear to have had the effect its proponents might have wished.

IMV, the true wealth of any country, is its people (which is why education is so important), land, and other productive assets not gold.

Ultimately, there are some serious events that cannot be protected against  - there is some defence against CME's (part of my professional activities was understanding and mitigating the effects of solar storms on a small subset of engineering systems) particularly since our predictive capabilities have improved, but against others less so. The national risk register is a fun read (https://www.gov.uk/government/publications/national-risk-register-2025 )

ClashCityRocker1

"I note that the BoE holds a lot more than this but it doesn't all belong to us. "

Well, it belongs to the Treasury so that's us, sort of.

OldScientist

ClashCityRocker1 said:

"I note that the BoE holds a lot more than this but it doesn't all belong to us. "

Well, it belongs to the Treasury so that's us, sort of.

Perhaps I should have said that 'the BoE stores a lot more than this' - it looks after other people's gold as well as the national stash.