Russia’s babushka time-bomb
The babushka, that embodiment of Russian grandmotherly goodness that has spawned iconic dolls and inspired a Kate Bush song, poses one of the gravest threat to the Russian economy.
Moscow-based investment bank Renaissance Capital also expects this segment of the demography to spur politically risky pension reforms.
Russia’s pension system is coming under increasing strain thanks to growing life expectancy — particularly among women — and a shrinking labour force due to the collapse in birth rates in the 1990s.
Since the introduction of the current system, the average life span of the Russian man has risen to 63.4 years, up from 58.7. Over the same period of time, the life expectancy for the country’s women has risen to 75.4 years, up from 71.9.
Russian women are thus likely to claim a pension for 20 years after retirement at 55. Compare this to the three to four years that the average Russian man gets.
Little wonder that it’s the babushka segment of the demographic that is giving Russian policymakers cause for pause.
“This is becoming expensive. Russia spends 6 percent of GDP on pensions compared to just 1 percent of GDP in Mexico.” writes Renaissance Capital Chief Economist Charles Robertson in a note.
When is a speculator not a speculator?
A lot of fuss is made about the dangers of speculators in commodity markets. But who is a speculator and who isn’t is based on a definition drawn up in the early part of the last century in the United States. The definition is no longer valid and anybody looking at those reports should be wary of drawing any firm conclusions.
For a start the word “speculator” with negative connotations is applied to pension funds, which invest over the long term to provide retirement income for many people around the world. Hedge funds are normally speculators but if they have hold the physical commodity then they can say they are commercial hedgers. Taking this theme a little further many natural resource companies run their Treasuries as profit making centres, which encourages them to trade the commodities they produce.
The London Metal Exchange has said it won’t go down the route the CFTC has and publish a weekly report detailing speculative long and short positions because there is no clear definition.
The CFTC bowing to popular pressure has continued to provide these weekly reports detailing long and short speculative positions, which ultimately could be misleading and make scapegoats of all investors whatever their ilk.
When is a speculator not a speculator? When the fed stops giving away free money.
Real-estate investors go back to schools
The old adage – there is no better time to go back to school than during a recession – seems to ring true for real estate investments as well.******With recession-wary workers and rising international interest driving up university applications, student home operators in the UK are enjoying near 100 percent occupancies, with rents predicted to go up 10 percent this year.******In contrast, other property classes in the UK such as offices, shopping malls and factories have seen values plunge a startling 45 percent since mid-2007. And the recession means rents are forecast to fall as much as 15 percent this year as landlords face the rising threat of tenant defaults.******As I wrote earlier, investors such as pension funds that were burnt by traditional commercial assets are now turning to the student accommodation market for the projected growth and steady returns other parts of the market aren’t delivering.************Student homes specialists King Sturge estimates that average rents jumped 7 to 10 percent annually in the last five years and can go up 10 percent this year, although it sees the yearly increase moderating to 5-7 percent for the next few years with new entrants to the market.******Branded student housing can be very pricey and the best stuff are a far cry from crowded, slum-like dorms that some of the world’s students have to put up with: high-end versions in London that offer en-suite bathrooms, flat-screen TVs and laundry services cost up to 300 pounds a week.******With the belt-tightening that comes with a recession, parents may groan about the higher costs of student housing for their university-bound offspring.******But operators expect there will be those who are still willing stump up the cash, if only to ensure their children make it for classes.******”First year students usually can’t find housemates to rent with, and there is no guarantee the flat will be near to school,” says Gabriel Behr of the University Partnerships Programme, a student homes operator owned by funds under Barclays Private Equity, which is developing over 700 new rooms for King’s College London.******”Are parents willing to stick their kids somewhere five miles away from class?” he asked me.
Well there’s the solution to the vacancy problem, rent the property out to students and wait till the worst of the recession is over and then put it up for sale again.
from Commentaries:
Are pension funds ignoring climate risk?
And are conservation groups moving into the business of giving investment advice?
It seems an unlikely path for environmentalists to take, but this WWF commissioned report warning that failure to take carbon risk into account could knock pension fund returns raises some interesting points.
"Carbon Risks in UK Equity Funds" by Mercer and Trucost "outlines how fund manager complacency on corporate carbon performance could put pension fund assets at risk as carbon-intensive companies face rising carbon costs and their company valuations fall in the short-term in anticipation of future carbon risk".
The report argues that fund managers "could dramatically reduce the carbon footprints of their funds through stock selection without the need to alter sector weightings or their overall investment strategy".
It also encourages them to engage with companies in their portfolios and calls on them to support mandatory reporting requirements for corporate greenhouse gas emissions.
The research says climate change is of "little importance in fund managers' investment decisions", with the main reason cited for this "a lack of confidence in government policies to address greenhouse gas emissions".
WWF wants fund managers to see there are financial incentives for pension funds and other institutional investors to consider carbon risk. If nothing else, it has learned to speak their language.
Must everything be viewed through the myopic window of economics? It would seem that capitalism is the one world religion. Until we lose it, nothing will change for the good.
Without getting too complicated, surely it is possible to look at the issue of ‘Gradfathering’-no pun intended-
the entitlement date an individual will recieve the pension. This would act to ensure individuals who will be entitled to a pension in year 2012 receive the benefit, but all others entitlement is pushed back one year based on the individuals year of birth in 2012.
As an example, an invididual aged 55 in year 2012 will receive the benefit in 2012.
An individual aged 48 in 2012 will now receive the pension in 2026, a deferral of the entitlement from age 55 to age 62.
There is no denying we all want to retire earlier. The reality is financial, neither we as individuals or the Government elect can afford the cost.
As individuals, we and the government we elect need to
speak the brutal truth, and accept the need to both work and save a little longer for our retirement.
It would also help if the goverment took a long term view of retirement savings, and ensure financial fees did not operate as gravy trains for the privelede by charging fees as a percentage of assets under management, and also look at extending tax exempt status to retirement savings. Who knows, this may work to reduce the goverment’s cost of borrowing, depending on how structured.