
A billionaire targeting contrarian, underappreciated causes - ca98am79
http://www.bloomberg.com/news/articles/2015-11-19/a-legendary-trader-is-making-few-friends-as-he-donates-billions?cmpid=BBD111915_BIZ
======
rayiner
> And Arnold, a moderate Democrat who believes a rich country like the U.S.
> should provide a high safety net for its citizens, sees the stakes as being
> no smaller than the survival of the very governments that provide that net.

Pensions are going to be an issue that deeply divides younger and older
liberals. State and local governments face existential crisis. Meeting pension
obligations is going to require trading away the future prosperity of these
places. What young millenials will want to move somewhere they have to pay
high taxes, but get few services in return because all that money is going to
paying pension obligations?

It's also going to be a major headwind to the trend of millenials moving back
to urban areas. Cities have particularly screwed up their finances. E.g.
Georgia pensions are pretty well funded, but Atlanta's is a disaster. As
millenials get older and have kids, the cuts to public safety and education
that will be necessary to meet pension obligations is going to drive many of
them to the suburbs.

~~~
crdoconnor
>Pensions are going to be an issue that deeply divides younger and older
liberals.

Pensions are an issue that divides rich and poor. This guy is rich. We are
not. This article seems to be about him trying to destroy our pensions.

The so called existential crises were created by the financial sector he
hailed from. They did not appear out of thin air. For example:

[https://www.wsws.org/en/articles/2014/01/14/swap-j14.html](https://www.wsws.org/en/articles/2014/01/14/swap-j14.html)

When the financial sector is in trouble, they get given virtually unlimited
bailout money and they have interest rates set to accommodate their desires.

When municipalities and pension funds are in trouble they are told to go fuck
themselves.

~~~
rayiner
Most people owed pensions are solidly middle class. They are way better off
than the young people who will be paying for them.

And blaming the financial sector for the pension crisis is ridiculous. States
and municipalities entered into very risky financial arrangements because for
years they made very optimistic actuarial assumptions about pension fund
growth, and committed to benefits that could not be sustained once population
growth plateaued.

Investing in those risky assets was a gambit to get the kind of returns they
needed to stay solvent. That gambit failed, but financial companies didn't
create the underfunding that led to the need to invest in risky assets in the
first place.

~~~
toomuchtodo
Wouldn't this suggest that a better pension system would be identical to
social security? Where payroll revenue is quickly distributed to pensioners?

That's the problem, isn't it. If you can use debt or a surplus to game the
system, everyone loses at someone else's benefit.

~~~
morgante
A better system would be to let people save in their own individual retirement
accounts.

If you want to force companies to support retirement, force them to pay into
employee's retirement accounts.

The benefit of individual accounts is that they're a lot harder to raid or
defund.

~~~
toomuchtodo
Except when financial firms skim off of personal accounts with excessive fees.
Or the fact that Social Security exists as a form of social insurance in the
event you're unable to save enough or lose all of your retirement funds.

Your idea of only individual retirement accounts is a terrible one.

~~~
tptacek
I hate fees as much as everyone else does, but excessive fees are not the
reason so many individual retirement accounts fail.

~~~
toomuchtodo
I don't disagree with you. My thesis is, it would be a terrible idea to switch
pension systems like social security to individual accounts you're responsible
for and could liquidate. That is not how insurance works!

------
tonyedgecombe
The pensions system for US public workers does seem quite broken to me.
Letting politicians with a relatively short term view control investments that
have to realise a return in thirty or forty years is a recipe for disaster.

~~~
glesica
The same can be said for private companies. The difference is that private
companies are allowed to weasel out of their obligations and the federal
government picks up their pension responsibilities...
[https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corpo...](https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation)

~~~
bradleyjg
Which is one reason that most private companies now offer defined contribution
plans rather than defined benefit plans. That way a worker isn't dependent on
the foresight, goodwill, or even existence of his past employer for his
retirement. It is a far better for everyone involved. And if workers are
nervous about investing these contributions into risky instruments they can
use them to buy deferred annuities from AAA rated insurance companies and
build their own "pensions".

~~~
glesica
> buy deferred annuities from AAA rated insurance companies and build their
> own "pensions".

Which, in a post-financial crisis world, also obviously involves relying on
government-backing of the insurance companies and bailouts when ratings
agencies hand out AAA ratings like candy. Ultimately, only the government can
guarantee people a retirement. Which is why I personally think we should say
"screw it" and just guarantee everyone a reasonable (livable) payout from
social security...

~~~
bradleyjg
I think you may be conflating AAA rating of a security with AAA rating of a
company. It is an easy mistake to make because the rating companies have
deliberately conflated the two in order to sell more structured products
rating services.

In contrast to the structured products ratings, the corporate ratings have
held fairly well. For life insurance subsidiaries, which are the units that
sell annuities, there is even further protection. The law requires insurance
subsidiaries to be bankruptcy remote from their parents, and regulates the
types of risks they can take on.

To take a famous example, even if AIG had been allowed to go bankrupt, it's
life insurance subsidiary -- American General Life Insurance Company -- would
not necessarily have been insolvent, and indeed retrospective analysis seems
to indicate it would have been fine.

I should mention that all this safety comes at a cost, implied return rates
for annuities aren't terribly impressive. But that's the nature of the beast,
return and risk are proportional.

------
kodis
Private industry has largely solved their pension problems by eliminating
pensions and instead making contributions to an employee controlled 401(k)
plan or similar. This eliminates some of the problems that come with pension
plans, but at the cost of requiring some personal responsibility on the part
of the individual employee.

------
kingmanaz
Contrarian billionaire request: Fund the Natami project. Amiga needs you.

------
crdoconnor
Billionaire financial leech wants to slash the pensions of people who work for
a living. News at 11.

~~~
fennecfoxen
As opposed to the elected political leeches who want to use _taxes_ slash the
paychecks of people who work for a living? Politicians who aren't even honest
enough to represent the true cost of the pensions they're paying up front,
instead assuming a 10% return on investment every year forever and let the
_next_ council candidate make the unpopular decisions and deal with the crisis
when they end up like Stockton and Detroit?

(Or perhaps we can imagine that every single state or municipal pension system
can make up the shortfall by taking money from all the billionaires they have
lying around. Ha.)

I'll tell you what, though. The "billionaire-financial leech" is spending
money that he already has on a cause, and he will never see it again. The
politician is spending someone else's money, and as thanks for this, he will
earn campaign contributions from the relevant unions. Draw your own
conclusions.

~~~
crdoconnor
John Arnold made money trading - a zero sum game by definition. All of that $4
billion is wealth that was _extracted_ from somebody else.

Probably some of it from pension funds.

He is now using that money to lobby politicians to strip wealth from the
working classes. He is paying PR companies to burnish his image for doing so
(this article did not come out of nowhere).

What. a. hero.

>Or perhaps we can imagine that every single state or municipal pension system
can make up the shortfall by taking money from all the billionaires they have
lying around.

Yes, god forbid we should consider raising taxes on the 0.01% and using it to
pay pensions for the working classes after they had so much of their money
stolen by rapacious oligarchs like him.

~~~
jensen123
Have you actually tried to calculate how much money you could raise if you
increased taxes on the richest 0.01%? And have you checked how much money is
necessary to pay out pensions in the future?

~~~
crdoconnor
The top 0.1% have as much as the bottom 90% (which includes housing wealth as
well as pension wealth).

So you could raise rather a lot more than you needed, actually.

Raising those taxes will also significantly drag down the cost of property
(and consequently rents) which is the main outgoing for lower and middle class
families.

~~~
harryh
> The top 0.1% have as much as the bottom 90%

False.

Some claim that the top 1% have as much as the bottom 90% but even that claim
is disputed.

[http://www.vanityfair.com/news/2011/05/top-one-
percent-20110...](http://www.vanityfair.com/news/2011/05/top-one-
percent-201105)

~~~
dahart
This might be the misquoted source for the claim you're refuting:
[http://www.nytimes.com/2014/07/24/opinion/nicholas-
kristof-i...](http://www.nytimes.com/2014/07/24/opinion/nicholas-kristof-
idiots-guide-to-inequality-piketty-capital.html)

That article is discussing wealth (net worth) versus the article you cited
which discusses income. No surprise that the lines between rich and poor
differ when you measure it different ways.

I found that via:
[https://en.m.wikipedia.org/wiki/Wealth_inequality_in_the_Uni...](https://en.m.wikipedia.org/wiki/Wealth_inequality_in_the_United_States)

One question: aside from arguing the specific numbers, it is irrefutably true
that a small minority hold the majority of the money, and it is widely
reported that the gap is currently growing, not shrinking. Is this a good
thing? Do the specific numbers change the outcome or what our course of action
should be? Even that Vanity Fair article concludes the situation is bad.

~~~
harryh
A line from the article I linked:

"In terms of wealth rather than income, the top 1 percent control 40 percent."

> Do the specific numbers change the outcome or what our course of action
> should be?

Of course the data matters! Especially when (as crdoconnor did) you report
data that is incorrect by an order of magnitude!

Jesus.

~~~
dllthomas
"In terms of wealth rather than income, the top 1 percent control 40 percent."

That doesn't seem to contradict anything said up-thread.

If the top 0.1% control 20% of the wealth, the next 0.9% control another 20%
of the wealth, and the bottom 90% control 20% of the wealth, then the claim
you objected to is true. That would mean the remaining 9%, between the top 1%
and the bottom 90%, control the wealth that remains - 40%. I don't think these
amounts violate any of the ordering constraints, given the relative size of
the groups; in reality there will be variation within the individual groups,
but if we assume there isn't the math checks out fine: 20/0.1 > 20/0.9 > 40/9
> 20/90

I'm not saying the original claim was correct - I don't know. Just that what
you quoted doesn't refute it.

~~~
harryh
And that's really the most interesting thing to talk about here. Not what's
right and wrong but the degree to which I've properly quoted evidence to
support my pov.

Really?

~~~
dllthomas
Your position that is data matters, as long as we don't pay attention to what
it actually means?

You accused someone of being wrong "by an order of magnitude" and the
"evidence" you produced did not even demonstrate that it was likely that they
were wrong. If the data matters, fucking understand the data.

~~~
harryh
I do understand the data. And I'm not wrong.

I'm just not really interested in doing the legwork to provide you with
perfectly cited sources. This is Hacker News not the US Congress. You know how
to use Google.

~~~
dllthomas
In general, evidence provided in discussion is more useful if it's likely to
be called out when it is invalid or irrelevant, so I called it out - giving my
reasoning.

You might not be wrong. You manifestly _don 't_ understand the data. Observe
that, learn from it, update your confidence.

 _" I'm just not really interested in doing the legwork to provide you with
perfectly cited sources."_

I was not disputing the citations of your sources, and I wasn't demanding
perfection. I was demanding that what was provided as evidence that someone
was wrong _" by an order of magnitude"_ actually _be_ evidence they were wrong
at all.

 _" This is Hacker News not the US Congress."_

Exactly! So we're agreed that we should expect at least a modicum of decency,
and respect for argument and informed discussion?

 _" You know how to use Google."_

I do, and I know that it doesn't do a very good job answering these kinds of
questions.

I engaged more deeply with your evidence (including the article you drew it
from) precisely because I hoped it would inform me in the ways you'd indicated
that it should. I was left disappointed.

Unfortunately, you seem quite a bit more interested in rhetoric and posturing
than in actually engaging intellectually, so unless your replies are
inordinately better than those above I won't be responding further.

------
confluence
Pension reform makes me laugh. "Oh yeah, this is a massive contract we signed,
we want to renege on it."

No corporation would stand by this in terms of major signed projects or debts
without a massive fight. If renegotiation was required for payment to occur,
either in the form of bankruptcy or reduced rates, then it would be a crushing
asset grab, with no quarter given. The person who took on a contract they
could not afford rightly should be squeezed to crap.

But because it's poor people, they are the ones who have to make the sacrifice
when someone wants to renege on their contract?

Hilarious.

~~~
imgabe
Sure, with a company you can liquidate it and creditors can seize whatever
assets are available. How are you going to do that with a city or a state? Is
the city of Atlanta supposed to close up shop and hand over whatever assets it
has to pensioners? Then what? Atlanta just continues on with no city
government to provide public services?

~~~
confluence
Raise taxes and meet your obligations. Reduce them if need be under
negotiation like any kind of bad debt situation, because that's what it is.

~~~
imgabe
There's a limited amount a city or state can raise taxes. If they're too high,
wealthy people will just leave. It's not hard to move if you have money. It
does screw over the poor people left behind who now have high taxes and no tax
base to pay for government services.

Reducing the pension burden is exactly Arnold and others are trying to do. The
result of that is that some people are not going to get the pensions they
thought they were. That sucks, but it's better than dissolving the government
altogether.

