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  #101  
Old 08-14-2016, 11:44 AM
Jeremy Gold Jeremy Gold is offline
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On June 6, Don Fuerst wrote an email to the AAA/SOA Presidents, PEs, Exec Dirs, and to the listserve for the disbanded PFTF.

Don is the CCA PE, soon to be President, and ex officio member of AAA Board.

I don't think it'd be fair for me to post his email. He took several positions in a forwarded email that he had sent to Craig and Tom. On June 8, I replied to all and added the three SOA PE contenders.

Here is what I said:

Quote:
Originally Posted by Jeremy Gold to Don Fuerst, AAA/SOA Leadership, defunct PFTF
Don,

Thanks for sharing this with us.

With respect to your support of the AAA view that the paper did not meet the AAA requirements of a Public Statement, I tend to agree. I think that reflects more negatively on the AAA requirements than it does on the quality of the paper. Nonetheless, the authors concluded last February that the paper was better described as an education and research paper than as a policy paper. At that time the authors proposed that the Pension Section of the SOA publish the paper in an issue of the Pension Forum using the authors names independently of the PFTF. My understanding is that the Pension Section Council was positively disposed and they suggested (and the authors concurred) that Bill Hallmark or another AAA person or persons be invited to comment on the paper for side by side inclusion in the Pension Forum. On February 19th in conversations and emails Bill Hallmark made various assertions to the effect that the paper belonged to the AAA (and, presumably, the SOA) and that the AAA would not find publication in the Pension Forum acceptable. He said:

Quote:
Originally Posted by Bill Hallmark, AAA Pension VP
"The suggestion to publish the paper in the SOA’s Pension Forum as the work of certain individuals who are members of the PFTF instead of completing the Academy review process is also not acceptable. The paper is work product of the PFTF on a high-profile topic and has the potential to provide an important alternative viewpoint on that topic. The Academy expects the work product to be completed and published. Using the efforts of the PFTF to publish a paper as individuals denies the Academy (and the SOA) its work product. As a matter of practice, we remove members of committees and task forces who do not contribute to the committee or task force. Here, the suggestion is that some members of the task force should be allowed to take the work of the task force and publish it as individuals, undermining the ability of the task force to meet its mission. If volunteers are not committed to delivering work product to the Academy that meets Academy standards for publication, they should consider resigning because they are not really volunteering for the Academy."
Those of you addressed in this email may find this paragraph perfectly reasonable. We authors were shocked by it.

Don, you doubt that "it was appropriate for SOA publication." Quite to the contrary, this is a scholarly paper and, absent its history and the delicate relationship between the AAA and the SOA, it would have been published (as the work of its authors) with almost no hesitation. In fact the Pension Section Council was prepared to publish it in the next Pension Forum. It appears to me that the only reason that senior management at the SOA overruled the Pension Section Council was out of concern over its relationship with the AAA. I believe that this constitutes a triumph of politics over mission. I am disappointed that the SOA chose this route. Given my recent SOA Board service and personal relationships with the SOA Leadership Team, I am also disappointed that no one chose to solicit my input. I have been advised that the SOA LT was led to understand that the paper was one-sided. Well, in many ways that is true. The paper is an application of financial economics and, once the premises are in place, logic and scholarship allow us to draw some narrow conclusions. Many previous SOA research publications have been equally narrow including the paper Reinventing Pension Actuarial Science written by Larry Bader and me and published (along with discussions) in the Pension Forum in 2003.

With regard to the dissolution of the PFTF, I think that may be a very good decision. The PFTF leadership on its own entertained this idea fairly continuously from February on and at various times in recent years. It might have been handled more politely if the decision makers had seen fit to include the PFTF chair Gordon Latter in their planning.

Unsurprisingly, I agree with your third comment to the effect that neither the SOA nor the AAA should impose limits on the usage by the authors of the paper that we wrote. The decision hinting at legal sanction against us has created unnecessary bad publicity for the AAA and SOA, publicity that could be cut short by a quick reversal on this admonition to the authors. I thought you might want to hear what nonactuaries think about this "suppression":

A famous financial economist said: "This is absolutely disgusting. The idea that they might be sued for exercising free speech is appalling. The AAA and SOA must be run by cowards."

A financial economist at a leading think DC think tank: "Wow – very strange stuff. It’s one thing to not publish a paper, but to try to assert ownership over it and suppress publication seems petty. But it will surely be a good read for me!"

Notice that this rather technical and turgid paper is increasingly interesting exactly because of the perceived censorship.

Further to that point, a prominent academic researcher: "Why is this so exciting? You've been saying this for decades."

A retired career pension actuary: "It's clear the paper will be published somewhere and interest has been magnified by the organizations' inanity. We have two choices: 1. Thank Mr. Reynolds for the free publicity; 2. Note that all actuaries are tainted by the foolishness of our profession's leaders and ask for a public apology and retraction of the attempted ban."

A British financial executive: "I have just re-read this. It is a super paper."

A member of Donald Trump's economic team: "Thank you for sending this. I am very interested in this process."

A financial economist (who had reviewed the paper last year) in an email to a journalist this week: "You and I spoke once before about me thinking that public pension fund accounting and funding rules – which, lest you forget, are inconsistent with basic principles of economics and result in state and local pension liabilities being underestimated by several trillion dollars – are a ripe area for investigative reporting."

Another financial economist who runs a prominent university financial research center: "I was going to say "that's unbelievable" but unfortunately it's very believable, especially in this surreal environment that the whole world seems to be entering. Do you have a copy of the paper? I would consider blogging about the controversy on the Center's website and posting a link to it if it were available."

A prolific British twitterer: "I have just sent a copy of the paper to the New York Times, so please direct any flak in my direction."

A Dutch academic: "Great paper. Indeed nothing surprising, but still a very nice, to the point treatment of all these aspects. I’ve been part of the whole discount rate debate in the Netherlands for a while now and know how toxic and political it can be. It still surprised me though that the AAA would want to prevent publication of something like this. My experience in the Netherlands is that actuaries are actually mostly absent in the whole debate ..."

Another prominent US financial economist: "This is, of course, a fraud perpetrated on a range of innocent victims. I will be very tough in what I write."

During my many years as an SOA and AAA volunteer, I often found myself better connected to the "outside" world than were my pension actuarial peers. A recurring threat to the actuarial profession is its own insularity, something that is difficult to self-perceive and often even harder to overcome. Nonetheless, public pension plans are a threat to all of their stakeholders now and especially in the future. Actuaries have successfully avoided the brunt of the fallout stemming from Detroit and Stockton and San Bernardino but this may not last. It is not only our participation in setting overly optimistic expected returns that exposes us to eventual criticism. Our methods themselves (which cannot really be blamed on trustees) severely backload contributions. Although few public plans are still entertaining benefit increases, the increases costed by actuaries prior to 2010 were severely undervalued and exchanged for far too small wage concessions. I believe it is time for our senior decision makers (especially those not in the pension specialty) to get their hands dirty, to understand how flawed the pension model is, and to end the insularity that threatens all actuaries regardless of specialty.

On the brighter side, I think the SOA Blue Ribbon Panel may help to protect us from some of the blow back and blame that will arise as public plans disappoint their stakeholders. On the other hand, the profession has, once again, failed to move forward with the BRP recommendations -- themselves too modest to satisfy me -- at anything but a snail's pace.

Jeremy
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  #102  
Old 08-14-2016, 12:09 PM
DiscreteAndDiscreet DiscreteAndDiscreet is offline
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Quote:
Originally Posted by bdschobel View Post
Beyond irrelevancy, it makes observers wonder if we are corrupt. This is really a low point for our profession. And the extreme exercise of copyright claims to prevent ANY publication of the work is the icing on the cake. Truly despicable.

Bruce
The problem is that this task force never had any hope of accomplishing what it set out to do in the first place.

This is an argument between people who feel that the profession needs a stronger grounding in the theory of finance and a traditional practice that has more in common with engineering. The folks on the theoretical side do not understand what is and is not implied by their theories. On the other hand, the folks on the traditional side devote their efforts to trying to overturn the theory with historical data, but always seem to miss that they aren't addressing the theory on its own terms. The traditionalists also have failed to fully develop a theory to support their practices. There is actually a very strong theoretical basis for their side, but they've failed to develop it.

The manner in which both sides are tending to argue fails to convert any members of the other camp. As a result, there are efforts to seize a political victory. What we see right now, this is a political stalemate.

This occurred because the task force has not developed any ideas that change people's minds.
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  #103  
Old 08-14-2016, 01:12 PM
DiscreteAndDiscreet DiscreteAndDiscreet is offline
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Quote:
A famous financial economist said: "This is absolutely disgusting. The idea that they might be sued for exercising free speech is appalling. The AAA and SOA must be run by cowards."

A financial economist at a leading think DC think tank: "Wow – very strange stuff. It’s one thing to not publish a paper, but to try to assert ownership over it and suppress publication seems petty. But it will surely be a good read for me!"

Notice that this rather technical and turgid paper is increasingly interesting exactly because of the perceived censorship.

Further to that point, a prominent academic researcher: "Why is this so exciting? You've been saying this for decades."

A retired career pension actuary: "It's clear the paper will be published somewhere and interest has been magnified by the organizations' inanity. We have two choices: 1. Thank Mr. Reynolds for the free publicity; 2. Note that all actuaries are tainted by the foolishness of our profession's leaders and ask for a public apology and retraction of the attempted ban."

A British financial executive: "I have just re-read this. It is a super paper."

A member of Donald Trump's economic team: "Thank you for sending this. I am very interested in this process."

A financial economist (who had reviewed the paper last year) in an email to a journalist this week: "You and I spoke once before about me thinking that public pension fund accounting and funding rules – which, lest you forget, are inconsistent with basic principles of economics and result in state and local pension liabilities being underestimated by several trillion dollars – are a ripe area for investigative reporting."

Another financial economist who runs a prominent university financial research center: "I was going to say "that's unbelievable" but unfortunately it's very believable, especially in this surreal environment that the whole world seems to be entering. Do you have a copy of the paper? I would consider blogging about the controversy on the Center's website and posting a link to it if it were available."

A prolific British twitterer: "I have just sent a copy of the paper to the New York Times, so please direct any flak in my direction."

A Dutch academic: "Great paper. Indeed nothing surprising, but still a very nice, to the point treatment of all these aspects. I’ve been part of the whole discount rate debate in the Netherlands for a while now and know how toxic and political it can be. It still surprised me though that the AAA would want to prevent publication of something like this. My experience in the Netherlands is that actuaries are actually mostly absent in the whole debate ..."

Another prominent US financial economist: "This is, of course, a fraud perpetrated on a range of innocent victims. I will be very tough in what I write."
My, your friends certainly have a lot of unearned confidence. There is a reason that the most robust disciplines have the least confident practitioners and it's unfortunate that you haven't taken interest in subjects that can help you understand why that phenomenon occurs.
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  #104  
Old 08-14-2016, 01:28 PM
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campbell campbell is offline
Mary Pat Campbell
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I'm pretty sure physicists do not lack arrogance. Intellectual and otherwise.

From my direct experience.

That said, there is a reason that people who make comments under their own names get more credibility than those who snipe anonymously. Just a bit of advice, if you'd like to convince people of anything.

Stand in propria persona. Jeremy is doing so.

Jeremy simply wants to publish a paper he co-wrote, and other co-writers agree with him. They would publish under their own names, without the imprimatur of the Academy.

Being an editor does not make one an author, as much as editors would like to believe. Intellectual humility indeed.
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  #105  
Old 08-14-2016, 01:53 PM
Jeremy Gold Jeremy Gold is offline
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Quote:
Originally Posted by DiscreteAndDiscreet View Post
My, your friends certainly have a lot of unearned confidence. There is a reason that the most robust disciplines have the least confident practitioners and it's unfortunate that you haven't taken interest in subjects that can help you understand why that phenomenon occurs.
Yeah, it's kinda funny how a Nobel Prize can give you unearned confidence. I'll take this opportunity to note that many of your posts are incomprehensible. I may not always be as perfectly informed as you seem to be, but I really really try to make my AO posts intelligible. I do the same with papers (although my priority in papers is precise language, sometimes at the expense of easy apprehension). Maybe my attempted attention to my audience leads to my low AO post count.

Quote:
Originally Posted by campbell View Post
I'm pretty sure physicists do not lack arrogance. Intellectual and otherwise.

From my direct experience.

That said, there is a reason that people who make comments under their own names get more credibility than those who snipe anonymously. Just a bit of advice, if you'd like to convince people of anything.

Stand in propria persona. Jeremy is doing so.

Jeremy simply wants to publish a paper he co-wrote, and other co-writers agree with him. They would publish under their own names, without the imprimatur of the Academy.

Being an editor does not make one an author, as much as editors would like to believe. Intellectual humility indeed.
Thanks Mary Pat

BTW, Mary Pat, "Mary Pat" is a good handle. What's your real name? You too BDSchobel.
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  #106  
Old 08-14-2016, 01:54 PM
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My real name is meep.
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  #107  
Old 08-14-2016, 02:18 PM
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SirVLCIV SirVLCIV is offline
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Originally Posted by campbell View Post
That said, I would be fine with a lower liability value, by breaking out the value of the (very nonzero) chance that the promises will not be made good.

If the probability of default on the promises were made public, I'd be fine with that.
This is the argument for limiting the valuation of retiree medical liabilities under FASB (currently, you value the promise, even though the promise can be broken tomorrow). The problem is putting percentages to the theoretical chance.
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  #108  
Old 08-14-2016, 02:24 PM
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Look, they're all just (point) estimates.

And of course it's difficult.

That's why actuaries are being paid the big bucks for this work, right?
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  #109  
Old 08-14-2016, 02:27 PM
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SirVLCIV SirVLCIV is offline
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Originally Posted by Jeremy Gold View Post
The most significant difference between financial economics applied to corporate plans and public plans comes from public finance where intergenerational equity is very important. IE is not very important in corporate finance because, with good information, shareholders can adjust stock prices for under- or overfunding.
And the biggest flaw I've seen in historical thinking re: public plans is the assumption that the tax base will increase over time. As New Jersey learned after their largest taxpayer moved to Florida, this is not a sound assumption.

Current generation taxpayers are paying for costs accrued a generation ago, and there's no guarantee the tax base will even remain level over time.

http://www.nytimes.com/2016/05/01/bu...ered.html?_r=0

Last edited by SirVLCIV; 08-14-2016 at 02:45 PM..
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  #110  
Old 08-14-2016, 02:33 PM
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SirVLCIV SirVLCIV is offline
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Originally Posted by Brian Grinnell View Post
If you’re only going to show one liability value, implying that it is a ‘certainty’, I think the most appropriate would be to show the liability value based on risk-free rates. But maybe the idea of showing a single liability value is so inherently flawed that we should abandon it entirely, and show a range, or somehow explicitly address the risk that contributions/benefits will be higher or lower than expected. In either case, more robust risk disclosures would be valuable to plan sponsors and participants.
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