Monday Musings 52

The old saw that highly intelligent people lack common sense is usually uttered by unintelligent people in an attempt to feel better about themselves. Being absent-minded or unmindful of mundane details is not the same as lacking common sense. Besides, I defy anyone to actually define “common” sense.

That’s my story and I’m sticking to it.

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August 1st marked the fifth anniversary (!) of my receiving my first pension payment from major league baseball. This month’s payment was received today; although the payment is supposed to be received on the 1st of each month, it is actually received on the first business day.

I have probably written elsewhere on this blog about my months of ruminating on when I should start receiving the pension. I performed all sorts of calculations using fixed and variable discount rate models in an effort to find the age that would maximize the present value of those payments. It should come as no surprise that the pension payout is structured in such a way that no real change exists in the present value at age 55–the first age when a person with 10+ years of service can begin receiving the pension–whether one begins receiving it at 55, 60, 65 or any age in between. (The earlier one begins receiving the pension, the smaller the nominal amount. Of course, a dollar received today is worth more than a dollar received five years from now. The amount increases literally every month one waits to receive it, like Social Security. Unlike Social Security, however, the pension is not adjusted for inflation. Also unlike Social Security, where waiting until 70 maximizes the nominal monthly amount received, the max for the baseball pension is age 65.)

I decided to begin receiving the pension on August 1st of the first year I was eligible because 1) that most closely mirrored my last day as a full-time employee of a major league team and 2) that would almost maximize the number of payments I received until they put me in the ground. The baseball pension is an “old-fashioned” defined benefit plan, of which very few exist these days. I did not put one penny into the pension fund; my benefit is a function of how many years I worked and how much I earned.

How much do I receive every month? That’s no one’s business except for my wonderful wife and my accountant.

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On this day in 2007 DaimlerChrysler completed a deal to sell an 80% stake in its ailing US Chrysler division to the private equity company Cerberus Capital Management for 7.4 billion euros, or $10.1 billion. Because debt/credit markets were already beginning to suffer at the beginning of the “Financial Meltdown/Great Recession,” DaimlerChrysler and Cerberus had to help with the financing. This was the first time a private equity company took majority ownership of a US car company.

Daimler-Benz AG had acquired Chrysler in 1998 in an alleged “merger of equals.” However, the merger terms clearly favored Daimler and within a year many people at Chrysler said it was being “Germanized” into a mere division of Daimler-Benz. Jurgen Schrempp, Chairman of Daimler-Benz, later conceded that was part of the “merger” plan.

Of course, less than two years after being sold to Cerberus Chrysler filed for Chapter 11 bankruptcy protection, which set in motion the events that led it to be purchased by Fiat, the company that currently owns Chrysler. Maybe the echoes of the Great Recession still haunt American car makers today and that partly explains why, in general, they seem very risk-averse in terms of product offerings. The fact that 70% of American adults are overweight and a third are obese also is a factor in the glut of SUVs and pickup trucks. The companies are all too happy to oblige since profit margins on those vehicles are higher than on “regular” cars.

From Classic Cars a picture of one of my favorite Chrysler/Mopar products, the Chrysler 300B:

 

See the source image

 

The “B” designation means the car is a 1956 model. The optional engine for this car was the first American motor to offer at least 1 HP per cubic inch, generating 355 HP from 354 cubic inches. The engine also produced 405 LB-FT of torque.

Who knows what long lasting effects “the virus” will have on the US and world automobile industries? Must I write it again? History is replete with examples of the folly of human beings trying to predict the future.

 

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8 thoughts on “Monday Musings 52

  1. I was never a fan of Chrysler’s products, mostly because I didn’t like their styling (generally). There were exceptions over the years, but they are rare. I only owned one, a Dodge station wagon that I inherited from my father… and that one I wrecked only a few months after I got it.

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    1. Thanks for sharing, sir.

      I also am not a big fan of Mopar, in general, but exceptions exist. It is also true that until very recently Fiat/Chrysler makes have fared very poorly in the JD Power Vehicle Dependability Study.

      Liked by 1 person

  2. You all are aware of my liking of Ford products (in general). I am more a fan of Dodge/Mopar products than of GM. That said, my current daily driver is a Dodge Journey. A very practical vehicle considering what i have to haul around most of the time, usually a boat load of groceries and my wife’s necessary walker as well as three grand children and their safety seats. A vehicle is a generally a “tool” and therefore needs to be useful. The added benefits of pleasing to the eye, performance and other “niceties” cannot be ignored and need (should) be enjoyed.

    One of the Chrysler products I do like is the above displayed 300B, the styling of which is somewhat to my liking. Now the 354 cubic inch “Hemi” is another matter which appeals to my engineer/hot rodder side.

    Pensions, IRAs and Social Security are all necessary forms of finance in today’s modern world in which I indulge of all three types as well as the benefits of prudent investments of other types. One lesson I learned early: Know the rules by which you have to play and then play by the rules, ALL of them, every nuance to your benefit.

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    1. Thanks, Philip.

      Too many people think they can play by their own rules. Most “games” have well-established, very entrenched rules. You can choose not to play, but 99.9% of us have to play by the rules or not play at all.

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  3. *looks longingly into the mist, searching for other Mopar fans.

    I was brought up around Chevrolet products, and my first 2 cars as a legal driver were Chevys. An impromptu street race against a local guy in a 340 Duster with my first car (62 Nova with a 350/300 engine) opened my eyes to what Mopars could do. My fourth car was a Mopar, 72 ‘Cuda 383. Except for about 2 years total since, I’ve owned at least 1 Mopar. Like other OEM’s, they have had their share of crap cans. It’s said that mid 70’s Mopars came from the factory with rust pre-installed (only half jokingly).

    A pension these days is a rare thing. I would say by 1980 very few company’s offered them anymore. Some form of 401k, stock ownership programs (I participated in one), or nothing at all became the new normal. I’ve been fortunate the last 15 years that our business has done well and even with my expensive habits I was able to set aside decent money for retirement. I have a good nest egg, 3 rental properties (that I plan to sell over the next 2-3 years, hopefully) and I still own that stock from the Fortune 100 company I worked at. In that light, I’m in a better position that probably 75-80% of folks my age (63rd trip around the sun).

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    1. Thanks for this and all of your comments on this blog.

      In theory, people should have more skin in the game regarding their retirement nest egg. In reality, many Americans are unwilling to sacrifice anything in order to save for their own future.

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  4. Retirement reminds me of that joke that ends “Death, but first chocha!!!”
    I am grateful that two of the companies I worked for have pension plans in addition to 401Ks, and paid salaries that make Social Security not too bad. Child support cut into savings but the two lovely children that resulted from it take the edge off the transfer of wealth. And living well while living below our means will hopefully set up me and the missus. One big plus was being able to go from a 30 yo a 15 year mortgage-we got married late; since we always doubled up on our payments, this should be paid off a few years after I retire. This on top of a job that is almost like being retired anyway!

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    1. Thanks for sharing, sir.

      You are fortunate that you have worked for companies with defined benefit pension plans. My wonderful wife’s company also has a pension plan for which she pays nothing, although it works a little differently in that it’s a defined contribution plan. The company puts a percentage of her salary, out of their pocket, in an investment with a “fixed” return. That plan is in addition to the company matching her 401(k) contributions.

      According to a Financial Samurai article, about a third of American workers with access to a 401(k) do not participate. I believe that proportion was even higher before opting in became the default when a new worker joins a company offering such plans. If your company offers a match and you don’t participate in the 401(k), then you are literally throwing away money.

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