{"id":2107,"date":"2009-12-16T08:01:42","date_gmt":"2009-12-16T16:01:42","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=2107"},"modified":"2009-12-16T08:31:11","modified_gmt":"2009-12-16T16:31:11","slug":"pay-apples-and-risk-oranges","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/pay-apples-and-risk-oranges\/","title":{"rendered":"Pay apples and risk oranges"},"content":{"rendered":"

With the headline “Executives Enjoy ‘Sure Thing’ Retirement Plans<\/strong>” a pair of writers created a story<\/a> about the iniquity of retirement plans for executives vs. “ordinary” workers.\u00a0\u00a0 But the headline is misleading.\u00a0 Here is how the story actually begins:<\/p>\n

Jacqueline D’Andrea last year lost more than 60% of the 401(k) savings she built over a decade as a Wal-Mart Stores<\/a> Inc. manager, she says.\u00a0 The 1.2 million employees in the retailer’s 401(k) retirement plan lost 18% as the market plunged, corporate filings show.<\/em><\/p><\/blockquote>\n

Top executives at Wal-Mart didn’t face such risks. Thanks to a guaranteed 6.6% return, Chief Executive Officer H. Lee Scott Jr.<\/span> had gains of $2.3 million in a supplemental retirement-savings plan, bringing its total savings to $46.7 million.<\/em><\/p><\/blockquote>\n

But they aren’t actually comparing retirement plans; they compare a supplemental deferred compensation plan designed to provide the kind of modest returns that few people would accept for the bulk of their retirement assets to a fully invested 401k retirement plan in a year of steep stock market declines.<\/p>\n

And that’s what happens when you have financially illiterate journalists writing for a financially illiterate audience–the opposite of education.<\/p>\n

Here, Ms. D’Andrea had the opportunity to take the kind of risks that would allow her returns to plummet 60 percent, and she unfortunately did.\u00a0 Who told her to take that risk?\u00a0 Did WalMart advise their employees to be imprudent with their 401k investments?\u00a0 Doubtful, given that the average WalMart employee only lost 18 percent in a year when the S&P dropped about 30 percent.\u00a0 The authors probably looked hard among those 1.2 million employees to find one who lost 60 percent.<\/p>\n

The truth is that Ms. D’Andrea’s predicament is terrible for her, but WalMart is not to blame.\u00a0 She wanted the big returns, so she took the big risks, whether she was aware of the risks or not.<\/p>\n

Mr. Scott apparently didn’t need to take those risks.\u00a0 Maybe he felt that the risks in other parts of his portfolio were enough for him.\u00a0 Maybe having most of his net worth tied up in $4.4 million WalMart shares<\/a> that dropped about 18%<\/a> was enough risk for him.\u00a0 Maybe he wasn’t greedy enough to chase more returns.<\/p>\n

\"Let

Let me tell you the color of this picture<\/p><\/div>\n

In any case, it’s ridiculous to compare these two sets of returns.\u00a0 But comparing apples to oranges is what reporters do when they know nothing about the fruit.<\/p>\n

I guess that yesterdays’ WSJ apparently had a contest for its writers to see who could come up with the most distorted reporting on pay<\/a> for the week.<\/p>\n","protected":false},"excerpt":{"rendered":"

With the headline “Executives Enjoy ‘Sure Thing’ Retirement Plans” a pair of writers created a story about the iniquity of retirement plans for executives vs. “ordinary” workers.\u00a0\u00a0 But the headline is misleading.\u00a0 Here is how the story actually begins: Jacqueline D’Andrea last year lost more than 60% of the 401(k) savings she built over a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[63],"class_list":["post-2107","post","type-post","status-publish","format-standard","hentry","category-reporting-on-pay","tag-throwing-fruit"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2107","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=2107"}],"version-history":[{"count":9,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2107\/revisions"}],"predecessor-version":[{"id":2109,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2107\/revisions\/2109"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=2107"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=2107"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=2107"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}