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From the Editor

John Kitchen and Ralph Monaco: Real-Time Forecasting in Practice

Jonathan McCarthy: Capital Overhangs

Henry Townsend: The Expected Rate of Return for Equities

Rolando F. Peláez: A Reassessment of the Purchasing Managers’ Index

Timotej Jagric: Forecasting with Leading Economic Indicators—A Neural Network Approach

A. Gary Shilling: Pension Profits Become Corporate Costs

Jack Kyser: The Los Angeles County Economic Development Corporation

Leslie G. Polgar: Flat Panel Displays

Robert P. Parker: December Will Bring Major Changes to the U.S. National Income and Product Accounts

Book Reviews

Forum on Emerging Issues

Pension Profits Become Corporate Costs

by A. Gary Shilling

A. Gary Shilling is president of A. Gary Shilling & Company.

In mid-June of this year, Standard & Poor’s fretted that the S&P 500 companies’ underfunding of their defined benefit pension funds had jumped to $226 billion from $212 billion at the end of 2002. In mid- August, however, after substantial increases in stock prices and bond yields, S&P forecast that the aggregate pension fund deficit will be $182 billion at the end of the year, much lower but still a big number. And the Pension Benefit Guaranty Corp. (PBGC), the federal agency that takes over busted defined benefit plans, estimates that private plans are underfunded by $400 billion.

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