"Hungarian stocks sank for a second day, with the benchmark BUX Index posting the steepest drop worldwide, after the government said citizens must move their privately managed pension assets to the state or lose 70 percent of their pension claim" http://noir.bloomberg.com/apps/news?pid=20601087&sid=arXqEoCf5dHw&pos=1 Niiice. Government fucks up its budget, and steals 70% of your pension to fund the gap.
EUR/HUF back above 280.00. I just wonder at what level the Hungarians will start finding it difficult to repay their EUR and CHF denominated home loans. No position in HUF because I don't know enough about the Hungarian economy, but obviously in times of risk-aversion it will suffer.
LOL, a little underinformed, aren't you? 1/ Socialists (Hungarian Socialist Party) fucked up the budget and the new (center-right) government (in office since the summer) is trying to fix it. 2/ Privately managed pension schemes in Hungary produced a staggering 0.5% return on average in the past decade. In 2008 they had an average -16.7%. Inflation on average was well above 5% for said decade. Care to calculate a sharpe on that? Oppose that to the state pension fund that is guaranteed by the state, the pension payments are adjusted for at least the inflation; for example in 2008 it was +6.5%. Also Hungarian gov. bonds were paying out a little above inflation. Now who is 'stealing'? 3/ Private pensions charge up to 5% 'operation fee' and 0.8% additional 'asset management fee' (which in reality works out to be more like 1.4% due to the usual 'nickel and diming'; for example some charge ~3USD/month for paper statements while electronic statements or an opt-out option is unavailable). State administered pension does it in 0.9% total. Interesting to see that the state is more efficient than private market participants. Add to that that private schemes always add a 3-6 month lag to crediting payments that amounts to an incredible interest income to the pension operator, as opposed to the state pension scheme where it is immediate. 4/ privately managed schemes collect new clients by deceit: they sell life insurance packages and the details of the pension are lost in the small print: the Hungarian Financial Supervisory Authority warned and sanctioned about this practice but it is so profitable that it does worth to pay the fines and carry on. 5/ The previous (socialist) government wanted to pass a new law that would have transferred ownership of private pension assets to the pension funds and the pensioners would become customers of them. Funny; I haven't read a beep about that in Anglo-Saxon media. Granted, that law was never passed, but still: what constitutes as stealing? 6/ Private pension schemes are not voluntary. Depending on age it is mandatory: generally, young people must participate in private pension funds and older people in the state fund. They opened up the possibility a few years back to leave the state fund and transfer into private funds, but only a few % transferred (overwhelmingly due to point 4/): simply put, nobody trusts private pension funds. 7/ Blah, I could go on and on with the details but what would be the point? But let's approach the problem differently: where do you really think the Hungarian budget deficit went? As for the HUF: as I told several times and I stick to it: I gladly short EUR/HUF from anywhere above 290 and USD/HUF from anywhere above 210. It's a gift. Because the HUF will strengthen back and while you're waiting you collect one of the highest carries achievable in the world. Risk:reward is simply staggering if you dig deep enough to understand what's going on. It is also not a coincidence that I see well timed articles like the one referenced.