He contends that the logistic companies, which do not own such tangible, freight-moving assets, perform better in a slowdown.
It's no surprise, therefore, that many chief executives opt for assumptions that are wildly optimistic, even as their pension assets perform miserably.
If the assets perform better than expected, there is a modest upside for taxpayers; if they perform worse, the wipeout could far exceed whatever gain taxpayers could ever have hoped to realize.
Then there are investors who think they are doing the right thing by spreading their money across different asset classes without understanding that those assets perform the same way.
This is because their products are typically not "unit-linked"—in other words, the company takes on more of the risk of how the underlying assets perform, whether shares, bonds or other instruments.
E.ON has a stronger balance sheet, but needs to make its existing assets perform better.Finally, both firms must prepare a strategy to deal with the full liberalisation of Europe's energy market, due in 2007.
If the assets perform very badly, then not only will private investors and the Treasury lose money, so will the Federal Reserve and FDIC.
"Throwing a thousand engineers at the problem won't solve it — it relies on domain expertise, a long history of people who have seen long cycles, and understand how assets perform," he said.
In the current plan, the investors are allowed to default on the government loans if the toxic assets perform badly.
Since some assets performed very well, they covered the losses incurred by other low-performing assets.
