'We are often called “the elderly"' Thank you, Rudy, for sharing this.

March 28, 2026

Rudy Fichtenbaum received this essay by a from a former colleague of his. Written by an unknown author, older versions of it have been around before, perhaps as early as 1926, but it's always good to read again as it is mind-boggling to realize how many developments many of us have experienced in a relatively few years: our lifetime. You may have lived through many of those years. Since my own life precedes the start of WWII by almost 18 months, there are many things I can still remember about those war years and life in America afterwards.

Many events will resonate with many retirees. Read and remember if you lived through the lightning speed of any of those years; read and learn if you were born later. We were all greatly impacted by those times, whether we realize it or not, and even more so by all that has come along since. Future generations will be writing their own story, which will be very different from ours. We can only hope they will learn something from our generation and be "one of a kind", passing their own wisdom on to others who will come when we are no longer around.

KBB

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We are often called “the elderly,” but that quiet label hides a truth most people rarely pause to consider: we are the last living witnesses of a world that no longer exists.

If you look closely, you might notice gray hair, slower steps, or the quiet patience that time alone can teach. But if you truly listen to our stories, you will discover something far more extraordinary. We are not simply older people moving through the final chapters of life. We are the survivors of one of the most breathtaking transformations in human history — a generation that walked from the slow, deliberate rhythm of an analog world into the dazzling speed of a digital one without ever losing our sense of humanity along the way.

Our journey began in a very different place.

Many of us were born in the 1940s, 1950s, and early 1960s, when the scars of World War II were still fresh across Europe and Asia and the world was slowly learning how to hope again. Cities rose from rubble. Families rebuilt lives after years of uncertainty. Childhood unfolded in ways that would feel almost unrecognizable to younger generations today. Our toys were simple: marbles played in dusty yards, hopscotch drawn on cracked sidewalks, checkers and cards gathered around kitchen tables while the smell of dinner filled the house. When the streetlights flickered on in the evening, it was the universal signal that childhood adventures were over for the day and it was time to go home.

There were no smartphones, no streaming videos, no endless scroll of digital distractions. Instead, we built our memories in the real world — with scraped knees, laughter echoing down neighborhood streets, and friendships that formed face to face, without the mediation of screens.

Music became one of the defining soundtracks of our youth. The 1960s and 1970s arrived like a wave of color and rebellion. We watched culture shift around us, carried by electric guitars and voices that dared to question the world. For many of us, gatherings like the legendary Woodstock Festival of 1969 symbolized something powerful: the belief that peace, music, and community could reshape the future. Hundreds of thousands of young people stood together in muddy fields, listening to artists who poured raw emotion into towering speakers known as the Wall of Sound. Those concerts were not merely entertainment; they were moments when strangers felt like a single generation singing the same hope under an open sky.

Education looked different then, too. Our notebooks were filled with handwritten notes carefully copied from chalkboards. Research required patience, long hours in libraries, and stacks of heavy books rather than a quick internet search. We learned to slow down and think through ideas because information did not arrive instantly. Mistakes were corrected with erasers and ink, not with the click of a delete button.

Love carried a different rhythm as well. We fell in love while vinyl records spun on turntables and cassette tapes clicked softly inside plastic players. Music became the background to first dances, long conversations, and dreams about the future. Those relationships grew into marriages, families, and lives built step by step through the 1980s and 1990s — decades that saw technology begin to reshape the world around us.

Yet nothing compares to the bridge our generation has crossed. We are the only generation to have experienced an entirely analog childhood and a fully digital adulthood. We remember waiting days — or sometimes weeks — for handwritten letters to arrive in the mail. We remember rotary telephones and party lines where neighbors could accidentally overhear conversations. Communication required patience and anticipation. Today, we can see the face of a loved one across the ocean instantly on a screen small enough to fit in a pocket.

The world changed in ways few could have imagined. We watched humanity land on the Moon in 1969, a moment when millions of people sat in living rooms staring at black-and-white televisions as Neil Armstrong took humanity’s first steps on another world. We saw the rise of personal computers, the birth of the internet, and eventually the arrival of smartphones that placed entire libraries of knowledge in our hands. Machines that once filled entire rooms now exist on devices lighter than a paperback book. We moved from punch cards and mechanical tools to artificial intelligence and global networks connecting billions of people instantly. And through every shift, we adapted.

Our bodies carry the marks of the times we lived through as well. We grew up during fears of polio and tuberculosis, illnesses that once terrified entire communities before vaccines helped bring them under control. We witnessed the global challenges of pandemics and health crises across decades, including the recent silence and uncertainty of COVID-19, which reminded the world that resilience is still required in every generation.

Science itself transformed before our eyes. We saw the discovery of the structure of DNA in 1953, the decoding of the human genome at the turn of the century, and the early steps into gene therapy and advanced medicine. Transportation evolved from simple bicycles and steam engines to hybrid vehicles and electric cars gliding almost silently through city streets.

Few generations have witnessed such sweeping change. And yet, despite everything that evolved around us, certain things remain unchanged. We still understand the joy of a cold glass bottle of lemonade on a hot afternoon. We still remember the taste of vegetables picked straight from a garden. We still know the value of a long conversation that unfolds slowly without a keyboard or screen interrupting it.

Our memories stretch across decades. We have celebrated births, mourned losses, watched friends depart, and carried their stories forward. Those of us who remain share something rare: the experience of standing at the crossroads of history, holding memories from a world that younger generations know only through photographs and stories.

But we are not relics. We are living bridges. Our perspective reminds the modern world that progress does not have to erase wisdom. The speed of technology does not have to replace patience, kindness, or reflection. We remember what life felt like before everything moved so fast — and that memory carries quiet lessons worth sharing.

So when someone calls us “elderly,” we can smile. Because behind that word lies something extraordinary. We are the generation that crossed two centuries, witnessed eight decades of transformation, and walked from the age of handwritten letters to the era of artificial intelligence.

What a life we have lived. What a remarkable story we continue to carry. And if you belong to this generation, take a moment today to look in the mirror and recognize something powerful. You are not simply growing older. You are living history. You are part of a generation that will always remain one of a kind. And perhaps, in the quietest and most meaningful way, you are becoming legendary.

Rudy Fichtenbaum: "Keeping the Promise"

Keeping the Promise

by

Rudy Fichtenbaum

March 25, 2026

At the last Investment Committee meeting of STRS, I was glad to hear that Representative Bird say that the pension should keep its promises. However, having been on the Board, I understand why the Board cannot currently provide a 2% ongoing COLA. In order to provide that COLA, STRS would need additional funding. The employee contribution is already one of the highest in the country and the employer contribution, which has not increased in 40 years, is among the lowest. So, had I been at the meeting, my response to Mr. Bird would have been, the burden is on you and your fellow legislators to increase in the employer contribution so that STRS can keep its promises.

Here is what I was promised by STRS, when I retired on April 30, 2015.

So, where is my 2% COLA, which should have started in 2020? It is being given away! The wealthiest Ohioan’s have repeatedly had their taxes cut, while at the same time the legislature and the governor choose to give vouchers that go disproportionately to students who were already attending private schools. I have nothing against private schools. If parents want to send their kids to private school they should pay for it. Meanwhile, if Ohio increased taxes on the wealthiest Ohioans and gave school districts and higher education the money they need to provide every Ohioan with a high-quality education, school districts and institutions of higher education would also have the money to pay for an increase in the employer contribution. That would allow STRS to keep its promise.

Rudy Fichtenbaum: "What is a Collateralized Loan Obligation?"

What is a Collateralized Loan Obligation?

by

Rudy Fichtenbaum

March 23, 2026

At the last Board meeting, during the investment seminar there was a discussion of collateralized loan obligations (CLOs) as part of the presentation on Liquid Alternatives. Any CLO involves leverage i.e., borrowing, and then securitizing, i.e., bundling the loans together so they can be sold as a security. In most cases, the underlying loans that are being securitized are B2 or B3, which are speculative and have high credit risk, i.e., there is a substantial risk of default. How risky is the underlying debt? The loans that are generally used in CLOs with a B2 or B3 rating -- 4th or 5th from the boPom on the 20-point scale used by Moody’s with AAA at the top and Ca at the boPom. CLOs are considered structured debt to support leveraged buyouts (private equity) or to finance infrastructure projects using non-recourse loans. Non-recourse loans are secured by pledged collateral. Thus, other assets of the borrower are protected from seizure if the borrower defaults. Companies that are building big data centers provide a prime example; they establish special purpose vehicles (SPVs) so that when they borrow, they can protect all of their other assets, using the assets of the data center, which don’t really exist until it is built, as collateral to borrow money. This makes them different from a regular construction loan, which is generally a recourse loan, meaning the lender can pursue all assets of the borrower if the project defaults.

So why would a pension be involved with a CLO? The simple answer is this: since the underlying loans are riskier, they pay higher interest and, in a market where returns for equities over the next 10 years are expected to be lower than they have been over the previous 10 years CLOs are sold as a way of getting a higher return with the illusion of not taking on additional risk.

All securitized debt is divided into different types of shares known as tranches. There is a senior tranche which is the least risky, because they get paid first, but they also receive a lower share of the interest payments and hence get a lower rate of return. There is a mezzanine tranche in the middle which is riskier but they earn a higher rate of return. Finally, there is a junior tranche which gets what is left after the other two tranches are paid off.

Despite the fact that the underlying securities are speculative, the structure allows the debt held by those in the Senior tranche to be given a AAA rating, thus creating what appears to be a “free lunch.” That is, those purchasing CLOs in the senior tranche get higher interest rates than those generated by other (legitimately rated) AAA debt. The reason for the low risk rating is because before anyone in the senior tranche would lose money, the investments in the mezzanine and junior tranches would have to be wiped out. So, why would anyone ever invest in the junior tranche? The answer is they get equity level returns without the volatility of equities.

Perhaps the easiest way to understand collateralized debt is to look at a collateralized mortgage obligation (CMO). Banks make loans so people can buy houses. Rather than holding those loans on their books, banks sell them to an investment bank which bundles them together and sells the bundle as a security which is divided into shares and sold on the market. The loans are overcollateralized because when you buy a house you have to make a down payment. If you default, you lose your down payment, and even if the bank sells the house for somewhat less than you paid for the house, it can likely still get back the money it lent to you.

For example, suppose you buy a house for $200,000, you put down 10% ($20,000) and get a mortgage for $180,000. The house is the collateral, and it is worth more than the loan. Now imagine a lender does this 1,000 times and thus has loaned out $180 million. Assume the interest rate on the loans is 6%, and the loans are for 30 years. Now suppose the lender divides the $180 million bundle into 1,000 shares and sells each share for $180,00. The share-holder would receive a payment of about $1,079.19 per month for 30 years, assuming there are no defaults. After 30 years, the share-holder would get back the principal of $180,000 and $208,508.74 in interest to boot. But suppose there is a 10% default rate, i.e., 100 of the 1,000 mortgage-holders make no payments at all. Then, instead of getting $1,079.19 per month for 30 years, the share-holder gets $971.27. So, over 30 years, the share-holder would get $162,000 in principal payments and $187,657.87 in interest payments. If the house is s4ll worth $200,000, the lender forecloses, and then sells the house, incurring $20,000 expenses, the lender nets $180,000 — the same as the money the lender originally loaned out, but less money than you than what you would have received had no one defaulted. If the price of the house goes down to $150,000, then not only has the lender lost due to the default, but also an additional $30,000 when the house was sold.

So, CLOs are subject to the risks (defaults, falling market prices) in the above example, and other risks as well. To mitigate against these risks, the lender can buy insurance called a credit default swap (CDS). Of course, appropriate pricing of a CDS depends on the insurer having a correct understanding of the risks being insured against. If the insurer underestimates the risk, then the insurer may not be able to cover the losses; that is exactly what happened in the second of the two bubbles we describe in the following paragraph.

All of these complex arrangements are subject to systemic risks. These are illustrated by two “bubbles”. Think first of the .com bubble, when from 2000-2002 the NASDAQ lost 75% of its value and did not recover for 15 years. Think also of the housing bubble 2007-2008, when the S & P 500 dropped 57% and took 5 years to recover -- even after a massive federal bailout plus the Fed also dropping interest rates to zero and engaging in quantitative easing. In that case, credit default swaps were already on the scene. So, within the space of a decade, financial markets experienced two major financial crises.

No one can predict when the next financial crisis will occur. But the growing complexity of our financial system, including the explosive growth of private equity and private credit, should give pause to those of us whose re4rement is totally dependent on the performance of financial markets; we should be wary when our pension systems participate in structured debt (that is, in the structured loan market).

One obvious solution, which would allow STRS to take less risk and continue to provide a secure retirement to Ohio’s teachers, would be to have a variable employer contribution like almost every other public pension in the U.S. (outside of Ohio). That would reduce the risk the pension needs to take and enable it to pay a COLA to retirees and provide an unreduced pension for active teachers after 32 years.