Quoting the Crisis

14/11/2009

“ Pensioners, otoh, are subject to “moral hazard.” Believing their contracts were viable, reasonable, and negotiated by people who were working in the best interest of the firm—that is, people who were not writing a check with their mouth that their pockets couldn’t cash—clearly causes them not to do enough to save. Because they don’t understand that mismanagement of their pension is their fault, and that the Pension Benefit Guaranty Corporation will only ensure that their pensions will be paid “up to certain limits,” no matter how much extra Roger Smith or Michael Eisner or Jack Welch took from the company for performing almost as well as the rest of the stock market. „

How to Explain Moral Hazard ~ Angry Bear

Quote posted at 13:02

11/11/2009

“

Wall Street couldn’t be happier than to provide public pension funds with a way to chase after magic bullets. After all, it’s fantastically lucrative for Wall Street. That helps explain why the financial industry has deployed hoards of salesmen to convince pension funds that the way to capture the magic is to invest in hedge funds, private equity partnerships and various other sorts of so-called alternative investments.

Based upon what I’m seeing, the sales effort is working even after the dismal showing these investment vehicles put in during the financial crisis. Once again, public pension plans, as well as endowments and foundations, are increasing asset allocations to risky funds.

It’s as if the trustees of these funds are simply incapable of learning. Or, more aptly, that they have vested interests in not doing so. Witness the scandals that have unfolded recently involving go-betweens for these investment funds and two of the nation’s largest public pensions: the New York State Common Fund and California Public Employees’ Retirement System.

„

Edward Siedle, former SEC attorney and president of Benchmark Financial Services, in Public Pensions Face Ugly Choices - Forbes.com

Quote posted at 15:03

06/11/2009

“

Municipalities dealt with the separation between taxes and expenses by borrowing. In the mid-1990s, states and cities were retiring as much debt as they were incurring. During the 2000s, though, they borrowed about $150 billion per year in aggregate, peaking at $215 billion in 2007 by which time $2.7 trillion in debt was outstanding, more than two years’ worth of tax receipts.

Barring some sort of miraculous boom in the economy and pension fund investment returns, state and local governments are headed for insolvency and default.

„

Philip Greenspun’s Weblog » The Coming Collapse of the Municipal Bond Market

Quote posted at 11:02

24/10/2009

“ …the idea that the typical American’s retirement basically depends on the stock market is utterly wrong; that’s only true for a small elite. „

Paul Krugman (via azspot)

Quote posted at 23:04

02/09/2009

» Sober Look: The warning signs in the US equity markets

tiffehr:

Sober Look:
TrimTabs Investment Research reported that selling by corporate insiders in August has surged to $6.1 billion, the highest amount since May 2008. The ratio of insider selling to insider buying hit 30.6, the highest level since TrimTabs began tracking the data in 2004. (prnewswire)
Meanwhile, CEOs Get Their Stock Grants, Workers’ Pensions Lag - BusinessWeek:
The report’s author, Jack T. Ciesielski, well known for digging into companies’ financial figures in his research publication, the Analyst’s Accounting Observer, found that the combined fair value of restricted stock and options issued as executive compensation during 2008 was $44.5 billion. Those same companies put $39.5 billion toward employee pensions.

Looks like rich folks are pulling money out of the current system as fast as they can. I’d love to see geographic distribution of both insider trading and exec compensation payouts overlaid on recession impact. @jimray?

Link posted at 15:32

24/07/2009

“ The pension plan for federal government workers lost 22.7 per cent in the latest fiscal year, but paid partial bonuses to its top executives for meeting their individual objectives for the year. „

Janet McFarland in Federal pension plan books 22.7% loss - The Globe and Mail

Quote posted at 15:54

21/07/2009

“ First of all, why the hell are you investing pension money in OTC derivatives? Do you really think that’s the most suitable investment? Second, and more importantly, considering your no-doubt negative answer to the former, why, after witnessing first-hand the epic failures at S&P, Moody’s and Fitch do you insist on such unwarranted over-reliance, or hell, any reliance, on them whatsoever? These guys & gals have proven, beyond a shadow of a doubt, that their “work” rests precariously on the fine line between rank incompetence and criminal negligence. „

An Open Letter to Pension, Endowment, and Other Institutional Trustees and Investment Committees | zero hedge

Quote posted at 18:17

10/07/2009

“ The decline in asset value, to $63 billion on June 30 from $78.2 billion a year earlier, adds stress to a retirement account that was underfunded by about $34 billion at the start of the fiscal year. The fund covers about $6 billion in benefit payments each year. „

Dunstan McNichol in New Jersey Pension Asset Value Dropped 19% Last Fiscal Year - Bloomberg.com

Quote posted at 22:52

12/06/2009

“ A perfect storm is confronting pensions planning, created by an ageing population, falling pension funds values, a drop in state and employer contributions and an economic downturn which is forcing people to make tough financial choices. „

Stephen Green, Group Chairman of HSBC, quoted by Leo Kolivakis in naked capitalism: Guest Post: Pensions ‘Perfect Storm’ Looms?

Quote posted at 13:04

10/06/2009

» Former CalPERS board member helped steer $1.4 billion to equity firms

crazynutjob:

CalPERS has invested more than $1.4 billion with private equity firms that hired a former CalPERS board member to represent them.

These pensions are guaranteed by California taxpayer dollars. Currently five of the seven investments are losing money. No charges have been filed. Still, this isn’t as bad as the land development deal they did that lost more than 100% of the investment.

Link posted at 10:10

08/06/2009

“ GM’s US fund is, of course, in deficit, but the company has made no contributions since 2003. Back then, it put in $18.5bn, which it raised through a bond issue. Since this counted as a pre-payment, GM is not obliged to pay any more for the next year or two. However, it will then have to start plugging the gap, under the new rules set down by the Pension Protection Act of 2006. This, Mr Ralfe calculates, would involve diverting $1bn to $2bn annually from operating cash flows. If GM cannot do that, bang it goes again. „

Tony Jackson in FT.com / Columnists / Tony Jackson - GM shows gravity of pension challenge

Quote posted at 15:32

“ Pensions are severely underfunded and they aren’t getting better fast „

Howard Silverblatt in PENSIONS: Work Till You Drop – If You Have A Job - BusinessWeek

Quote posted at 12:02

“

More than $440 million disappeared from the pension fund that pays benefits for some 1 million retirees and public employees.

Counties, cities and school districts face a loss of more than $300 million for roads, sewers and schools.

The state has $290 million less to pay for everything from hurricane claims to health care, community colleges and care for infants with disabilities.

While the general losses have been expected, this is the first public accounting of the magnitude of the Lehman-related public losses for Florida.

„

Sidney P. Freedberg and Connie Humburg in Florida stands to lose $1 billion because of Lehman Brothers’ bankruptcy - St. Petersburg Times

Quote posted at 11:16

26/05/2009

“ A C.D. Howe Institute report has concluded that only one-third of Canadian households are saving enough to meet their projected basic household expenses by 2030, leaving two-thirds of the population not saving enough to cover their non-discretionary costs in the future. „

Pensions for the pensionless | Globe and Mail

Quote posted at 21:17

04/05/2009

“ Senior managers believe it is up to investors to ask rather than the duty of the agency to disclose. This attitude is troubling. It places a huge burden on investors to ask exactly the right question. „

Tanya Beder, a risk-management expert who audited an SBA fund for the Legislature last year, quoted by Sydney P. Freedberg and Connie Humburg in Florida investment agency uses smoke, mirrors

Quote posted at 14:33