Wednesday, October 5, 2011

Is Pension Ignorance Bliss?

Looks like the market is pricing in some good news but ratings agencies are at it again. Bloomberg reports that Moody's warns more European nations face downgrade after Italy:
“All but the strongest euro-area sovereigns are likely to face sustained negative pressure on their ratings,” Moody’s said in a statement late yesterday in London. “Consequently, Moody’s expects fewer countries below Aaa to retain high ratings.” It added that “there are no immediate pressures that could cause downgrades for Aaa-rated countries.”
The pressure is on European policymakers to come up with a more robust solution to their debt woes or risk sinking into a depression. Being the good old stubborn Europeans that they are, they're taking their time "examining all options," but there really is only one option, create a big enough backstop for banks to put an end to the endless speculative attacks on the sovereign debt of weaker eurozone members.

Meanwhile, elite hedge funds are having a field day trading all risk assets. The best of them thrive in these volatile markets but the majority of hedge funds are getting clobbered along with other institutional investors, suffering their worst quarter since 2008, down 5% in Q3. This hardly surprises me as most hedge funds are selling beta as alpha and are full of crap. Many have become large asset gatherers with an army of salespeople who continuously "schmooze" with clients. It's a joke and I can say the same thing of many long-only funds that have been performing even worse but still manage to garner assets because they pay "incentives" to brokers and pension consultants. When are pensions going to finally wake up and start seeding performance driven emerging managers, just like CalPERS recently did in Canada?

I have to write a book on all the bullshit that goes on in the investment and pension world. Even better, last night I ran into an old friend at a resto-bar on St-Denis and we talked about producing a documentary on the financial crisis (he produces movies). I told him to watch all four parts of Meltdown which I posted on my comment looking beyond the global financial tsunami, and he told me to watch documentaries produced by Alex Jones, The Obama Deception and Endgame.

I don't know how this will all end, but it's going to get a lot uglier in the future and most people remain clueless of what lies ahead. The Toronto Star reports, Pension plan ignorance is not bliss. I note the following:

DB plans are considered more costly for employers than defined contribution (DC) plans and are becoming more rare in the corporate world. Air Canada for instance is hoping to phase out DB plans by providing only DC plans for all new pilot hires.

Perhaps more worrisome, the study found 31% of respondents said they don’t know what percentage of their current annual income they will need to maintain their desired standard of living past the age of 65. Not surprisingly, more than half expect to be able to afford trips and other activities they can’t now.

The vast majority of DB plan holders said they rely on the fund as their primary vehicle for retirement savings. On average, members expect 55.7% of their retirement income to come from their DB plan, a further 17.2% to come from government sources and another 12.6% to come from Registered Savings Plans.

“Plan members may need to adjust their expectations to be able to enjoy their retirement while not earning a full income. It's up to plan sponsors to help educate their members about the amounts that might be needed to enjoy a long and fruitful retirement,” MacDonald said.

Canadians live such sheltered lives. They're oblivious to what's going on in the rest of the world and truly believe that our banking system and "sound" regulations are why we escaped economic hardship. Their expectations will get radically readjusted in the next decade. They will discover that a Greek-style implosion can happen here and learn the virtues of living frugal lives, just like Americans are doing right now.

I drove my father and brother downtown this morning and was struck by the traffic on the road. Nothing like a deep recession to get rid of all those useless cars clogging our streets. And on the radio, I smirked as I listened to how housing prices continue going up and the Canadian sheep continue to buy the nonsense that "you can never lose money on real estate." (Hint: Get out of Canadian real estate while you still can!)

I know, I sound so hopelessly cynical. It's because "I haven't dealt with my MS," or because "I'm too negative and nobody wants to work with me." This is the psychological bullying that I had to endure while working at a large Canadian public pension fund. It still bugs me that I'm unemployed while the slimy weasels who screwed me collect outrageous bonuses as they beat their bogus benchmarks and lost billions after the crisis, but my psychologist keeps reminding me, "acceptance is deliverance from hell."

I made peace with my past. I forgive but will never forget. I accept that I got royally screwed and that many others will continue getting screwed in finance where the most insecure, unscrupulous, slimy weasels rise to their level of incompetence. The "Peter Principle" is alive and well in many financial institutions and at a handful of Canadian public pension plans (read Altucher's comment on dealing with crappy bosses). There are, however, good people too, people I trust and listen to when it comes to trading, pension investments and issues.

One of those is a former colleague of mine from PSP Investments. He's much happier now trading from home and doesn't miss the "institutional bullshit" of large organizations with all the "cover your ass politics." I don't either which is why I refuse to work for slimy weasels. They can be found everywhere, not just pensions, but life is too short to deal with assholes on a daily basis. My friends are doctors and even though doctors have their own quirks, most of them love their job and work environment.

This is what I want too, get a group of competent people together, no egos, no bullshit, just trade, make money, watch each others back, have fun and give some of our profits back to worthy charities. Might be a pipe dream in Montreal, but that's what I want and I know enough competent people to set this up properly and make it into a successful venture. What does all this have to do with markets and pensions? Absolutely nothing. It's my blog and I have the right to vent once in a while.

Don't forget, I'm not a charity, so please donate generously by clicking on the PayPal button at the top of my blog. And to all you pension pricks who continue to blacklist me, I suggest you do everything in your power to help me or else I will come at you even harder. This is not a threat, it's a fact. I've had enough of your bullshit and you know exactly who you are.

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