Showing posts from July, 2012

Singapore's GIC Raising Cash to Crisis Levels?

Kyunghee Park and Weiyi Lim of Bloomberg report, Singapore’s GIC Boosts Cash to Levels Exceeding 2008 Crisis:
Government of Singapore Investment Corp., managing more than $100 billion, boosted cash to levels exceeding the 2008 global financial crisis as it pared stocks and bonds, reducing its holdings in Europe. Cash allocation almost quadrupled to 11 percent of its portfolio in the year ended March from 3 percent a year earlier, GIC, as the sovereign wealth fund is known, said in its annual report. Stocks fell to 45 percent from 49 percent as it pared equities in developed markets, while bonds dropped to 17 percent from 22 percent.
GIC is reducing its investments as the MSCI World Index (MXWO) posted its biggest slump since the 2008 global financial crisis and market volatility reached the highest level in more than two years. Trading options have become limited for government funds seeking to preserve capital as policy makers across the world prepare for a deeper impact from Europe’s…

Simple Truth #6: Is Consolidation Feasible?

On Friday, I wrote a comment on seven truths about public employee pensions and received excellent feedback from Chis Conradi, a retired pension actuary who spent the last twenty years of his career working on governmental retirement plans, mostly at the statewide level:
In your recent blog posting, you suggest, in your sixth simple truth, the consolidation of local plans. You say:
It's simply mind-boggling to see a bunch of city and county plans that are severely underfunded, bankrupting their communities and jeopardizing vital public services. Both Congress and the Senate need to introduce a bill to consolidate all these plans and have them managed by existing or (preferably) new state public plans.While consolidation would most probably be a good thing, it is not something that can be forced by the US Congress, due to states’ rights under the Constitution. It will be up to the various state legislatures to accomplish this, and I have a lot of evidence that it will not happen.


A Market-Friendly Debt Buyback?

Dimitris Kontogiannis of ekathimerini reports, A market-friendly debt buyback:
It took just a few months after the completion of the biggest-ever sovereign debt restructuring in history, known as PSI (Private Sector Involvement), for policymakers and others to see what the markets have been saying all along: that the Greek public debt has not become sustainable.Unfortunately, most decision-makers in the European Union now appear to be leaning toward a writedown of Greek debt in public hands, which is hardly the optimum solution.PSI turned out to be a big success as far as high investor participation and smooth execution was concerned, but it failed in the most critical test: To provide significant debt relief and convince the markets that the Greek public debt was sustainable, unleashing a series of positive reactions from investors and others that would contribute to the stabilization of the economy.Debt relief should have amounted to more than 100 billion euros, or 50 pe…

The Biology of Boom and Bust?

The Montreal Gazette published an excerpt from John Coates' new book,The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust:
Derivatives trader turned neuroscientist John Coates looks at the biological roots of economic boom and bust in his new book, The Hour Between Dog and Wolf. Here is an excerpt from Chapter 7, Stress Response on Wall Street.Shell-shocked traders, under the influence of an overly active amygdala, become prey to rumour and imaginary patterns. In a recent study, two psychologists presented meaningless and random patterns to healthy participants, who appropriately found nothing of significance in them, and then to people exposed to an uncontrollable stressor, who did find patterns in the noise.
Under stress we imagine patterns that do not exist. A striking real-life example of this phenomenon is reported by Paul Fussell in his astonishing book The Great War and Modern Memory. Troops living in the trenches during the Fir…

Seven Truths About Public Employee Pensions?

Kil Huh, Director of Research, Pew Center on the States, wrote an article for Huffington Post, Five Truths About Public Employee Pensions:
The debate over public pensions and retiree health benefits is vital, so we were heartened to see it in The Huffington Post. However, Harold Schaitberger's recent piece misrepresents our work and the realities facing state and local governments. Here are five truths about state and local pensions.1) Public pension funds face real funding challenges in a majority of states.In fiscal year 2010, public pension funds as a whole were only 75 percent funded and had a shortfall of $757 billion between what they should have set aside to pay for the benefits promised to workers and retirees and what they had on hand. While some states, like New York, North Carolina, and Wisconsin, have well-funded and well-managed plans, the majority of states face significant challenges. Thirty-four states were less than 80 percent funded -- a threshold many e…

Can Japan's GPIF Solve its Funding Problems?

Institutional Investor reports,Can Japan's Government Pension Solve its Funding Problems?:
THE AIR INSIDE THE GOVERNMENT PENSION FUND'S Tokyo headquarters was as warm and dry as a spaceship’s. As president Takahiro Mitani and his colleagues filed silently into an austere meeting room, I was sweating slightly, struggling to compose my question with the correct level of Japanese politesse: “How did the world’s largest pension fund decide on such a conservative level of risk and return for its portfolio?” It was far from an idle question. The GPIF has ¥108 trillion ($1.36 trillion) in assets under management. That’s nearly six times as much as the California Public Employees’ Retirement System, the biggest U.S. pension fund, and nearly four times as much as Europe’s largest pension plan, Stichting Pensioenfonds ABP of the Netherlands. Even more striking than the fund’s gargantuan size is its composition: Fully three quarters of the GPIF is invested in bond…

Dangerous Dynamic Or Big Buying Opportunity?

Nathaniel Baker of Bloombeg reports, Bridgewater Sees ‘Dangerous Dynamic’ as Largest Economies Slow:
Bridgewater Associates LP, the hedge fund founded by Ray Dalio that manages about $120 billion in assets, said the global economy is facing the threat of a self- reinforcing decline after the world’s largest economies slowed in recent months. Global growth has slowed to about 1.9 percent “in the past few months” from around 3.3 percent as Europe deleverages and China’s economic is cooling, the Westport, Connecticut-based firm estimated in its second-quarter report, a copy of which was obtained by Bloomberg News. Bridgewater also said the European debt crisis has been poorly managed, bringing Europe closer to a “debt implosion” or a currency collapse.
“The breadth of this slowdown creates a dangerous dynamic because, given the inter-connectedness of economies and capital flows, one country’s decline tends to reinforce another’s, making a self-reinforcing global decline more likely and a r…