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Showing posts from October, 2012

Straight Outta Compton?

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Dale Kasler of the Sacramento Bee reports, CalPERS sues Compton over missed payments:
A second California city has fallen behind on its payments to CalPERS, prompting a lawsuit by the big pension fund.

Compton owes $2.7 million to the California Public Employees' Retirement System, the pension fund said Monday.

CalPERS sued the city in Sacramento Superior Court after Compton failed to make its required payments for September.

Harold Duffey, the city manager, said Monday that Compton is experiencing a short-term cash-flow problem and expects to clear up the debt before the end of the year.

Compton has been facing significant financial problems and publicly flirted with a bankruptcy filing over the summer.

Still, Compton's troubles represent yet another challenge to CalPERS and the durability of public pensions in general, as cities cope with severe revenue shortfalls.

San Bernardino, which filed for bankruptcy protection in August, is $5.2 million behind on its payments to CalPER…

Exposing the Magnitude of the Catastrophe?

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Frank Keegan, editor of StateBudgetSolutions.org, a project of sunshinereview.org, recently wrote a comment, Milliman government pension report exposes magnitude of catastrophe:
When a "premier global consulting and actuarial" firm proves in its first Public Pension Funding study that those government pensions are doomed, it is past time for action. Milliman's study showing a 33 percent increase in pension debt over official numbers from a minute change in accounting should be enough to spur reform.

However, this hidden fiscal cancer threatening to consume the American economy and sabotage essential state and local government services gets even worse when you look at pension performance since the Jan. 1, 2012 cutoff date for the Milliman data.

Those latest numbers show a system collapsing faster than the experts can calculate.

While Milliman's 2012 Public Pension Funding Survey calculates pension debt for the biggest 100 funds at almost $1.2 trillion instead of the o…

Preparing For The Ultimate Disaster?

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Before I proceed to my comment, wanted to bring to your attention a new blog that Jean-Pierre Desloges, a former fixed income trader at the Caisse de dépôt et placement du Québec, recently created. It's called Financial Iceberg and it's mainly geared toward institutional traders looking for quick and in-depth market information often ignored in mainstream media. All you need is to create a password and log in for free.

Jean-Pierre trades bond, currency and equity futures. In his blog, he covers charts, markets, technicals, top news and even posts short blog comments. Today he posted a link to a BNN article stating that Moody’s could cut the credit ratings of six Canadian banks and an analysis of Spanish retail sales from the Instituto Nacional de Estadistica (report in English).

A few weeks ago, Jean-Pierre contacted me to work together on a blog. Told him that I'm a lone wolf, fiercely independent, and warned him that a blog requires a lot of unpaid work, but promised to…

The Paulson Disadvantage Minus Fund?

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Kate Kelly of CNBC reports, Paulson Fund Losses Prompt Some Investors to Pull Out:
Last January, when investors in one of Paulson & Co.’s best-known hedge funds saw the value of their investments had been slashed in half, some wondered how much worse it could get.

Then by Sept. 30, there was an additional drop of 15 percentage points—with three months left to go in the year.

As a result, some Paulson investors—who gave the firm a pass last year when the riskier version of the firm’s umbrella fund, Paulson Advantage Plus, saw enormous losses—are now throwing in the towel.

Fed up with lagging returns at the hedge-fund management company, a number of investors large and small are opting to either reduce their capital at risk or yank it entirely by year’s end. 

It's the latest blow to fund manager John Paulson, who became famous in the investing world after he bet correctly on the collapse of housing prices in 2008.

"We expected, based on the way [Paulson] does things, t…

The Vilification of the 1%?

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Billionaire financier and Home Depot co-founder Ken Langone told Bloomberg Television's Trish Regan on "Street Smart" that he is "proudly part of the 1%":
Langone on his past:

"As a little boy, my first job was delivering newspapers and then I had a variety of different jobs. I worked in a butcher shop, I worked in a supermarket, I worked in construction. I dug ditches on the Long Island expressway in 1954, 1955, 1956. During my summers off from Bucknell, I was a day laborer and they were building the section of the expressway from the city line to Shelter Rock Road. That was the way that I was able to augment my needs for college. My parents did what they could do but I still had to work to help because it was only about $2,500 a year to go to Bucknell. Today it is $53,000 a year, which is kind of sad."

On whether it's frustrating to hear politicians talk about working Americans vs. the 1%:

"Let me say this loud and clear. I am proudly part o…

Hedge Funds Belt Few Home Runs?

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Gregory Zuckerman and Juliet Chung of the WSJ report, Hedge Funds Belt Few Home Runs:
They are the few. The proud. The hedge-fund managers making a killing this year.

David Tepper's firm was up about 25% through Friday, partly from a bet Europe will avoid a meltdown. Steve Mandel's firm gained nearly as much from soaring consumer and technology stocks. Pine River Capital Management rose 30% thanks in part to subprime mortgages, as did Josh Birnbaum's Tilden Park. And the Barnegat Fund has climbed over 39% with a debt strategy that the manager concedes isn't for the faint of heart.

The big gains, as reported by fund investors and people familiar with the firms, come as most hedge funds struggle for the fourth year a row, the longest period of underperformance since 1995 to 1998. Hedge funds on average gained 4.7% through September, according to industry tracker HFR, while stock-trading funds were up on average 5.5%. By comparison, the Standard & Poor's 500 ind…

Ontario Downsizes Proposed Super Fund?

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Mark Browlee of the Ottawa Citizen reports, Provincial Liberals announce 3 new pension agreements:
The Ontario Liberals say they have taken another step toward reducing their multi-billion-dollar deficit, this time by negotiating new public sector pension plans that freeze contribution rates for three unions.

The five-year rate freeze applies to both employers and employees of the Healthcare of Ontario Pension Plan, the Ontario Public Service Employees Union Pension Plan and the Colleges of Applied Arts and Technology Pension Plan.

They will save the province $1.5 billion over the next three years the government would have otherwise had to pay, said Bob Chiarelli, member of provincial parliament for Ottawa West-Nepean and the minister of Infrastructure, in a news release issued Wednesday.

It is the Liberals’ latest attempt at reining in a $14.8-billion deficit that has steadily grown since they took power nine years ago.

They imposed a wage freeze on teachers across the pr…

Private Equity Eyes Dividend Recaps?

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Michael Stothard and Dan McCrum of the FT report, Private equity eyes dividend ‘recaps’:
Private equity firms are looking to cash in on the latest rally in the European corporate debt markets by borrowing at low cost against their investments to pay themselves dividends.

So-called “dividend recapitalisations” by private equity groups, which were a prominent feature of the pre-crisis boom years, are showing signs of returning on the back of increased demand from investors for riskier forms of corporate debt.

RAC, the UK car breakdown service, on Tuesday closed the books on a £260m term loan intended to help pay a special dividend to Carlyle, which bought the company in June for £1bn. Also expected is a similar €250m deal by Birds Eye Iglo, the frozen foods business owned by Permira.

Bankers say there are about 10 more European deals being discussed that might come to market in the coming months. “Interest in dividend recaps has grown very quickly post the summer as market conditions …